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

                                    FORM 10-K

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

                   For the fiscal year ended January 28, 2006
                                       OR
             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

           For the Transition Period from____________ to _____________

                         Commission file number: 0-8858

                            THE PENN TRAFFIC COMPANY
             (Exact name of registrant as specified in its charter)

                   DELAWARE                          25-0716800
           (State of incorporation)       (IRS Employer Identification No.)

 1200 STATE FAIR BLVD., SYRACUSE, NEW YORK 13221-4737          (315) 453-7284
       (Address of principal executive offices)              (Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                                                            $.01 par value

Indicate by check mark if the registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.  YES [_]    NO [X]

Indicate  by check  mark if the  registrant  is not  required  to file  reports
pursuant to, Section 13 or 15 (d) of the Act.  YES [_]    NO [X]

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 [_]    NO [X]

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. [X]

Indicate by check mark whether the registrant is a large accelerated  filer, an
accelerated  filer, or a non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act:

Large accelerated filer [_]   Accelerated filer [_]   Non-accelerated filer [X]

Indicated by check mark whether the  registrant  is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YES [_]    NO [X]

The  aggregate  market  value  of  the   registrant's   voting  stock  held  by
nonaffiliates  of the registrant was  approximately $0 as of July 30, 2005, the
last business day of the registrant's most recently completed second quarter.

COMMON STOCK,  PAR VALUE $.01 PER SHARE:  8,297,697  SHARES  OUTSTANDING  AS OF
AUGUST 9, 2007

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<PAGE>

                                 FORM 10-K INDEX

                                                                            PAGE
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PART I.
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Item      1.    Business                                                      4

Item     1A.    Risk Factors                                                 14

Item      2.    Properties                                                   23

Item      3.    Legal Proceedings                                            23

Item      4.    Submission of Matters to a Vote of Security Holders          23

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PART II.
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Item      5.    Market for Registrant's Common Equity, Related
                Stockholder Matters and Issuer Purchases of
                Equity Securities                                            24

Item      6.    Selected Financial Data                                      25

Item      7.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations                          30

Item     7A.    Quantitative and Qualitative Disclosures About
                Market Risk                                                  45

Item      8.    Financial Statements and Supplementary Data                  45

Item      9.    Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure                       74

Item     9A.    Controls and Procedures                                      75

Item     9B.    Other Information                                            75

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PART III.
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Item     10.    Directors and Executive Officers of Registrant               76

Item     11.    Executive Compensation                                       84

Item     12.    Security Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters                   91

Item     13.    Certain Relationships and Related Transactions               93

Item     14.    Principal Accounting Fees and Services                       93

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PART IV.
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Item     15.    Exhibits, and Financial Statement Schedules                  94

                                      -2-
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements  included in this Form 10-K,  including without  limitation,
statements  included  in Item 7 -  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations,"  which are not  statements of
historical   fact,   are  intended  to  be,  and  are  hereby   identified  as,
"forward-looking  statements"  within  the  meaning of the  Private  Securities
Litigation  Reform Act of 1995,  as amended,  reflecting  management's  current
analysis and expectations,  based on what management  believes to be reasonable
assumptions.  These  forward-looking  statements include statements relating to
our  anticipated  financial  performance  and  business  prospects.  Statements
proceeded   by,   followed  by  or  that  include   words  such  as  "believe,"
"anticipate,"  "estimate," "expect," "could," and other similar expressions are
to be considered such forward-looking  statements.  Forward-looking  statements
may involve known and unknown risks, uncertainties and other factors, which may
cause the actual results to differ  materially from those projected,  stated or
implied,  depending  on such  factors  as: our  ability  to  improve  operating
performance and effectuate  business plans;  our ability to operate pursuant to
the terms of our credit  facilities and to comply with the terms of our lending
agreements or to amend or modify the terms of such  agreements as may be needed
from time to time;  our  ability to generate  cash;  our ability to attract and
maintain adequate capital; our ability to refinance our indebtedness; increases
in prevailing interest rates; our ability to obtain trade credit, and shipments
and terms with vendors and service providers for current orders; our ability to
maintain  contracts  that are  critical to our  operations;  potential  adverse
developments  with respect to our liquidity or results of  operations;  general
economic and business  conditions;  competition,  including  increased  capital
investment and promotional activity by our competitors;  availability, location
and terms of sites for store development;  the successful implementation of our
capital expenditure program; labor relations;  labor and employee benefit costs
including  increases  in  health  care  and  pension  costs  and the  level  of
contributions  to our  sponsored  pension  plans;  the result of our pursuit of
strategic alternatives;  economic and competitive uncertainties; our ability to
pursue strategic alternatives; economic and competitive uncertainties;  changes
in strategies;  changes in generally accepted  accounting  principles;  adverse
changes  in  economic  and  political  climates  around  the  world,  including
terrorist activities and international hostilities; and the outcome of pending,
or the  commencement  of any new, legal  proceedings  against,  or governmental
investigations  of  us,  including  the  previously   announced  SEC  and  U.S.
Attorney's  Office  investigations.  We  caution  that  the  foregoing  list of
important  factors is not  exhaustive.  Accordingly,  there can be no assurance
that we will meet future  results,  performance  or  achievements  expressed or
implied by such forward-looking statements,  which are generally required to be
publicly revised as circumstances change, and which we do not intend to update.


EXPLANATORY NOTE

This Annual  Report on Form 10-K is for the fiscal year ended  January 28, 2006
and, except as expressly indicated otherwise, information in this report speaks
as of such date.  This report  does not  include  all of the audited  financial
information  required to be included in a Form 10-K under applicable SEC rules.
This report includes audited financial information for the 41-week period ended
January 28, 2006 and unaudited  financial  information  for the 11-week  period
ended April 15, 2005 and the fiscal years ended  January 29, 2005,  January 31,
2004, February 1, 2003 and February 2, 2002, as well as management's discussion
of our results of operations  since 2004. This report does not include,  and we
have not otherwise filed or furnished to the SEC, audited financial information
for the fiscal years ended  January 29, 2005 and January 28, 2006. As discussed
further in this report,  we emerged from Chapter 11  bankruptcy  reorganization
effective April 13, 2005.

                                      -3-
<PAGE>

PART I

ITEM 1.   BUSINESS

GENERAL

We are one of the leading  food  retailers  in the eastern  United  States.  We
operate 110  supermarkets in  Pennsylvania,  upstate New York,  Vermont and New
Hampshire  under the "Bi-Lo" (25 stores),  "P&C" (59 stores) and  "Quality" (26
stores) trade names.  We also operate a wholesale  food  distribution  business
serving 79 independent supermarkets and 41 other independent wholesale accounts
and Penny Curtiss Bakery, a Syracuse-based  commercial  bakery. We classify our
businesses in two primary segments: (i) Retail Food Business and (ii) Wholesale
Food Distribution  Business.  Our consolidated  revenues for the 41-week period
ended  January 28, 2006, or the "fiscal  period"  ended January 28, 2006,  were
approximately $1.0 billion.

Our Retail  Food  Business  currently  operates  in  communities  with  diverse
economies  and  demographics.  The  average  revenue  per store for the 41-week
period ended January 28, 2006 was  approximately  $7.5 million.  Our stores are
generally  clustered  geographically  within  our  marketing  area  to  provide
economies of scale in advertising, distribution and operations management.

Our supermarkets offer a broad selection of grocery,  meat,  poultry,  seafood,
dairy, fresh produce, delicatessen, bakery and frozen food products. The stores
also offer  nonfood  products  and  services  such as health  and  beauty  care
products,  housewares,  general  merchandise,  and in many  cases,  pharmacies,
floral items and banking.

Our  supermarkets,   which  average   approximately  36,000  square  feet,  are
conveniently  located  and  generally  modern.  We tailor the size and  product
assortment of each store to local demographics.

Our  Wholesale  Food  Distribution  Business  supplies  independently  operated
supermarkets  with a wide  variety  of  food  and  nonfood  products  from  our
distribution  centers in New York and Pennsylvania.  Customers of the wholesale
food  distribution  business  are  primarily  located in  upstate  New York and
western Pennsylvania.

Revenues for our wholesale  food  distribution  segment for the 41-week  period
ended January 28, 2006 were  approximately  $171.9 million,  which  represented
16.9% of our revenues for the period.

                                      -4-
<PAGE>

On May 30, 2003, The Penn Traffic Company and certain of its subsidiaries filed
petitions  for relief (the  "Bankruptcy  Cases") under Chapter 11 of the United
States  Bankruptcy Code in the United States  Bankruptcy Court for the Southern
District of New York (the  "Bankruptcy  Court").  On February 2, 2005, we filed
the First Amended Joint Plan of  Reorganization  with the Bankruptcy Court. The
Plan was  confirmed  on March 17, 2005 and became  effective  on April 13, 2005
(the "2005 Effective Date").  See  "Reorganization"  and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

The Penn Traffic Company was incorporated in the State of Delaware on April 22,
1992.  Our  principal  executive  offices  are at 1200  State  Fair  Boulevard,
Syracuse, New York, 13221, telephone (315) 453-7284.

Our  fiscal  year ends each year on the  Saturday  closest  to  January  31. In
addition,   in  connection  with  our  emergence  from  Chapter  11  bankruptcy
protection,  on April 16, 2005 we commenced fresh-start financial reporting. As
a result, fiscal year 2006 includes the 52-week period from January 30, 2005 to
January 28, 2006 ("fiscal  year 2006") and two fiscal period ends,  the 41-week
period  from April 17,  2005 to January 28,  2006  ("period  ended  January 28,
2006") and the 11-week  period from January 30, 2005 to April 16, 2005 ("period
ended April 16, 2005").


BUSINESS STRATEGY

Over the past few years, the operating  environment in the supermarket industry
has  become  more  competitive  and  challenging  as a result of,  among  other
factors, a slowing economy,  lack of inflation on food prices and the increased
penetration of the retail food industry by alternative  channels of trade, such
as Wal-mart  supercenters and limited  assortment  stores.  In addition,  since
2002,  a greater  number of  competitive  new stores have opened in our markets
than in  prior  years.  To  respond  to the  challenges  of  such an  operating
environment,  we are committed to all  components of our business  strategy and
are continuing to enhance or refine this strategy as actual results unfold.

In the fall of 2005,  a strategy  session  was held to identify  key  strategic
initiatives  to guide us through  fiscal year 2006 into fiscal year 2007 or the
"period ended February 3, 2007". These initiatives interrelate with each other,
such that improving on one will have a benefit on the others.  The  initiatives
are as follows:


                                      -5-
<PAGE>

I.  INCREASE SAME STORE SALES AND CUSTOMER COUNT

We identified five key factors to increase same store sales and customer counts
at our retail store level. They are:

1. Improve price perception

We  undertook  several  actions  to  improve  our  price  perception  with  our
customers. They included:

   a.  increasing and  reintroducing  our private label items,  which increased
       availability  of lower  priced  items  that  had not been  traditionally
       offered in our stores;

   b.  improving  the front page of our  advertising  circular by reducing  the
       number of items  presented  on the page while  making the savings on the
       items  greater  for  our   customers.   We  also  changed  our  circular
       distribution where appropriate;

   c.  better monitoring of competitors'  pricing to insure that we are in line
       with the competition;

   d.  increasing  our  event  marketing  plan for each of our  trade  names by
       developing  advertising  and  targeted  marketing  campaigns to increase
       customer volume,

   e.  improving the in-store  signage to make our  customers  aware of savings
       opportunities throughout our stores; and

   f.  lowering our costs of goods by taking  advantage of  truck-load  savings
       when available in order to pass the savings on to our customers.

2. Improve store conditions and execution

We enhanced our store  conditions  by improving  our in-stock of products  with
more efficient ordering and in some cases, daily  replenishment of product.  We
also developed a standard for all stores  regarding  facing the store perimeter
and  blocking of all aisles.  With the  implementation  of this  standard,  our
shelves are  consistent  and orderly.  In addition,  we changed the  scheduling
policy to insure that our store  department  managers' were  accessible to meet
our customers' needs.

3. Improve customer service

We listened to what the  customer  wanted via  research  and  complaints.  As a
result,  we increased  efficiency  at the  checkout by improving  the number of
items  scanned  per minute and  improving  our  scheduling  to better  meet our
customers'  needs.  We followed up with an enhanced  secret shopper  program to
point out areas that  required  special  attention.  We  implemented  a program
having our store  managers' walk through their stores to check the condition of
the store "through the customers' eyes".


                                      -6-
<PAGE>

4. React to changing competitive environment

As competitors  remodeled and added stores, some of our locations became stale.
We  took a hard  look  at the  capital  we had to  spend  on  improvements  and
determined that our "Fresh" concept was the best way to combat the competition.
"Fresh" concept stores offer an enhanced fresh foods  selection,  presentation,
and breadth.

5. Increase community involvement

We  looked  at  each  of  our  marketing   areas  to  determine  our  community
involvement.  We found  that we were not as active in these  communities  as we
would  like to be.  We  implemented  a plan in which one  person at each  store
coordinates and plans community events. We also developed an improved community
events budget to assist our stores in funding these events.


II.  ATTRACT, DEVELOP AND RETAIN THE BEST PEOPLE

In recent years we faced several uncertainties, including our bankruptcy filing
in May 2003. Under these conditions we found it difficult to attract and retain
qualified personnel.  This caused us to fill positions and hire individuals who
may not have been the correct person for the position. Since our emergence from
bankruptcy we have  refocused  our hiring  practices and have assigned a hiring
manager for each  location.  These  managers  must approve all new hires and be
accountable for the recruitment and hiring of their staff.

We have also  improved  our  strategy  to entice  new hires.  These  strategies
included advertising on local radio stations,  participating in local job fairs
and expanding our referral programs.

To retain our current staff and reduce turnover rates, we improved the working
conditions of our facilities and stores.


III. EFFECTIVELY COMMUNICATE TO ASSOCIATES RESULTING IN DESIRABLE MORALE AND
     INCREASED MOTIVATION

While  we  were  in  bankruptcy,  we  did  not  adequately  communicate  to our
associates  at all levels of the  company.  This lack of  communication  led to
employee uncertainty,  which contributed to low productivity,  high turnover, a
lack  of  initiative  and  poor  employee  morale.   We  developed  a  detailed
communication  plan that includes a company  newsletter,  semi-annual town hall
meetings and more information being  disseminated to our associates through our
e-mail system.

In  addition  the  executive  management  team  has  undertaken  a "flow  down"
technique  whereby  information from  management's  weekly meetings is provided
down the chain to our employees.  Also,  regular conference calls are held with
the operations  staff to make sure they are all working  towards the same goals
and all members have the same information.


                                      -7-
<PAGE>

IV.  PROVIDE DIFFERENTIABLE SUPERIOR CUSTOMER SERVICE

We  have  identified  the  need  to  provide   superior   customer  service  to
differentiate ourselves from our competitors.  We have done this through better
associate  training,  improved  hiring  practices,   refocusing  staff  on  the
customer, and improved out of stock inventory.

Our training programs have been improved by keeping our training material up to
date with the latest information,  improving our new hire orientation  process,
developing a computer based training program and holding  semi-annual  training
seminars.  We have  used  customer  feedback  to  improve  processes  and  help
individuals become more effective.


FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Our  businesses  are  classified by our  management  into two primary  industry
segments:  Retail Food Business and Wholesale Food Distribution  Business (both
described  below).  Financial  information  about our industry segments for the
41-week  period ended January 28, 2006 is found in Note 13 to the  Consolidated
Financial Statements.


RETAIL FOOD BUSINESS

We are one of the leading  supermarket  retailers in our operating areas, which
include Pennsylvania,  upstate New York, Vermont and New Hampshire.  We operate
in communities with diverse economies and demographics.

Our stores are conveniently  located in close proximity to our customers.  Most
of our stores are located in shopping  centers.  We believe that our store base
is  generally  modern  and  provides  a pleasant  shopping  experience  for our
customers.

Our supermarkets offer a broad selection of grocery,  meat,  poultry,  seafood,
dairy, fresh produce, delicatessen, bakery and frozen food products. Our stores
also offer  nonfood  products  and  services  such as health  and  beauty  care
products,  housewares,  general  merchandise,  and in many  cases,  pharmacies,
floral items and banking services.  In general, our larger stores carry broader
selections of merchandise  and feature a larger variety of service  departments
than our other stores.

Our  store  sizes and  formats  vary  widely,  depending  upon the  demographic
conditions  in each  location.  For example,  "conventional"  store formats are
generally  more  appropriate  in  areas  of  low  population  density;   larger
populations  are better  served by  full-service  supermarkets  of up to 78,000
square  feet,  which offer an  increased  variety of  merchandise  and expanded
service  departments such as bakeries,  delicatessens,  floral  departments and
fresh seafood departments.


                                      -8-
<PAGE>

WHOLESALE FOOD DISTRIBUTION BUSINESS

We  supply  120  independently  operated  supermarkets  and  other  independent
accounts with a wide variety of food and nonfood products from our distribution
centers in New York and  Pennsylvania.  These  customers of our wholesale  food
distribution  business  are  primarily  located in upstate New York and western
Pennsylvania.

As  part  of  our  wholesale  food  distribution  business,  we  license  on  a
royalty-free basis, the use of our "Riverside," "Bi-Lo" and "Big M" names to 79
of these independently owned supermarkets that are required to maintain certain
quality and other standards. The majority of these independent stores use us as
their   primary   wholesaler   and  also   receive   advertising,   accounting,
merchandising and retail counseling  services from us. In addition,  we receive
rent  from  24 of  the  licensed  independent  operators  that  sublease  their
supermarkets from us. We also act as a food distributor to 41 other independent
accounts.  In addition to contributing to our operating  income,  our wholesale
food   distribution   business  enables  us  to  spread  fixed  and  semi-fixed
procurement and distribution costs over additional revenues.


OTHER

We own and operate Penny Curtiss,  a bakery  processing plant in Syracuse,  New
York.  Penny  Curtiss  manufactures  and  distributes  fresh and frozen  bakery
products to our stores and third parties,  including customers of our wholesale
food distribution business.


                                      -9-
<PAGE>

PURCHASING AND DISTRIBUTION

We are a  large-volume  purchaser of products.  Our  purchases are generally of
sufficient  volume to qualify for minimum  price  brackets  for most items.  We
purchase brand name grocery merchandise  directly from national  manufacturers.
We also purchase private label products,  other food products and certain goods
not for resale through TOPCO  Associates,  Inc., a national product  purchasing
cooperative   comprising  63  regional   supermarket   chains  and  other  food
distributors.  For the 11-week  period ended April 16, 2005, the 41-week period
ended  January 28, 2006 and the fiscal years ended January 29, 2005 and January
31, 2004,  purchases of goods for resale from TOPCO Associates,  Inc. accounted
for approximately 19%, 20%, 21% and 17%,  respectively,  of our total purchases
of goods during those periods.

Our primary New York distribution  facility is a leased 514,000 square foot dry
grocery  facility in Syracuse,  New York.  We also lease a 241,000  square foot
distribution center for perishable  products in Syracuse,  and a 274,000 square
foot  distribution  center for general  merchandise  and health and beauty care
items in Jamestown, New York.

Our primary Pennsylvania  distribution facility is a leased 390,000 square foot
dry grocery  facility in DuBois,  Pennsylvania.  We also lease a 195,000 square
foot distribution center for perishable products in DuBois.

Approximately  three-fourths of the merchandise offered in our retail stores is
distributed from our warehouses by our fleet of tractors, refrigerated trailers
and dry trailers.  Merchandise  not delivered  from our warehouses is delivered
directly to the stores by manufacturers, distributors, vendor drivers and sales
representatives for such products as beverages, snack foods and bakery items.


COMPETITION

The food  retailing  business  is highly  competitive  and may be  affected  by
general  economic  conditions.  The  number of  competitors  and the  degree of
competition  encountered by our supermarkets vary by location.  We compete with
several  multi-regional,  regional and local  supermarket  chains,  convenience
stores,  stores  owned and operated and  otherwise  affiliated  with large food
wholesalers,  unaffiliated  independent food stores,  warehouse clubs, discount
drug  store  chains,   discount  general  merchandise  chains,   "supercenters"
(combination supermarket and general merchandise stores) and other retailers.


                                     -10-
<PAGE>

EMPLOYEES

Labor  costs and their  impact on  product  prices  are  important  competitive
factors  in  the  supermarket   industry.  As  of  January  28,  2006,  we  had
approximately 7,600 hourly employees and 700 salaried employees.

Approximately  84.5% of our  hourly  employees  belong to the  United  Food and
Commercial   Workers  Union.  An  additional  8.3%  of  our  hourly   employees
(principally  employed in our  distribution  function and in our bakery  plant)
belong to a total of four other unions.  All salaried employees and 7.2% of the
hourly employees do not belong to a union.


GOVERNMENT REGULATION

Our food and drug business requires us to hold various licenses and to register
certain of our  facilities  with state and federal  health,  drug and alcoholic
beverage  regulatory  agencies.  By virtue of these  licenses and  registration
requirements,  we are  obligated to observe  certain rules and  regulations.  A
violation  of such  rules  and  regulations  could  result in a  suspension  or
revocation of these licenses or registrations,  which could require us to close
the  affected  stores until the  violation  is  remedied.  Most of our licenses
require periodic  renewals.  We have experienced no material  difficulties with
respect to obtaining, retaining or renewing our licenses and registrations.


SEASONALITY, CUSTOMERS AND SUPPLIERS

Our supermarket  business is generally not seasonal in nature.  During the past
three  fiscal  years,  no single  customer or group of  customers  under common
control  accounted  for 10% or more of our  consolidated  revenues.  Groceries,
general  merchandise  and raw  materials  are  available  from  many  different
sources.  During the past three fiscal years, no single supplier  accounted for
10% or more of our cost of sales except TOPCO Associates, Inc., which accounted
for  approximately  19%,  20%, 21% and 17% of purchases of goods for resale for
the 11-week  period ended April 16, 2005,  the 41-week period ended January 28,
2006,   the  fiscal  years  ended  January  29,  2005  and  January  31,  2004,
respectively.


                                     -11-
<PAGE>

REORGANIZATION - 2005 EFFECTIVE DATE

On May 30, 2003 we and all of our subsidiaries filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern  District of New York.  On April 13, 2005 our Chapter 11
Plan of Reorganization became effective.

While  operating  under  Chapter 11, we  reorganized  our business  operations,
including  the  cessation of business in Ohio and West  Virginia  under the Big
Bear  name,  the   implementation   of  cost  reduction  and  cost  containment
initiatives,  which  included  consolidation  and  closing of  warehouses,  the
closing of unprofitable stores and the rejection of certain executory contracts
and unexpired  leases.  Additionally,  we disposed of a number of non-core real
estate properties.

    Pursuant  to  the  terms  of  our  plan  of  reorganization  the  following
transactions occurred:

    1.   Administrative   claims,   priority  tax  claims  and  our  debtor-in-
         possession loan were paid in full, in cash.

    2.   The Penn Traffic  Company Cash Balance  Pension Plan was terminated in
         accordance  with the terms and  conditions  of a settlement  agreement
         between The Pension Benefit Guaranty  Corporation,  or the "PBGC," and
         us. The PBGC settlement agreement provided for, among other things,

         o    an  initial  partial  cash  settlement  payment  to the  PBGC  of
              $155,378;

         o    funding of PBGC allowed  administrative claims of $3.5 million to
              be paid in four equal  installments  bi-annually  over a two-year
              period commencing six months after the 2005 Effective Date; and

         o    an allowed PBGC unsecured claim in the amount of $60.0 million.

              The PBGC  settlement  agreement  also required us to maintain all
              remaining retirement plans in accordance with their terms and all
              requirements of ERISA and the Internal Revenue Code.

    3.   We issued  8,279,800 new shares of our common stock to satisfy  senior
         note claims, trade claims and other unsecured claims.

    4.   Unsecured  claim  holders with claims of $5,000 or less who elected to
         be  classified  as  convenience  claims  received 15% of their allowed
         claim in cash.

    5.   Our existing common stock and other equity interests were canceled and
         received no distributions under our plan of reorganization.


                                     -12-
<PAGE>

On  April  13,  2005,  in  connection  with  the  consummation  of our  plan of
reorganization,  we  entered  into a  $136.0  million  senior  credit  facility
comprised  of a $130.0  million  revolving  loan and a $6.0  million term loan.
Concurrent  with the senior  credit  facility,  we entered into a $28.0 million
supplemental  real estate  facility  consisting  of a term loan on a multi-draw
basis. The credit facility and the supplemental real estate facility provide us
with aggregate credit facilities of $164.0 million.  Additionally,  pursuant to
our  plan of  reorganization,  we  entered  into a  sale-leaseback  transaction
pursuant to which we sold our five owned  distribution  centers  located in New
York and  Pennsylvania  for $37.0 million and leased the  distribution  centers
back for a period of 15 years  from  emergence.  The  lenders  under the credit
facility have a first priority perfected security interest in substantially all
of our assets,  with a second  lien on a  substantial  number of our  leasehold
assets.  The  supplemental  real estate  facility is secured by a first lien on
such  leasehold  interests  and a  second  lien  on  substantially  all  of our
remaining  properties.   Proceeds  from  the  two  credit  facilities  and  the
sale-leaseback  transaction were used to satisfy our obligations under our plan
of  reorganization,  including payment of our  debtor-in-possession  financing.
Additionally,  the credit  facilities  continue to provide funds to satisfy our
ongoing working capital and capital expenditure requirements.


AVAILABLE INFORMATION

We file annual,  quarterly  and current  reports,  proxy  statements  and other
information with the SEC under the Exchange Act.

You may read and copy this information at the Public Reference Room of the SEC,
Room 1024, 100 F Street NE, Washington,  D.C. 20549. You may obtain information
about the  Public  Reference  Room by  calling  the SEC at  1-800-SEC-0330.  In
addition,  the SEC maintains an Internet website that contains  reports,  proxy
and information  statements and other  information  regarding issuers that file
electronically  through the "EDGAR"  (Electronic  Data Gathering,  Analysis and
Retrieval) System, available on the SEC's website (WWW.SEC.GOV).


                                     -13-
<PAGE>

ITEM 1A.  RISK FACTORS

THE  SUPERMARKET  INDUSTRY IS HIGHLY  COMPETITIVE.  IF WE ARE UNABLE TO COMPETE
EFFECTIVELY,  OUR  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS  COULD BE
MATERIALLY AFFECTED.

The supermarket industry is highly competitive and characterized by high
inventory turnover, high capital intensity and narrow profit margins. The number
and type of competitors vary by location and include:

    o    multi-regional and regional supermarket chains;
    o    independent and specialty grocers;
    o    drug and convenience stores; and
    o    "alternative  format"  food  stores,  such as  specialty  food stores,
         retail  drug  stores,  national  general  merchandisers  and  discount
         retailers, membership clubs, warehouse stores and supercenters.

We also face increasing  competition  from restaurants and fast food chains due
to the increasing  proportion of household food  expenditures for food prepared
outside the home.  In  addition,  certain of our stores also compete with local
video stores, florists, book stores, pharmacies and gas stations.

Our principal  competitors  include national and regional  supermarket  chains,
which compete with us on the basis of location,  quality of products,  service,
price,  product  variety and store  condition.  An overall lack of inflation in
food  prices  and  increasingly  competitive  markets  has  made  it  difficult
generally for grocery store operators to achieve  comparable store sales gains.
Because  sales  growth has been  difficult  to  attain,  our  competitors  have
attempted to maintain  market share  through  increased  levels of  promotional
activities and discount pricing, creating a more difficult environment in which
to consistently increase year-over-year sales gains.

In addition, most of our "traditional" and "nontraditional" competitors are not
unionized  and have lower labor costs,  which allows them to take measures that
could adversely affect our competitive position.

We face  increased  competitive  pressure in all of our markets  from  existing
competitors and from the threatened entry by one or more major new competitors.
Some  of our  competitors  have  greater  financial  resources  and  have  less
indebtedness  than us, and could use these  resources  to take  measures  which
could adversely affect our competitive position.

Our business,  financial  condition or results of operations could be adversely
affected by competitive factors, including product mix and pricing changes that
may be made in response to competition from existing or new  competitors.  From
time to time, the relative  strength of our  competitors  changes  depending on
prevailing market conditions.


                                     -14-
<PAGE>

OUR BUSINESS AND RESULTS OF OPERATIONS MAY BE SENSITIVE TO ECONOMIC  CONDITIONS
THAT IMPACT CONSUMER SPENDING.

Our business and results of  operations  may be sensitive to changes in overall
economic  conditions that impact  consumer  spending,  including  discretionary
spending.  Future economic conditions affecting disposable consumer income such
as employment levels,  energy prices,  business conditions,  interest rates and
tax rates could  reduce  consumer  spending or cause  consumers  to shift their
spending away from our product quality and service offering,  to a more focused
price-based  offering.  A  general  reduction  in the  level  of  discretionary
spending or shifts in consumer  discretionary spending to our competitors could
adversely affect our growth and profitability.


WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR COMPARABLE STORE SALES.

Our comparable  store sales in the future could  fluctuate or be lower than our
historical average for many reasons,  including  increased  competition,  price
changes in response to competitive factors,  shifts in demographic patterns and
local  economic  conditions,  changes in traffic  patterns and possible  supply
shortages. Our results of operations may be materially impacted by fluctuations
in our comparable store sales as it becomes more difficult to leverage expenses
at a lower level of sales.


OUR STORES ARE CONCENTRATED IN THE NORTHEASTERN UNITED STATES, MAKING US
SUSCEPTIBLE TO ECONOMIC DOWNTURNS, NATURAL DISASTERS AND OTHER ADVERSE
CONDITIONS OR CATASTROPHIC EVENTS IN THAT REGION.

Our stores are  located in  Pennsylvania,  upstate  New York,  Vermont  and New
Hampshire. As a result, we are vulnerable to economic downturns in those areas,
in addition to those that may affect the country as a whole, as well as natural
and other  catastrophic and terrorist events that may impact these regions.  In
addition, we may be adversely affected by these events to a greater extent than
our competitors whose operations extend outside of these regions.  These events
may  adversely  affect our  sales,  which may lead to lower  earnings,  or even
losses, and may also adversely affect our future growth and expansion.


                                     -15-
<PAGE>

OUR DISTRIBUTION AND BAKERY BUSINESS COULD BE NEGATIVELY AFFECTED IF WE FAIL TO
RETAIN EXISTING CUSTOMERS OR ATTRACT SIGNIFICANT NUMBERS OF NEW CUSTOMERS.

Increasing the growth and profitability of our distribution and bakery business
is dependent in large measure upon our ability to retain existing customers and
capture  additional  customers  through our  existing  network of  distribution
centers,  enabling  us to more  effectively  utilize  the  fixed  assets in our
distribution  and bakery  businesses.  Our  ability to achieve  these  goals is
dependent,  in part,  upon our  ability to  continue to provide a high level of
customer  service,  offer  competitive  products at low prices,  maintain  high
levels  of  productivity  and  efficiency,   particularly  in  the  process  of
integrating  new  customers  into our  distribution  system  and  manufacturing
process, and offer marketing, merchandising and ancillary services that provide
value to our independent  distribution  customers.  If we are unable to execute
these  tasks  effectively  and at a  competitive  price,  we may not be able to
attract  significant  numbers of new customers and attrition among our existing
customer  base could  increase,  either or both of which  could have an adverse
impact on our revenue and profitability.


CHANGES IN VENDOR PROMOTIONS OR ALLOWANCES, INCLUDING THE WAY VENDORS TARGET
THEIR PROMOTIONAL SPENDING, AND OUR ABILITY TO EFFECTIVELY MANAGE THESE PROGRAMS
COULD SIGNIFICANTLY IMPACT OUR MARGINS AND PROFITABILITY.

We engage in a wide  variety of  promotional  programs  cooperatively  with our
vendors.  The nature of these  programs and the  allocation of funds among them
evolve over time as the parties  assess the results of specific  promotions and
plan for future promotions.  These programs require careful management in order
for us to maintain or improve margins while at the same time  increasing  sales
for us and for our participating  vendors.  A reduction in overall  promotional
spending  or a shift  in  promotional  spending  away  from  certain  types  of
promotions that we have historically  utilized could have a significant  impact
on our gross profit margin and  profitability.  Our ability to  anticipate  and
react to changes in promotional  spending by, among other things,  planning and
implementing  alternative  programs that are expected to be mutually beneficial
to our vendors and us, will be an important  factor in maintaining or improving
margins  and  profitability.  If we are  unable  to  effectively  manage  these
programs,  it could have a material adverse effect on our results of operations
and financial condition.


                                     -16-
<PAGE>

OUR DEBT INSTRUMENTS INCLUDE FINANCIAL AND OTHER COVENANTS THAT MAY LIMIT OUR
OPERATING FLEXIBILITY AND THAT MAY AFFECT OUR FUTURE BUSINESS STRATEGIES AND
OPERATING RESULTS.

Covenants in the documents governing our outstanding or future debt,  including
our credit facilities, or our future debt levels, could limit our operating and
financial  flexibility.  Our  ability  to  respond  to  market  conditions  and
opportunities  as well as capital needs could be  constrained  by the degree to
which we are leveraged,  by changes in our availability or cost of capital, and
by contractual  limitations on the degree to which we may,  without the consent
of our  lenders,  take  actions  such as engaging in mergers,  acquisitions  or
divestitures,   incurring   additional  debt,   making  capital   expenditures,
rationalizing underperforming assets and making investments, loans or advances.
If needs  or  opportunities  were  identified  that  would  require  additional
financial  resources,  obtaining those additional  resources could increase our
borrowing costs, further reduce financial  flexibility,  require alterations in
our strategies and affect future operating results.


SUBSTANTIAL OPERATING LOSSES MAY OCCUR IF THE CUSTOMERS TO WHOM WE EXTEND CREDIT
OR FOR WHOM WE GUARANTEE LOAN OR LEASE OBLIGATIONS FAIL TO REPAY US.

In the ordinary course of business,  we extend credit,  including loans, to our
food  distribution  customers.  We also  sublease  store  sites to  independent
retailers. Generally, our loans and other financial accommodations are extended
to  small   businesses  that  are  unrated  and  may  have  limited  access  to
conventional  financing.  As of January 28, 2006 we had loans, net of reserves,
of $0.3 million outstanding to two of our food distribution customers and lease
obligations for properties sublet to food distribution  customers totaling $8.3
million.  In the normal course of business,  we also sublease retail properties
to third parties.  While we seek to obtain security  interests and other credit
support  in  connection  with the  financial  accommodations  we  extend,  such
collateral may not be sufficient to cover our exposure.

If a  significant  number of these  customers or lease  counterparties  fail to
repay us or honor their lease  obligations to us, our operating  results may be
adversely affected.


                                     -17-
<PAGE>

A SIGNIFICANT  PORTION OF OUR EMPLOYEES ARE  UNIONIZED,  AND OUR  RELATIONSHIPS
WITH UNIONS, INCLUDING LABOR DISPUTES OR WORK STOPPAGES,  COULD HAVE AN ADVERSE
IMPACT ON OUR FINANCIAL RESULTS.

We are party to approximately  18 collective  bargaining  agreements,  of which
seven were  scheduled  to expire in fiscal  year 2006,  and all seven have been
renewed.  These  expiring  agreements  covered  approximately  71% of our union
employees.  In future  negotiations  with labor  unions,  we expect that rising
health care,  pension and employee benefit costs,  among other issues,  will be
important  topics  for  negotiation.  Upon the  expiration  of such  collective
bargaining  agreements,  our inability to negotiate  acceptable  contracts with
labor  unions  could  result in strikes by the  affected  workers  and  thereby
significantly  disrupt  our  operations.  Further,  if we are unable to control
health  care  and  pension  costs  provided  for in the  collective  bargaining
agreements,  we may experience  increased operating costs and an adverse impact
on future operating results.


WE MAY  EXPERIENCE  TECHNOLOGY  FAILURES  WHICH  COULD HAVE A MATERIAL  ADVERSE
EFFECT ON OUR BUSINESS.

We use large, complex information  technology systems that are important to our
business  operations.  Although  we  have a  disaster-recovery  plan  and  have
installed  security  programs and  procedures,  the security of our  technology
systems could be  compromised  and technology  failures and system  disruptions
could occur.  Any of these events could result in a loss of sales or profits or
cause us to incur significant  costs,  including  payments to third parties for
damages.


                                     -18-
<PAGE>

LOSSES AS A RESULT OF OUR OWNING, LEASING AND DEVELOPING REAL ESTATE MAY IMPAIR
OUR ABILITY TO FOCUS ON AND EXPAND OUR CORE BUSINESS AS DESIRED.

As a result of our real estate  holdings and leases,  we are subject to varying
degrees of risk and  liability  generally  incident to the  ownership,  use and
development of real estate.  These risks and liabilities  include,  among other
things:

    o    fluctuations in value caused by adverse changes in national,  regional
         and local economic  condition and local real estate market  conditions
         (such as an oversupply of or a reduction in demand for retail space in
         the area);

    o    costs of compliance with zoning, environmental, tax and other laws and
         regulations;

    o    real estate  development  risks,  such as incorrect cost and occupancy
         estimates,  non-availability  of  financing  and the need for mortgage
         lender or property partner approvals for certain expansion activities;

    o    the  perceptions of customers and tenants and  prospective  tenants of
         the safety, convenience and attractiveness of our properties;

    o    the lack of  liquidity of real estate  investments  and our ability to
         sell,  lease or sublease  any of our  properties  for cash in a timely
         fashion;

    o    failure to promptly renew leases;

    o    competition from comparable properties;

    o    the occupancy rate of our properties;

    o    tenant and subtenant defaults and the costs of enforcing our rights;

    o    the effects of any  bankruptcies  or  solvencies  of major  tenants or
         subtenants;

    o    increasing  operating  costs  (including  increased real estate taxes)
         which may not be passed through fully to tenants or subtenants; and

    o    fluctuations in mortgage interest and lease rates.

A failure to  adequately  manage these risks and  liabilities  could  adversely
affect  our  revenues,  profits  and  available  cash and could have a material
adverse effect on our business, financial condition or results of operations.

Several  portions  of  our  properties  are  mortgaged  to  secure  payment  of
indebtedness outstanding under our credit facilities.  If we are unable to meet
our debt  obligations,  we could sustain losses as a result of  foreclosures on
the  properties  by our  lenders.  In  addition,  if it  becomes  necessary  or
desirable  for us to dispose  of one or more of the  mortgaged  properties,  we
might not be able to obtain a release of the lien on such mortgaged  properties
without  payment of the  associated  debt.  The  foreclosure  of a mortgage  or
default  of a loan on a property  or the  inability  to sell a  property  could
adversely  affect our business,  financial  condition or results of operations.
These considerations could make it difficult for us to sell properties, even if
a sale were in our best interests.

                                     -19-
<PAGE>

We maintain property insurance,  difference in conditions  insurance,  national
flood insurance (where applicable), general liability insurance, directors' and
officers'  insurance  and excess  insurance  coverage.  At leased and mortgaged
locations we maintain any of these lines of coverage that we are  contractually
obligated  to  maintain.  At owned  locations we maintain all of these lines of
coverage.  We maintain large deductibles  and/or large layers of self-insurance
on several of these lines of coverage.

We are subject to  federal,  state and local laws and  regulations  relating to
zoning, land use, environmental  protection,  work place safety, public health,
beer and wine  sales and  pharmaceutical  sales.  A number of states  and local
jurisdictions  regulate the licensing of  supermarkets,  including beer license
grants. In addition,  under certain local  regulations,  we are prohibited from
selling beer in certain of our stores.


WE ARE AFFECTED BY FLUCTUATING UTILITY AND FUEL COSTS.

Fluctuating  fuel costs  adversely  affect our operating costs for our fleet of
tractors  and  trailers  that   distribute   goods  from  our   warehouses  and
distribution  facilities  to all of our  stores.  We may not be able to recover
these rising  utility and fuel costs through  increased  prices  charged to our
customers.


WE MAY BE HELD LIABLE FOR ENVIRONMENTAL DAMAGES WITH REGARD TO OUR CURRENT AND
FORMER PROPERTIES, REGARDLESS OF THE LAWFULNESS OF OUR ACTIVITIES ON SUCH
PROPERTIES.

Our  operations  subject us to various  laws and  regulations  relating  to the
protection of the  environment,  including  those  governing the management and
disposal of hazardous  materials and the cleanup of contaminated  sites.  Under
some  environmental  laws, such as the  Comprehensive  Environmental  Response,
Compensation,  and Liability Act of 1980, also known as CERCLA or the Superfund
law, and similar state statutes,  responsibility for the entire cost of cleanup
of a contaminated site can be imposed upon any current or former site owners or
operators,  or upon any party who sent  waste to the  site,  regardless  of the
lawfulness of the original activities that led to the contamination.  From time
to time we have been named as one of many  potentially  responsible  parties at
Superfund  sites,  although to date our share of liability has  typically  been
small.  We believe we are currently in substantial  compliance  with applicable
environmental requirements.

However,  future developments such as more aggressive enforcement policies, new
laws or discovery of unknown conditions may require  expenditures that may have
a material adverse effect on our business and financial condition.


                                     -20-
<PAGE>

CUSTOMER CONCERNS REGARDING FOOD SAFETY MAY ADVERSELY AFFECT OUR BUSINESS.

We could be adversely  affected if our customers lose confidence in the quality
and safety of certain  products in our  stores.  Negative  publicity  regarding
these concerns,  whether valid or not, may discourage customers from buying our
products.  Any  loss of  confidence  on the  part  of our  customers  would  be
difficult and costly to reestablish. As such, any issue regarding the safety of
our products could have a substantial and adverse effect on our operations.


OUR OPERATING RESULTS MAY BE IMPACTED BY VARIABILITY IN SELF-INSURANCE LIABILITY
ESTIMATES.

We are self-insured for workers'  compensation and general  liability claims up
to set retention  amounts,  after which we maintain excess insurance  coverage.
Liabilities  are  maintained  based  on  independent   actuarial  estimates  of
aggregate  liability  claims  incurred  and an estimate  for  incurred  but not
reported claims. Our insurance  accruals reflect certain actuarial  assumptions
and  management  judgments  that are made based on factors  that are subject to
change.  Any  significant  variation  in these  factors  could cause a material
change in our self-insurance liabilities and our operating results.


WE HAVE NOT RECENTLY FILED PERIODIC REPORTS WITH THE SECURITIES AND EXCHANGE
COMMISSION.

We did not complete an audit for the periods  between  February 1, 2003 through
April 16, 2005.  Additionally,  we have not made any required  periodic filings
with the SEC for any period since our Annual Report on Form 10-K for the fiscal
year ended February 2, 2002 and our most recent quarterly  reports on Form 10-Q
for the quarter ended  November 2, 2002.  Because of our failure to make timely
periodic filings with the SEC, we could be subject to civil penalties and other
administrative  proceedings  by the SEC. In addition,  until we have  completed
such updated  filings,  it is unlikely  that our common shares will be approved
for  listing on any  national  securities  exchange.  The failure of our common
shares to be so listed may adversely affect their liquidity and trading price.


WE HAVE NOT RECENTLY FILED LOCAL, STATE OR FEDERAL INCOME TAX RETURNS WITH THE
APPROPRIATE GOVERNMENTAL AUTHORITIES.

As a result of our inability to definitively  determine our taxable income, and
as a result of our  operating  losses over the years,  we have not filed any of
our federal,  state or local income tax returns  following fiscal year 2003. In
addition,  we have not made any  estimated  tax  payments  during that  period.
Because of our  failure to file  timely  annual  income  tax  returns  with the
appropriate  local  authorities,  we  could  be  subject  to  failure  to  file
penalties, as well as other penalties.

                                     -21-
<PAGE>

THERE IS NO EXISTING TRADING MARKET FOR OUR COMMON STOCK.

Our  common  shares  are  currently  quoted on the Pink  Sheets and there is no
assurance that an active trading market for our common shares will develop.  We
are not currently applying for a listing on any national  securities  exchange.
Accordingly,  no assurance  can be given that a holder of common shares will be
able to sell such securities in the future or as to the price at which any such
sale would occur.  If a trading  market were to develop,  the  liquidity of the
market for such securities and the prices at which such securities  would trade
will  depend  upon many  factors,  including  the number of  holders,  investor
expectations  and other  factors  beyond our control.  In addition,  our common
shares have been issued to certain  pre-petition  creditors as part of our plan
of  reorganization.  Some of  these  holders  may  prefer  to  liquidate  their
investment  rather  than to hold it on a long-term  basis,  which may create an
initial imbalance in the market if and when one were to develop.


THE RESULTS OF THE ONGOING GOVERNMENTAL INVESTIGATIONS REGARDING OUR PROMOTIONAL
ALLOWANCE PRACTICES AND POLICIES MAY HAVE AN ADVERSE EFFECT ON US.

We are  currently  the subject of ongoing  investigations  by the United States
Attorney's  Office  for  the  Northern  District  of New  York  and by the  SEC
regarding   our   promotional   allowance   practices   and   policies.   These
investigations  began  prior  to  our  emergence  from  Chapter  11  bankruptcy
protection in April 2005. We are cooperating with these investigations and have
produced  documents  and  made  our  employees   available  for  interviews  as
requested.  At present, we are unable to predict the outcome of either of these
investigations.  However,  an  unfavorable  resolution of these  investigations
could  ultimately  result in damage claims,  fines or penalties to us. Any such
claims,  fines or penalties could  adversely  affect our business or results of
operations.


OUR DISCLOSURE CONTROLS AND PROCEDURES WERE INEFFECTIVE AS OF JANUARY 28, 2006,
AND THESE WEAKNESSES COULD HAVE A MATERIALLY ADVERSE EFFECT ON US.

As  discussed in more detail in Item 9A.  below,  as a result of changes in our
financial condition and operations immediately preceding,  during and after our
reorganization   under   Chapter  11  bankruptcy   protection,   including  the
appointment  of our  current  President  and Chief  Executive  Officer  to such
position on December 12, 2006 and our current  Senior Vice  President and Chief
Financial  Officer  to such  position  on May 9, 2007 and other  changes in our
senior  management  and our external  auditors,  as well as our failure to make
periodic reports on a timely basis to the SEC during such periods,  our present
management has concluded that our disclosure  controls and procedures  were not
effective  as of  January  28,  2006 in  providing  reasonable  assurance  that
material information requiring disclosure was brought to management's attention
on a timely basis and that our financial reporting was reliable.

As discussed in more detail in Item 9A. below, our current management has taken
steps to correct  deficiencies  and weaknesses in our  disclosure  controls and
procedures.  However,  it is probable  that we may not be able to remediate all
deficiencies and weaknesses before the conclusion of fiscal year 2008.

                                     -22-
<PAGE>

ITEM 2.  PROPERTIES

We follow the general  industry  practice of leasing the majority of our retail
supermarket  locations.  We own 21 and  lease  89 of the  supermarkets  that we
operate.  The leased  supermarkets  are held under leases expiring from 2006 to
2020,  excluding  option  periods.  We own or lease 24  supermarkets  which are
leased or subleased to independent operators.

We own 3 shopping centers that contain company-owned or licensed  supermarkets.
We also lease  distribution  centers in Syracuse and  Jamestown,  New York; and
DuBois, Pennsylvania; and a bakery plant in Syracuse, New York.

Also see Item 1 - "Business - Retail Food  Business" and "Business - Purchasing
and Distribution" for additional information concerning our properties.


ITEM 3.  LEGAL PROCEEDINGS

The  United  States  Attorney  for the  Northern  District  of New York and the
Securities and Exchange Commission has been conducting  investigations relating
to our promotional allowance practices and policies.  Such investigations began
prior to our emergence from bankruptcy in April 2005. We have been  cooperating
with these  investigations  and have produced  documents and made our employees
available for interviews as requested.  We understand that these investigations
are ongoing.

On June 1,  2006,  we  announced  that  the  Audit  Committee  of the  Board of
Directors had completed its internal investigation of our promotional allowance
practices.  The Audit  Committee  hired  independent  counsel  to  perform  the
investigation.  The  Audit  Committee  found  that we had  engaged  in  certain
improper  practices  principally  relating  to  the  premature  recognition  of
promotional  allowances and that these practices had largely ceased by the time
of our Chapter 11 filing in May 2003.  On February 3, 2006,  we announced  that
the  employment  of  our  Chief  Marketing  Officer  and  our  Vice  President,
Non-Perishables  Marketing had been  terminated  following an interim report to
the Audit Committee on the findings of the investigation.

In connection with these matters,  we could be subject to damage claims,  fines
or  penalties.  At present,  we are unable to  estimate  the  likelihood  of an
unfavorable  outcome or the amount of any damage claims,  fines or penalties in
the event of an  unfavorable  outcome and,  accordingly,  no liability has been
recorded for this contingency.

Also see Item 1 -  "Business  -  Reorganization  - 2005  Effective  Date" for a
description of the consummation of our plan of reorganization and see Note 8 to
our consolidated financial statements, included in this report, regarding legal
proceedings relating to the consummation of our plan of reorganization.


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

No matter was  submitted to a vote of security  holders  during the fiscal year
ended January 28, 2006.

                                     -23-
<PAGE>

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASE OF EQUITY SECURITIES

Since August 23,  2005,  our common  shares have been quoted on an  unsolicited
basis on the Pink Sheets under the symbol  "PTFC.PK".  All of our common shares
that were  outstanding  prior to April 13, 2005, the effective date of our plan
of  reorganization,  were  cancelled as part of our  emergence  from Chapter 11
bankruptcy protection

The following  table sets forth the high and low bid information for our common
shares  during the two fiscal  quarters  during  fiscal  year 2006 in which our
common shares were quoted.  Such  over-the-counter  market  quotations  reflect
inter-dealer prices, without retail markup, mark-down or commission and may not
necessarily represent actual transactions.

                                                          HIGH           LOW
                                                       ---------     ---------
             Quarter Ended January 28, 2006            $   17.00     $   12.00
             Quarter Ended October 29, 2005                22.25         15.00


Our common  shares were held by  approximately  700  stockholders  of record on
August 1, 2007.

There have been no  repurchases  of our common  shares  during the fiscal  year
ended January 28, 2006.

We have not paid a cash dividend to common  stockholders  since we emerged from
bankruptcy and we do not anticipate  paying a cash dividend in the  foreseeable
future.


                                     -24-
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

CONSOLIDATED FIVE-YEAR FINANCIAL SUMMARY

Set forth below is our selected historical  consolidated financial data for the
five fiscal years ended  January 28, 2006. As a result of the  consummation  of
our plan of  reorganization  we adopted  fresh-start  reporting as of April 16,
2005.  The  accounting  periods ended on or prior to April 16, 2005,  have been
designated  "Predecessor Company" and the periods subsequent to April 16, 2005,
have been designated "Successor Company."

In accordance with the  implementation  of fresh-start  reporting,  our assets,
liabilities and  stockholders'  equity have been revalued as of April 16, 2005.
In addition, as a result of the consummation of our plan of reorganization, the
amount of our indebtedness has been  substantially  reduced.  Accordingly,  our
financial statements for periods after April 16, 2005 are not comparable to our
financial statements for periods ended on or prior to such date.

The selected  historical  consolidated  financial  data for the 41-week  period
ended January 28, 2006, are derived from our consolidated financial statements,
which have been audited by Eisner LLP, independent accountants. The Predecessor
Company's  selected  historical  consolidated  financial  data for the  11-week
period ended April 16, 2005,  52-week  periods ended January 29, 2005,  January
31, 2004,  February 1, 2003 and February 2, 2002 are derived from our unaudited
consolidated  financial  statements.   In  addition,  the  selected  historical
consolidated  financial  data  for  the  Successor  Company  should  be read in
conjunction  with our  consolidated  financial  statements  and  related  notes
included elsewhere herein.


                                     -25-
<PAGE>

<TABLE>
                                     (AUDITED)
                                     SUCCESSOR
                                      COMPANY                       (UNAUDITED) PREDECESSOR COMPANY
                                   -----------------------------------------------------------------------------------------
                                      41 WEEKS       11 WEEKS      52 WEEKS       52 WEEKS      52 WEEKS        52 WEEKS
                                       ENDED          ENDED          ENDED         ENDED          ENDED           ENDED
(IN THOUSANDS OF DOLLARS,           JANUARY 28,     APRIL 16,     JANUARY 29,   JANUARY 31,    FEBRUARY 1,     FEBRUARY 2,
   EXCEPT PER SHARE DATA)               2006           2005          2005           2004          2003          2002 (11)
                                   -------------------------------------------------------------------------- --------------
<S>                                  <C>             <C>           <C>            <C>           <C>             <C>
REVENUES                             $1,015,893   |  $  265,260    $1,285,148     $1,307,977    $1,348,437      $1,364,980
                                                  |
COSTS AND OPERATING EXPENSES:                     |
   Cost of sales (1)                    754,995   |     195,533      955,609         973,393       999,880       1,018,605
   Selling and administrative                     |
   expenses (2)                         256,300   |      71,414      312,826         325,388       319,118         305,987
   Amortization of goodwill (4)               -   |           -            -               -             -         109,809
   Asset impairment charge (3)                -   |           -            -           1,002        17,858               -
   Goodwill impairment charge (4)             -   |           -            -          22,832        28,397               -
                                     ----------   |  ----------    ---------      ----------    ----------      ----------
                                                  |
OPERATING INCOME (LOSS)                   4,598   |      (1,687)      16,713         (14,638)      (16,816)        (69,421)
   Interest expense (5)                   8,289   |       1,755       12,365          32,018        35,479          34,820
   Gain on extinguishment of debt(6)              |    (182,831)
   Reorganization expense (7)             1,023   |      71,117       19,060          30,818             -               -
                                     ----------   |  ----------    ---------      ----------    ----------      ----------
                                                  |
(LOSS) INCOME FROM CONTINUING                     |
OPERATIONS, BEFORE INCOME TAXES                   |
AND DISCONTINUED OPERATIONS              (4,714)  |     108,272      (14,712)        (77,474)      (52,295)       (104,241)
   (Benefit) provision for income                 |
    taxes (8)                              (903)  |     (23,945)         251             755        (8,565)          2,429
                                     -----------  |  ----------    ---------      ----------    ----------      ----------
                                                  |
(LOSS) INCOME FROM CONTINUING                     |
   OPERATIONS BEFORE DISCONTINUED                 |
   OPERATIONS                            (3,811)  |     132,217      (14,963)        (78,229)      (43,730)       (106,670)
   Loss (Income) from discontinued                |
   operations, net of tax (9)                 -   |       3,133        8,994          84,163         4,337         (11,719)
                                     ----------   |  ----------    ---------      ----------    ----------      -----------
                                                  |
NET (LOSS) INCOME                    $   (3,811)  |  $  129,084    $ (23,957)     $ (162,392)   $  (48,067)     $  (94,951)
                                     ==========   |  ==========    =========      ==========    ==========      ==========
                                                  |
NET LOSS PER SHARE (BASIC AND                     |
DILUTED)                             $    (0.45)  |
                                     ===========  |
</TABLE>

No dividends on common stock have been paid during the past five fiscal  years.
Per share data is not  presented for the periods ended on or prior to April 16,
2005 due to a general lack of  comparability as a result of the revised capital
structure of the company.

<TABLE>
<CAPTION>
BALANCE SHEET DATA:
<S>                                  <C>             <C>           <C>            <C>           <C>             <C>
Total assets                         $  329,207   |  $  418,086    $ 394,225      $  454,417    $  739,974      $  809,032
Total debt (including capital                     |
leases)                                  51,252   |      67,473      156,201         164,555       356,925         328,116
Stockholders' equity (deficit)          119,686   |           0     (133,606)        (99,021)       61,739         136,858
                                                  |
OTHER DATA:                                       |
EBITDA (10)                          $   25,130   |  $    3,100    $  39,511      $   31,596    $   53,506      $   66,404
Depreciation and amortization            19,075   |       4,712       21,985          21,697        26,173          25,368
LIFO (benefit) provision                  1,457   |          75          813             703        (2,106)            648
Capital expenditures                     20,533   |       4,148       21,244           6,377        56,439          48,008
Cash interest expense                     7,222   |       1,753       10,520          27,542        32,858          33,944
</TABLE>


                                     -26-
<PAGE>

NOTES

1)      During the  fourth  quarter  of fiscal  year 2003 we  adopted  Emerging
        Issues Task Force Issue No.  02-16  "Accounting  by a Reseller for Cash
        Consideration  Received  from a Vendor",  or "EITF  02-16".  EITF 02-16
        requires that vendor  allowances,  including  slotting  allowances,  be
        categorized  as a  reduction  of  cost  of  sales  unless  they  are  a
        reimbursement of costs incurred to sell the vendor's products, in which
        case, the cash consideration  should be characterized as a reduction of
        that cost.  EITF 02-16 also requires  that rebates or refunds  payable,
        only  if  the  customer  completes  a  specified  cumulative  level  of
        purchases  from the vendor,  be  recognized  as a reduction  of cost of
        sales based on a systematic and rational  allocation  over the purchase
        period.  Adoption of this  standard did not  materially  affect our net
        loss for fiscal year 2003.

2)      During the  fourth  quarter of fiscal  year  2003,  we  recorded a $3.6
        million  reduction of selling and  administrative  expenses  associated
        with an adjustment  to reserves for group health and general  liability
        insurance. The reserve balance for our sponsored group health insurance
        was reduced due to improved claims processing that decreased the claims
        incurred but not reported.  Additionally,  through fiscal year 2002, we
        have  estimated  the  general  liability  insurance  reserve for future
        claims  based on our actual  claim  history,  supplemented  by industry
        benchmarks  for  comparable  companies.  During the period  when we had
        insufficient actual claim history to provide the appropriate  assurance
        in the result,  we maintained the liability balance at the upper end of
        a  reasonable  range.  Based on actual  claim  history,  we  recorded a
        reduction in the general liability insurance reserve.

3)      We  adopted  Statement  of  Financial   Accounting   Standard  No.  144
        "Accounting  for the Impairment or Disposal of Long-Lived  Assets",  or
        "SFAS 144"  during  fiscal  year 2003,  which  required us to perform a
        review of the recorded value of our long-lived  assets whenever changes
        in  circumstances  indicate the carrying  value of the asset may not be
        recoverable. During the fourth quarter of fiscal year 2003, we recorded
        a non-cash  charge of $17.9 million  related to the write-down of 16 of
        our operating  retail stores and three closed stores to estimated  fair
        market  value.  In fiscal year 2004,  we recorded a non-cash  charge of
        $1.0 million for 4 retail stores. The impairment charges under SFAS 144
        resulted  from  lower  estimated  future  cash flows that were due to a
        combination of factors,  including the difficult  economic  environment
        and a more challenging  competitive environment during fiscal year 2003
        and fiscal year 2004.  These factors reduced the  profitability  of our
        stores and caused us to conclude that the  profitability  of certain of
        our stores would not increase to a level that would enable the carrying
        value to be recovered.


                                     -27-
<PAGE>

4)      We adopted Statement of Financial Accounting Standard No. 142 "Goodwill
        and  Other  Intangible  Assets"  or SFAS 142 in  fiscal  year  2003 and
        performed a  transitional  goodwill  assessment,  which  resulted in no
        impairment. SFAS 142 provides that intangible assets with finite useful
        lives be  amortized,  and that  goodwill  and  intangible  assets  with
        indefinite  useful  lives  not to be  amortized  but  tested  at  least
        annually for  impairment.  As of the adoption of SFAS 142, we no longer
        record  amortization  of  goodwill  in our  Consolidated  Statement  of
        Operations. During the fourth quarter of fiscal years 2003 and 2004, we
        completed an annual impairment review,  which was further  necessitated
        by the  change in the  economic  and  competitive  environment,  and we
        recorded a $28.4 million and a $22.8 million,  non-cash  charge for the
        impairment of goodwill in these periods, respectively.

5)      As a result of our Chapter 11 filing on May 30,  2003,  no principal or
        interest  payments  were  made on or after  such  date on our  formerly
        outstanding  senior  and senior  subordinated  notes.  Accordingly,  no
        interest  expense for these  obligations  has been  accrued on or after
        such date. Had such interest been accrued,  interest expense would have
        increased by $7.4  million,  $11.0  million and $2.3 million for fiscal
        years  2004,  2005  and  the  11-week  period  ended  April  16,  2005,
        respectively.

6)      The gain on  extinguishment  of debt for the 11-week period ended April
        16, 2005,  consists of our  extinguishment of the allowed claims of our
        unsecured  creditors  including trade claims, Cash Balance Pension Plan
        assumed by Pension Benefit  Guaranty  Corporation and the former senior
        notes in exchange primarily for shares of our common stock.

7)      During the 41-week period ended January 28, 2006 reorganization expense
        consisted of $1.0 million for professional  fees and during the 11-week
        period ended April 16, 2005 reorganization  expense primarily consisted
        of $10.4  million  of  professional  fees and $60.0  million  of losses
        included  in other  comprehensive  loss  related  to the  Cash  Balance
        Pension  Plan,  which was  recognized in income on  termination  of the
        plan,  upon  assumption by the PBGC.  For fiscal year ended January 29,
        2005  the  reorganization  expenses  consisted  of  $17.9  million  for
        professional fees related to the bankruptcy  filing,  $0.2 million loss
        on asset  disposals  and $0.9  million  related to  severances  paid in
        connection   with  the   reorganization.   For  fiscal  year  2004  the
        reorganization expenses were primarily for professional fees related to
        our plan of reorganization.

8)      The tax benefit from continuing operations for the 11-week period ended
        April 16, 2005 is not recorded at statutory  rates  principally  due to
        the gain on the  extinguishment  of debt not being  included in taxable
        income and a $24.0 million tax benefit  related to losses from the Cash
        Balance  Pension Plan,  which benefit had  previously  been credited to
        other  comprehensive  loss. The tax provision for fiscal years 2004 and
        2005 was not  recorded at  statutory  rates due to the  recording  of a
        valuation  allowance  for all of the income tax benefits  generated.  A
        valuation  allowance  is required  when it is more likely than not that
        the recorded  value of a deferred  tax asset will not be realized.  The
        tax provision  (benefit) for fiscal years 2002 and 2003 is not recorded
        at statutory rates due to differences  between income  calculations for
        financial  reporting and tax reporting  purposes that result  primarily
        from nondeductible amortization of goodwill.


                                     -28-
<PAGE>

9)      The  (income)  loss from  discontinued  operations  reflects  operating
        results and (gains)  losses on  disposals  of Big Bear Stores and other
        stores,  which were closed or sold during the fiscal  years of 2004 and
        2005 and the 11-week  period ended April 16, 2005.  The losses  (gains)
        for these periods are $33.6 million, ($1.9) million and ($0.3) million,
        respectively.

10)     "EBITDA" is earnings from continuing operations before interest, taxes,
        depreciation,  amortization, amortization of goodwill, asset impairment
        charge,  goodwill impairment charge, and LIFO provision.  EBITDA should
        not be  interpreted  as a  measure  of  operating  results,  cash  flow
        provided by operating activities or liquidity,  or as an alternative to
        any generally accepted accounting principle measure of performance.  We
        report EBITDA as it is an important  measure  utilized by management to
        monitor the operating performance of our business. We also believe that
        EBITDA assists investors and other interested parties in evaluating our
        capacity to service its debt. Our reported EBITDA may not be comparable
        to similarly titled measures used by other companies.  Below is a table
        that sets  forth  the  reconciliation  of  operating  income  (loss) to
        EBITDA.

<TABLE>
                             (AUDITED)
                             SUCCESSOR
                              COMPANY                          (UNAUDITED) PREDECESSOR COMPANY
                           -----------------------------------------------------------------------------------------
                             41 WEEKS       11 WEEKS       52 WEEKS       52 WEEKS       52 WEEKS       52 WEEKS
                               ENDED          ENDED          ENDED          ENDED          ENDED          ENDED
(IN THOUSANDS OF DOLLARS)   JANUARY 28,     APRIL 16,     JANUARY 29,    JANUARY 31,    FEBRUARY 1,    FEBRUARY 2,
                               2006           2005           2005           2004           2003           2002
                           -----------------------------------------------------------------------------------------
<S>                          <C>            <C>            <C>            <C>            <C>            <C>
OPERATING INCOME (LOSS)      $    4,598  |  $ (1,687)      $  16,713      $ (14,638)     $ (16,816)     $ (69,421)
                                         |
   Depreciation and                      |
amortization                     19,075  |     4,712          21,985         21,697         26,173         25,368
   Amortization of                       |
goodwill                              -  |         -               -              -              -        109,809
   Asset impairment charge            -  |         -               -          1,002         17,858              -
   Goodwill impairment                   |
charge                                -  |         -               -         22,832         28,397              -
   LIFO provision (benefit)       1,457  |        75             813            703         (2,106)           648
                             ----------  |  --------       ---------      ---------      ---------      ---------
                                         |
EBITDA                       $   25,130  |  $  3,100       $  39,511      $  31,596      $  53,506      $  66,404
                             ==========  |  ========       =========      =========      =========      =========
</TABLE>

11)     Restated  from  amounts  previously  reported  to reflect  discontinued
        operations and a reduction of cost of sales to reflect a correction for
        the recording of certain promotional allowances.


                                     -29-
<PAGE>

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

OVERVIEW

As discussed in Note 2 to the accompanying  Consolidated  Financial Statements,
we emerged from our Chapter 11  proceedings  on April 13, 2005.  For  financial
reporting  purposes,   we  accounted  for  the  consummation  of  our  plan  of
reorganization  as of the close of business on April 16,  2005.  In  accordance
with the  American  Institute  of Certified  Public  Accountant's  Statement of
Position 90-7,  "Financial  Reporting by Entities in  Reorganization  under the
Bankruptcy  Code" we have  applied  fresh-start  reporting  as of the  close of
business on April 16, 2005,  which has resulted in  significant  changes to the
valuation of certain of our assets and  liabilities,  and to its  stockholders'
equity. In connection with the adoption of fresh-start  reporting, a new entity
has been deemed to be created for  financial  reporting  purposes.  The periods
ended on or prior to April 16, 2005 have been designated  "Predecessor Company"
and the periods  subsequent to April 16, 2005 have been  designated  "Successor
Company". For purposes of the discussion of the unaudited Results of Operations
the 11-week  period ended April 16, 2005 and the audited  41-week  period ended
January  28,  2006  have  been  deemed  noncomparible  to  prior  years  and no
comparison was done for these periods and prior years.


                                     -30-
<PAGE>

RESULTS OF OPERATIONS

The  following  table sets forth certain  Consolidated  Statement of Operations
components  expressed as  percentages  of revenues for the 41-week period ended
January 28, 2006 and the 11-week period ended April 16, 2005.


                                           AUDITED              UNAUDITED
                                       SUCCESSOR COMPANY    PREDECESSOR COMPANY
                                      -------------------   -------------------
                                           41-WEEKS             11-WEEKS
                                             ENDED                ENDED
                                          JANUARY 28,           APRIL 16,
                                              2006                2005
                                      -------------------   -------------------
                                                          |
Revenues                                     100.0%       |       100.0%
                                                          |
Gross profit (1)                              25.7        |        26.3
                                                          |
Selling and administrative expenses           25.2        |        26.9
                                                          |
Operating income                               0.5        |        (0.6)
                                                          |
Interest expense                               0.8        |         0.7
                                                          |
Extinguishment of debt                         0.0        |       (68.9)
                                                          |
Reorganization item                            0.1        |        26.8
                                                          |
Income tax benefit                            (0.1)       |        (9.0)
                                                          |
Discontinued operations                        0.0        |         1.2
                                                          |
Net (loss) income                             (0.4)       |        48.7


---------------------------
(1) Revenues less cost of sales.


                                     -31-
<PAGE>

FISCAL 2006 (THE  AUDITED  41-WEEK  PERIOD  ENDED  JANUARY  28,  2006 AND THE
UNAUDITED 11-WEEK PERIOD ENDED APRIL 15, 2005)

REVENUES

Revenues for the 41-week  period ended January 28, 2006 and the 11-week  period
ended April 16, 2005 were $1.0 billion and $265.3 million, respectively.

Same store sales for the 41-week  period ended  January 28, 2006 was a decrease
of 1.59%  compared to the 41-week  period  ended  January 29, 2005 and the same
store sales for the 11-week period ended April 16, 2005 was a decrease of 0.53%
compared to the 11-week period ended April 17, 2004.

Wholesale food distribution revenues were $171.9 million for the 41-week period
ended January 28, 2006 and $28.7 million for the 11-week period ended April 16,
2005.


GROSS PROFIT

Gross profit was $260.9  million,  or 25.7% of revenues for the 41-week  period
ended  January 28, 2006 and $69.7  million or 26.3% of revenues for the 11-week
period ended April 16, 2005.


SELLING AND ADMINISTRATIVE EXPENSES

Selling and  administrative  expenses for the 41-week  period ended January 28,
2006  were  $256.3   million,   or  25.2%  of  revenues  and  the  selling  and
administrative  expenses for the 11-week period ended April 16, 2005 were $71.4
million, or 26.9% of revenues.


DEPRECIATION AND AMORTIZATION

Depreciation  and amortization  expense was $19.1 million,  or 1.9% of revenues
for the 41-week  period  ended  January 28, 2006 and $4.7  million,  or 1.8% of
revenues  for the  11-week  period  ended  April  16,  2005.  Depreciation  and
amortization  expense  increased in Fiscal 2006 primarily due to the shortening
of asset  life for our  property,  equipment  and  machinery,  an  increase  in
carrying value of favorable  leases,  the addition of two new intangible assets
(Pharmacy  Scripts  and  Software)  with  the   implementation  of  fresh-start
reporting.  The increase in depreciation and amortization expense was partially
offset  by  the   recording  of   unfavorable   leases   associated   with  the
implementation of fresh-start reporting.


                                     -32-
<PAGE>

OPERATING INCOME (LOSS)

Operating  income  for the  41-week  period  ended  January  28,  2006 was $4.6
million,  or 0.5% of revenues,  and for the 11-week period ended April 16, 2005
operating loss was $1.7 million, or 0.6% of revenues.


INTEREST EXPENSE

Interest  expense  for the  41-week  period  ended  January  28,  2006 was $8.3
million,  or 0.8% of revenues,  and for the 11-week period ended April 16, 2005
interest  expense was $1.8  million,  or 0.7% of revenues.  At  fresh-start  we
eliminated the interest rate swap. We obtained a more  favorable  interest rate
under  our  credit  facility  and  cancellation  of  our   debtor-in-possession
facility.


INCOME TAX BENEFIT

Income tax  benefit  for the  41-week  period  ended  January 28, 2006 was $0.9
million, or 0.1% of revenues, and the income tax benefit for the 11-week period
ended April 16, 2005 was $23.9 million, or 9.0% of revenues.

During   Fiscal   2006  we   provided   for  only   minimal   state  taxes  and
capital/franchise tax and reset our deferred tax liability due to our emergence
from bankruptcy.

At January 29, 2005 we had approximately $59.8 million of federal net operating
loss   carry-forwards,   as  well  as   certain   state  net   operating   loss
carry-forwards. On January 29, 2006 $85.0 million of net operating loss and tax
credit  carry-forwards were eliminated due to the implementation of our plan of
reorganization. In addition, as the result of the implementation of our plan of
reorganization  we lost  55.6%  of the  tax  basis  of our  long  lived  assets
(approximately $38.4 million as of January 29, 2006).


REORGANIZATION ITEM

During the 41-week  period  ended  January 28, 2006 we recorded  reorganization
item expense of $1.0 million,  or 0.1% of revenues,  and for the 11-week period
ended April 16, 2005 we recorded  reorganization item expense of $71.1 million,
or 26.8% of revenues.  These expenses were primarily due to PBGC  assumption of
our  Cash  Balance  Plan  and  consulting  fees  paid  to  various   bankruptcy
professionals.


                                     -33-
<PAGE>

DISCONTINUED OPERATIONS

Loss from  discontinued  operations for the 11-week period ended April 16, 2005
was $3.1  million.  This loss was  primarily  attributable  to our  closure  of
unprofitable stores during this period.


NET (LOSS) INCOME

Net loss for the 41-week  period ended  January 28, 2006 was $3.8  million,  or
0.4% of  revenues,  and net income for the 11-week  period ended April 16, 2005
was $129.1 million,  or 48.7% of revenues.  The change in the net income (loss)
was primarily  attributable to recognition of a gain from the extinguishment of
debt of $182.8 million in the 11-week period ended April 16, 2005.



                                     -34-
<PAGE>

RESULTS OF OPERATIONS (CONTINUED)

The  following  table sets forth certain  Consolidated  Statement of Operations
components  expressed  as  percentages  of  revenues  for the fiscal year ended
January 29, 2005, or "Fiscal 2005", and the fiscal year ended January 31, 2004,
or "Fiscal 2004":

                                                           UNAUDITED
                                                       PREDECESSOR COMPANY
                                                      FISCAL        FISCAL
                                                       2005          2004
                                                   -------------  -----------

Revenues                                              100.0%        100.0%

Gross profit (1)                                       25.6           25.6

Selling and administrative expenses                    24.3           24.9

Asset impairment charge                                 0.0            0.1

Goodwill impairment charge                              0.0            1.7

Operating income (loss)                                 1.3           (1.1)

Interest expense                                        1.0            2.4

Reorganization item                                     1.5            2.4

Income tax provision                                    0.0            0.1

Discontinued operations, net of tax                     0.7            6.4

Net loss                                               (1.9)         (12.4)

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

1) Revenues less cost of sales.


                                     -35-
<PAGE>

FISCAL 2005 COMPARED TO FISCAL 2004 (BASED ON UNAUDITED RESULTS)

REVENUES

Revenues for Fiscal 2005 were $1.29 billion, a 1.7% decrease from $1.31 billion
in  Fiscal  2004.  The  decrease  in  revenues  for  Fiscal  2005 is  primarily
attributable to a decrease in same store sales.

Same store sales for Fiscal 2005 decreased 1.64% from Fiscal 2004.

Wholesale  food  distribution  revenues were $213.2  million for Fiscal 2005, a
decrease of 2.3% from $218.3 million for Fiscal 2004. The decrease in wholesale
food  distribution  revenues in Fiscal  2005 was  primarily  attributable  to a
reduction  in the  number  of  customers  of our  wholesale  food  distribution
business.


GROSS PROFIT

Gross  profit was  $329.5  million,  or 25.6% of  revenues,  for  Fiscal  2005,
compared to $334.6 million, or 25.6% of revenues, for Fiscal 2004. The decrease
in gross profit is primarily due to a decrease in revenues.


SELLING AND ADMINISTRATIVE EXPENSES

Selling and  administrative  expenses for Fiscal 2005 were $312.8  million,  or
24.3% of revenues, compared to $325.4 million, or 24.9% of revenues, for Fiscal
2004. The decrease in selling and administrative expenses were primarily due to
a  reduction  in the  administrative  labor  force  stemming  from the sale and
closure of 99 stores in Fiscal 2004 and 7 stores in Fiscal 2005.


DEPRECIATION AND AMORTIZATION

Depreciation and amortization  expense was $22.0 million,  or 1.7% of revenues,
in Fiscal 2005 compared to $21.7 million, or 1.7% of revenues, in Fiscal 2004.


OPERATING INCOME (LOSS)

Operating  income  for  Fiscal  2005 was $16.7  million,  or 1.3% of  revenues,
compared  to an  operating  loss for Fiscal 2004 of $14.6  million,  or 1.1% of
revenues for Fiscal 2004.  The change from an operating loss for Fiscal 2004 to
operating  income for Fiscal 2005 was  primarily  due to a reduction in selling
and  administrative  expenses  and asset  impairment  and  goodwill  impairment
charges recorded in Fiscal 2004.

                                     -36-
<PAGE>

INTEREST EXPENSE

Interest  expense  for  Fiscal  2005  decreased  to $12.4  million,  or 1.0% of
revenues,  from $32.0 million,  or 2.4% of revenues,  in Fiscal 2004.  Interest
expense for Fiscal 2005 decreased primarily due to the elimination of principal
and interest  payments on our senior  notes,  the  cancellation  of our hedging
activities and reduced average balances outstanding on our debtor-in-possession
facility in accordance with our cost reduction initiatives.


REORGANIZATION ITEMS

During  Fiscal  2005 we  recorded  reorganization  expenses  of  $19.0  million
compared  to $30.8  million  recorded  in  Fiscal  2004.  These  expenses  were
attributable to various  lawyers and  consultants  retained to proceed with the
bankruptcy filing and to manage our operations during this process.


DISCONTINUED OPERATIONS

Losses from discontinued operations were $9.0 million for Fiscal 2005, compared
to $84.2 million in Fiscal 2004. The decrease is primarily  attributable to the
results of  operations  of the 99 stores sold or closed in Fiscal 2004 compared
with the 7 stores  closed or sold in Fiscal  2005 and a $33.6  million  loss on
sales or closure of  unprofitable  stores  during  Fiscal 2004 compared to $1.9
million gain on disposals of unprofitable stores during Fiscal 2005.


INCOME TAX PROVISION

Income tax  provision was $0.3  million,  or 0.0% of revenues,  for Fiscal 2005
compared to an income tax  provision of $0.8  million,  or 0.1% of revenues for
continuing operations, for Fiscal 2004.

The  effective  tax rate for Fiscal 2005 is not recorded at expected  statutory
rates  primarily due to the recording of a valuation  allowance of $7.7 million
principally related to tax benefit attributable to net operating loss generated
during  Fiscal 2005. A valuation  allowance is required  when it is more likely
than not that the recorded  value of a deferred tax asset will not be realized.
The effective tax rate for Fiscal 2004 varies from the expected statutory rates
due to the recording of a valuation allowance of $20.6 million.


                                     -37-
<PAGE>

NET LOSS

Net loss for Fiscal 2005 was $24.0 million, or 1.9% of revenues,  compared to a
net loss of $162.4 million, or 12.4% of revenues, for Fiscal 2004. The net loss
decreased  during Fiscal 2005 primarily due to the reduction of  reorganization
expenses,  interest  expense and  impairment  charges  and reduced  losses from
discontinued operations.


LIQUIDITY AND CAPITAL RESOURCES

On April 16, 2005, upon emergence from Chapter 11 proceedings,  we entered into
a  revolving   credit  and  term  loan  facility  with  a  group  of  financial
institutions  providing for a $130.0 million  revolving  credit  facility and a
$6.0 million term loan.  Also on April 16, 2005, we entered into a supplemental
real estate credit  facility with another group of lenders,  providing for term
loan  borrowings  of  up to  $28.0  million.  Availability  under  both  credit
facilities is dependent on levels of accounts receivable, inventory and certain
other assets.  Interest rates on borrowings under the revolving credit facility
vary  depending  upon  the  amount  of  availability.   At  January  28,  2006,
outstanding  borrowings  under both  facilities  aggregated  $33.0  million and
outstanding  letters of credit under the revolving credit facility  amounted to
approximately  $53.0  million.   At  such  date,   availability  in  excess  of
outstanding  borrowings and letters of credit was approximately  $54.0 million.
Borrowings  under the  revolving  credit and term loan  facility are secured by
substantially all of our assets,  subject to first liens on certain  properties
by other lenders.  Borrowings  under the real estate  facility are secured by a
first lien on substantially all of our leasehold interests and a second lien on
substantially  all of our remaining  assets. During  fiscal  year 2006,  we had
stand-by  letters  of  credit of  approximately  $53.5  million.  Many of these
stand-by  letters of credit were required upon emergence from bankruptcy and as
a result of our inability to file financial statements.

Provisions  of  both  credit  facilities,   among  other  things,  require  the
maintenance of certain financial  covenants (when availability under the credit
facilities  is less than $35.0 million for four  consecutive  days or less than
$30.0 million for any one day),  and limit the amount of capital  expenditures,
our  assumption  of additional  debt and our payment of  dividends.  At no time
through  January  28,  2006  have we been  subject  to  compliance  with  these
financial  covenants.  However,  had such an event occurred,  we would not have
been in compliance with the financial  covenants and would have been in default
under the terms of the loan agreement at January 28, 2006.

On December 26, 2006 and on August 1, 2007, both the revolving  credit and term
loan facility and the supplemental  real estate credit facility were amended to
permit the disposal of assets in connection with the closing of certain stores.
Pursuant to our plan of  reorganization,  we entered  into a  collateral  trust
agreement with the collateral trustee in connection with the secured trade lien
program.  The  secured  trade lien  program is with  certain of our vendors and
allows us to maintain  trade terms.  This program has been extended until April
13, 2008.

We also have borrowings under mortgages secured by the related properties.


OFF-BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements.


                                     -38-
<PAGE>

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The table below presents our significant contractual obligations at January 28,
2006 (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                                                         TOTAL
    COMMITMENT EXPIRES                                                                OTHER           CONTRACTUAL
        DURING THE            LONG-TERM      CAPITAL LEASE        OPERATING        LONG-TERM             CASH
    FISCAL YEAR ENDING         DEBT (1)     OBLIGATIONS (2)(3)    LEASES (3)     LIABILITIES (4)      OBLIGATIONS
----------------------------------------------------------------------------------------------------------------------
    <S>                       <C>             <C>                <C>              <C>                <C>
    February 3, 2007          $     278       $    2,855         $   22,766       $    7,440         $    33,339
    February 2, 2008             33,314            2,855             20,873            4,053              61,095
    January 31, 2009                280            2,855             19,759            2,443              25,337
    January 29, 2010                298            2,781             15,778            1,868              20,725
    January 28, 2011                324            1,944             13,761            1,451              17,480
    Thereafter                    3,019           12,766             70,935            4,294              91,014
</TABLE>
----------------------
    (1)  Balance for fiscal year ending February 2, 2008 includes  repayment of
         $33.0 million under the Revolving Credit Facility at January 28, 2006.

    (2)  Includes amounts classified as imputed interest.

    (3)  See Note 4 to the Consolidated Financial Statements.

    (4)  Other liabilities  include workers  compensation,  general  liability,
         asset  retirement  obligations,  store  closing  costs  and  the  PBGC
         settlement.

We have also made certain  contractual  commitments  that extend beyond January
28, 2006 as shown below (in thousands of dollars):

                                           STAND-BY
                                           LETTERS OF          SURETY
                                           CREDIT (1)          BONDS (2)
                                         ------------        -------------
          Total amounts committed          $  53,483           $  7,495

-------------
    (1)  Letters of credit are primarily  associated with  supporting  workers'
         compensation obligations and are renewable annually.

    (2)  We are required to maintain  surety bonds for varying periods of up to
         three years from the date of issuance.


                                     -39-
<PAGE>

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

During  December 2004,  the Financial  Accounting  Standards  Board issued FASB
Statement No. 123 (revised 2004),  "Share-Based Payment," or "SFAS 123R", which
is  a  revision  of  FASB  Statement  No.  123,   "Accounting  for  Stock-Based
Compensation".  SFAS 123R supersedes APB Opinion No. 25,  "Accounting for Stock
Issued to  Employees,"  and requires  all  share-based  payments to  employees,
including  grants of employee  stock  options,  to be  recognized in the income
statement  based on their fair  values.  Pro forma  disclosure  is no longer an
alternative.  SFAS 123R is required to be adopted in the first annual reporting
period  beginning  after  June 15,  2005.  Accordingly,  we  adopted  SFAS 123R
effective January 29, 2006.

In  June  2006,  the  FASB  issued   Interpretation  No.  48,  "Accounting  for
Uncertainty in Income Taxes - an  interpretation of FASB Statement No. 109", or
"FIN 48",  effective for fiscal years beginning after December 15, 2006. FIN 48
clarifies the  accounting for  uncertainty  in tax  positions.  FIN 48 requires
financial statement recognition of the impact of a tax position when it is more
likely than not,  based on its  technical  merits,  that the  position  will be
sustained upon examination.  We are currently evaluating the effect of adopting
FIN 48.

In June 2006, the FASB ratified Emerging Issues Task Force Issue No. 06-3, "How
Sales Taxes Collected From Customers and Remitted to  Governmental  Authorities
Should Be  Presented  in the  Income  Statement  (that  is,  Gross  Versus  Net
Presentation)",  or "EITF 06-3", effective for periods beginning after December
15, 2006. EITF 06-3 allows taxes assessed by various  governmental  authorities
that are directly imposed on  revenue-producing  transactions  between a seller
and a customer,  such as sales and some excise taxes, to be presented on either
a gross or net basis.  If such taxes are  significant,  the  accounting  policy
should be  disclosed  as well as the  amount of taxes  included  in  revenue if
presented on a gross  basis.  We record  sales net of  applicable  sales taxes.
Therefore, the adoption of EITF 06-3 will have no effect on the presentation of
our financial statements.

In September 2006, the FASB issued Statement of Financial  Accounting  Standard
No. 157, "Fair Value  Measurement",  or "SFAS 157",  effective for fiscal years
beginning after November 15, 2007.  SFAS 157 defines fair value,  establishes a
framework for measuring fair value according to generally  accepted  accounting
principles and expands disclosures about fair value measurements. SFAS 157 does
not require any new fair value  measurements.  We are currently  evaluating the
effect of adopting SFAS 157.

In September 2006, the FASB issued Statement of Financial  Accounting  Standard
No.  158,  "Employers'   Accounting  for  Defined  Benefit  Pension  and  Other
Postretirement  Plans - an  amendment  of FASB  Statements  No. 87, 88, 106 and
132R", or "SFAS 158", effective for fiscal years ending after December 15, 2006
with  early  application  encouraged.  SFAS 158  requires  financial  statement
recognition  of the  overfunded  or  underfunded  status of a  defined  benefit
postretirement  plan or other  postretirement plan as an asset or liability and
recognition  of changes in the funded status in  comprehensive  earnings in the
year in which the changes occur. We elected early  application and adopted SFAS
158 effective as of January 28, 2006. The adoption of the recognition provision
of SFAS 158 increased  stockholders  equity by $4.9 million reduced the defined
benefit  pension  plan  liability  by $8.3 million and reduced the deferred tax
liability by $3.4 million at January 28, 2006 (see Note 10 to the  Consolidated
Financial Statements).

                                     -40-
<PAGE>

CRITICAL ACCOUNTING POLICIES

Critical  accounting  policies  are  those  accounting  policies  that are very
important  to  the   portrayal  of  our  financial   condition   which  require
management's most difficult, subjective or complex judgments, often as a result
of the need to make  estimates  about the effect of matters that are inherently
uncertain.  Our significant accounting policies are summarized in Note 3 to the
consolidated financial statements.

We believe the following accounting policies to be critical and could result in
materially different amounts being reported under different conditions or using
different assumptions:


RESERVE FOR STORE CLOSURES

Reserves  for closed  stores are  recorded  in  accordance  with  Statement  of
Financial  Accounting  Standard No. 146,  "Accounting for Costs Associated with
Exit and Disposal  Activities,"  or "SFAS 146".  We record a liability  for the
estimated  future  cash  flows  (including  future  lease  commitments,  net of
estimated cost recoveries) and miscellaneous  closing costs.  Future cash flows
are  estimated  based on our knowledge of the market in which the closed stores
are  located.  The  estimates of future cash flows are then  discounted  to the
present based on our interest rate of our real estate facility term loan. These
estimates of discounted  future cash flows could be affected by changes in real
estate  markets,  other economic  conditions and the interest rate used in such
calculations.


IMPAIRMENT OF LONG-LIVED ASSETS

Annually or whenever  changes in circumstance  indicate that the carrying value
of an asset  may not be  recoverable,  we  review  our  long-lived  assets  for
impairment at the individual store level based on estimated future undiscounted
cash flows  attributable  to such  assets.  This review is in  accordance  with
Statement  of  Financial  Accounting  Standards  No. 144,  "Accounting  for the
Impairment or Disposal of Long-Lived Assets", or "SFAS 144".

In the event such cash flows are not expected to be  sufficient  to recover the
recorded value of the assets, such assets are written down to their fair value.
In estimating future cash flows,  management considers  historical  performance
and assesses the effect of projected changes in competition,  maturation of new
stores and store remodels,  merchandising and marketing  strategies and general
market conditions.  Fair values were determined either by management,  based on
management's  knowledge of local real estate markets and the value of equipment
utilized  in  the  supermarket  industry,  or by  an  independent  third  party
valuation  firm.  No assurance  can be given that the actual  future cash flows
will be sufficient  to recover the carrying  value of  long-lived  assets.  Any
reductions in the carrying value  resulting from the application of this policy
are reflected in the Consolidated  Statement of Operations as "Asset impairment
charge".


                                     -41-
<PAGE>

INVENTORIES

Our  inventories  are  stated at the  lower of cost or  market.  We follow  the
link-chain,  dollar-value  LIFO  method  when  calculating  our LIFO  charge or
credit. Vendor allowances,  including early payment discounts,  volume rebates,
and funds for product  placement and advertising,  are generally  recorded as a
reduction  of  inventory  cost based on  average  inventory  turnover  rates by
product category.

We take physical counts of inventories throughout the year and record inventory
shortages based on our physical counts. Where physical counts are not available
we record an allowance for inventory  shortages  based on historical  shrinkage
percentages.


INTANGIBLE ASSETS

We have recorded intangible assets for favorable leases,  pharmacy prescription
files  and  computer  software.  We  amortize  our  favorable  leases  over the
remaining life of the lease  including all favorable  options.  We amortize the
pharmacy  prescription  files  over five  years and we  amortize  the  computer
software  over five  years.  We  consider  these  assets  annually  during  our
impairment testing.


ALLOWANCE FOR DOUBTFUL ACCOUNTS

We evaluate the  collectability  of our accounts and notes  receivable based on
our  analysis of past due  accounts and  historical  loss trends.  We record an
allowance for doubtful accounts against the receivable based on the amount that
we  believe is  reasonably  collectable.  It is  possible  that our  estimation
process could differ materially from the actual amounts collected.


INCOME TAXES

We are required to estimate our income  taxes in each of the  jurisdictions  in
which we operate.  In addition,  various tax  authorities  audit our income tax
returns. Although management believes these estimates are reasonable the actual
results  could  differ  resulting  in a  material  effect  on our  consolidated
financial statements.


                                     -42-
<PAGE>

SELF-INSURANCE LIABILITY

We are primarily  self-insured for workers' compensation and general liability.
Self-insurance  liabilities are primarily  calculated based on claims filed and
an estimate of claims incurred but not yet reported.  Workers' compensation and
general  liability  reserves are determined  based on historical  loss history,
industry  development  factors and trends related to actual  payments.  We have
limited our total exposure related to self-insured liability claims incurred by
maintaining  stop-loss  coverage with third party  insurers,  as defined in the
applicable  insurance  policies,  for claims  incurred in excess of established
stop-loss levels and policy deductibles.  Projection of losses concerning these
liabilities is subject to a high degree of  variability  due to factors such as
claim settlement patterns,  litigation trends, legal interpretations and future
levels of health care. Should a greater amount of claims occur compared to what
was  estimated or costs of health care  increase  beyond what was  anticipated,
reserves recorded may not be adequate and additional  expense could be required
in the consolidated financial statements.


PENSION ACCOUNTING

We currently are sole sponsors of four  tax-qualified  defined  benefit pension
plans (the "Pension  Plans").  In accordance  with the  provisions of SOP 90-1,
upon emergence from bankruptcy,  the Company recorded the underfunded status of
each of the defined  benefit plans as a liability on the balance  sheet.  As of
January 28, 2006, the Company  adopted the  provisions of Financial  Accounting
Standard No. 158, "Employers'  Accounting for Defined Benefit Pension and Other
Postretirement  Plans" and in accordance  therewith  reflected the  underfunded
status of the  plans in its  balance  sheet at such  date.  Prospectively,  the
Company will adjust the  liability to reflect the current  funded status of the
plan.  Any gains or losses that arise during the period but are not  recognized
as components of net periodic benefit cost will be recognized as a component of
other  comprehensive   income.  The  adoption  of  SFAS  158  resulted  in  the
recognition of $8.3 million of unrecognized  actuarial gains which arose during
the period ended January 28, 2006 and a corresponding  reduction in the defined
benefit  pension plan liability at January 28, 2006. Such  unrecognized  gains,
net of  deferred  taxes of $3.4  million  were  credited to  accumulated  other
comprehensive  income in the amount of $4.9  million.  The adoption of SFAS 158
had no effect on the Company's  consolidated  statement of  operations  for the
period  ended  January  28,  2006.  See Note 10 to the  Consolidated  Financial
Statements for further discussion on pensions.

Pension  expense is  calculated  based upon a number of actuarial  assumptions,
including an expected  long-term rate of return on the Pension Plans assets,  a
discount rate, and an assumed rate of compensation increase. After consultation
with our actuaries,  we determined  these  actuarial  assumptions on our fiscal
year end of each year to calculate  liability  information  as of that date and
pension  expense for the  following  year.  The  discount  rate  assumption  is
determined based on the internal rate of return for Citigroup Pension Liability
Index with  maturities  that are  consistent  with  projected  future plan cash
flows.  The assumed  discount  rate used to determine  pension  expense for the
period ended January 28, 2006 was 5.48%.  The assumed  discount rate at January
28, 2006 of 5.68% will be used to determine pension expense for Fiscal 2007.

                                     -43-
<PAGE>

The assets of the plans consist of  approximately  54% equity  securities,  44%
fixed income securities and 2% cash at January 28, 2006. The expected long-term
rates of return on plan assets is based on  historical  and  projected  average
rates of return for current and planned  asset  classes in the plan  investment
portfolio.  At January 28, 2006 the expected  long-term  rate of return on plan
assets to be used in the  determination  of pension expense for Fiscal 2007 was
7.5%.  Based on an estimate  of 50% bonds and 50% stock,  the rate of return at
January 28, 2006 was 10% and 5%, respectively.

Significant differences between our actual experience or significant changes in
our  assumptions,  may  materially  affect the pension  obligations  and future
expense. Additionally, changes in the fair value of plan assets at year end may
materially affect our future pension expense. The fair value of plan assets can
vary significantly from year to year.



                                      -44-
<PAGE>

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
           RISK

Our  financial  results are subject to risk from  interest rate changes on debt
that has variable  interest rates.  Total variable rate debt outstanding  under
our loan agreements at January 28, 2006 was $33 million with a weighted average
interest  rate of 9.49%.  A 1% change in interest  rates would  impact  pre-tax
income by $0.3 million  based on the debt  outstanding  at January 28, 2006. In
addition  to the  variable  rate  debt we had $5  million  of fixed  rate  debt
outstanding at January 28, 2006 with a weighted average interest rate of 7.80%.
We  view  the  fixed  rate  debt  as a  partial  hedge  against  interest  rate
fluctuations  which  should  minimize  the  potential  impact on earnings  from
interest rate changes.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                           PAGE
------------------------------------------                           ----

     Reports of Independent Accountants                                46


     Consolidated Financial Statements:

        Balance Sheets                                                 47

        Statement of Operations                                        49

        Statement of Cash Flows                                        50

        Statement of Stockholders' Equity                              51

        Notes to Consolidated Financial Statements                     52


                                     -45-
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
The Penn Traffic Company
Syracuse, New York

We have  audited  the  accompanying  consolidated  balance  sheets  of The Penn
Traffic  Company  (the  "Company")  as of January  28,  2006 and April 16, 2005
(effective date of plan of  reorganization  for accounting  purposes),  and the
related  consolidated  statements of operations,  cash flows and  stockholders'
equity for the period from April 17, 2005 to January 28, 2006.  These financial
statements   are  the   responsibility   of  the  Company's   management.   Our
responsibility is to express an opinion on these financial  statements based on
our audit.

We conducted  our audit in  accordance  with  auditing  standards of the Public
Company  Accounting  Oversight Board (United States).  Those standards  require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material  misstatement.  An audit includes
examining,  on a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also includes  assessing  the  accounting
principles  used  and  significant  estimates  made by  management,  as well as
evaluating the overall financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements referred to above present fairly, in
all material respects,  the consolidated financial position of The Penn Traffic
Company as of January 28, 2006 and April 16, 2005, and the consolidated results
of its  operations  and its cash  flows for the period  from April 17,  2005 to
January 28, 2006, in conformity with accounting  principles  generally accepted
in the United States of America.

As discussed in Note 2 to the  consolidated  financial  statements,  on May 30,
2003, the Company filed for voluntary bankruptcy  protection and reorganization
under Chapter 11 of the United States  Bankruptcy  Code. On April 13, 2005, the
Company's  amended  plan of  reorganization  became  effective  and the Company
emerged  from  bankruptcy  and  effective  April 16, 2005  adopted  fresh-start
reporting  which  results  in a  new  reporting  entity  and  a  new  basis  of
accounting.

The Company has not presented the selected  quarterly  financial data specified
in item 302(a) of Regulation S-K that the  Securities  and Exchange  Commission
requires as supplementary information to the basic financial statements.


/s/ Eisner LLP


New York, New York
June 29, 2007


                                     -46-
<PAGE>

<TABLE>
<CAPTION>
The Penn Traffic Company
Consolidated Balance Sheets
As of January 28, 2006 and April 16, 2005
(In thousands, except share and per share data)

                                                                  JANUARY 28,        APRIL 16,
                                                                     2006               2005
                                                                 ------------      -------------
                                                                                      (Note 3)
<S>                                                              <C>               <C>
                                   ASSETS

CURRENT ASSETS:
   Cash                                                          $     12,432      $     29,304
   Accounts and notes receivable (less allowance for
      doubtful accounts of $3,174 and $3,243, respectively)            36,970            40,416
   Inventories (Note 3)                                               113,467           116,518
   Prepaid expenses and other current assets                            6,157            11,433
                                                                 ------------      ------------
                                                                      169,026           197,671
                                                                 ------------      ------------

CAPITAL LEASES:
   Capital leases                                                      12,023            12,023
   Less: Accumulated amortization                                      (1,026)                -
                                                                 ------------      ------------
                                                                       10,997            12,023
                                                                 ------------      ------------

FIXED ASSETS:
   Land                                                                11,588            11,584
   Buildings                                                           13,621            13,238
   Equipment and furniture                                             86,885            72,444
   Vehicles                                                             6,749             5,419
   Leasehold improvements                                               5,062               721
                                                                 ------------      ------------
                                                                      123,905           103,406
   Less: Accumulated depreciation                                     (16,276)                -
                                                                 ------------      ------------
                                                                      107,629           103,406
                                                                 ------------      ------------

OTHER ASSETS:
   Intangible assets (Note 5)                                          36,220            39,612
   Other assets                                                         5,335             6,845
                                                                 ------------      ------------
                                                                       41,555            46,457
                                                                 ------------      ------------

TOTAL ASSETS                                                     $    329,207      $    359,557
                                                                 ============      ============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                     -47-
<PAGE>

<TABLE>
<CAPTION>
The Penn Traffic Company
Consolidated Balance Sheets
As of January 28, 2006 and April 16, 2005
(In thousands, except share and per share data)

                                                                      JANUARY 28,        APRIL 16,
                                                                         2006               2005
                                                                     ------------     --------------
                                                                                          (Note 3)
<S>                                                                  <C>               <C>
                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current portion of obligations under capital leases (Note 4)      $      1,310      $      1,200
   Current maturities of long-term debt (Note 6)                              278               254
   Accounts payable                                                        36,695            35,075
   Other current liabilities (Note 7)                                      46,294            58,576
   Accrued interest expense                                                   557               554
   Deferred income taxes (Note 9)                                             119               344
   Liabilities subject to compromise (Note 8)                               2,871             8,497
                                                                     ------------      ------------
                                                                           88,124           104,500
                                                                     ------------      ------------


NON-CURRENT LIABILITIES:
   Obligations under capital leases (Note 4)                               12,429            13,425
   Long-term debt (Note 6)                                                 37,235            37,967
   Deferred income taxes (Note 9)                                          16,112            13,655
   Defined benefit pension plan liability (Note 10)                        27,600            39,959
   Other non-current liabilities (Note 7)                                  28,021            31,473
                                                                     ------------      ------------
                                                                          121,397           136,479
                                                                     ------------      ------------

TOTAL LIABILITIES                                                         209,521           240,979
                                                                     ------------      ------------

COMMITMENTS AND CONTINGENCIES (NOTES 4, 6 AND 11)

STOCKHOLDERS' EQUITY:
   Preferred stock - authorized 1,000,000 shares,
      $.01 par value; none issued                                               -                 -
   Common stock - authorized 15,000,000 shares, $.01 par value;                85                85
      issued and to be issued 8,498,752 shares at both dates
   Capital in excess of par value                                         118,493           118,493
   Deficit                                                                 (3,811)                -
   Accumulated other comprehensive income                                   4,919                 -
                                                                     ------------      ------------
     TOTAL STOCKHOLDERS' EQUITY                                           119,686           118,578
                                                                     ------------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $    329,207      $    359,557
                                                                     ============      ============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                     -48-
<PAGE>

The Penn Traffic Company
Consolidated Statement of Operations
For the Period from April 17, 2005 to January 28, 2006
(In thousands, except share and per share data)



REVENUES                                                          $   1,015,893

COST AND OPERATING EXPENSES:
   Cost of sales                                                        754,995
   Selling and administrative expenses                                  256,300
                                                                  -------------

OPERATING INCOME                                                          4,598
   Interest expense                                                       8,289
   Reorganization expenses                                                1,023
                                                                  -------------

LOSS BEFORE INCOME TAXES                                                 (4,714)
   Income tax benefit (Note 3 and 9)                                       (903)
                                                                  -------------

NET LOSS                                                          $      (3,811)
                                                                  =============

   Shares outstanding and to be issued                                8,498,752

NET LOSS PER SHARE (BASIC AND DILUTED) (NOTE 3)                   $       (0.45)
                                                                  =============



                                     -49-
<PAGE>

The Penn Traffic Company
Consolidated Statement of Cash Flows
For the Period from April 17, 2005 to January 28, 2006
(In thousands)



OPERATING ACTIVITIES:
   Net (loss)                                                       $    (3,811)
   Adjustments to reconcile net loss to net cash
   provided by operating activities:
      Depreciation and amortization                                      19,075
      Amortization of deferred financing cost                             1,066
      Deferred income taxes                                              (1,164)
      (Gain) on sale of fixed assets                                       (605)

NET CHANGE IN OPERATING ASSETS AND LIABILITIES:
   Accounts and notes receivable, net                                     3,446
   Prepaid expenses and other current assets                              5,276
   Inventories                                                            3,051
   Liabilities subject to compromise                                     (5,626)
   Accounts payable and other current liabilities                       (10,659)
   Other assets                                                             444
   Defined benefit pension plan                                          (4,044)
   Other non-current liabilities                                         (1,799)
                                                                   -------------

NET CASH PROVIDED BY OPERATING ACTIVITIES                                 4,650
                                                                   ------------

INVESTING ACTIVITIES:
   Capital expenditures                                                 (20,533)
   Proceeds from sale of fixed assets                                       605
                                                                   ------------

NET CASH USED IN INVESTING ACTIVITIES                                   (19,928)
                                                                   ------------

FINANCING ACTIVITIES:
   Payments of mortgages                                                   (208)
   Net repayments under revolving credit facility                          (500)
   Reduction in capital lease obligations                                  (886)
                                                                   ------------

NET CASH USED IN FINANCING ACTIVITIES                                    (1,594)
                                                                   ------------

NET DECREASE IN CASH                                                    (16,872)

CASH AT THE BEGINNING OF PERIOD                                          29,304
                                                                   ------------

CASH AT END OF PERIOD                                              $     12,432
                                                                   ============


                                     -50-
<PAGE>

<TABLE>
<CAPTION>
The Penn Traffic Company
Consolidated Statement of Stockholders' Equity For the Period from April 17,
2005 to January 28, 2006 (In thousands)

                                               Capital in                  Accumulated Other       Total
                                  Common        Excess of                     Comprehensive     Stockholders'
                                   Stock       Par Value       Deficit          Income             Equity
                                 -----------  -------------  ------------  ------------------  ---------------
<S>                              <C>          <C>            <C>           <C>                 <C>
Common stock to be issued
   in connection with plan
   of reorganization               $    85    $ 118,493        $     0                           $  118,578


   Net loss for the 41-week
    period ended
    January 28, 2006                                            (3,811)                              (3,811)
   Unrecognized actuarial
gain of pension plans,
    net of deferred taxes
    of $3,396                                                                       4,919             4,919
--------------------------------------------------------------------------------------------------------------
Balance at January 28, 2006        $    85    $ 118,493        $(3,811)         $   4,919        $  119,686
==============================================================================================================
</TABLE>


                                     -51-
<PAGE>

The Penn Traffic Company
Notes to Consolidated Financial Statements

NOTE 1 - DESCRIPTION OF BUSINESS

The Penn Traffic  Company and its  subsidiaries  (the "Company") are engaged in
the retail food business and the wholesale food  distribution  business.  As of
January  28,  2006,  the Company  operated  110  supermarkets  under the "P&C",
"Quality" and "Bi-Lo"  banners in upstate New York,  Pennsylvania,  Vermont and
New  Hampshire,   and  supplied  79  independent   supermarkets  and  41  other
independent   wholesale   accounts.   The  Company  services  these  owned  and
independent  supermarkets  and  independent  wholesale  accounts  through  five
distribution centers and a bakery.


NOTE 2 - VOLUNTARY BANKRUPTCY FILING AND REORGANIZATION

On May 30, 2003,  The Penn Traffic  Company and all of its  subsidiaries  filed
voluntary  petitions  under Chapter 11 of the United States  Bankruptcy Code in
the United States  Bankruptcy Court for the Southern  District of New York. The
filing  was  made  in  response  to  pending   defaults   under  the  Company's
then-existing  loan agreements and a lack of liquidity to continue  operations.
Under  Chapter  11,  the  Company   continued  to  operate  its  businesses  as
debtor-in-possession  under court  protection from its creditors and claimants,
while using the Chapter 11 process to substantially reduce its debt obligations
and implement a plan of reorganization.

On  February  2,  2005,  the  Company  filed the First  Amended  Joint  Plan of
Reorganization  (the "Plan") with the bankruptcy  court. The Plan was confirmed
on March  17,  2005 and  became  effective  on April 13,  2005 (the  "Effective
Date").

Pursuant to the terms of the Plan,  the following  transactions  occurred on or
around the Effective Date:

    1.   The  Company  entered  into  new  credit   agreements   providing  for
         borrowings of up to $164 million (see Note 6). Proceeds from these new
         credit    agreements    provided   funds   sufficient   to   repay   a
         debtor-in-possession   credit  facility  and  all  administrative  and
         priority claims to the extent provided for in the Plan.

    2.   The  Company  sold  and  leased  back  its  five  owned   distribution
         facilities for a sales price of approximately $37 million.

    3.   All  shares  of  common  stock  and all  stock  options  and  warrants
         outstanding  prior to the  confirmation of the Plan were cancelled and
         the holders of such equity securities  received no distributions under
         the Plan.

    4.   The  reorganized  Company was authorized to issue new shares of common
         stock to unsecured  creditors,  which included holders of $100 million
         of senior notes, a claim by the Pension Benefit  Guaranty  Corporation
         or the "PBGC" of $60 million  (see Note 10) and trade  claims,  all of
         whom were eligible to receive pro rata  distributions of new shares of
         common stock and the right to share in potential proceeds from certain
         causes of action.

                                     -52-
<PAGE>

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying  financial statements include the accounts of The Penn Traffic
Company  and  its  wholly-owned  subsidiaries.   All  significant  intercompany
balances and transactions have been eliminated in consolidation.


FISCAL YEAR

The  Company's  fiscal year ends on the Saturday  closest to January 31. Fiscal
year 2006 is the  41-week  period  from April 17,  2005,  the  commencement  of
Fresh-Start Reporting (see below), to January 28, 2006.


BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements as of April 16, 2005 and
January 28, 2006,  and for the fiscal period from April 17, 2005 to January 28,
2006,  have been  prepared in  accordance  with the  provisions of Statement of
Position  90-7  "Financial  Reporting by Entities in  Reorganization  Under the
Bankruptcy  Code" ("SOP 90-7")  issued by the  American  Institute of Certified
Public Accountants. Pursuant to the provisions of SOP 90-7, upon emergence from
Chapter  11  proceedings,  the  Company  adopted  fresh-start  reporting  which
resulted in a new reporting entity and a new basis of accounting.

Although  April 13, 2005 was the effective  date of the Plan, the Company chose
April  16,  2005  as the  effective  date  for  accounting  purposes  to  adopt
fresh-start  reporting  because of the  proximity of that date to the end of an
accounting period.  Applying fresh-start  reporting as of April 16, 2005 rather
than the actual effective date of April 13, 2005 did not have a material effect
on the financial condition or results of operations of the Company.

The  reorganization  value of the Company  upon  emergence  from the Chapter 11
proceedings was approximately $195 million. The reorganization value represents
the debt and equity value of the Company as of the effective  date. Such value,
which was determined with the assistance of the Company's  financial  advisors,
was based  upon  various  valuation  methods,  including  discounted  cash flow
methodologies  and analysis of  comparable  companies.  The equity value of the
Company  upon  reorganization  amounting to  approximately  $118  million,  was
determined  after  taking  into  account  approximately  $77  million  of debt,
consisting of long-term  debt,  obligations  under  capital  leases and defined
benefit pension plan liabilities,  net of related deferred taxes. In accordance
with fresh-start  reporting,  all assets and liabilities were recorded at their
respective fair values. The fair values of the Company's long-lived assets were
determined, in part, using information provided by third-party appraisers.  The
excess of the aggregate fair value of the Company's  tangible and  identifiable
intangible  assets  less  non-interest   bearing  liabilities  over  the  total
reorganization  value of approximately $31.7 million has been recorded as a pro
rata reduction of non-current assets.


                                     -53-
<PAGE>

USE OF ESTIMATES

The  preparation  of the financial  statements in  conformity  with  accounting
principles  generally accepted in the United States requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts of assets and
liabilities and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues and expenses
during the reporting period. Actual amounts could differ from those estimates.


REVENUE RECOGNITION

Revenue from the sale of products to retail customers is recognized at the time
of sale.  Discounts  provided to customers  through company  sponsored  loyalty
programs are recognized as a reduction in sales as products are sold. Discounts
provided  through  vendor coupons are not recognized as a reduction in sales to
the extent the Company is reimbursed by the vendor. Pharmacy sales are recorded
when prescriptions are picked up by the customer.  Sales taxes are not recorded
as a component of sales.  Revenue from gift  certificates  is  recognized  upon
redemption of the gift certificates for products.

Revenue from the sale of products to wholesale  customers is  recognized at the
time of shipment.


COST OF SALES

Cost of sales includes the cost of product and related  warehousing and freight
costs.  Vendor allowances are recorded as a reduction of cost of sales when the
related  product is sold in accordance  with the provisions of Emerging  Issues
Task Force Issue 02-16.  "Accounting  by a Customer  (Including a Reseller) for
Certain  Consideration  Received from a Vendor".  Vendor allowances,  including
early payment  discounts,  volume rebates,  and funds for product placement and
advertising,  are generally  recorded as a reduction of inventory cost based on
average inventory turnover rates by product category.

Vendor  allowances  recognized  as a reduction  of cost of sales for the period
ended January 28, 2006 aggregated $43.8 million.


ADVERTISING

Advertising  costs are  expensed  as  incurred  and  included  in  selling  and
administrative  expenses.  Advertising expense for the period ended January 28,
2006 aggregated $11.1 million.


ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable  consist  primarily of amounts due from wholesale
customers,  debit and credit card sales,  third party insurance  pharmacy sales
and vendor  allowances.  The Company  establishes  an  allowance  for  doubtful
accounts based on an analysis of past due accounts and historical loss trends.

                                     -54-
<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash,  accounts  receivable,  trade accounts  payable and
accrued  expenses  approximate  their fair values due to the  relatively  short
maturities of the instruments. For other debt, carrying value approximates fair
value because their interest rates approximate market rates.


INVENTORIES

Inventories,  consisting primarily of grocery and pharmacy products, are stated
at the lower of cost or market. Cost is determined using the last-in, first-out
method  ("LIFO")  using the estimated fair value of inventory on April 16, 2005
upon  adoption of  fresh-start  reporting to determine  LIFO cost for financial
reporting purposes.  If cost had been determined using the first-in,  first-out
method ("FIFO"),  inventories would have been $1.5 million higher than reported
at January 28, 2006.

The  Company  takes  physical  counts of  inventories  throughout  the year and
records inventory shortage adjustments based on the physical counts. Throughout
the year the Company is accruing for  inventory  shortages  based on historical
trends and averages in the proper periods.  Where physical counts are not taken
at the year end, the Company  establishes an allowance for inventory  shortages
based on historical shrinkage percentages.


FIXED ASSETS AND CAPITAL LEASES

Major renewals and betterments are capitalized,  while  maintenance and repairs
are charged to expense as incurred.  Depreciation and amortization are provided
on a straight-line  basis over the estimated useful lives of the assets or, for
leasehold improvements, the shorter of the estimated useful lives of the assets
or the lease term (which includes renewal periods that are reasonably assured).

Estimated useful lives are as follows:

             Buildings                                    39 years
             Capitalized leases                           5 to 32 years
             Equipment and furniture                      3 to 10 years
             Leasehold improvements                       10 to 32 years
             Vehicles                                     3 to 8 years


Fixed  assets  are  reviewed   for   impairment   when  events  or  changes  in
circumstances  indicate  that the carrying  amount may not be  recoverable.  An
impairment  loss  would be  recognized  when  future  undiscounted  cash  flows
expected to result from the use of the asset and its eventual disposal are less
than the carrying amount.


                                     -55-
<PAGE>

INTANGIBLE ASSETS

Identifiable  intangible  assets  consist  primarily  of  favorable  leases and
pharmacy  prescription  files (both  established  upon adoption of  fresh-start
reporting).  Favorable  operating  leases  represent  the present  value of the
difference  by which market value rent exceeds  contract rent and are amortized
on a  straight-line  basis over the  remaining  lease term,  including  renewal
options ranging from 2 to 32 years.  Pharmacy  prescription files are amortized
on a straight-line  basis over 5 years.  Computer  software is amortized over 5
years.

Identifiable  intangibles are reviewed for impairment when events or changes in
circumstances  indicate  that the carrying  amount may not be  recoverable.  An
impairment  loss  would be  recognized  when  future  undiscounted  cash  flows
expected to result from the use of the asset and its eventual disposal are less
than the carrying amount.


UNFAVORABLE LEASES

Unfavorable   operating  leases   (established  upon  adoption  of  fresh-start
reporting)  are reported in other  non-current  liabilities  and  represent the
present  value of the  difference by which  contract rent exceeds  market value
rent and are amortized on a straight-line  basis over the remaining lease term,
excluding renewal options, ranging from 2 to 13 years.


INCOME TAXES

Income taxes are provided based on the liability method of accounting. Deferred
income  taxes are recorded to reflect the tax  consequences  in future years of
net operating loss carryovers and temporary  differences  between the tax basis
of assets and liabilities and their  corresponding  financial reporting amounts
at each year-end.


SELF-INSURANCE LIABILITY

The  Company   self-insures   certain   insurable  risks  related  to  workers'
compensation  and  general  product  liability  claims.   The  Company  accrues
estimated losses for unpaid claims, including incurred but not reported losses,
with the  assistance of an external  actuary and by factoring in pending claims
and historical loss experience.  The Company also maintains self-insured health
benefits plans, which provide medical and dental benefits to employees electing
coverage  under the plans.  The  Company  accrues  estimated  losses for unpaid
claims,  including  incurred  but not  reported  claims,  based  on  historical
experience and other assumptions.  Commercial  policies are obtained to provide
for coverage of certain risk exposure above the self-insured  retention limits.
The estimated  liability  associated with settling unpaid claims is included in
other  current  liabilities  if  expected  to be settled  within  one year,  or
otherwise is included in other non-current liabilities.


                                     -56-
<PAGE>

STORE PRE-OPENING COSTS

Store pre-opening costs are expensed as incurred.


STORE CLOSING COSTS

For operating  leases  related to closed stores,  the Company  records the fair
value  of  the  liability  at  the  cease-use  date,  determined  based  on the
discounted value of the remaining lease rentals,  reduced by estimated sublease
rentals  that could be  reasonably  obtained  for the  property.  Any  one-time
termination  benefits are recognized at the time the benefits are  communicated
to the  employees.  Other related  costs are  recognized in the period when the
liability is incurred.


PER SHARE DATA

Basic and  diluted  net loss per share is based on the number of common  shares
issued and  estimated to be issued  pursuant to the Plan.  Common shares issued
and  estimated  to be issued in  settlement  of claims  filed in the  Company's
Chapter 11 proceeding  are treated as  outstanding  as of the effective date of
the Plan. At January 28, 2006, 201,055 common shares are estimated to be issued
in connection with the settlement of remaining claims (see Note 8).


RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R") which is
a  revision  of  FASB   Statement   No.  123,   "Accounting   for   Stock-Based
Compensation."  SFAS 123R supersedes APB Opinion No. 25,  "Accounting for Stock
Issued to  Employees,"  and requires  all  share-based  payments to  employees,
including  grants of employee  stock  options,  to be  recognized in the income
statement  based on their fair  values.  Pro forma  disclosure  is no longer an
alternative.  SFAS 123R is required to be adopted in the first annual reporting
period beginning after June 15, 2005. Accordingly,  the Company will adopt SFAS
123R effective January 29, 2006.

In  June  2006,  the  FASB  issued   Interpretation  No.  48,  "Accounting  for
Uncertainty  in Income Taxes - an  interpretation  of FASB  Statement  No. 109"
("FIN 48") effective for fiscal years beginning after December 15, 2006. FIN 48
clarifies the  accounting for  uncertainty  in tax  positions.  FIN 48 requires
financial statement recognition of the impact of a tax position when it is more
likely than not,  based on its  technical  merits,  that the  position  will be
sustained upon examination.  The Company is currently  evaluating the effect of
adopting FIN 48.

                                     -57-
<PAGE>

In June 2006, the FASB ratified Emerging Issues Task Force Issue No. 06-3, "How
Sales Taxes Collected From Customers and Remitted to  Governmental  Authorities
Should Be  Presented  in the  Income  Statement  (that  is,  Gross  Versus  Net
Presentation)" ("EITF 06-3") effective for periods beginning after December 15,
2006. EITF 06-3 allows taxes assessed by various governmental  authorities that
are directly imposed on  revenue-producing  transactions between a seller and a
customer,  such as sales and some excise  taxes,  to be  presented  on either a
gross or net basis. If such taxes are significant, the accounting policy should
be disclosed as well as the amount of taxes included in revenue if presented on
a gross  basis.  The  Company  records  sales net of  applicable  sales  taxes.
Therefore, the adoption of EITF 06-3 will have no effect on the presentation of
the Company's financial statements.

In September 2006, the FASB issued Statement of Financial  Accounting  Standard
No. 157,  "Fair Value  Measurement"  ("SFAS  157")  effective  for fiscal years
beginning after November 15, 2007.  SFAS 157 defines fair value,  establishes a
framework for measuring fair value in generally accepted accounting  principles
and  expands  disclosures  about  fair  value  measurements.  SFAS 157 does not
require any new fair value  measurements.  The Company is currently  evaluating
the effect of adopting SFAS 157.

In September 2006, the FASB issued Statement of Financial  Accounting  Standard
No.  158,  "Employers'   Accounting  for  Defined  Benefit  Pension  and  Other
Postretirement  Plans - an  amendment  of FASB  Statements  No. 87, 88, 106 and
132R" ("SFAS 158")  effective  for fiscal years ending after  December 15, 2006
with  early  application  encouraged.  SFAS 158  requires  financial  statement
recognition  of the  overfunded  or  underfunded  status of a  defined  benefit
postretirement  plan or other  postretirement plan as an asset or liability and
recognition  of changes in the funded status in  comprehensive  earnings in the
year in which the changes  occur.  The Company  elected early  application  and
adopted  SFAS 158  effective  as of  January  28,  2006.  The  adoption  of the
recognition  provision  of  SFAS  158  increased  stockholders  equity  by $4.9
million, reduced the defined benefit pension plan liability by $8.3 million and
reduced the  deferred  tax  liability  by $3.4 million at January 28, 2006 (see
Note 10).


                                     -58-
<PAGE>

NOTE 4 - LEASES

The  Company  leases  store  facilities  for the  operation  of its retail food
business  and  distribution  facilities  for its  wholesale  food  distribution
business.   In  accordance  with  the  provision  of  FASB  Statement  No.  13,
"Accounting for Leases," certain of the leases meet the criteria to be recorded
as capital leases. The remaining leases are recorded as operating leases.  Most
of the lease  agreements  provide  for renewal  options  and  require  that the
Company pay real estate taxes and other related expenses.  Certain of the lease
agreements  also provide for contingent  rent payments based on a percentage of
sales.

The following is a summary of future minimum rent payments for operating leases
and for capital leases as of January 28, 2006 (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR ENDING                                OPERATING LEASES         CAPITAL LEASES
<S>                                               <C>                       <C>
February 3, 2007                                    $      22,766           $      2,855
February 2, 2008                                           20,873                  2,855
January 31, 2009                                           19,759                  2,855
January 30, 2010                                           15,778                  2,781
January 29, 2011                                           13,761                  1,944
Thereafter                                                 70,935                 12,766
                                                    -------------           ------------

Total minimum lease payments                        $     163,872                 26,056
                                                    =============

Less: Amount representing interest                                                12,317
                                                                            ------------

Present value of net minimum lease payments                                       13,739

Less: Current portion                                                              1,310
                                                                            ------------

Long-term obligations under capital leases                                  $     12,429
                                                                            ============
</TABLE>

Future  minimum rent  payments  have not been reduced by minimum  sublease rent
income of $8.3 million due in the future under non-cancelable subleases.

Rent expense under  operating  leases for the period ended January 28, 2006 was
$10.7 million as follows (in thousands):


                     Minimum rent                           $     13,115
                     Contingent rent                                 201
                     Less: sublease rent                          (2,625)
                                                            ------------
                     Net rent expense                       $     10,691
                                                            ============


                                     -59-
<PAGE>

NOTE 5 - INTANGIBLE ASSETS

Intangible  assets as of January  28,  2006 and April 16,  2005  consist of the
following (in thousands):

<TABLE>
                                                            JANUARY 28, 2006                   APRIL 16, 2005
                                         --------------------------------------------------   ---------------
                                          GROSS CARRYING      ACCUMULATED                      GROSS CARRYING
                                              AMOUNT          AMORTIZATION         NET             AMOUNT
                                         ----------------    --------------    ------------   ---------------
<S>                                        <C>                <C>                  <C>         <C>
      Amortized intangible assets:
             Favorable leases              $   26,739         $    (1,365)         25,374      $    26,739
        Pharmacy prescription files            10,362              (1,657)          8,705           10,362
             Computer software                  2,542                (401)          2,141            2,511
                                           ----------         -----------      ----------      -----------

                 Total                     $   39,643         $    (3,423)     $   36,220      $    39,612
                                           ==========         ===========      ==========      ===========
</TABLE>

    Aggregate amortization expense:
             For the period ended January 28, 2006                 $     3,423


          Future Amortization:


          Fiscal Year Ending:
            February 3, 2007                $    4,280
            February 2, 2008                     4,129
            January 31, 2009                     4,129
            January 30, 2010                     4,129
            January 29, 2011                     2,024
               Thereafter                       17,529
                                            ----------

                                            $   36,220
                                            ==========


                                     -60-
<PAGE>

NOTE 6 - DEBT

Debt  consists  of the  following  at January  28,  2006 and April 16, 2005 (in
thousands):

<TABLE>
                                                                      JANUARY 28,        APRIL 16,
                                                                         2006               2005
                                                                     -------------     -------------
<S>                                                                  <C>               <C>
Revolving credit facility, interest (6.60% at January 28, 2006)
at prime plus .50% to 1.25% or LIBOR plus 2.00% to 2.75%,
maturing April 13, 2008                                              $     17,000      $     17,500

Term loan facility, interest (12.25% at January 28, 2006)
at prime plus 5.00%, maturing April 13, 2008                                6,000             6,000

Supplemental real estate credit facility, interest (12.75% at
January 28, 2006) at prime plus 5.50%, maturing April 13, 2008             10,000            10,000

Mortgages payable, interest at 6.125% to 12%, maturing at
various dates through May 1, 2021                                           4,513             4,721
                                                                     ------------      ------------

Total debt                                                                 37,513            38,221

Less: Current portion of long-term debt                                       278               254
                                                                     ------------      ------------

Total long-term debt                                                 $     37,235      $     37,967
                                                                     ============      ============
</TABLE>


Maturities of debt over the next five years are as follows (in thousands):

                    Fiscal Year Ending:
                    February 3, 2007                           $       278
                    February 2, 2008                                33,314
                    January 31, 2009                                   280
                    January 30, 2010                                   298
                    January 29, 2011                                   324
                    Thereafter                                       3,019
                                                               -----------

                                                               $    37,513
                                                               ===========


                                     -61-
<PAGE>

On April 16, 2005,  upon  emergence  from Chapter 11  proceedings,  the Company
entered  into a  revolving  credit  and  term  loan  facility  with a group  of
financial  institutions  providing for a $130 million revolving credit facility
and a $6 million term loan.  Also on April 16, 2005, the Company entered into a
supplemental  real  estate  credit  facility  with  another  group of  lenders,
providing for borrowings of up to $28 million.  Availability  under both credit
facilities is dependent on levels of accounts receivable, inventory and certain
other assets.  Interest rates on borrowings under the revolving credit facility
vary  depending  upon  the  amount  of  availability.   At  January  28,  2006,
outstanding  borrowings  under  both  facilities  aggregated  $33  million  and
outstanding  letters of credit under the revolving credit facility  amounted to
approximately $53 million. At such date,  availability in excess of outstanding
borrowings  and letters of credit was  approximately  $54  million.  Borrowings
under the revolving  credit and term loan facility are secured by substantially
all the assets of the  Company,  subject to first liens on certain  property by
other lenders. Borrowings under the real estate facility are secured by a first
lien on substantially all leasehold interests of the Company, and a second lien
on realty owned by the Company.

Provisions  of  both  credit  facilities,   among  other  things,  require  the
maintenance of certain financial  covenants (when availability under the credit
facilities is less than $35 million for four  consecutive days or less than $30
million  for any one day),  and limit the amount of capital  expenditures,  the
assumption of additional debt and the payment of dividends.  At no time through
January 28, 2006 has we have been subject to  compliance  with these  financial
covenants  because the amount  available for borrowing has not dropped to those
levels.  However,  had  such an event  occurred,  we  would  not  have  been in
compliance  with the  financial  covenants and would have been in default under
the terms of the loan agreement at January 28, 2006.

On December 26, 2006, both the revolving  credit and term loan facility and the
supplemental real estate credit facility were amended to permit the disposal of
assets in connection with the closing of five stores.

The  Company  also  has  borrowings  under  mortgages  secured  by the  related
properties.


                                     -62-
<PAGE>

NOTE 7 - OTHER CURRENT AND OTHER NON-CURRENT LIABILITIES

Other current and non-current  liabilities as of January 28, 2006 and April 16,
2005 consist of the following (in thousands):

                                                      JANUARY 28,    APRIL 16,
                                                         2006           2005
                                                      -----------   -----------

OTHER CURRENT LIABILITIES:

Payroll and related payroll taxes                     $    5,565    $     9,130
Workers compensation                                       9,980          8,828
Vacation and other compensated absences                   12,329         12,765
Reorganization costs                                         250          7,527
Employee benefits                                          5,310          5,467
State lottery                                              2,345          2,109
Utilities                                                  2,195          1,636
Professional fees                                          1,680          2,532
Other accrued liabilities                                  6,640          8,582
                                                      ----------    -----------

Total                                                 $   46,294    $    58,576
                                                      ==========    ===========


OTHER NON-CURRENT LIABILITIES:

Workers compensation                                  $   16,172    $    17,444
Unfavorable leases                                         5,767          7,420
General liability insurance                                1,294          1,657
Asset retirement obligations                                 928            862
Step rent liability                                          705              -
PBGC settlement                                            2,500          3,214
Store closing costs                                          655            876
                                                      ----------    -----------

Total                                                 $   28,021    $    31,473
                                                      ==========    ===========


                                     -63-
<PAGE>

NOTE 8 - LIABILITIES SUBJECT TO COMPROMISE

In connection  with the Chapter 11  proceeding,  there are two pending  matters
involving  claims for the payment of money or the transfer of property.  In one
matter,  the Ohio Bureau of Workers'  Compensation  ("OBWC") has filed priority
and  administrative  claims  aggregating $13.4 million for pre-petition  unpaid
workers'  compensation  premiums and for reserves to pay future claims  arising
from existing injuries. The OBWC has also filed claims aggregating $1.8 million
for alleged  non-payment  of  post-petition  premiums  and for  reserves to pay
future claims arising from existing injuries.  The Company disputes the amounts
of the claims, and is attempting to negotiate a settlement.

In another  matter,  a claimant has filed a priority  claim  allegedly  arising
under an agreement for a sale-leaseback  transaction  seeking either damages of
$2.2 million or specific performance of the agreement. The Company disputes the
merits of the claim and is defending against it.

During the period  ended  January 28,  2006,  the Company  paid $5.6 million in
settlement of disputed claims. The Company has established  liabilities for the
estimated cash payments required to settle the remaining claims  outstanding in
the Chapter 11  proceedings.  Estimated  shares of common stock to be issued in
settlement of claims have been accounted for as stockholders' equity.


NOTE 9 - INCOME TAXES

The  components of income tax benefit for the period ended January 28, 2006 are
as follows (in thousands):

       Current tax provision
              Federal                                               $         -
              State                                                         261

       Deferred tax benefit
              Federal                                                      (908)
              State                                                        (256)
                                                                    -----------

       Total income tax benefit                                     $      (903)
                                                                    ===========

The following is reconciliation between the federal income tax benefit computed
at the  statutory  federal  income tax rate and actual  income tax  benefit (in
thousands):


       Federal income tax benefit at statutory rate                 $    (1,677)
       State income taxes, net of federal income tax effect                 172
       Non-deductible expenses                                              602
                                                                    -----------
       Total income tax benefit                                     $      (903)
                                                                    ===========


                                     -64-
<PAGE>

The  significant  components of deferred  income tax assets and  liabilities at
January 28, 2006 and April 16, 2005 are as follows (in thousands):

<TABLE>
                                                                     JANUARY 28,       APRIL 16,
                                                                         2006             2005
                                                                     ------------     --------------
<S>                                                                  <C>              <C>
       Current deferred income tax assets / (liabilities)

                 Reserves and accruals                               $    19,076      $      19,427
                 Inventories                                             (19,195)           (19,771)
                                                                     -----------      -------------
                                                                            (119)              (344)
                                                                     -----------      -------------

       Non-current deferred income tax assets / (liabilities)

                 Beneficial leases and other intangible assets           (12,427)           (13,150)
                 Fixed assets                                            (21,774)           (24,788)
                 Capital leases                                           (4,492)            (4,911)
                 Pensions                                                 11,274             16,324
                 Goodwill (1)                                              5,695              6,896
                 Capital lease obligations                                 5,612              5,974
                                                                     -----------      -------------
                                                                         (16,112)           (13,655)
                                                                     -----------      -------------
       Net deferred income tax (liabilities)                         $   (16,231)     $     (13,999)
                                                                     ===========      =============
</TABLE>

(1)  Represents tax basis of deductible  goodwill arising from acquisitions
     consummated in prior years.

Prior net operating  loss carry  forwards were  entirely  eliminated  effective
January 29, 2006 principally as a result of cancellation of debt in the Chapter
11  proceedings.  Further,  the Company  lost a portion of the tax basis of its
long-lived  assets,  reducing the amount of tax  depreciation  and amortization
that the Company will be able to utilize on its tax returns.


                                     -65-
<PAGE>

NOTE 10 - PENSION PLANS

The Company has four  noncontributory  defined  benefit  pension plans covering
certain union  personnel.  The Company's  policy is to fund pension benefits to
the extent contributions are deductible for tax purposes and in compliance with
federal laws and regulations. For the Company's plans, normal retirement age is
either 62 or 65, but provisions are made for earlier  retirement.  Benefits are
determined either on average annual  compensation and years of service, or as a
pre-determined  amount  for each year of  service.  Full  vesting  occurs  upon
completion  of five years of service.  Assets of the  Company's  pension  plans
primarily consist of investments in publicly traded equity and debt securities.

In accordance with the provisions of SOP 90-1, upon emergence from  bankruptcy,
the Company  recorded  the  underfunded  status of each of the defined  benefit
plans as a liability on the balance sheet.  As of January 28, 2006, the Company
adopted the provisions of Financial  Accounting  Standard No. 158,  "Employers'
Accounting for Defined Benefit Pension and Other  Postretirement  Plans" and in
accordance  therewith  reflected  the  underfunded  status  of the plans in its
balance  sheet  at such  date.  Prospectively,  the  Company  will  adjust  the
liability to reflect the current funded status of the plan. Any gains or losses
that  arise  during  the period but are not  recognized  as  components  of net
periodic benefit cost will be recognized as a component of other  comprehensive
income. The adoption of SFAS 158 resulted in the recognition of $8.3 million of
unrecognized  actuarial  gains which arose during the period ended  January 28,
2006  and a  corresponding  reduction  in  the  defined  benefit  pension  plan
liability at January 28, 2006. Such  unrecognized  gains, net of deferred taxes
of $3.4 million were credited to accumulated other comprehensive  income in the
amount of $4.9 million. The adoption of SFAS 158 had no effect on the Company's
consolidated statement of operations for the period ended January 28, 2006.

At April 16, 2005,  the  aggregate  projected  benefit  obligation  of the four
defined  benefit plans was $108.8  million and the aggregate fair value of plan
assets was $68.8 million. The unfunded obligation of $39.9 million was recorded
as  a  liability  on  the  balance  sheet.  The  following   weighted-  average
assumptions were used to determine the projected benefit obligation as of April
16, 2005 - discount rate 5.48% and salary increases 3.00%.


                                     -66-
<PAGE>

Information  as to the  Company's  four  defined  benefit  pension  plans as of
January  28,  2006,  which is the  measurement  date of the plans,  and for the
period then ended is as follows (in thousands):

                                                               JANUARY 28, 2006
                                                               -----------------

Change in benefit obligation
             Benefit obligation at beginning of period           $     (108,766)
             Service cost                                                (1,468)
             Interest cost                                               (4,356)
             Actuarial gain                                               2,836
             Benefits paid                                                4,154
                                                                 --------------

             Benefit obligation at end of period                       (107,600)

Change in plan assets
             Fair value of plan assets at beginning of period            68,824
             Actual return on plan assets                                 9,459
             Employer contributions                                       5,872
             Benefits paid                                               (4,155)
                                                                 --------------

             Fair value of plan assets at end of period                  80,000

Underfunded status                                               $      (27,600)
                                                                 ==============



                                     -67-
<PAGE>

                                                                  PERIOD ENDED
                                                                JANUARY 28, 2006
                                                                ----------------
Components of net periodic pension cost

             Service cost                                       $         1,468
             Interest cost                                                4,356
             Expected return on plan assets                              (3,979)
             Amount of recognized gains and losses                            -
                                                                ---------------

             Net periodic pension cost                          $         1,845
                                                                ===============

The weighted-average assumptions used to determine the benefit obligation as of
January 28, 2006 are as follows:

             Discount rate                                                 5.68%
             Rate of compensation increase                                 3.00%

The weighted-average assumptions used to determine the net benefit cost for the
period ended January 28, 2006 are as follows:

             Discount rate                                                 5.48%
             Expected return on plan assets                                7.50%
             Rate of compensation increase                                 3.00%


Plan assets by major category as of January 28, 2006 are as follows:

                                            Target Range       Actual Allocation

             Equity securities              50% to 60%                 54%
             Debt securities                40% to 50%                 44%
             Cash                            0% to 10%                  2%


                                     -68-
<PAGE>

The Company  considers the actual asset  categories of the invested  assets and
the  historical   rates  of  return  of  those  categories  as  the  basis  for
establishing  the expected  long-term rate of return (7.5% at January 28, 2006)
on plan assets.

For the year ended January 28, 2006,  the Company  contributed  $5.9 million to
the four defined benefit pension plans and for the year ended February 3, 2007,
contributed $4.3 million to these plans.

The amount of benefits  expected to be paid over each of the next six years and
in the  aggregate  for  the  following  five-year  period  are as  follows  (in
thousands):

           YEAR                                       AMOUNT
           ----                                     ---------

           2007                                     $   5,002
           2008                                         5,092
           2009                                         5,080
           2010                                         5,205
           2011                                         5,434
           2012                                         5,735
           2013-2017                                   31,124

On May 20, 2004, a distress termination  application was filed with the PBGC to
terminate a cash balance pension plan sponsored by the Company.  The PBGC filed
various claims in bankruptcy court for payment of unfunded benefit liabilities.
On February 4, 2005, the parties entered into a global  settlement  whereby the
Company settled the PBGC claims by agreeing to pay the PBGC $0.155 million upon
emergence from  bankruptcy  and $3.5 million over a two year period  commencing
six months after the emergence from bankruptcy. Further, the PBGC was permitted
to retain a $60 million unsecured claim in the bankruptcy  proceeding which was
settled through the issuance of common shares pursuant to the Plan.

The Company  maintains a 401(k) savings plan for eligible  employees.  The plan
provides  for  matching  contributions  by the  Company for all  employees  not
covered by other union pension plans.  The Company's  contributions  aggregated
$1.4 million for the period ended January 28, 2006.

The Company also participates in seventeen multiemployer  collective bargaining
agreements  that provide for  employer  contributions  to fund  union-sponsored
pension and other benefits. The Company's contributions aggregated $3.9 million
for the period ended  January 28, 2006.  While the Company has not indicated an
intention to withdraw from any multiemployer plan, such withdrawal could result
in an obligation to the plans for a portion of unfunded benefit  obligations of
the particular plans. The Company's aggregate  withdrawal  liability at January
28, 2006 is approximately $70 million. (See "Item 11. Executive Compensation --
Stock Options".)


                                     -69-
<PAGE>

NOTE 11 - COMMITMENTS AND CONTINGENCIES

The  United  States  Attorney  for the  Northern  District  of New York and the
Securities and Exchange Commission have been conducting investigations relating
to  the  Company's   promotional   allowance   practices  and  policies.   Such
investigations  began prior to the Company's emergence from bankruptcy in April
2005.  The  Company  has been  cooperating  with these  investigations  and has
produced  documents  and made Company  employees  available  for  interviews as
requested. The Company understands that these investigations are ongoing.

On June 1, 2006, the Company announced that the Audit Committee of the Board of
Directors had completed its internal investigation of the Company's promotional
allowance  practices.  The Audit Committee hired independent counsel to perform
the  investigation.  The Audit  Committee found that the Company had engaged in
certain improper practices principally relating to the premature recognition of
promotional  allowances and that these practices had largely ceased by the time
of the  Company's  Chapter 11 filing in May 2003.  On  February  3,  2006,  the
Company  announced that the employment of the Company's Chief Marketing Officer
and the Company's Vice President, Non-Perishables Marketing had been terminated
following  an interim  report to the Audit  Committee  on the  findings  of the
investigation.

In  connection  with  these  matters,  the  Company  could be subject to damage
claims,  fines or penalties.  At present, the Company is unable to estimate the
likelihood of an unfavorable outcome or the amount of any damage claims,  fines
or  penalties  in the event of an  unfavorable  outcome  and,  accordingly,  no
liability has been recorded for this contingency.

The Company enters into various purchase  commitments in the ordinary course of
business.  In the opinion of management,  no losses are expected to result from
these  purchase  commitments  (see "Item 11.  Executive  Compensation  -- Stock
Options").



                                  -70-
<PAGE>

NOTE 12 - STOCK AWARD PLAN

On December 15, 2006, the Company  established the 2006 Omnibus Award Plan (the
"Award  Plan").  Pursuant to the  provisions of the Award Plan, the Company can
grant stock options,  restricted  stock,  phantom stock and stock  appreciation
rights. The amount of shares of common stock that can be granted are limited to
902,268 in the aggregate.

On December 15,  2006,  the Company  granted an aggregate of 150,000  shares of
phantom stock to two officers of the Company.  The awards provide for a payment
in  cash  on the  settlement  date  of May  1,  2009,  or  earlier  in  certain
circumstances,  of the  difference  between the value of the  Company's  common
stock on the  grant  date and the  settlement  date.  In  accordance  with FASB
Statement No. 123R,  "Accounting  for Share Based  Payment," the awards will be
accounted for as compensation  expense and a  corresponding  liability over the
period to settlement date based on changes in the value of the Company's common
stock.

On May 14, 2007,  the Company  granted an aggregate of 22,685 shares of phantom
stock to five non-officer  directors.  The awards provide for a payment in cash
on the settlement date,  which is the earlier of when the individual  ceases to
be a member of the  Company's  Board of Directors or upon the  occurrence  of a
change in control,  as defined,  of the value of an equivalent number of shares
of  common  stock.  The award was fully  vested  upon the grant  date,  and the
Company will record a compensation  charge with a  corresponding  liability for
the fair value of the awards at date of grant.  The liability  will be adjusted
based on changes in value of the Company's  common stock,  with a corresponding
adjustment to compensation expense, at each period to settlement date.


                                     -71-
<PAGE>

NOTE 13 - SEGMENT INFORMATION

The  Company  operates  in two  segments - the  retail  food  business  and the
wholesale food distribution  business. The retail food business consists of 110
supermarkets  which the  Company  operates.  The  wholesale  food  distribution
business  supplies  79  independent   supermarkets  and  41  other  independent
wholesale  accounts with food and related  products.  The Company has allocated
warehouse and transportation  costs based on each segment's percentage of total
shipments.  In fiscal year 2007, we had a change in our  allocation  policy for
warehouse and distribution.  The calculation was modified to include order size
and distance from the  warehouse.  Although this change will not have an effect
on our consolidated results of operations, it may have a material effect on our
segment reporting.


The Company's senior management  utilizes more than one measurement to evaluate
segment  performance and allocate  resources.  However,  the dominant  measures
utilized are revenues and operating income before depreciation and amortization
and unallocated overhead expenses.

The  accounting  policies  of the  reportable  segments  are the  same as those
described in Note 3 except that the Company  accounts  for  inventory on a FIFO
basis at the segment level  compared to LIFO basis at the  consolidated  level.
The table below presents information with respect to operating segments as well
as reconciliations to consolidated information (in thousands).

<TABLE>
                                                              Wholesale Food         Reconciling
                                            Retail Food        Distribution             Items               Total
                                           --------------     ---------------      ---------------      --------------
<S>                                          <C>                <C>                  <C>                <C>
Revenues                                     $  824,340         $    171,907         $   19,646    (1)   $ 1,015,893

Cost of sales                                  (579,288)            (158,656)           (13,715)   (2)      (751,659)  (4)
Selling and administrative expense             (207,260)              (6,438)           (26,863)   (3)      (240,561)  (4)

Operating income before
   depreciation and amortization                 37,792                6,813            (20,932)              23,673

Depreciation and amortization                   (16,568)              (1,337)            (1,170)             (19,075)
                                                                                                         -----------
Operating income                                                                                               4,598
Interest expense                                                                                              (8,289)
Reorganization costs                                                                                          (1,023)
                                                                                                         -----------

Consolidated loss before income taxes                                                                    $    (4,714)
                                                                                                         ===========

Total assets as of January 28, 2006          $  290,230   (5)   $     23,744   (5)   $   15,233     (6)  $   329,207
                                             ==========         ============         ==========          ===========

Capital expenditures for the period
   ended January 28, 2006                    $   16,649         $          -         $    3,884          $    20,533
</TABLE>


                                     -72-
<PAGE>


    (1)  Consists  principally of approximately  $12.2 million for bakery sales
         principally to customers  other than those of the retail and wholesale
         segments and approximately $5.1 million for trucking revenues.

    (2)  Consists  principally of approximately  $10.8 million for bakery sales
         and approximately  $1.5 million increase in cost of sales to reconcile
         segment inventories on FIFO to consolidated inventories on LIFO.

    (3)  Consists  principally  of  approximately  $22.3  million  of  payroll,
         benefits,  and payroll taxes associated with the administrative staff,
         approximately  $2.5 million of contract  hauling costs associated with
         trucking  revenue,  and  approximately  $2.2  million  of legal  costs
         associated  with the  internal and SEC  investigation  relating to the
         Company's practices regarding promotional discounts and allowances.

    (4)  Excludes  depreciation  and  amortization  of $3.3 million for cost of
         sales and $15.7 million for selling and administrative expenses.

    (5)  The warehouse and transportation  assets have been allocated using the
         same  methodology  as  that  which  was  used  for the  warehouse  and
         transportation costs.

    (6)  Consists  principally  of fixed  assets  and  inventory  of the bakery
         operation and general corporate assets.


NOTE 14 - ALLOWANCE FOR DOUBTFUL ACCOUNTS

An analysis of the  changes to the  allowance  for  doubtful  accounts  for the
period from April 17, 2005 to January 28, 2006 was as follows (in thousands):

           Balance at beginning of period                      $      3,243
           Additions charged to costs and expenses                    2,540
           Accounts written off, net of recoveries                   (2,609)
                                                               ------------
           Balance at the end of period                        $      3,174
                                                               ============


                                     -73-
<PAGE>

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

On  September  6, 2006,  Deloitte & Touche,  LLP  resigned  as our  independent
registered public accounting firm.

Deloitte  never  rendered  an  audit  report  with  respect  to  our  financial
statements  for any period.  During the fiscal years ended January 29, 2005 and
January 28, 2006 and through Deloitte's resignation on September 6, 2006, there
had been no  disagreement  between us and Deloitte on any matter of  accounting
principles or practices,  financial statement disclosure,  or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Deloitte,
would  have  caused  it to  make a  reference  to  the  subject  matter  of the
disagreement in connection with its reports.

Except as described  below,  during the fiscal years ended January 29, 2005 and
January 28, 2006 and through Deloitte's resignation on September 6, 2006, there
have been no reportable  events (as defined in Item  304(a)(1)(v) of Regulation
S-K).  In connection  with its  resignation,  Deloitte  informed us that it was
unwilling to rely on representations  from our former internal General Counsel.
Further,  as a  result  of  the  interim  findings  of  the  Audit  Committee's
investigation  that we had engaged in certain  improper  practices  principally
relating to the premature recognition of promotional allowances, which has been
previously  disclosed,  Deloitte  had  advised  us that it would need to expand
significantly the scope of its audit. However, due to its resignation, Deloitte
did not expand the scope of its audit.

We  furnished a copy of the above  disclosure  to Deloitte and  requested  that
Deloitte  furnish us with a letter  addressed  to the  Securities  and Exchange
Commission  stating  whether or not it agreed  with such  disclosure.  Deloitte
subsequently  furnished  us  with a  letter  addressed  to the  Securities  and
Exchange  Commission in which Deloitte  agreed with the  disclosure  statements
made by us.

On September 22, 2006, we announced  that we had hired the  accounting  firm of
Eisner LLP to serve as our independent auditor.


                                     -74-
<PAGE>

ITEM 9A.   CONTROLS AND PROCEDURES

Disclosure controls and procedures under Rule 13a-15(e) of the Exchange Act are
those  controls and other  procedures  of a company that are designed to ensure
that information required to be disclosed by the company in the reports that it
files or submits under the Exchange Act is recorded, processed,  summarized and
report,  within  the time  periods  specified  in the  SEC's  rule  and  forms.
Disclosure  controls and procedures include,  without limitation,  controls and
procedures  designed to ensure that information  required to be disclosed by an
issuer in the reports it files or submits under the Exchange Act is accumulated
and communicated to the issuer's management,  including its principal executive
and principal financial officers,  or persons performing similar functions,  as
appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(e) under the Exchange Act, our management evaluated the
effectiveness  of the design  and  operation  of our  disclosure  controls  and
procedures  with the  participation  of our  principal  executive and principal
financial  officers.  Our President and Chief Executive  Officer and our Senior
Vice President and Chief Financial  Officer were not with us during fiscal year
2006.  Based on their current  observations  combined with  observations by the
disclosure  committee (which is comprised of members of management,  members of
the audit  committee  and  external  counsel),  management  concluded  that our
disclosure  controls and procedures were  ineffective as of January 28, 2006 in
providing reasonable  assurance that material information  requiring disclosure
was brought to management's  attention on a timely basis and that our financial
reporting was reliable.


CHANGE IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING

Management did not conduct an evaluation of the  effectiveness  of our internal
control over financial  reporting as of January 28, 2006. In May 2007, we hired
an  outside  consulting  firm to assist  management  in its  evaluation  of the
effectiveness  of our internal  controls over  financial  reporting,  including
disclosure  controls and procedures.  They have since  determined they will use
the framework established in "Internal Control-Integrated Framework", issued by
the Committee of Sponsoring Organizations of the Treadway Commission.


ITEM 9B.   OTHER INFORMATION

None


                                     -75-
<PAGE>

PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

As  described in Part I, Item 1 of the Form 10-K,  on May 30, 2003,  we filed a
petition  for relief under  Chapter 11 of the United  States  Bankruptcy  Code.
Members of the Board of Directors  following our emergence from Chapter 11 were
included in our plan of  reorganization  and are listed  below along with their
age as of January 28,  2006 and  biographical  information.  We have not held a
meeting of  stockholders to elect directors since we emerged from bankruptcy on
April 13, 2005.

We held 13 board  meetings  during the 41-week  period ended  January 28, 2006.
Each  director  attended at least 92% of the meeting of the Board of Directors,
plus meetings of committees on which the particular director served.

DIRECTORS FROM APRIL 13, 2005 TO CURRENT

NAME AND AGE                       BIOGRAPHICAL INFORMATION
------------                       ------------------------

Robert J. Kelly                Mr.  Kelly  has been our  Chairman  of the Board
Age: 61                        since April 2005.  Mr. Kelly was Chairman of the
Director since April 2005      Board of Reorganized Eagle Food Center Inc. from
                               2003 to present. Prior to that, between 2000 and
                               2003, Mr. Kelly was the Chairman of the Board of
                               Eagle Food Centers,  Inc.,  during which time he
                               led Eagle through a successful reorganization of
                               their senior debt and an orderly  liquidation of
                               the company.  Prior to that,  from 1995 to 2000,
                               Mr. Kelly was the Chairman, President and CEO of
                               Eagle Food Centers,  Inc. Prior to joining Eagle
                               Food Centers, Mr. Kelly was employed by The Vons
                               Companies,   from   1963  to  1995  in   various
                               management  positions,  including Executive Vice
                               President of Retailing.

John E. Burke                  Mr. Burke served as a consultant  for Nestle USA
Age: 65                        through  2006,  and has  worked at Nestle  since
Director since April 2005      1971. From 1991 through August,  2004, Mr. Burke
                               was the Vice President of Credit and Collections
                               for Nestle USA in the  United  States.  Prior to
                               that, in 1979, Mr. Burke was appointed Assistant
                               Treasurer of Nestle  Corporation.  Mr. Burke has
                               chaired  or  served  on  a  number  of  Official
                               Unsecured Creditors' Committees,  including that
                               of Fleming  Companies,  Inc.  Mr. Burke has also
                               served as a Director of  Cumberland  Farms,  the
                               National Food  Manufacturers  Credit Group,  the
                               Delaware Valley Credit  Management  Association,
                               and   the  New   York   Credit   and   Financial
                               Management.



                                     -76-
<PAGE>

Kevin P. Collins               Mr. Collins has been a member and a Principal of
Age: 56                        The Old Hill Company,  LLC  (financial  advisory
Director since 1999            services  company) since 1997. Mr. Collins was a
                               Principal of JHP  Enterprises,  Ltd.  (financial
                               advisory   services)  from  1991  to  1997.  Mr.
                               Collins  serves  as a  Director  of  Key  Energy
                               Services, Inc. (provider of oilfield services to
                               the   oil  and  gas   industry)   and   Metretek
                               Technologies,   Inc.  (provider  of  information
                               services to the energy industry). Mr. Collins is
                               a director of Contractors Holding Inc. and a CFA
                               charter holder.

Ben Evans                      Mr. Evans has served or is currently  serving as
Age: 76                        a Director  of Revco D.S.,  Inc.,  Kash n' Karry
Director since April 2005      Food   Stores,   Inc.,   Jamesway   Corporation,
                               Megafood  Stores,  Inc.,   Furrs/Bishop,   Inc.,
                               Gibson's   Discount   Centers,    Inc.,   Salant
                               Corporation,  Accord  Financial  Corp.,  Hampton
                               Industries,  Inc., Levitz Furniture, and Factory
                               Card & Party Outlet. Mr. Evans is a CPA and is a
                               member and chairman of various audit committees.
                               Mr.  Evans  is  our  audit  committee  financial
                               expert.  Mr.  Evans  joined  S.D.  Leidesdorf  &
                               Company,  predecessor  firm to  Ernst & Young in
                               1954, became a partner at that firm in 1968, and
                               retired  from  Ernst & Whinney  as a partner  in
                               1989.  From 1978 through  1989,  Mr. Evans was a
                               member  of Ernst & Whinney  corporate  financial
                               service  group.  From 1989 until 1999, Mr. Evans
                               was a  consultant  for the firm of Ernst & Young
                               in their corporate financial services group.

Alan C. Levitan                Mr. Levitan currently serves on the Board of the
Age: 63                        New Jersey  Community  Food Bank, the Academy of
Director since April 2005      Food Marketing at St. Joseph's  University,  and
                               the  Arts  Council  of the  Morris  area  in New
                               Jersey.  Mr. Levitan is a former Director of the
                               Food   Marketing   Institute   and  former  Vice
                               Chairman  of the New Jersey  Food  Council.  Mr.
                               Levitan was also employed by Kings Super Markets
                               in New Jersey in various  management  positions,
                               including  President and CEO. Prior to that, Mr.
                               Levitan was employed by Purity Supreme, Inc. for
                               many  years,  progressing  through a variety  of
                               positions,  including  Senior Vice  President of
                               Marketing and Merchandising and Division General
                               Manager.

Robert R. Panasuk              Mr. Panasuk is President & CEO,  serving in this
Age: 50                        role since  December  2006.  Mr.  Panasuk joined
Director since December 2006   Penn  Traffic  in  October  2006 as Senior  Vice
                               President,   Co-Chief  Operating  Officer.   Mr.
                               Panasuk was Executive Vice President of A&P from
                               2004  to  2005  where  he  was  responsible  for
                               Merchandising,  Marketing and  Distribution  for
                               U.S. Operations.  From 2002 to 2004 he served as
                               President of Waldbaum's  Inc.,  and from 2001 to
                               2002 he was Executive Vice President A&P Canada.

                                     -77-
<PAGE>

Gregory J. Young               Mr.  Young is Executive  Vice  President & Chief
Age: 50                        Operating  Officer,  serving  in this role since
Director since December 2006   December   2006.   Mr.  Young  was  Senior  Vice
                               President  -  Chief   Marketing  &  Distribution
                               Officer of the Company between July and December
                               2006. From 2003 until he became  associated with
                               Penn  Traffic,  Mr. Young served as an executive
                               with  C&S  Wholesale  Grocers,   first  as  Vice
                               President  of  Perishables   and  then  as  Vice
                               President/General  Manager of C&S  Retail.  From
                               2001  to  2003  Mr.   Young   was   Group   Vice
                               President/General    Manager   for   A&P   Super
                               Foodmart.  From  2000 to 2001 he  served as Vice
                               President of Store  Operations  and from 1999 to
                               2000 he  served  as Vice  President  of  Sales &
                               Merchandising  for A&P Super Foodmart.  Prior to
                               1999, Mr. Young served for more than 25 years in
                               a number of  management  and other  positions at
                               the Company and its subsidiary, P&C Foods.

Kurt M. Cellar                 Mr.  Cellar  joined Bay  Harbour  Management  in
Age: 37                        1998.  Mr.  Cellar  is  a  Chartered   Financial
Director since June 2007       Analyst.  He is currently a director of Hardwood
                               Lumber  Manufacturing  and a former  director of
                               Telcove.

Scott Sozio                    Mr. Sozio  joined Bay Harbour in November  2004.
Age: 27                        Prior to joining Bay  Harbour,  Mr. Sozio worked
Director since June 2007       at  CIBC   World   Markets   in  the   Financial
                               Restructuring Group.


                                     -78-
<PAGE>

DIRECTORS FROM JANUARY 29, 2005 TO APRIL 12, 2005


NAME AND AGE                      BIOGRAPHICAL INFORMATION
------------                      ------------------------

Byron E. Allumbaugh            Mr.  Allumbaugh  is a business  consultant.  Mr.
Age: 75                        Allumbaugh was the Chairman and Chief  Executive
Director from 1999 until       Officer of the  former  Ralphs  Grocery  Company
April 2005                     from  1976  until  he   retired  in  1997.   Mr.
                               Allumbaugh   serves   as  a   Director   of  CKE
                               Restaurants,   Inc.  (quick-service   restaurant
                               company),  El Paso Energy  Company  (natural gas
                               and  energy   company),   Galyan's  Trading  Co.
                               (sporting   goods   company)   and  The   Pantry
                               (convenience store chain).

Richard P. Brennan             Mr.  Brennan has been the Portfolio  Manager and
Age: 50                        Managing  Director  responsible  for the Special
Director from 2002 until       Situations Group at Soros Fund Management,  LLC.
April 2005                     Prior to that time Mr.  Brennan was the Managing
                               Director  responsible  for  all of the  European
                               credit  business at Merrill Lynch as well as the
                               head  of  the  European  Credit  for  Donaldson,
                               Lufkin and Jenrette.

Kevin P. Collins               Mr. Collins has been a member and a Principal of
Age: 56                        The Old Hill  Company  LLC  (financial  advisory
Director since 1999            services  company) since 1997. Mr. Collins was a
                               Principal of JHP  Enterprises,  Ltd.  (financial
                               advisory   services)  from  1991  to  1997.  Mr.
                               Collins  serves  as a  Director  of  Key  Energy
                               Services, Inc. (provider of oilfield services to
                               the   oil  and  gas   industry)   and   Metretek
                               Technologies,   Inc.  (provider  of  information
                               services to the energy industry). Mr. Collins is
                               a director of  Contractors  Holding,  Inc. and a
                               CFA charter holder.

James A. Demme                 Mr. Demme serves as an Investment  Principal for
Age: 66                        Sterling Capital Management, Inc., a Birmingham,
Chairman of the Board from     Alabama  -  based   investment   management  and
September 2003 until           venture  capital  firm. In 1997 Mr. Demme joined
April 2005                     Bruno's  as  Chairman  of the  Board  and  Chief
                               Executive Officer, engineering the Alabama based
                               supermarket company's successful reorganization.
                               Bruno's  was sold to Royal Ahold in 2001 and Mr.
                               Demme  retired  from  Bruno's  after  leading  a
                               successful transition program.  Prior to Bruno's
                               Mr. Demme was Chairman,  Chief Executive Officer
                               and  President  of  Homeland  Stores,   Inc.  an
                               Oklahoma-based  supermarket  company,  which  he
                               also guide through a successful  reorganization.
                               Mr.  Demme  has  also  held  senior   management
                               positions at the Schriver Company, and served as
                               President and Chief Operating  Officer at Shaw's
                               Supermarkets.  Mr. Demme spent 20 years with the
                               Great Atlantic and Pacific Tea Company, where he
                               progressed through all store positions including
                               Store Manager and Division Manager.

                                     -79-
<PAGE>

Joseph V. Fisher               Mr. Fisher was our President and Chief Executive
Age: 64                        Officer  from  November  1998 until August 2003.
Director from 1998 until       From  1992 to  November  1998  Mr.  Fisher  held
April 2005                     senior   management   positions   with   Big   V
                               Supermarkets,   Inc.   ("Big   V"),  a  regional
                               supermarket  company  operating  primarily under
                               the ShopRite name, including President and Chief
                               Executive  Officer from 1995 to 1998;  Executive
                               Vice  President - Marketing and  Operations  and
                               Chief  Operating  Officer  from  1994  to  1995;
                               Senior Vice President - Marketing and Operations
                               from  1993 to 1994  and Vice  President  - Store
                               Operations  from 1992 to 1993. He also served as
                               a Director of Big V from 1993 to 1998.  Prior to
                               joining Big V, Mr. Fisher was employed by Purity
                               Supreme, Inc. (supermarket  company),  from 1973
                               to  1991,  in  various   management   positions,
                               including  Senior Vice  President - Supermarkets
                               from 1985 to 1991.

Matthew Glass                  Mr.  Glass has worked in the  special  situation
Age: 47                        group  of  Soros  Fund  Management,   LLC  as  a
Director from 2002 until       Director since 2002.
April 2005

Richard L. Hockett             Mr.  Hockett  is  a  principal  at  DDJ  Capital
Age: 43                        Management,  LLC, which he joined in 1996. Prior
Director from 2003 until       to DDJ,  between  1994 - 1996,  Mr.  Hockett was
April 2005                     Vice  President and an analyst in the High Yield
                               Department  at  Keystone  Investments.  Prior to
                               that,  from 1989 to 1994,  Mr.  Hockett was vice
                               President in the Investment  Banking  Department
                               at Salomon Brothers, Inc. Mr. Hockett has served
                               on a number of Boards  of  Directors,  including
                               Bruno's Supermarket, Inc.

Richard D. Holahan             Mr.  Holahan  is  Assistant  General  Counsel of
Age: 39                        Soros Fund  Management,  LLC,  and has worked at
Director from 2002 until       Soros since 1999. Mr. Holahan is also a director
April 2005                     of Seoul  Securities  Co. Ltd., a Korean  broker
                               dealer.

Peter J. Zurkow                Mr.  Zurkow was our  Chairman  of the Board from
Age: 53                        June 1999 until  September  2003.  Since January
Director from 1999             2002, Mr. Zurkow has been a Managing Director of
until April 2005               Investec,  Inc.  (investment banking firm). From
                               April 2001 to December  2001,  Mr.  Zurkow was a
                               private  investor.  From 1992 to April 2001, Mr.
                               Zurkow was a Managing  Director  of UBS  Warburg
                               (January 2001 to April 2001) and its predecessor
                               firm,  PaineWebber,  Inc.  (1992  to  2000).  He
                               served as a Director of Streamline, Inc. (online
                               grocery  company)  from  1997 to  1998,  Kash N'
                               Karry   Supermarkets   from  1994  to  1996  and
                               E-artgroup.com  (online art dealer) from 1999 to
                               2000

There are no family relationships among our directors and executive officers.

                                     -80-
<PAGE>

The members of the  Compensation  Committee  as of January 28, 2006 are Messrs.
Burke and Kelly.  Mr. Burke is Chairman of the Compensation  Committee.  During
Fiscal 2006, Mr.  Chapman  served on the committee as our advisor.  Mr. Chapman
was  replaced  in 2006 by Mr.  Panasuk  as an  advisor  to the  committee.  The
Compensation   Committee  reviews  the  annual  recommendations  of  the  Chief
Executive Officer  concerning the compensation of our certain of our employees,
including the compensation plans,  retirement plans and fringe benefit plans in
which such persons  participate,  and makes  reports and  recommendations  with
respect to such matters to our Board of Directors.  The Compensation Committee,
which held ten meetings  during  fiscal year 2006,  also  administers  our 2006
Omnibus Award Plan.

The members of the Audit  Committee  as of January 28, 2006 are Messrs.  Evans,
Collins and Levitan. Mr. Evans is Chairman of the Audit Committee and our audit
committee  financial expert. The Audit Committee held 14 meetings during Fiscal
2006.



                                  -81-
<PAGE>

EXECUTIVE OFFICERS FOR FISCAL YEAR 2006

NAME                        AGE    POSITION HELD
----                        ---    -------------

Robert J. Chapman           56     Chief Executive Officer and President
Charles C. Bostwick         56     Vice President of Information Technology and
                                   Chief Information Officer
Leslie H. Knox              60     Senior Vice President-Chief Marketing Officer
Randy P. Martin             50     Senior Vice President-Finance
Francis D. Price, Jr.       57     Vice President, General Counsel and Secretary


Executive  officers are  appointed  by the Board of  Directors  and hold office
until their  successors have been appointed or until their earlier  resignation
or  removal  from  office.  A brief  biography  of each  executive  officer  is
presented below.

Mr. Chapman served as our President and Chief Executive Officer from April 2004
until October 2006. Mr. Chapman joined P&C Foods as a part-time  store employee
in 1968 and became store manager in 1974.  Over the past 38 years,  Mr. Chapman
held a number of positions of  increasing  authority  first at P&C and later at
Penn  Traffic  after it purchased  P&C in 1988.  He served as Director of Store
Operations,  Director of Franchise  Operations  and Vice President of Wholesale
and  Franchise  Operations.  Mr.  Chapman  has also  served on a number of Penn
Traffic's internal committees,  including the Operations Steering Committee and
the Strategic Business Reorganization Committee.

Robert  Panasuk,  who joined us in October 2006,  is our current  President and
Chief Executive Officer.

Mr. Bostwick held the position of Vice President of Information  Technology and
Chief Information  Officer with us between 1998 and 2007. From 1993 to 1998 Mr.
Bostwick  held top IT  positions  for various  divisions  of  Whirlpool,  Asian
Division.  Mr. Bostwick was Vice President,  MIS & Chief  Information  Officer,
Long  Drugstore,  1989 to  1993.  Between  1986  and  1989 he was  Director  of
Computing and Communication Services, Bekins.

Mr. Knox served as our Senior Vice President and Chief  Marketing  Officer from
May 1999 until  March 4,  2006.  From 1995  until May 1999,  Mr.  Knox held the
position of Vice President -  Merchandising  with Weis Markets,  Inc. From 1984
until 1995, Mr. Knox held various management positions with ABCO Markets, Inc.,
including  Senior Vice President of Sales and Marketing from 1988 to 1995. From
1969 to 1984,  Mr.  Knox was  employed  by Alpha Beta  Company,  a division  of
American Stores Company, in various management positions.


                                     -82-
<PAGE>

Mr.  Martin served as our Senior  Vice-President-Finance  from March 2005 until
January  2007.  From January 1999 until March 2005 Mr. Martin held the position
of Vice President-Finance and Chief Accounting Officer. From 1997 until January
1999, he served as our Vice President of Strategic Planning and Treasurer. From
1993 to 1997,  Mr. Martin  served as our Director of Taxes.  From 1984 to 1993,
Mr.  Martin was employed by Price  Waterhouse in various  positions,  including
Senior Tax Manager from 1991 to 1993.

Tod A. Nestor,  who joined us in May 2007, is our current Senior Vice President
and Chief Financial Officer.

Mr. Price served as our Vice  President and General  Counsel from 1993,  and as
our Secretary from 1997,  until November 2006. Mr. Price was Vice President and
General  Counsel of the Company's P&C division from 1985 until 1993.  From 1978
to 1985, Mr. Price served in various other management positions at P&C.

Daniel Mahoney,  who joined us in December 2006, is our current Vice President,
General Counsel and Secretary.


                                     -83-
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

The following table sets forth the compensation  paid or accrued to (i) persons
serving as President and Chief  Executive  Officer  during fiscal year 2006 and
(ii) the four other most highly compensated  executive officers  (collectively,
the "Named Executive  Officers")  during fiscal year 2006 for services rendered
in all  capacities  during  fiscal year 2004,  fiscal year 2005 and fiscal year
2006.

<TABLE>
<CAPTION>
                         SUMMARY COMPENSATION TABLE

-------------------------------------------------------------------------- ------------- ----------------
                                                                            Long-Term
                                                                           Compensation
                              Annual Compensation                             Awards
-------------------------------------------------------------------------- -------------
                                                                            Securities           All
                                                                            Underlying          Other
         Name and Principal            Fiscal     Salary         Bonus       Options/       Compensation
              Position                  Year        ($)         ($) (1)    SARs (#) (2)        ($) (3)
-------------------------------------------------------------------------- ------------- ----------------
<S>                                     <C>     <C>            <C>         <C>            <C>
Robert J. Chapman                       2006    $  451,000     $  67,713          -       $   16,087
  President and Chief Executive         2005       410,956        32,375        20,000        13,894
  Officer                               2004       196,215         7,358        20,000        10,782

Charles C. Bostwick                     2006    $  208,000     $  23,400          -       $   12,749
  Vice President of Information         2005       208,000        34,320        20,000        11,103
  Technology and Chief Information      2004       208,000         7,800        20,000        10,520
  Officer

Leslie B. Knox                          2006    $  305,000     $  61,000          -       $   13,555
  Senior Vice President and Chief       2005       305,000        58,713        50,000        12,731
  Marketing Officer                     2004       305,000          -           50,000         8,033

Randy P. Martin                         2006    $  221,452     $  31,853          -       $   12,822
  Senior Vice-President-Finance         2005       194,250        32,051        15,000        10,178
                                        2004       194,250         7,284        15,000         9,383

Francis D. Price                        2006    $  169,126     $  26,527          -       $   11,902
  Vice-President, General Counsel,      2005       169,126        27,906        20,000         8,743
  Secretary                             2004       169,126         6,342        20,000         7,582
-------------------------------------------------------------------------- ------------- ----------------
</TABLE>
-------------------------------

(1) Amounts shown were payments under our Key Employee  Retention  Program (see
    below).

(2) On June 29, 1999,  we adopted an Equity Plan.  Pursuant to the Equity Plan,
    on July 7, 1999  Messrs.  Chapman,  Bostwick,  Knox,  Martin and Price were
    awarded  options to purchase  shares of our Common Stock then existing with
    an exercise price of $12.13 per share and a four-year  vesting period.  The
    numbers of shares awarded were 20,000,  20,000,  50,000, 15,000 and 20,000,
    respectively. The options were voided upon our emergence from bankruptcy on
    April 13, 2005.

(3) Amounts shown include the contribution to a company-sponsored  401(k) plan,
    life insurance, health insurance, and disability insurance.


                                     -84-
<PAGE>

Compensation for our Executive Officers is comprised of:

    o    Salary
    o    Sign on bonus
    o    Performance based bonus
    o    Relocation
    o    Retirement & other benefits

We  provide  our  executive   officers  with  fixed  and  variable  amounts  of
compensation  including  annual  salary  reviews  approved by the  compensation
committee.

Store  Managers and Assistant  Managers  were  eligible to receive  performance
based  bonuses.  Based on other  factors such as our financial  condition,  the
compensation  committee  did not  approve  a plan for the  executive  and other
non-store  employees fiscal year 2006. The amount of the Managers' bonuses were
based on targeted  performance levels  established by executive  management and
approved by the Board of Directors.

Company directors and executives were paid retention bonuses in order to secure
their services during the reorganization period.

We provide retirement  benefits to all non-union  employees that have worked at
least 6 months in their position.  We match 50% of the employees'  contribution
up to 1.5%. We also  contribute an annual match of 3% for  participants  in our
401(k) plan.  We also  contribute  to health and group life  insurance  for all
levels of employees.


KEY EMPLOYEE RETENTION PLAN

On October 24, 2003, the bankruptcy court approved our Key Employee  Retention,
Incentive and Severance  Plan. We implemented  the Key Employee  Retention Plan
with the goal of retaining and incentivizing management and other key employees
to stabilize and continue our  operations,  implement a plan of  reorganization
and preserve and enhance our value business during our Chapter 11 proceedings.


                                     -85-
<PAGE>

RETIREMENT PLANS

Our named  executive  officers are  eligible to  participate  in our  sponsored
401(k)  plan after six months of  employment.  Under the plan,  employees  make
contributions from 1% to 25% of salary, tax-deferred up to the maximum Internal
Revenue Code limit and we match 50% of the first 3% of employee  deferral after
one year of employment.  In addition,  once an employee completes six months of
service,  we  will  make  a  contribution  of 3%  of  the  participants'  total
compensation to the 401(k) plan each year.


COMPENSATION OF DIRECTORS

Set forth  below is the fee  schedule  for  directors.  Directors  who are also
officers are not eligible to receive board fees.


                ANNUAL RETAINER FEE
                -------------------
                    Chair                                 $      50,000
                    Director                                     25,000

                BOARD MEETING FEES
                ------------------
                    Chair                                         1,500
                    Director                                      1,500

                COMMITTEE FEES
                AUDIT AND COMPENSATION:
                -----------------------
                    Chair - annual                                5,000
                    Chair and Member meeting                      1,000


In addition to fees listed above, directors are reimbursed for expenses and
receive $750 for each telephonic meeting.

The following table sets forth amounts paid by us to directors in connection
with their services to us in fiscal year 2006. The second quarter retainer fees
were paid on a pro-rata basis.


                                                      FEES EARNED OR
                NAME                                   PAID IN CASH
                ----                                   ------------
                John E. Burke                             54,511
                Kevin P. Collins                          54,500
                Ben Evans                                 56,511
                Robert J. Kelly                           72,601
                Alan C. Levitan                           56,926


In fiscal year 2007,  certain  members of the Board were grantd  phantom  stock
(see "Item 11. Executive Compensation -- Stock Options").


                                     -86-
<PAGE>

CURRENT EMPLOYEES - EMPLOYMENT AGREEMENTS

We have entered into employment  agreements with Mr. Panasuk  pursuant to which
he serves as Chief  Executive  Officer and President,  Mr. Nestor,  pursuant to
which he serves as Senior  Vice and  President  Chief  Financial  Officer,  Mr.
Young,  pursuant  to which he  serves as  Executive  Vice  President  and Chief
Operating  Officer,  and Mr.  Mahoney,  pursuant  to  which he  serves  as Vice
President General Counsel and Secretary.  Certain terms of these agreements are
described below under Summary Compensation Table. The employment agreements for
Mr.  Panasuk,  Mr. Nestor,  Mr. Young and Mr.  Mahoney,  are described below in
detail,  which include  annual  salary,  provisions  for  participation  in our
Management  Performance  Incentive  Plan,  401(k)  Plan,  health care and other
employee benefit programs and change in control severance payments.  Employment
agreements for Mr. Panasuk and Mr. Young also provide for  participation in the
Company 2006 Omnibus Award Plan.


EMPLOYMENT AGREEMENT OF ROBERT PANASUK

On December 12, 2006, Mr. Panasuk was appointed our Chief Executive Officer and
appointed to the Board of Directors.  Pursuant to an offer letter from us dated
December 12, 2006,  Mr. Panasuk will be entitled to receive an annual salary of
$500,000,  with a performance  and salary review within the first six months of
employment.  In addition to participation  in our 401(k),  health insurance and
other employee benefits  programs,  Mr. Panasuk will be entitled to participate
in our Management  Performance Incentive Program (Bonus),  pursuant to which he
will be eligible to receive 75% of his base salary at 100% of Plan,  increasing
to 150% of his base salary for  exceeding the Plan.  In addition,  Mr.  Panasuk
received a "phantom stock" award under our 2006 Omnibus Award Plan. The phantom
stock award entitles Mr. Panasuk,  subject to his continued  employment with us
or an affiliate  thereof through the settlement  date, to a cash payment on the
settlement  date of the award equal to the  excess,  if any, of the fair market
value of 100,000  shares of our common  stock on the  settlement  date over the
fair  market  value on the date of grant.  The fair  market  value of a phantom
stock  award on any given date is equal to the  average of the high bid and low
ask price of our common stock on the Pink Sheets as of the most recent  trading
day  proceeding  such date on which a sale of our common stock  occurred on the
Pink Sheets.  The shares of phantom stock will settle on the earlier of (i) May
1,  2009,  (ii) the death or  disability  of Mr.  Panasuk or (iii) a "change of
control" (as such term is defined in our 2006 Omnibus Award Plan).  Pursuant to
the Offer letter dated  October 6, 2006,  Mr.  Panasuk will also be entitled to
receive (i) the sign-on bonus of $100,000, which was paid in three installments
(ii) relocation expenses and (iii) the other benefits described in his existing
arrangement with us relating to his previous position.  Mr. Panasuk is entitled
to 78 weeks of severance based on the terms of his change of control agreement.



                                     -87-
<PAGE>

EMPLOYMENT AGREEMENT OF GREG YOUNG

On December 12, 2006, Gregory J. Young was appointed Executive Vice President -
Chief Operating Officer and was appointed to the Board of Directors Pursuant to
an offer letter from us dated  December 12, 2006. Mr. Young will be entitled to
receive an annual  salary of $400,000,  with a  performance  and salary  review
within the first six months of employment.  In addition to participation in our
401(k),  health insurance and other employee benefits programs,  Mr. Young will
be entitled to participate in the our Management  Performance Incentive Program
(Bonus),  pursuant  to which he will be  eligible  to  receive  60% of his base
salary at 100% of the Plan, increasing to 120% of his base salary for exceeding
the Plan.  In addition,  Mr. Young  received a "phantom  stock" award under the
2006 Omnibus Award Plan. The phantom stock award entitles Mr. Young, subject to
his continued employment with us or an affiliate thereof through the settlement
date,  to a cash  payment  on the  settlement  date of the  award  equal to the
excess,  if any, of the fair market value of 50,000  shares of our common stock
on the  settlement  date over the fair market  value on the date of grant.  The
fair  market  value of a phantom  stock award on any given date is equal to the
average  of the high  bid and low ask  price  of our  common  stock on the Pink
Sheets as of the most recent trading day preceding such date on which a sale of
our common stock occurred on the Pink Sheets.  The shares of phantom stock will
settle on the earlier of (i) May 1, 2009,  (ii) the death or  disability of Mr.
Young or (iii) a  "change  of  control"  (as such term is  defined  in our 2006
Omnibus Award Plan). Mr. Young will also continue to be entitled to receive the
other  benefits  described  in his existing  agreement  with us relating to his
current position,  the material term of which were described under Item 1.01 of
our Current Report on Form 8-K filed on October 6, 2006. He is also entitled to
receive up to 52 weeks of severance based on the terms of his change of control
agreement.


EMPLOYMENT AGREEMENT OF TOD NESTOR

On May 2, 2007,  we delivered an offer letter to Tod Nestor with respect to his
employment as Senior Vice President - Chief Financial Officer.  Pursuant to the
Offer  Letter,  Mr.  Nestor  will be  entitled  to receive an annual  salary of
$275,000 as well as a sign-on bonus of $50,000,  "grossed up," payable in three
installments,  the  first  installment  of 50% to be  payable  upon the date he
commences his employment in Syracuse,  NY, the second  installment of 25% to be
payable three months  thereafter and the final installment of 25% to be payable
six months  thereafter.  In addition  to  participation  in our 401(k),  health
insurance and other employee benefits programs,  Mr. Nestor will be entitled to
participate in our Management  Performance Incentive Program (Bonus),  pursuant
to which he will be  eligible to receive 45% of his base salary up to a maximum
of 90% for  exceeding  the plan.  He will also be entitled  to receive  $15,000
"grossed up" after 60 days of employment in lieu of a company car, up to $2,500
per month plus expenses for up to nine months for temporary  housing  expenses,
as well as 52 weeks of  severance  based on the terms of his  change of control
agreement.


                                     -88-
<PAGE>

EMPLOYMENT AGREEMENT OF DANIEL MAHONEY

On December  10, 2006,  we  delivered  an offer  letter to Daniel  Mahoney with
respect to his employment as Vice President,  General Counsel.  Pursuant to the
Offer  Letter,  Mr.  Mahoney  will be entitled  to receive an annual  salary of
$175,000 as well as a sign-on bonus of $42,500 payable in two installments, the
first  installment  of  $28,750 to be payable  upon the date he  commences  his
employment in Syracuse,  NY, the second installment of $13,750.00 to be payable
three months. In addition to participation in our 401(k),  health insurance and
other employee benefits  programs,  Mr. Mahoney will be entitled to participate
in our Management  Performance Incentive Program (Bonus),  pursuant to which he
will be  eligible  to receive 40% of his base salary up to a maximum of 80% for
exceeding  the Plan.  He will also be entitled to receive  $2,000 per month for
three months for temporary housing  expenses,  as well as 52 weeks of severance
based on the terms of his change of control agreement.


FORMER EMPLOYEES - EMPLOYMENT AGREEMENTS

In connection  with the  resignation  of Mr. Chapman as our President and Chief
Executive Officer,  effective as of October 2, 2006, Mr. Chapman is entitled to
receive severance payments pursuant to our severance policy, which entitles Mr.
Chapman to 78 weeks of severance pay based on an annualized salary of $477,611.
Additionally,  Mr. Chapman will continue to receive health care, life insurance
and 401(k) contributions through the severance payout period.

On March 16, 2005, Randy P. Martin was appointed as our Senior Vice President -
Finance.  Mr.  Martin's  agreement  with us called for him to receive an annual
salary of  $225,000.  Mr.  Martin was eligible to  participate  in our benefits
programs.

In connection with the resignation of Mr. Martin as our Senior Vice President -
Finance,  effective as of January 26, 2007,  Mr.  Martin is entitled to receive
severance payments pursuant to our severance policy,  which entitles Mr. Martin
to 52  weeks of  severance  pay  based on an  annualized  salary  of  $236,242.
Additionally,  Mr. Martin will continue to receive health care,  life insurance
and 401(k) contributions through the severance payout period.

In connection  with the  resignation  of Mr. Price as our Senior Vice President
General Counsel and Secretary,  effective as of November 10, 2006, Mr. Price is
entitled to receive severance payments pursuant to our severance policy,  which
entitles Mr. Price to 52 weeks of severance pay based on an  annualized  salary
of $169,126. Additionally, Mr. Price will continue to receive health care, life
insurance and 401(k) contributions through the severance payout period.



                                     -89-
<PAGE>

CHANGE OF CONTROL AGREEMENT

Our Change of  Control  Protection  Agreement,  effective  from April 17,  2006
through April 17, 2009, provides that in the event of a "Change of Control" (as
defined in the agreement),  certain employees are eligible to receive severance
payments  ranging  from 12 weeks to 78 weeks of base salary if such  employee's
employment is terminated  within one year of such change of control for reasons
other than "Cause" or "Total  Disability" (each as defined in the agreement) or
if the executive terminates his/her employment for "Good Reason" (as defined in
the agreement) within one year of such change of control.


STOCK OPTION PLANS

Upon emergence from bankruptcy on April 13, 2005, all stock options relating to
the 1999 Equity Plan were voided.

The 2006  Omnibus  Award Plan  provides a means  through  which we may  attract
talented  persons to enter and remain in our  employment  and to provide  means
whereby our employees, directors and affiliates can acquire and maintain Common
Stock ownership, or be paid incentive compensation measured by reference to the
value of Common Stock, thereby strengthening their commitment to our affiliates
welfare and promoting an identity of interest  between  stockholders  and these
persons.  The Plan provides for granting Incentive Stock Options,  Nonqualified
Stock Options,  Stock Appreciation Rights,  Restricted Stock,  Restricted Stock
Units,   Deferred  Stock  Units,   Phantom  Stock  Awards,  Stock  Bonuses  and
Performance Compensation Awards or any combination of the foregoing.

In  December  of Fiscal  2007 a total of 150,000  shares of Phantom  Stock were
granted under the Plan to the Mr.  Panasuk and Mr. Young.  On May 14, 2007, the
Board of Directors  granted  phantom stock awards under the Plan to John Burke,
Kevin  Collins,  Ben Evans,  Alan  Levitan  and Robert  Kelly,  all of whom are
independent members of the Board. Each recipient received three separate grants
of phantom stock awards,  with each recipient  receiving grant of 1,242,  1,656
and 1,659 phantom stock awards.  In addition,  beginning in 2008,  non-employee
members of the Board will receive an annual grant of phantom stock on the first
Monday of each fiscal year.  Such annual phantom stock award will provide for a
cash payment on the settlement  date equal to the fair market value (as defined
in the Plan) on the settlement date of the number of whole shares of our common
stock,  par value  $0.01 per share,  which had a fair value equal to $25,000 on
the grant date.


                                     -90-
<PAGE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain  information known to us with respect to
beneficial  ownership  of our  common  shares  as of  August  1,  2007  (unless
otherwise  indicated) by: (i) each person who  beneficially  owns 5% or more of
our common shares; (ii) each of our directors;  (iii) each of the persons named
in the Summary  Compensation Table set forth herein; and (iv) all directors and
executive  officers  as a  group.  The  information  set  forth  below  for  5%
stockholders  was derived from publicly  available  reports made by the persons
listed below on Forms 13G and 13D. We have not  attempted to verify any of this
information.  All shares of our common stock issued prior to the effective date
of our plan of reorganization  were deemed cancelled as provided in our plan of
reorganization.  Except as otherwise  indicated,  the holders listed below have
sole voting and investment power with respect to all shares  beneficially owned
by them.  For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares which such person or group of persons
has the  right to  acquire  within  60 days.  For  purposes  of  computing  the
percentage of outstanding  shares held by each person or group of persons named
below,  any  security  which such  person or  persons  has the right to acquire
within  60 days  (including  shares  which may be  acquired  upon  exercise  of
warrants or upon exercise of vested  portions of stock options) is deemed to be
outstanding,  but is not deemed to be outstanding  for the purpose of computing
the  percentage  ownership of any other person.  On August 9, 2007,  there were
8,297,697 shares of Common Stock outstanding.


                                     -91-
<PAGE>

<TABLE>
                                                                AMOUNT & NATURE OF
NAME AND ADDRESS OF                                                 BENEFICIAL        PERCENT OF
BENEFICIAL OWNER                                                     OWNERSHIP           CLASS
-------------------------------------------------------------------------------------------------
<S>                                                             <C>                   <C>
Bay Harbour Management, L.C.(1)                                    1,912,992              23.1%
885 Third Avenue
New York, NY 10022

Pension Benefit Guaranty Corporation (2)                           1,874,134              22.6%
Agent: JP Morgan Investment Management, Inc
522 Fifth Avenue
New York, NY 10036

King Street Capital Management, L.L.C.(3)                          1,174,908              14.2%
65 East 55th Street
30th  Floor
New York, NY 10022

Southpoint Capital Advisors, LP (4)                                  607,236               7.3%
623 Fifth Avenue Suite 2503
New York, NY 10022

CR Intrinsic Investors LLC (5)                                       460,085               5.5%
72 Cummings Point Road
Stamford, CT  06901

All directors and executive officers as a Group (22 persons)               0               0%
</TABLE>

    John E.  Burke,  Kevin P.  Collins,  Ben Evans,  Robert J.  Kelly,  Alan C.
    Levitan, Robert J. Chapman, Byron E. Allumbaugh,  Richard P. Brennan, James
    Demme,  Joseph V. Fisher,  Matthew  Glass,  Richard L. Hockett,  Richard D.
    Holahan,  Peter L.  Zurkow,  Charles G  Bostwick,  Leslie H Knox,  Randy P.
    Martin, Francis P Price, Robert R. Panasuk, Gregory J. Young, Tod A. Nestor
    and Daniel J. Mahoney

1)  As reported in the  Schedule  13D  (Amendment  No. 5) filed with the SEC on
    February 16, 2007.

2)  On September 28, 2005, JP Morgan Investment  Management,  Inc., or "JPMIM",
    as agent for the PBGC and pursuant to an  investment  management  agreement
    between  JPMIM and PBGC,  received  1,874,134 of our common  shares,  which
    shares  were  distributed  to  the  PBGC  in  accordance  to  our  plan  of
    reorganization.

3)  As reported in the Schedule 13D filed with the SEC on June 15, 2007.

4)  As reported in the Schedule  13G/A  (Amendment No. 1) filed with the SEC on
    February 9, 2006.

5)  As reported in the Schedule 13G filed with the SEC on April 25, 2007.


                                     -92-
<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the federal securities laws, the directors and executive officers and any
persons holding more than 10% of our common shares are required to report their
initial  ownership of such shares and any subsequent  changes in that ownership
to the SEC. To our knowledge,  based upon a review of the copies of the reports
furnished  to us  and  written  representations  that  no  other  reports  were
required, these filing requirements were satisfied during fiscal year 2006.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 12, 2006, Robert J. Kelly, our Non-Executive Chairman of the Board,
terminated the Consulting Agreement,  dated as of June 29, 2006, between us and
Mr. Kelly.  Pursuant to which Mr. Kelly had been providing  certain  consulting
and advisory services to us, including certain services  customarily  performed
by a chief executive  officer of a corporation.  We paid Mr. Kelly $0.2 million
during this time period for his services.

On September  16, 2003,  we entered into a Chairman  Retention  Agreement  with
James A. Demme. Pursuant to the Chairman Retention Agreement,  Mr. Demme served
as the  Chairman  of our  Board of  Directors  and  managed  and  directed  our
merchandising,   operational  and  other  strategic   decisions,   assisted  in
formulating the plans of reorganization, and had such other responsibilities as
are typically performed by the Chairman of the Board of Directors.  Mr. Demme's
last day of employment  was January 29, 2005 and he was replaced as Chairman of
Board upon emergence. Mr. Demme was paid $0.9 million during fiscal year 2006.


ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Fees  billed by Eisner LLP for the audit of our  financial  statements  for the
41-week period ended January 28, 2006, totaled approximately $4.8 million. Such
fees represented the total fees for audit services. There were no audit related
tax or other fees billed by Eisner LLP related to services rendered during such
period.

Pre-approval  Policy.  Pursuant to its Charter, the Audit Committee is required
to  pre-approve   the  audit  services  to  be  performed  by  the  independent
accountants  in order to assure the provisions of such services does not impair
the auditor's independence.  All the above services do not impair the auditor's
independence. All of the above services were approved by the Audit Committee in
accordance with its pre-approval policy.

Annually,  the  independent  accountants  will  present to the Audit  Committee
services  expected to be performed by independent  accountants over the next 12
months.  The  audit  committee  will  review  and,  as  it  deems  appropriate,
pre-approve those services.


                                     -93-
<PAGE>

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K

Our  consolidated  financial  statements  filed as part of this  report  appear
beginning on page 45.

EXHIBITS:

The following are filed as Exhibits to this Report:


EXHIBIT NO.                    DESCRIPTION
-----------                    -----------

    2.1       First  Amended Joint Plan of  Reorganization  of The Penn Traffic
              Company and its  Affiliated  Debtors  and  Debtors-in-Possession,
              dated February 4, 2005  (incorporated by reference to Exhibit 2.1
              to Form 8-K filed on March 24, 2005).

    2.2       Notice of Technical Modifications to the First Amended Joint Plan
              of  Reorganization of The Penn Traffic Company and its Affiliated
              Debtors  and  Debtors  in  Possession  under  Chapter  11 of  the
              Bankruptcy Code dated February 4, 2005 (incorporated by reference
              to Exhibit 2.3 to the Form 8-K filed on March 24, 2005).

    3.1       Second  Amended  and  Restated   Certificate   of   Incorporation
              (incorporated  by reference to Exhibit 3.1 to Form 8-A12G/A filed
              on April 13, 2005).

    3.2       Amended and  Restated  By-Laws of Penn Traffic  (incorporated  by
              reference to Exhibit 2 to Form 8-A12G/A filed on June 29, 1999).

   10.1       Global  Settlement  Agreement  and  Mutual  Release,  dated as of
              February 4, 2005,  by and between  The Pension  Benefit  Guaranty
              Corporation,  the Official  Committee of Unsecured  Creditors and
              The Penn Traffic Company and its affiliated debtors (incorporated
              by  reference  to Exhibit  10.1 to the Form 8-K filed on February
              11, 2005).

   10.2       Form of Change in Control Protection  Agreement  (incorporated by
              reference  to  Exhibit  99.1 to the Form 8-K  filed on April  18,
              2006).


                                     -94-
<PAGE>

Exhibits (continued):

EXHIBITS NO.
------------

    10.3      Credit Agreement,  among The Penn Traffic Company,  Penny Curtiss
              Baking Company, Inc. and Big M Supermarkets,  Inc., as borrowers;
              the other credit  parties  signatory  thereto;  General  Electric
              Capital  Corporation;   JP  Morgan  Chase  Bank,  N.A.;  The  CIT
              Group/Business  Credit; GECC Capital Markets Group, Inc.; and the
              other lenders signatory  thereto from time to time  (incorporated
              by  reference  to Exhibit 99.1 to the Form 8-K filed on September
              12, 2006).

    10.4      Supplemental Loan Credit  Agreement,  dated as of April 13, 2005,
              among The Penn Traffic  Company,  Penny Curtiss  Baking  Company,
              Inc. and Big M Supermarkets, Inc., as borrowers; the other credit
              parties  signatory  thereto;  Kimco Capital Corp.;  and the other
              lenders  signatory  thereto  from time to time  (incorporated  by
              reference to Exhibit 99.2 to the Form 8-K filed on September  12,
              2006).

    10.5      Amendment,  dated  December  28, 2006,  to the Credit  Agreement,
              among The Penn Traffic  Company,  Penny Curtiss  Baking  Company,
              Inc. and Big M Supermarkets, Inc., as borrowers; the other credit
              parties signatory thereto;  General Electric Capital Corporation;
              JP Morgan Chase Bank, N.A.; The CIT Group/Business  Credit;  GECC
              Capital  Markets  Group,  Inc.;  and the other lenders  signatory
              thereto from time to time.

    10.6      Amendment,  dated  December 28, 2006,  to the  Supplemental  Loan
              Credit  Agreement,  dated as of April  13,  2005,  among The Penn
              Traffic  Company,  Penny Curtiss Baking  Company,  Inc. and Big M
              Supermarkets,  Inc.,  as  borrowers;  the  other  credit  parties
              signatory  thereto;  Kimco Capital  Corp.;  and the other lenders
              signatory thereto from time to time.

    10.7      Consulting Agreement, dated as of June 29, 2006, between The Penn
              Traffic Company and Robert J. Kelly (incorporated by reference to
              Exhibit 99.1 to the Form 8-K filed on June 30, 2006).

    10.8      Offer  Letter,  dated as of  October 2,  2006,  between  The Penn
              Traffic Company and Robert Panasuk  (incorporated by reference to
              Exhibit 99.1 to the Form 8-K filed on October 6, 2006).

    10.9      Offer  Letter,  dated as of December 12,  2006,  between The Penn
              Traffic Company and Robert Panasuk  (incorporated by reference to
              Exhibit 99.1 to the Form 8-K filed on December 18, 2006).

    10.10     Description of Material Terms of  Compensation of Randy P. Martin
              (incorporated  by  reference  to the Form 8-K  filed on March 15,
              2005).


                                     -95-
<PAGE>

Exhibits (continued):

EXHIBITS NO.
------------

    10.11     Severance Agreement between The Penn Traffic Company and Randy P.
              Martin (incorporated by reference to Exhibit 99.1 to the Form 8-K
              filed on February 1, 2007).

    10.12     Offer Letter, dated May 2, 2007, between The Penn Traffic Company
              and Tod A. Nestor  (incorporated  by reference to Exhibit 99.1 to
              the Form 8-K filed on May 9, 2007).

    10.13     The Penn Traffic Company 2006 Omnibus Award Plan (incorporated by
              reference  to Exhibit  99.4 to the Form 8-K filed on December 18,
              2006).

    10.14     Form of The Penn Traffic  Company  Phantom Stock Award  Agreement
              (incorporated  by reference to Exhibit 99.1 to the Form 8-K filed
              on May 18, 2007).

    10.15     Second  Amendment,  dated as of August  1,  2007,  to the  Credit
              Agreement,  among The Penn Traffic Company,  Penny Curtiss Baking
              Company,  Inc. and Big M  Supermarkets,  Inc., as borrowers;  the
              other credit parties signatory thereto;  General Electric Capital
              Corporation;  JP Morgan Chase Bank, N.A.; The CIT  Group/Business
              Credit;  GECC Capital Markets Group,  Inc.; and the other lenders
              signatory thereto from time to time (incorporated by reference to
              Exhibit 99.1 to the Form 8-K filed on August 13, 2007).

    10.16     Second Amendment, dated as of August 1, 2007, to the Supplemental
              Loan Credit Agreement, dated as of April 13, 2005, among The Penn
              Traffic  Company,  Penny Curtiss Baking  Company,  Inc. and Big M
              Supermarkets,  Inc.,  as  borrowers;  the  other  credit  parties
              signatory  thereto;  Kimco Capital  Corp.;  and the other lenders
              signatory thereto from time to time (incorporated by reference to
              Exhibit 99.2 to the Form 8-K filed on August 13, 2007).

    16.1      Letter from Deloitte & Touche LLP to the  Securities and Exchange
              Commission dated September 12, 2006 (incorporated by reference to
              Exhibit 99.1 to the Form 8-K filed on September 12, 2006).

    21.1      Subsidiaries of The Penn Traffic Company.

    31.1      Certification  of  CEO  pursuant  to  Rule  13a-14(a)  under  the
              Securities Exchange Act of 1934, as amended.

                                     -96-
<PAGE>

Exhibits (continued):

EXHIBITS NO.
------------

    31.2      Certification  of  CFO  pursuant  to  Rule  13a-14(a)  under  the
              Securities Exchange Act of 1934, as amended.

    32.1      Certification  of  CEO  pursuant  to  Rule  13a-14(b)  under  the
              Securities Exchange Act of 1934, as amended,  and Section 1350 of
              Chapter 63 of Title 18 of the United States Code.

    32.2      Certification  of  CFO  pursuant  to  Rule  13a-14(b)  under  the
              Securities Exchange Act of 1934, as amended,  and Section 1350 of
              Chapter 63 of Title 18 of the United States Code.



                                     -97-
<PAGE>

                                  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  as of the 16th day of
August 2007.

                THE PENN TRAFFIC COMPANY


                By:     /s/  Robert R. Panasuk
                       --------------------------------------
                Name:   Robert R. Panasuk
                Title:  Chief Executive Officer and President


Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934,  this
report  has been  signed  below by the  following  persons on its behalf by the
registrant and in the capacities and on the dates indicated:


Signature                     Title                             Date


/s/ Robert J. Kelly           Chairman of the Board             August 16, 2007
---------------------------
Robert J. Kelly


/s/ John E. Burke             Director                          August 16, 2007
---------------------------
John E. Burke


/s/ Kevin P. Collins          Director                          August 16, 2007
---------------------------
Kevin P. Collins


/s/ Ben Evans                 Director                          August 16, 2007
---------------------------
Ben Evans


/s/ Alan C. Levitan           Director                          August 16, 2007
---------------------------
Alan C. Levitan


/s/ Robert  R. Panasuk        Chief Executive Officer and       August 16, 2007
---------------------------   President and Director
Robert R. Panasuk


/s/ Gregory J. Young          Executive Vice President          August 16, 2007
---------------------------   Chief Operating Officer and
Gregory J. Young              Director


/s/ Tod A. Nestor             Senior Vice President             August 16, 2007
---------------------------   Chief Financial Officer
Tod A. Nestor


                                     -98-