<PAGE>   1
                                  United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549
                                    FORM 10-K
(Mark One)

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

For the Fiscal Year ended:   January 31, 1998
                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from __________________ to ________________.

                           Commission File No. 0-21597
                               MAZEL STORES, INC.
                           ---------------------------
             (Exact name of Registrant as specified in its charter)

             Ohio                                             34-1830097
-------------------------------                                ----------------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                              Identification No.)

                                31000 Aurora Road
                                Solon, Ohio 44139
              ----------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                  440-248-5200
                                -----------------
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S>                                                   <C>
Title of each class                                   Name of each exchange on which registered
-------------------                                   -----------------------------------------
        None                                                       Not Applicable
</TABLE>

           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, No par Value
                           --------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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.
            [X] Yes   [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. [ ]

         The aggregate market value of voting stock held by nonaffiliates of the
Registrant was approximately $64,785,000 at April 1, 1998. The number of common
shares outstanding at April 1, 1998 was 9,148,289.



<PAGE>   2

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the registrant's definitive Proxy Statement to be mailed to
stockholders in connection with the registrant's 1998 Annual Meeting of
Stockholders are incorporated by reference into Part III, Items 10-13.



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<PAGE>   3

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                      PART I

                                                                                                   Page
<S>                                                                                                <C>
Item 1.  Business                                                                                    4
Item 2.  Properties                                                                                 11
Item 3.  Legal Proceedings                                                                          11
Item 4.  Submission of Matters to a Vote of Security Holders                                        12

                                                      PART II

Item 5.  Market for the Registrant's Common Stock and Related Stockholder
                    Matters                                                                         14
Item 6.  Selected Financial Data                                                                    15
Item 7.  Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                           17
Item 8.  Financial Statements and Supplementary Data                                                25
Item 9.  Changes and Disagreements with Accountants on Accounting and
                    Financial Disclosures                                                           25

                                                     PART III

Item 10. Directors and Executive Officers of the Company                                            25
Item 11. Executive Compensation                                                                     25
Item 12. Security Ownership of Certain Beneficial Owners and Management                             25
Item 13. Certain Relationships and Related Transactions                                             25

                                                      PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                           26
</TABLE>






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<PAGE>   4

                                     PART I

ITEM 1. BUSINESS

GENERAL

         The Company consists of two complementary operations: (i) a major
regional closeout retail business; and (ii) the nation's largest closeout
wholesale business. The Company sells quality, value-oriented consumer products
at a broad range of price points offered at a substantial discount to the
original retail or wholesale price. The Company's merchandise primarily consists
of new, frequently brand-name products that are available to the Company for a
variety of reasons, including overstock positions of a manufacturer, wholesaler
or retailer; the discontinuance of merchandise due to a change in style, color,
shape or repackaging; a decrease in demand for a product through traditional
channels; or the termination of business by a manufacturer, wholesaler or
retailer. At January 31, 1998 (1997 fiscal year-end), the Company operated a
chain of 32 closeout retail stores, including 17 in New York (six of which are
in Manhattan), 13 in New Jersey and one each in Pennsylvania and Connecticut.
The Company had fiscal 1997 sales of $208.3 million, including retail sales of
$113.2 million and wholesale sales (excluding intercompany sales between the
Company's Odd Job retail business and the Company's wholesale operation) of
$95.1 million.

         The Company was founded in 1975 as a wholesaler of closeout
merchandise. Management's business strategy has expanded from a primary focus
on wholesale operations to an emphasis on growth of its Odd Job stores, the
initial 12 of which were acquired in 1995 (the "Odd Job Acquisition"). The
Company's goal is to establish itself as the leading closeout retailer in its
Northeast and Mid-Atlantic markets.

         The Company believes that the combination of its wholesale operations
and the Odd Job retail operations have resulted in significant synergies that
have enabled the Company to expand its retail operations and increase sales and
net income of both the wholesale and retail operations.

INDUSTRY OVERVIEW

         Closeout retailing is one of the fastest-growing segments of the
retailing industry in the United States. Closeout retailers and wholesalers
provide a valuable service to manufacturers by purchasing excess products.
Closeout merchandisers also take advantage of generally lower prices in the
off-season by buying and warehousing seasonal merchandise for future sale. As a
result of acquiring merchandise at a deeper discount, closeout merchandisers can
offer merchandise at prices significantly lower than those offered by
traditional retailers and wholesalers.

         The closeout sector has benefited from several recent industry trends.
Consolidation in the retail industry and the expansion of just-in-time inventory
requirements have generally had


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<PAGE>   5

the effect of shifting inventory risk from retailers to manufacturers. In
addition, a trend toward shorter product cycles, particularly in the consumer
goods sector, has increased the frequency of new product and new product
packaging introductions. These factors have increased the reliance of
manufacturers on closeout retailers and wholesalers like the Company, who
frequently are able to purchase larger quantities of excess inventory and
successfully control the distribution of such goods.

RETAIL OPERATIONS

         General. The Company's chain of 32 retail stores operating under the
"Odd Job" name are located in New York (17, including six in Manhattan), New
Jersey (13), Connecticut (1) and Pennsylvania (1). Odd Job opened its first
store in 1974. The retail stores generated sales in fiscal 1997 of $113.2
million.

         Expansion Plans. The Company plans to expand upon stores currently
operating by opening new stores in the Northeast and Mid-Atlantic markets, 
which are serviceable from the Company's Englewood, New Jersey warehouse and
distribution facility and other storage facilities used on an as needed basis.
Stores may be opened in other geographic areas if favorable conditions exist.
The Company anticipates opening or acquiring approximately 30 new stores
through the end of fiscal 1999. In addition, the Company may add stores through
the acquisition of other closeout businesses if favorable opportunities are
presented.

         In choosing specific sites for expansion, the Company considers
numerous factors including demographics, traffic patterns, location of
competitors and overall retail activity. The Company's standards for evaluating
these factors are flexible and are based on the nature of the market. The
Company will seek to expand in both suburban and urban markets. Due to its
broader selection of closeout merchandise than other closeout retailers, the
Company seeks areas with a concentration of middle and upper middle-class
households for its suburban store locations.

         Merchandising and Marketing. The Company believes that its customers
are attracted to its stores principally because of the availability of a large
assortment of quality consumer items, which are frequently brand-name, at
attractive prices. The Company offers certain general categories of merchandise
on a continual basis, although specific lines, products and manufacturers change
frequently. Inventories depend primarily on the types of merchandise which the
Company is able to acquire at any given time. The Company believes that this
changing variety of merchandise from one day to the next results in customers
shopping at the stores more frequently than they might otherwise. The Company
refers to such frequent shoppers as "treasure hunters" due to their regular
visits to the Odd Job stores in an effort to seek out bargains. Historically,
the Company's stores have offered substantial savings on merchandise categories,
including housewares, stationery, books, party supplies, health and beauty aids,
food, toys, hardware, giftware, electronics and garden supplies. Brands carried
by the Company's stores may include, at any given time, Black and Decker,
Enesco, Hershey, Keebler, Mars,



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<PAGE>   6

Mattel, Mikasa, Rubbermaid and Sony.

         Following the Odd Job Acquisition, the Company has developed and
implemented a new merchandising approach. As a result of the purchasing
expertise and vendor contacts of executive officers and senior purchasing staff,
the Company has increased the number of brand-name products that it offers,
particularly toys, books, greeting cards, health and beauty aids, party supplies
and food. In addition, the Company has increased the breadth and quality of its
seasonal merchandise and has sought to promote these items through in-store
displays designed around specific holidays.

         The Company believes its large selection of brand-name products often
attracts a customer seeking a particular brand or product, who will check the
Company's stores in search of the lowest price before resorting to a large
discount store where the customer assumes the product is in stock. In addition,
Odd Job stores carry, on a consistent basis, selected goods manufactured to the
Company's specifications. The Company is able to negotiate competitive prices
with manufacturers of these products, many of whom are located outside the
United States. Such products provide cost-effective merchandise on certain items
for which continuity is important to customers.

         Management believes the presentation of its merchandise is critical to
communicating value and quality to its customers. The Company uses a variety of
adaptable merchandising fixtures and displays, including mobile racks that allow
flexibility in the presentation of a merchandise mix which changes daily. Some
merchandise is displayed in its initial packaging, stacked floor-to-ceiling. A
message board appears in every store, indicating both new arrivals and coming
merchandise, in an effort to appeal to the "treasure hunters." The Company
relies on attractive exterior signage and in-store merchandising as its primary
form of advertising. The Company's advertising program, particularly for the
suburban locations, uses mailers and in- paper circulars, on a periodic basis,
to promote up to 40 value-oriented, easily recognizable items. As a result of
its merchandise mix, visual merchandising methods and high-traffic store
locations, the retail operation average inventory turn rate is approximately
four times per year, which the Company believes is greater than the average for
other major closeout retailers.

         Purchasing. The Company believes that the primary factor contributing
to the success of its business is its ability to locate and take advantage of
opportunities to purchase large quantities of quality brand-name merchandise at
prices which allow the Company to resell the merchandise at prices that are
substantially below traditional retail prices. Its retail operations maintain a
buying staff in Columbus, Ohio and New York City. The retail purchasing staff
works closely with the wholesale operation to identify the most attractive
closeout purchasing opportunities available. Synergies created through the
combined buying power and expertise of the retail and wholesale purchasing
staffs enable the Company to identify and purchase large quantities of quality,
brand-name closeout merchandise and then sell the merchandise through its retail
stores, its wholesale distribution channels or both. The Company believes the
combined wholesale and retail operations enable the retail buying staff to
broaden the scope and the quantities of quality


                                        6

<PAGE>   7



merchandise that it purchases and offer better value to its customers. For
example, the Odd Job stores, prior to their acquisition, purchased seasonal
items through importers or other middlemen. Such items are now purchased
primarily from manufacturers, at substantial savings. The Company's retail
buyers purchase merchandise from more than 1,300 suppliers throughout the world.

         Store Operations. Each store is staffed with section managers who have
primary responsibility for helping customers and monitoring sales floor
inventory in several merchandise categories. Section managers continually
replenish the shelves, communicate information as to fast-selling items to store
managers and identify slow-moving products for clearance. Each store has between
six and 14 check-out stations and provides sales personnel for customer
assistance. Sales are primarily for cash, although personal checks and bank
credit cards are accepted. The Company's Manhattan stores offer free daily
storage, which enables customers to pick up items purchased during the day on
their way home from work. The Odd Job stores have seven day-a- week operations
and have extended weekend hours. The Company has created an infrastructure
consisting of Regional Vice Presidents responsible for the operations of
approximately 15 stores, reporting directly to the Senior Vice President-Retail
Operations.

         Store Locations. The Company's 26 suburban stores are located in strip
shopping centers. The six Manhattan stores are located in high-traffic urban
corridors (e.g. near Grand Central Station, Rockefeller Center, Port Authority
and Wall Street) which provide access to large numbers of commuters. As a
result, the Manhattan stores generate higher sales volumes during the work week.
The Company's suburban stores are generally near a major highway or
thoroughfare, making them easily accessible to customers. The suburban stores
generate higher sales volumes during the weekends. The Company attempts to
tailor its merchandising and marketing strategies to respond to the differences
in its urban and suburban stores. The Company's stores range in size from 6,500
to 25,000 square feet. On average, approximately 60% of the area of each store
represents selling space. All of the stores are located in leased facilities.

         In selecting its new store locations, the Company seeks suitable
existing structures which it can refurbish in a manner consistent with its
merchandising concept. This strategy, which requires minimal leasehold
improvements by the Company, enables the Company to open stores in new locations
generally within six to twelve weeks following execution of a lease.

         Warehousing and Distribution. Merchandise is distributed to the retail
stores from the Company's 253,000 square foot Englewood, New Jersey warehouse
and distribution facility. The Company believes the Englewood facility has the
capacity to support the warehousing and distribution needs of approximately 60
stores. The Company is actively searching for a larger facility that will enable
warehousing and distribution requirements beyond 60 stores. The Company also
utilizes public warehouse space to store inventory on an as needed basis.

         Substantially all of the Company's retail inventory is shipped directly
from suppliers to





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<PAGE>   8

the Company's Englewood, New Jersey warehouse and distribution facility or the
Company's Solon, Ohio warehouse and distribution facility. Since the Englewood,
New Jersey warehouse and distribution facility maintains back-up inventory and
provides delivery several times per week to each store, in-store inventory
requirements are reduced and the Company is able to operate with smaller stores.
Off-hours stocking and off-site storage space are utilized to support the
store's inventory turnover, particularly during the busy fourth quarter. The
majority of the Company's inventory is delivered to the stores by a contract
carrier, as well as by direct vendor shipments.

         Distribution to the stores is controlled by the Company's buyers and
senior management. The Company's merchandise is distributed based on variables
such as store volume and certain demographic and physical characteristics of
each store. Each store has monthly budgeted inventory levels based on its
projected sales and available storage. Stores receive shipments of merchandise
several times per week based on budgeted inventory requirements and direct
communications between store managers and the Company's buyers and senior
management.

WHOLESALE OPERATIONS

         General. The Company is the nation's largest wholesaler of closeout
merchandise, with fiscal 1997 sales of $95.1 million, excluding intercompany
sales to Odd Job. The Company's wholesale operations purchase and resell many of
the same lines of merchandise sold through the Company's retail operations. The
wholesale operations acquire closeout merchandise at prices substantially below
traditional wholesale prices and sell such merchandise through a variety of
channels. In general, the Company does not have long-term or exclusive
arrangements with any manufacturer or supplier for the wholesale distribution of
specified products. Rather, the Company's wholesale inventory, like its retail
inventory, consists primarily of merchandise obtained through specific purchase
opportunities.

         Purchasing. The Company's wholesale buyers purchase merchandise from
more than 1,000 suppliers throughout the world and continually seek
opportunities created by manufacturers and other closeout circumstances such as
packaging changes, the overstock inventory of wholesalers and retailers,
buybacks, receiverships, bankruptcies and financially distressed businesses, as
well as other sources. The Company's experience and expertise in buying
merchandise from such suppliers has enabled it to develop relationships with
many manufacturers and wholesalers who offer some or all of their closeout
merchandise to the Company prior to attempting to dispose of it through other
channels. By selling their inventories to the Company, suppliers can reduce
warehouse expenses and avoid the sale of products at concessionary prices
through their normal distribution channels. In addition to closeout merchandise
purchased from suppliers, approximately 27% of the Company's wholesale purchases
for fiscal 1996 and fiscal 1997 consisted of selected items manufactured to the
Company's specifications by domestic and foreign suppliers.

         The Company's primary sources of merchandise are manufacturers, barter
agents, distributors and retailers. The Company accommodates the needs of its
vendors by (i) making rapid purchasing decisions; (ii) taking immediate delivery
of larger quantities of closeout merchandise than many of its competitors; (iii)
purchasing the entire product assortment offered by a particular vendor; (iv)
minimizing disruption to the supplier's ordinary distribution channels; and (v)
making prompt and reliable payments. The Company believes that its flexibility
and expertise has established the Company as a preferred customer of many key
sources of closeout merchandise. In many cases, the Company has developed
valuable sources from which it obtains certain lines of merchandise on a
continuing basis.





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<PAGE>   9

         The Company's wholesale and retail buyers work closely together to
identify attractive purchasing opportunities and negotiate and complete the
purchase of significant quantities of closeout consumer items. The Company
believes the expertise and resources of the retail operations have enabled the
wholesale operations to broaden the categories and quantities of merchandise
offered to its customers.

         Sales and Marketing. The Company maintains a direct sales force of 12
persons in its wholesale operations and also sells its merchandise through 9
independent representatives. In addition to a showroom at its Solon, Ohio
facility, the Company maintains showrooms in New York City, Columbus, Chicago,
Boston and Philadelphia. The Company sells to over 2,200 wholesale customers,
which include a wide range of major regional and national retailers as well as
smaller retailers and other wholesalers and distributors. Sales to the Company's
single largest wholesale customer accounted for approximately 14.9% of total
sales in fiscal 1997 and 20.0% of total sales in fiscal 1996. No other customer
accounted for more than 10% of total sales in either period.

         Warehousing and Distribution. The Company conducts its wholesale
operations primarily from a 740,000 square foot leased warehouse and
distribution facility in Solon, Ohio. In addition, the Company leases space at
public warehouses on an as needed basis. Generally, the Company does not have a
prospective customer prior to purchasing merchandise, although in some cases a
customer willing to purchase part or all of the goods will be found immediately
prior to, or soon after, a purchase. In the latter case, the Company attempts,
whenever possible, to drop ship the goods directly to the customer from the
point of purchase. In other cases, the Company ships the merchandise to its
warehouse and distribution facility via back haulers and common carriers. For
fiscal 1997, approximately 65.0% of the Company's wholesale sales were of
merchandise shipped through its warehouse and distribution facility, with the
remainder drop shipped directly to customers.

VALUE CITY JOINT VENTURE

         On August 3, 1997, the Company commenced operation of VCM, Ltd.
("VCM"), a 50 percent owned joint venture with Value City Department Stores. VCM
operates the toy, sporting goods, and expanded health and beauty care
departments in the Value City department store chain. The Company coordinates
merchandise purchasing on behalf of VCM, some of which is sourced from the
Company's wholesale segment. The Company's investment in VCM was $9,637,000. In
addition to its 50 percent share of VCM net profit or loss, the Company receives
a management fee equal to three percent of sales.

MANAGEMENT INFORMATION SYSTEMS

         The Company's wholesale operations are currently supported by an IBM
AS400-based computer system, which has been upgraded to support the Company's
combined retail and wholesale operations. The system utilizes proprietary 
software which allows the Company to

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monitor and integrate its distribution, order entry, showroom, product
management, purchasing, inventory control, shipping and accounting systems. The
Company is exploring the use of radio frequency equipment in its warehouse and
showrooms.

         The Company is in the process of installing an IBM AS400-based software
package for use in its retail operations. The Company intends to install a
point-of-sale (POS) system to fully capture store transactions and provide
updated data to its purchasing staff and other corporate personnel, and for
transfer into the Company's accounting, merchandising and distribution systems.
The Company spent $900,000 in fiscal 1997 and estimates that it will spend
approximately $1.1 million in fiscal 1998 in implementing its retail management
information systems. The addition of POS scanning in a core of its retail stores
is scheduled to be completed in fiscal 1998 with the balance to be completed in
fiscal 1999.

COMPETITION

         In its retail operations, the Company competes with other closeout
retailers, discount stores, deep discount drugstore chains, supermarkets and
other value-oriented specialty retailers. In its wholesale operations, the
Company competes with numerous national and regional wholesalers, retailers,
jobbers, dealers and others which sell many of the items sold by the Company.
Certain of these competitors have substantially greater financial resources and
wider distribution capabilities than those of the Company, and competition is
often intense. Competition is based primarily on product selection and
availability, price and customer service. The Company believes that by virtue of
its ability to make purchases of closeout, bulk and surplus items, its prices
compare favorably with those of its competitors.

         In addition to competition in the sale of merchandise at wholesale and
retail, the Company encounters significant competition in locating and obtaining
closeout, overproduction and similar merchandise for its operations. There is
increasing competition for the purchase of such merchandise. However, the
Company believes that it will have sufficient sources to enable it to continue
purchasing such merchandise in the future. Furthermore, the Company believes
that as the number and capacity of its stores grow, its ability to take
advantage of purchase opportunities of larger quantities of merchandise at
favorable prices will increase accordingly.

TRADEMARKS

         The Company has registered "Odd Job" as a trademark in the United
States. The Company has registered or has filed registration applications for
certain other trademarks and trade names.

EMPLOYEES

         At January 31, 1998, the Company had 1,181 employees, including 961 in
direct retail operations, 110 in direct wholesale operations and 110 in general
management and administrative


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positions. The Company considers its relationship with its employees to be
good. Approximately 68 of the Company's Solon, Ohio hourly warehouse employees
are subject to a five year collective bargaining agreement expiring December
31, 1999. The warehouse employees in Englewood, N.J., approximately 75
individuals, are subject to a 42 month collective bargaining agreement expiring
January 28, 2001. The Company is not a party to any other labor agreements.

ITEM 2. PROPERTIES

         The Company leases its offices, warehouse and distribution facility in
Solon, Ohio from a corporation in which certain of the Company's shareholders
are minority owners. The Company currently occupies approximately 740,000 square
feet at such facility, of which approximately 22,000 square feet is used as
office and showroom space and the remainder of which is used as warehouse space
for the Company's wholesale operations. The lease for the facility, as amended,
expires December 31, 2008. The Company leases its 253,000 square foot warehouse
and distribution facility in Englewood, New Jersey. The lease for the facility,
as amended, expires October 31, 2001. With the planned expansion of the retail
operations, the Company has initiated a search for a larger warehouse and
distribution facility. In addition, the Company leases space at several public
warehouses depending on its needs at a particular point in time. The Company
believes that, once established in the larger retail warehouse and distribution
facility, the facilities described above will be generally adequate for its
retail and wholesale operational requirements.

         The Company leases its offices and showrooms in Columbus, Ohio, Chicago
and New York City. The Columbus lease renews on a month to month basis, the
Chicago lease expires on October 21, 2002 and the New York City lease expires on
December 31, 2001.

         The Company leases all of its stores. Store leases generally provide
for fixed monthly rental payments, plus the payment, in most cases, of real
estate taxes, utilities, liability insurance and common area maintenance. In
certain locations, the leases provide formulas requiring the payment of a
percentage of sales as additional rent. Such payments are generally only
required when sales reach a specified level. The typical store lease is for an
initial term of five or ten years, with certain leases having renewal options.

ITEM 3. LEGAL PROCEEDINGS

         The Company is also subject to various legal proceedings and claims
that arise in the ordinary course of business. The Company believes that the
amount of any ultimate liability with respect to these actions will not have a
material adverse effect on the Company's liquidity or results of operations.





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

         None

ITEM 4a. DIRECTORS AND EXECUTIVE OFFICERS

         The executive officers and directors of the Company and their ages as
of May 1, 1998 are as follows:

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

<S>                                         <C>      <C>                               
Reuven D. Dessler                           50       Chairman of the Board and Chief
                                                       Executive Officer
Brady Churches                              39       President, Director
Jacob Koval                                 50       Executive Vice President-Wholesale,
                                                       Director
Jerry Sommers                               47       Executive Vice President-Retail,
                                                       Director
Susan Atkinson                              47       Senior Vice President - Chief Financial
                                                       Officer and Treasurer
Charles Bilezikian                          61       Director
Phillip Cohen                               79       Director
Robert Horne                                39       Director
Ned L. Sherwood                             48       Director
Marc H. Morgenstern                         48       Secretary
</TABLE>

         Reuven Dessler is Chairman of the Board and Chief Executive Officer of
the Company since November 1996. Mr. Dessler co-founded the Company in 1975 and
served as its President until November 1996.

         Brady Churches has served as the Company's President and a Director
since November 1996 and served as President - Retail from August 1995 until such
date. From 1978 until April 1995, Mr. Churches held various senior management
positions at Consolidated Stores, including President from August 1993 until 
April 1995. Mr. Churches is currently a member of the Board of Directors of Sun
Television & Appliance, Inc.

         Jacob Koval is Executive Vice President - Wholesale and a Director of
the Company. Mr. Koval co-founded the Company in 1975.

         Jerry Sommers has served as Executive Vice President - Retail of the
Company since November 1995, and as a Director since November 1996. From 1984
through April 1995, Mr. Sommers held various senior management positions with
Consolidated Stores, including Executive Vice President from August 1993 until 
April 1995.






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<PAGE>   13
         Susan Atkinson has served as Senior Vice President-Chief Financial
Officer and Treasurer of the Company since January 1993. From August 1988
through December, 1992, she was employed by Harris Wholesale Company, a
pharmaceutical wholesaler, serving as Chief Financial Officer and Vice President
Finance/Administration from January 1991 until December 1992.

         Charles Bilezikian, has been the President of Christmas Tree Shops,
Inc., a specialty New England retailer, since its formation in 1971.

         Phillip Cohen, is a Vice President of P-C Sales, Inc., a wholesaler and
importer of closeout and other merchandise. From 1947 to his retirement in 1989,
Mr. Cohen was Chairman and CEO of Wisconsin Toy and Novelty, Inc., a Midwest
distributor of closeout toy and novelty items.

         Robert Horne has served as a Director of the Company since November
1996. Mr. Horne has been a principal of ZS Fund L.P., a Company engaged in
making private investments, for over five years. Prior to joining ZS Fund L.P.,
Mr. Horne was employed by Salomon Brothers, Inc. as a Vice President in its
Mergers and Acquisitions Group.

         Ned L. Sherwood has served as a Director of the Company since November
1996. Mr. Sherwood has been a principal and President of ZS Fund L.P. for more
than five years. Mr. Sherwood is currently a member of the Boards of Directors
of Sun Television & Appliance, Inc., Kaye Group, Inc. and Market Facts, Inc.

         Marc H. Morgenstern has served as Secretary of the Company since
November 1996. He has been a principal in the Cleveland, Ohio law firm of Kahn,
Kleinman, Yanowitz & Arnson Co., L.P.A. serving as President of the firm and
Chairman of its Executive Committee, for more than five years.




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                                     PART II


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

         The Company's Common Stock trades on The Nasdaq Stock Market(sm) under
the symbol "MAZL". The following table shows the quarterly high and low closing
sale prices of the Common Stock since the Company began trading publicly on
November 21, 1996, at an initial public offering price of $16.00 per share.


<TABLE>
<CAPTION>
                                        Fiscal Year 1997                Fiscal Year 1996
                                      --------------------            --------------------
            Fiscal Quarter            High             Low            High             Low
            --------------            ----             ---            ----             ---
<S>                                   <C>             <C>             <C>             <C>   
              First Quarter           28.250          12.625               -               -
              Second Quarter          20.250          11.750               -               -
              Third Quarter           25.250          19.000               -               -
              Fourth Quarter          19.250          12.500          25.125          19.000
</TABLE>

         As of May 1, 1998, the Company believes that there were 1,500
beneficial owners of the Company's Common Stock.

Dividend Policy

         The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain its future earnings, to finance
the expansion of its business and for general corporate purpose and currently
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. Any payment of cash dividends in the future will be at the
discretion of the Board of Directors and will depend upon, among other things,
the Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of dividends
and other factors that the Company's Board of Directors deems relevant. In
addition, the Company's credit facility prohibits declaring or paying any
dividends without the prior written consent of the Lender.



                                       14
<PAGE>   15

ITEM 6. SELECTED FINANCIAL DATA

         The selected historical financial data of the Company presented under
the captions Statement of Operations Data and Balance Sheet Data as of January
31, 1994, 1995 and 1996 (fiscal years 1993, 1994 and 1995, respectively) have
been derived from the financial statements of Mazel Company L.P.
("Partnership"), which during 1996 was restructured as the Company. The
financial statements of the Partnership include the operations of the Peddlers
Mart retail store from December 9, 1994 and the Odd Job operations from December
7, 1995. The selected historical financial data presented under the captions
Statement of Operations Data and Balance Sheet Data for the fiscal years ended
January 25, 1997 and January 31, 1998 (fiscal years 1996 and 1997, respectively)
were derived from the financial statements of the Company. Such financial
statements of the Partnership and the Company were audited by KPMG Peat Marwick
LLP, independent certified public accountants. The selected data referred to
above and the pro forma as adjusted data should be read in conjunction with the
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this filing. The pro forma as adjusted data and the information shown in the
table are unaudited.























                                       15
<PAGE>   16

<TABLE>
<CAPTION>
                                                                                     FISCAL YEAR
                                    -----------------------------------------------------------------------------------------------
                                                                                                        PRO FORMA,
                                                                                                        AS ADJUSTED
                                        1993             1994            1995            1996             1996 (1)          1997
                                    -----------      -----------     -----------     -----------       -----------      -----------


<S>                                 <C>              <C>             <C>             <C>               <C>              <C>        
STATEMENT OF OPERATIONS DATA 
(DOLLARS IN THOUSANDS, EXCEPT 
PER SHARE DATA):   
Net sales                           $    74,954      $    76,254     $    98,106     $   179,877       $   179,877      $   208,326
Cost of sales                            54,201           55,183          70,208         121,382           121,382          136,446
                                    -----------      -----------     -----------     -----------       -----------      -----------
Gross profit                             20,753           21,071          27,898          58,495            58,495           71,880
SG & A expense                           15,094           15,317          20,753          45,802            44,567           55,839
Special charges                           1,285                -           2,203           4,243                 -                -
                                    -----------      -----------     -----------     -----------       -----------      -----------
Operating profit                          4,374            5,754           4,942           8,450            13,928           16,041
Interest expense (income)                 1,130              894           1,265           2,254              (205)             943
Other expense (income)                       43              (26)            559             (34)              (34)             662
                                    -----------      -----------     -----------     -----------       -----------      -----------

Income before
   income taxes                           3,201            4,886           3,118           6,230            14,168           14,436
Income taxes expense
   (benefit)                                 21               71              19          (1,987)            5,667            5,919
Extraordinary loss                         (455)               -               -               -                 -                -
                                    -----------      -----------     -----------     -----------       -----------      -----------

Net income                          $     2,725      $     4,815     $     3,099     $     8,217       $     8,501      $     8,517
                                    ===========      ===========     ===========     ===========       ===========      ===========

Net income per share (basic)                                                                           $      0.93      $      0.93
Net income per share (diluted)                                                                         $      0.91      $      0.92
Shares outstanding (basic)                                                                               9,170,100        9,162,100
Shares outstanding (diluted)                                                                             9,386,000        9,265,400



BALANCE SHEET DATA (In Thousands):
Working capital                     $    18,373      $    17,439     $    26,193     $    44,473       $    44,473      $    55,862
Total assets                             28,450           31,129          56,634          86,361            86,644          113,884
Long term debt                           12,303           10,649          27,382              70                70           19,781
Total liabilities                        18,997           19,567          43,764          21,599            21,599           41,045
Stockholders' equity and
   partners' capital                      9,453           11,562          12,870          64,762            65,045           72,839

SELECTED RETAIL OPERATIONS DATA:
Number of stores                             11               12              13              23                                  32
Total square footage                    153,718          164,386         188,361         336,905                             466,716
Total store sales growth                    5.4%            12.8%            6.3%           40.2%                              34.4%
Comparable store net sales                 -2.6%             7.9%           -4.4%           15.8%                               1.8%
Avg.  net sales per gross sq. ft    $       326      $       344     $       319     $       354                        $        294
                                                                                                                              
<FN>
(1)      Pro forma as adjusted data gives effect to the Company's initial public offering as of the beginning of all period
         presented, and includes the combination of: (i) the Mazel wholesale operations; (ii) the Odd Job retail operations;
         and (iii) the Peddlers Mart retail store, as if the combination of entities had occurred at the beginning of all
         periods presented. Pro forma as adjusted data exclude certain non-recurring charges, and give effect to the use of
         proceeds resulting from the Company's 2,960,100 share initial public offering, as well as certain adjustments to
         compensation expense.
</FN>
</TABLE>


                                       16
<PAGE>   17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      OVERVIEW

      The Company consists of two complementary operations: (i) a major regional
      closeout retail business; and (ii) the nation's largest closeout wholesale
      business. The Company sells quality, value-oriented consumer products at 
      a broad range of price points offered at a substantial discount to the 
      original retail or wholesale price. The Company's merchandise primarily 
      consists of new, frequently brand-name products that are available to the
      Company for a variety of reasons, including overstock positions of a 
      manufacturer, wholesaler or retailer; the discontinuance of merchandise 
      due to a change in style, color, shape or repackaging; a decrease in 
      demand for a product through traditional channels; or the termination of 
      business by a manufacturer, wholesaler or retailer.

      The Company was founded in 1975 as a wholesaler of closeout merchandise. 
      In fiscal 1996, the Company purchased the established Odd Job retail 
      business, consisting of 12 retail stores and a warehouse and distribution 
      facility, from an affiliate of ZS Fund L.P., a shareholder of the
      Company. At the end of  fiscal 1997, the Company operated 32 closeout
      retail stores, including 17 in New York (six of which are in Manhattan),
      13 in New Jersey, and one  each in Pennsylvania and Connecticut.

      Management's business strategy has expanded from a primary focus on whole
      sale operations to an emphasis on growth of its Odd Job retail business.
      The execution of this strategy coupled with the fiscal 1997 investment in
      VCM, Ltd. has transformed the Company into a "retailer", with quarterly 
      sales and earnings patterns similar to other retail operations. The 
      Company's Odd Job expansion plan is to open 13-15 stores in fiscal 1998 
      and 15 stores in fiscal 1999.


      MANAGEMENT'S ANALYSIS OF RESULTS OF OPERATIONS

      The results of operations set forth below describe the Company's retail 
      and wholesale segments and the Company's combined corporate structure. 
      Although the presentation of the retail operations prior to the Odd Job 
      acquisition is not required, the Company believes that such presentation 
      will assist the reader in a better understanding of the business.


                                       17
<PAGE>   18



                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                      (Predecessor and
                                                                                                          Successor*)
                                                   Fiscal 1997                 Fiscal 1996                Fiscal 1995
                                            ------------------------    -----------------------    -----------------------

                                                          Percent of                 Percent of                 Percent of
                                              Amount       Net Sales    Amount       Net Sales     Amount        Net Sales
                                              ------      ---------     ------       ---------     ------        ---------
Net sales
<S>                                         <C>            <C>         <C>            <C>          <C>           <C>
   Retail                                   $113,205        54.34%      84,202         46.81%      60,064
   Wholesale                                  95,121        45.66%      95,675         53.19%      73,817
                                              ------        -----       ------         -----              
                                             208,326       100.00%     179,877        100.00%
Gross profit
   Retail                                     44,608        39.40%      32,903         39.08%      22,523         37.50%
   Wholesale                                  27,272        28.67%      25,592         26.75%      20,341         27.56%
                                              ------        -----       ------         -----               
                                              71,880        34.50%      58,495         32.52%
Segment operating profit
   Retail                                      5,393         4.76%       3,817          4.53%       1,366          2.27%
   Wholesale                                  12,821        13.48%      14,015         14.65%      10,320         13.98%
   Corporate                                  (2,173)       -1.04%      (5,139)        -2.86%      (3,342)
   Special charges                             -            -           (4,243)        -2.36%      (2,203)
                                           ---------    ----------      -----           ----
                                              16,041         7.70%       8,450          4.70%

Interest expense, Net                            943         0.45%       2,254          1.25%       1,265
Other (income) expense                           662         0.32%         (34)        -0.02%         559
Income tax expense (benefit)                   5,919         2.84%      (1,987)        -1.10%          19
                                              ------         ----       -----           ----              

Net income
   As reported                                $8,517         4.09%       8,217          4.57%       3,099
   Pro forma as adjusted                                                $8,501          4.73%       6,442
Net income per share
   Basic                                     $  0.93                      0.93                       0.70
   Diluted                                   $  0.92                      0.91                       0.70
</TABLE>

* Successor refers to the period (December 7, 1995 through January 27, 1996)
following the Odd Job acquisition by ZS Fund L.P.


     RETAIL SEGMENT

     Fiscal 1997 Results versus Fiscal 1996

     Net sales increased $29.0 million, or 34.4%, to $113.2 million in fiscal 
     1997, from $84.2 million for fiscal 1996. Comparable store (13 stores for 
     fiscal 1997) net sales increased approximately 3.3%. Adjusting for the 
     additional week in fiscal 1997, comparable store net sales increased



                                       18
<PAGE>   19


      1.8%. The increase in net sales was attributable to the full year impact
      of the 10 stores opened during fiscal 1996, as well as the partial year
      results of the nine stores opened during fiscal 1997.

      Gross profit increased $11.7 million, or 35.6%, to $44.6 million in fiscal
      1997, from $32.9 million in fiscal 1996. Gross margin increased to 39.4%
      in fiscal 1997, from 39.1% in fiscal 1996. Better store controls resulting
      in reduced inventory shrink results together with promotions and rebate
      income, all reducing cost of sales, were largely responsible for the
      increase.

      Selling, general and administrative expenses increased $10.1 million, or
      34.8%, to $39.2 million in fiscal 1997, from $29.1 million in fiscal 1996.
      The increase resulted primarily from a $9.2 million increase in store
      level and warehouse and distribution expenses, reflecting the addition of
      nine stores during fiscal 1997. Store preopening costs, which are expensed
      as incurred, totaled $1.0 million in fiscal 1997, compared to $850,000 in
      fiscal 1996. The Company also expanded its advertising program during
      fiscal 1997, resulting in $1.1 million of additional expenses. In
      addition, administrative support expenses increased $650,000. Selling,
      general and administrative expenses, as a percentage of net sales,
      increased slightly to 34.6% in fiscal 1997, from 34.5% in fiscal 1996.

      Operating profit increased to $5.4 million for fiscal 1997, from $3.8
      million for fiscal 1996. As a percentage of net sales, operating profit
      increased to 4.8% from 4.5%. This increase was primarily due to the
      factors described above.

      Fiscal 1996 Results versus Fiscal 1995 (Combined Predecessor and
      Successor)

      Net sales increased $24.1 million, or 40.2%, to $84.2 million in fiscal
      1996, from $60.1 million for fiscal 1995. Comparable store net sales
      increased approximately 15.8%, contributing $9.5 million of the increase
      in net sales. Comparable store net sales increased primarily due to
      expanded store hours including seven day-a-week operations following the
      Odd Job acquisition, as well as an expanded product mix and enhanced
      merchandising techniques. The remaining $14.6 million increase is
      attributable to two stores acquired in March 1996, one store acquired in
      December 1996, and seven stores opened during fiscal 1996. Net sales in
      fiscal 1995 were marginally negatively affected by the relocation of one
      of the Company's Manhattan stores during August of that year.

      Gross profit increased $10.4 million, or 46.1%, to $32.9 million in fiscal
      1996, from $22.5 million in fiscal 1995. Gross margin increased to 39.1%
      in fiscal 1996, from 37.5% in fiscal 1995. The increase was due to
      increased purchasing opportunities resulting from the ability to buy for
      both retail and wholesale operations, as well as the efforts of the
      Company's eight new senior buyers in acquiring higher margin products.

      Selling, general and administrative expenses increased $8.2 million, or
      39.5%, to $29.1 million in fiscal 1996, from $20.9 million in fiscal 1995.
      Selling, general and administrative expenses, 



                                       19
<PAGE>   20


      as a percent of net sales, decreased slightly to 34.5% in fiscal 1996, 
      from 34.7% in the comparable 1995 year. The $8.2 million increase 
      primarily resulted from $4.7 million of increased store level expenses.
      Approximately $1.7 million of the increase resulted primarily from an
      increase in administrative cost, principally attributable to costs
      associated with the new buying and advertising personnel and costs
      associated with store management trainees. In addition, warehouse and
      store delivery costs increased $1.7 million due to costs associated with
      increased inventory levels, new store opening support costs, and costs
      associated with the setup of expanded warehouse square footage. A more
      aggressive advertising program, including periodic circulars, resulted in
      an increase of approximately $173,000 in advertising costs.

      Operating profit increased to $3.8 million for fiscal 1996, from $1.4
      million for fiscal 1995. As a percentage of sales, operating profit
      increased 4.5% from 2.3%. This increase was primarily due to factors
      described above.


      WHOLESALE SEGMENT

      Fiscal 1997 Results versus Fiscal 1996

      Net sales for fiscal 1997 of $95.1 million were virtually unchanged from
      fiscal 1996 despite a 15% decline in sales to the Company's largest
      wholesale customer. Wholesale net sales exclude sales to Odd Job
      operations of $12.4 million for fiscal 1997, compared to $9.1 million for
      fiscal 1996, a 37.1% increase. In January 1998 the Company's largest
      wholesale customer was sold to Consolidated Stores, Inc., and as a
      consequence, the Company may experience further declines in sales to this
      customer.

      Gross profit increased $1.7 million, or 6.6%, to $27.3 million in fiscal
      1997, from $25.6 million in fiscal 1996. Gross margin increased to 28.7%
      in fiscal 1997, from 26.8% in fiscal 1996. The increase in gross margin
      was attributable to a higher percentage of stock sales which typically
      present a higher gross margin.

      Selling, general and administrative expenses increased $2.9 million, or
      24.8%, to $14.5 million in fiscal 1997, from $11.6 million in fiscal 1996.
      The increase in selling, general and administrative expenses was
      attributable to higher warehouse expenses, including rent and costs
      related to the repackaging of products, additional sales commission
      expenses, and higher administrative costs primarily related to the
      development of new product sales programs. As a percentage of net sales,
      selling, general and administrative expenses increased to 15.2% in fiscal
      1997, from 12.1% in fiscal 1996.

      Wholesale operating profit decreased $1.2 million, or 8.5%, to $12.8
      million in fiscal 1997, from $14.0 million in fiscal 1996. As a percentage
      of net sales, operating margin decreased to 13.5% in fiscal 1997, from
      14.6% in fiscal 1996, due to factors described above.


                                       20
<PAGE>   21



      Fiscal 1996 Results versus Fiscal 1995

      Net sales increased $21.9 million, or 29.6%, to $95.7 million in fiscal
      1996, from $73.8 million in fiscal 1995. Fiscal 1996 net sales were
      positively affected by a higher level of sales to existing customers,
      including one key customer whose secondary distribution center had been
      damaged early in the second quarter of 1996. The Company also benefited
      from the addition of new customers.

      Gross profit increased $5.3 million, or 25.8%, to $25.6 million in fiscal
      1996, from $20.3 million in fiscal 1995. Gross margin decreased to 26.7%
      in fiscal 1996, from 27.6% in fiscal 1995. The increase in gross profit
      was driven by the large increase in sales volume, while the gross margin
      decline resulted from a change in merchandise mix and a reduced gross
      margin on stock sales in fiscal year 1996.

      Selling, general and administrative expenses increased $1.9 million, or
      19.5%, to $11.6 million in fiscal 1996, from $9.7 million in fiscal 1995.
      The increase in selling, general and administrative expenses was
      principally due to increases in variable expense (such as sales commission
      and travel). As a percentage of net sales, selling, general and
      administrative expenses decreased to 12.1% in fiscal 1996, from 13.1% in
      fiscal 1995.

      Wholesale operating profit increased to $14.0 million in fiscal 1996, from
      $10.3 million in fiscal 1995. As a percentage of net sales, operating
      margin increased to 14.6% in the 1996 fiscal year, from 14.0% in the
      comparable 1995 year, due to the factors described above.


      CORPORATE EXPENSES AND SPECIAL CHARGES

      Fiscal 1997 Results  versus Fiscal 1996

      Corporate expenses consist of the cost of senior management and shared
      administrative resources which are utilized by both segments of the
      business. Corporate expense decreased $2.9 million to $2.2 million for
      fiscal 1997, from $5.1 million for fiscal 1996, attributable to salary
      reductions effected at the time of the initial public offering ("IPO"),
      offset by the addition of expenses attributed to being a public company.
      In addition, corporate expense is net of $1.8 million management fee
      revenue from VCM, Ltd., the 50% owned joint venture with Value City
      Department Stores, which commenced operations on August 3, 1997. As a
      result, net corporate expense decreased as a percentage of total Company
      sales to 1.0% in fiscal 1997 from 2.9% in fiscal 1996.

      Special charges for fiscal 1996 totaling $4.2 million resulted from
      compensation and other charges arising in connection with the Company's
      IPO. There were no special charges for fiscal 1997.



                                       21
<PAGE>   22


      Interest expense decreased $1.3 million to $943,000 for fiscal 1997,
      compared to $2.3 million for fiscal 1996, primarily reflecting lower
      post-IPO net borrowings. Other income/expense includes a $758,000 net loss
      which reflects the Company's 50% interest in VCM, Ltd.

      Fiscal 1996 Results  versus Fiscal 1995

      Corporate expense increased $1.8 million or 53.8% to $5.1 million during
      fiscal 1996, from $3.3 million for fiscal 1995. The increase is primarily
      due to the addition of two key executives, their respective signing
      bonuses, expenses associated with the opening of a Columbus, Ohio office
      and increases in other expenses, including insurance expense. As a result,
      corporate expense increased as a percentage of total Company sales to
      2.9% in 1996 from 2.5% in 1995.

      Special charges for fiscal 1996 totaling $4.2 million resulted from
      compensation and other charges arising in connection with the Company's
      IPO. Special charges of $2.2 million for fiscal 1995 resulted from a loss
      on the Partnership's disposal of the Ohio retail business and executive
      signing bonuses.

      Interest expense increased $1.0 million to $2.3 million for fiscal 1996
      compared to $1.3 million for fiscal 1995, due to higher net borrowings to
      fund cash requirements including the Odd Job acquisition in late fiscal   
      1995, subsequently repaid with funds generated by the IPO in late fiscal  
      1996. Other income/expense decreased by $593,000, due primarily to
      non-recurring legal expenses during fiscal 1995.


      LIQUIDITY AND CAPITAL RESOURCES

      The Company's primary requirements for capital consist of inventory
      purchases, expenditures related to new store openings, existing store
      remodeling, and other working capital needs. The Company takes advantage
      of closeout and other special situation purchasing opportunities which
      frequently result in large volume purchases, and as a consequence, its
      cash requirements are not constant or predictable during the year and can
      be affected by the timing and size of its purchases. The Company's high
      level of committed credit allows it to take immediate advantage of special
      situation purchasing opportunities. Having such credit availability
      provides the Company with a competitive advantage measured against many of
      its competitors.

      On November 21, 1996 the Company completed an IPO of 2,960,100 shares of
      Common Stock, no par value, at $16.00 per share. The offering generated
      net proceeds of approximately $43.0 million after deducting underwriting
      fees and offering expenses. The net proceeds were used to repay $33.4
      million of indebtedness to a senior institutional lender and $4.0 million
      of Partners' notes, to fund approximately $2.9 million in tax loans to
      certain executives and former shareholders of the Company, $900,000 in
      compensation buyouts to certain executives and the remainder used for 
      general corporate purposes.



                                       22
<PAGE>   23


      Historically, the Company's growth has been financed through cash flow
      from operations, borrowings under its revolving credit facility and the
      extension of trade credit. In March 1998, the Company entered into a new
      $60.0 million credit facility. This facility is comprised of a $50.0
      million revolving line of credit and a $10.0 million term loan. The
      facility expires on November 15, 2002. The term loan requires 20
      consecutive quarterly payments of $500,000 plus accrued interest
      commencing May 1, 1998. Borrowings under the facility bear interest, at
      the Company's option, at either the banks' prime rate less 50 basis points
      or LIBOR plus a spread. Availability on the facility is the lesser of the
      total credit commitment or a borrowing base calculation based upon the
      Company's accounts receivable and inventories. The facility contains
      restrictive covenants which require minimum net worth levels, maintenance
      of certain financial ratios and limitations on capital expenditures and
      investments.

      For fiscal year 1997, cash used by consolidated operating activities was
      $9.1 million compared to cash provided in fiscal 1996 of $878,000.
      Increases in trade receivables, inventories, and a decrease in trade
      payables comprised the majority of cash used for fiscal 1997. Increases in
      trade payables and deferred income taxes, offset by increases in inventory
      and trade receivables, accounted for the cash provided from operations in
      fiscal 1996. Cash used in investing activities increased to $17.4 million
      in fiscal 1997 from $7.1 million in fiscal 1996. Fiscal 1997 investing
      activities primarily comprised of capital expenditures of $5.8 million and
      the investment in VCM, Ltd. of $9.6 million. Cash generated by financing
      activities of $19.7 million for fiscal 1997 was the result of additional
      borrowings from the Company's credit facility. Fiscal 1998 capital
      expenditures are budgeted at approximately $6.6 million, relating
      primarily to new retail stores, existing retail store remodeling and
      management information systems initiatives including retail store POS.

      Total assets increased 31.9% to $113.9 million at fiscal year end 1997,
      from $86.4 million at year end 1996. Working capital increased to $55.9
      million in fiscal 1997, from $44.5 million at the prior year end,
      primarily as a result of increases in trade receivables and inventory. The
      current ratio improved to 3.95 at year end 1997, from 3.37 at year end
      1996. Net fixed assets was $10.9 million at the end of fiscal 1997, an
      increase of $4.6 million over fiscal year end 1996, primarily related to
      capital expenditures for fixtures, equipment, and leasehold improvements
      related to new store openings, costs associated with the expansion of the
      wholesale warehouse and distribution center, and investment in management
      information systems initiatives.

      The Company currently anticipates opening new stores in each of the next
      few years. In addition to new store openings, the Company may increase the
      number of stores it operates through acquisitions. Management believes
      that from time to time, acquisition opportunities will arise. Possible
      acquisitions will vary in size and the Company will consider larger
      acquisitions that could be material to the Company. In order to finance
      any such possible acquisitions, the Company may use cash flow from
      operations, may borrow additional amounts under its revolving credit
      facility, may seek to obtain additional debt or equity financing or may
      use its equity securities as consideration. The availability and
      attractiveness of any outside sources of financing will depend on a number
      of factors, some of which will relate to the financial 



                                       23
<PAGE>   24


      condition and performance of the Company, and some of which will be beyond
      the Company's control, such as prevailing interest rates and general
      economic conditions.


      SEASONALITY

      The Company, with the growth of the retail operations and the retail
      orientation of the VCM, Ltd. joint venture, has shifted its business mix
      more toward retail. This shift will also effect the net sales and earnings
      pattern of the Company, with a greater weighting toward the second half of
      the fiscal year.


      YEAR 2000 DISCLOSURE

      The Company has completed a review of its management information systems
      regarding "Year 2000" issues. The Company's planned systems initiatives
      will resolve the majority of the issues as current systems are converted
      to year 2000 compliant systems. The Company expects to bring all of its
      management information systems into year 2000 compliance by fiscal 1999.
      While it is likely that these efforts will be successful, if necessary
      modifications and conversions are not completed in a timely manner, the
      year 2000 issue could have an adverse effect on the Company's operations.
      Costs associated with making management information systems year 2000
      compliant are not expected to have a material effect on the Company's
      financial position or results of operations.


      NEW ACCOUNTING PRONOUNCEMENTS

      In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
      an Enterprise and Related Information. SFAS No. 131 requires public
      business enterprises to report certain information about operating
      segments, as well as certain information about products and services,
      geographic areas in which an enterprise operates, and any major
      customers. SFAS No. 131 is effective for fiscal years beginning after
      December 15, 1997. Management does not expect the implementation of SFAS  
      No. 131 to have a material impact on the Company's financial condition or
      results of operations.


      FORWARD LOOKING STATEMENT

      Forward looking statements in this report are made pursuant to the safe
      harbor provisions of the Private Securities Litigation Reform Act of 1995.
      Such forward looking statements are subject to certain risks and
      uncertainties that could cause actual results to differ materially from
      those projected. Readers are cautioned not to place undue reliance on
      these forward looking statements which speak only as of the date hereof.
      Such risks and uncertainties include, but are not limited to, the
      successful implementation of the Company's retail expansion plans and the
      timing of new store openings, the ability to purchase quality closeout
      merchandise at prices that allow the Company to maintain or exceed
      expected margins on sales, the effect of comparable store sales on the
      small 


                                       24



<PAGE>   25
      platform of stores and the disproportionate impact caused by individual
      buying transactions, growth into new geographic areas, availability of
      appropriate retail locations, any unanticipated problems at the Company's
      distribution facilities or in the transportation of merchandise in
      general, the operating and financial results of the Value City joint
      venture, the effect of the Consolidated Stores/Mac Frugal merger on
      wholesale sales, and general economic conditions. Please refer to the
      Company's subsequent SEC filings under the Securities Exchange Act of
      1934, as amended, for further information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Reference is made to Part IV, Item 14 of this Form 10-K for the 
information required by Item 8.

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

         None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The information required by this Item (other than the information
regarding executive officers set forth at the end of Item 4(a) of Part I of this
Form 10-K) will be contained in the Company's definitive Proxy Statement for its
1998 Annual Meeting of Shareholders, and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this Item will be contained in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of
Shareholders, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item will be contained in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of
Shareholders, and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item will be contained in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of
Shareholders, and is incorporated herein by reference.



                                       25
<PAGE>   26

                                     PART IV

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

        (a) (1)    Financial Statements:

                   Independent Auditors' Report

                   Consolidated Balance Sheets as of January 31, 1998 and
                   January 25, 1997.

                   Consolidated Statements of Operations for the Years Ended
                   January 31, 1998, January 25, 1997 and January 31, 1996.

                   Consolidated Statements of Stockholders' Equity and Partners'
                   Capital for the Years Ended January 31, 1998, January 25,
                   1997 and January 31, 1996.

                   Consolidated Statements of Cash Flows for the Years Ended
                   January 31, 1998, January 25, 1997 and January 31, 1996.

                   Notes to Consolidated Financial Statements

        (a) (2)    Financial Statement Schedules:

                   All schedules are omitted because they are not applicable or
                   because required information is included in the financial
                   statements or notes thereto.

        (a) (3)    Exhibits
                   See the Index to Exhibits included on page 47.

        (b)        Reports on Form 8-K
                   None


                                       26
<PAGE>   27



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

The Board of Directors and Stockholders
Mazel Stores, Inc.:

We have audited the consolidated financial statements of Mazel Stores, Inc. and
subsidiaries as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mazel Stores, Inc.
and subsidiaries as of January 31, 1998 and January 25, 1997 and the results of
their operations and their cash flows for each of the years in the three year
period ended January 31, 1998, in conformity with generally accepted accounting
principles.

                                             KPMG Peat Marwick, LLP



Cleveland, Ohio
March 16, 1998





                                       27
<PAGE>   28


                               MAZEL STORES, INC.
                         
                          CONSOLIDATED BALANCE SHEETS
                            
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ASSETS                                                                   January 31,      January 25,
                                                                             1998            1997
                                                                         ------------     -----------
<S>                                                                        <C>             <C>     
Current assets
     Cash and cash equivalents                                             $  1,240        $  8,010
     Accounts receivable-trade, less allowance for doubtful
        accounts of $195 in both years presented                             15,507          10,565
     Notes and other receivables                                                334              96
     Inventories                                                             53,676          40,399
     Prepaid expenses                                                         1,194           1,186
     Deferred income taxes (note 8)                                           2,837           3,006
                                                                           --------        --------

             Total current assets                                            74,788          63,262

     Equipment, furniture, and leasehold improvements, net (note 4)          10,889           6,251
     Other assets                                                             3,183           1,107
     Investment in VCM, Ltd. (note 16)                                        8,879             -
     Notes and accounts receivable-related parties (notes 6 and 16)           3,952           2,936
     Goodwill, net (note 1)                                                  10,701          10,876
     Deferred income taxes (note 8)                                           1,492           1,929
                                                                           --------        --------
                                                                           $113,884        $ 86,361
                                                                           ========        ========

LIABILITIES, STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL

Current liabilities
     Long-term debt, current portion (note 5)                              $     17        $     17
     Accounts payable                                                        14,362          15,447
     Accrued expenses                                                         4,036           3,050
     Other current liabilities                                                  511             275
                                                                           --------        --------
             Total current liabilities                                       18,926          18,789
     Revolving line of credit (note 5)                                       19,716             -
     Long-term debt, net of current portion (note 5)                             48              53
     Other liabilities (note 9)                                               2,355           2,091
     Deferred income taxes (note 8)                                             -               666
                                                                           --------        --------
             Total liabilities                                               41,045          21,599
Stockholders' equity and partners' capital
     Preferred stock, no par value; 2,000,000 shares authorized;
        no shares issued or outstanding                                         -               -
     Common stock, no par value; 14,000,000 shares authorized;
        9,148,300 and 9,170,100 shares issued and
        outstanding, respectively                                               -               -
     Additional paid-in capital                                              64,302          64,742
     Retained earnings                                                        8,537              20
                                                                           --------        --------
             Total stockholders' equity and partners' capital                72,839          64,762
Commitments and contingencies (note 9)
                                                                           --------        --------
                                                                           $113,884        $ 86,361
                                                                           ========        ========
</TABLE>


           See accompanying notes to consolidated financial statements



                                       28

<PAGE>   29



                               MAZEL STORES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                         Fiscal Year Ended
                                                                         -------------------------------------------------
                                                                         January 31,        January 25,         January 31,
                                                                            1998               1997                1996
                                                                           -------            -------             ------
<S>                                                                       <C>                 <C>                 <C>   
Net sales                                                                 $208,326            179,877             98,106
Cost of sales                                                              136,446            121,382             70,208
                                                                           -------            -------             ------
          Gross profit                                                      71,880             58,495             27,898
Selling, general, and administrative expense                                55,839             45,802             20,753
Special charges (note 11)                                                    -                  4,243              2,203
                                                                           -------            -------             ------
          Operating profit                                                  16,041              8,450              4,942
Other income (expense)
  Interest expense, net                                                      (943)            (2,254)            (1,265)
  Other (note 16)                                                            (662)                 34              (559)
                                                                           -------            -------             ------
          Income before income taxes                                        14,436              6,230              3,118
Income tax expense (benefit) (note 8)                                        5,919            (1,987)                 19
                                                                           -------            -------             ------
          Net income                                                     $   8,517              8,217              3,099
                                                                           =======            =======             ======

Pro forma as adjusted data (unaudited) (note 13)
  Income before income taxes                                                                 $  6,230              3,118
 Supplemental pro forma adjustments
   Income of Odd Job retail operation                                                               -              1,365
   Loss on discontinued Ohio retail operation                                                       -              2,210
   Management compensation adjustments                                                          1,235              1,404
   Special charges                                                                              4,243                600
   Reduction in interest expense, net                                                           2,460              2,040
   Provision for income taxes                                                                 (5,667)            (4,295)
                                                                                              -------            -------
          Pro forma as adjusted net income                                                   $  8,501              6,442
                                                                                               ======            =======

Net income per share (basic)                                             $    0.93
Net income per share (diluted)                                           $    0.92
Pro forma as adjusted net income per share (unaudited) (basic)                              $    0.93               0.70
Pro forma as adjusted net income per share (unaudited) (diluted)                            $    0.91               0.70

Average shares outstanding (basic)                                       9,162,100          9,170,100          9,170,100
Average shares outstanding (diluted)                                     9,265,400          9,386,000          9,170,100
</TABLE>



           See accompanying notes to consolidated financial statements

                                       29

<PAGE>   30



                               MAZEL STORES, INC.

      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL

                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                                       Mazel
                                                                  Additional        Retained          Company
                                                  Common           Paid-in          Earnings         Partners'
                                                  Shares           Capital          (Deficit)         Capital             Total
                                                  ------           -------          ---------         -------             -----

<S>                                             <C>             <C>                     <C>         <C>                    <C>   
Balance as of January 31,1995                                   $       100                 6            11,456            11,562
Capital contributed                                                     -                 -                  92                92
Partners' withdrawals                                                   -                 -              (1,773)           (1,773)
Dividends paid                                                          -                (110)              -                (110)
Partnership net income                                                  -                 -               3,199             3,199
Odd-job Holdings, Inc.  net loss                                        -                (100)              -                (100)
                                                                -----------       -----------       -----------       -----------

Balance as of January 31, 1996                                          100              (204)           12,974            12,870

Capital contributed                                                     -                 -               4,000             4,000
Net proceeds from issuance and sale
  of Common Stock
  in connection with the initial public
  offering, net of issuance costs of
 $1,038 (Note 2)                                2,960,100            43,008               -                 -              43,008
Stock issued pursuant to compensation
  arrangements                                    206,900             3,646               -                 -               3,646
Conversion of debt                                312,500             1,000               -                 -               1,000
Partners' withdrawals                                 -                 -                 -              (7,979)           (7,979) 
Net income                                            -                 -                 224             7,993             8,217  
Exchange of partnership equity for stock        5,690,600            16,988               -             (16,988)              -
                                              -----------       -----------       -----------       -----------       -----------

Balance as of January 25, 1997                  9,170,100            64,742                20               -              64,762
Stock retirement                                  (21,800)             (440)              -                 -                (440)
Net income                                            -                 -               8,517               -               8,517
                                              -----------       -----------       -----------       -----------       -----------
Balance as of January 31, 1998                  9,148,300       $    64,302             8,537               -              72,839
                                              ===========       ===========       ===========       ===========       ===========
</TABLE>





           See accompanying notes to consolidated financial statements

                                       30

<PAGE>   31




                               MAZEL STORES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                            January 31,     January 25,    January 31,
                                                                               1998            1997           1996
                                                                            -----------     -----------    -----------
<S>                                                                          <C>              <C>            <C>  
Cash flows from operating activities
  Net income                                                                 $  8,517          8,217          3,099
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities
    Depreciation and amortization                                               1,519          1,075            646
    Deferred income taxes                                                         439         (2,304)           (12)
    Equity in net loss from VCM, Ltd.                                             758            -              -
    Loss on sale of Ohio retail operations                                        -              -            1,571
    Noncash charges on sale of Ohio retail operations                             -              -           (3,038)
    Noncash compensation expense                                                  -            2,928            -
    Noncash retirement of shareholder loans
     and stock options                                                           (440)           -              -
    Changes in operating assets and liabilities
     Accounts receivable - trade                                               (4,942)        (2,077)          (672)
     Notes and other receivables                                                 (238)           256           (196)
     Inventories                                                              (13,277)       (10,735)        (1,686)
     Deferred taxes                                                               (60)           -              -
     Prepaid expenses                                                              (8)          (704)           266
     Other assets                                                              (1,633)           (31)           113
     Accounts payable                                                          (1,085)         3,627         (2,107)
     Accrued expenses and other liabilities                                     1,383            626           (178)
                                                                             --------       --------       --------

                    Total adjustments                                         (17,584)        (7,339)        (5,293)
                                                                             --------       --------       --------
                    Net cash provided by (used in) operating activities        (9,067)           878         (2,194)
                                                                             --------       --------       --------

Cash flows from investing activities
  Capital expenditures                                                         (5,832)        (3,923)          (450)
  Investment in VCM, Ltd.                                                      (9,637)           -              -
  Cash paid for lease acquisitions                                             (1,950)           -              -
  Cash paid for acquisitions, net of cash acquired                                -             (266)        (8,395)
  Cash received at acquisition, net of cash expenses                              -               70            -
  Issuance of notes receivable - related parties                                  -           (2,936)           -
  Proceeds from sale of Ohio retail operations                                    -              -            1,818
                                                                             --------       --------       --------

               Net cash used in investing activities                          (17,419)        (7,055)        (7,027)
                                                                             --------       --------       --------

Cash flows from financing activities
  Proceeds from term loan                                                         -              -           10,925
  Repayment of debt                                                           (44,065)       (33,414)        (4,151)
  Net borrowings under credit facility                                         63,781          7,102          6,220
  Repayment of subordinated notes payable                                         -              -             (500)
  Equity contributions                                                            -            4,000             92
  Partners' withdrawals                                                           -           (7,979)        (1,773)
  Dividends paid                                                                  -              -             (110)
  Loan fees                                                                       -              -             (155)
  Net proceeds of initial public offering                                         -           43,008            -
                                                                             --------       --------       --------

               Net cash provided by financing activities                       19,716         12,717         10,548
                                                                             --------       --------       --------

Net increase (decrease) in cash and cash equivalents                           (6,770)         6,540          1,327

Cash and cash equivalents at beginning of year                                  8,010          1,470            143
                                                                             --------       --------       --------

Cash and cash equivalents at end of year                                     $  1,240          8,010          1,470
                                                                             ========       ========       ========

Supplemental disclosures
  Cash paid for interest                                                     $  1,883          2,503          1,225
  Cash paid for income taxes                                                 $  5,441            278            198
                                                                             ========       ========       ========
</TABLE>

           See accompanying notes to consolidated financial statements

                                       31

<PAGE>   32



                               MAZEL STORES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (a)  DESCRIPTION OF BUSINESS

                The Company consists of two complementary operations: (i) a
           major regional closeout retail business; and (ii) the nation's
           largest closeout wholesale business. The Company sells quality,
           value-oriented consumer products at a broad range of price points
           offered at a substantial discount to the original retail or wholesale
           price. The Company operates a chain of 32 closeout retail stores,
           including 17 in New York (six of which are in Manhattan), 13 in New
           Jersey, and one each in Pennsylvania and Connecticut.

      (b)  ORGANIZATION

           The Company was incorporated as a wholly owned subsidiary of Mazel
           Company L.P. ("Partnership") in preparation for an initial public
           offering ("IPO") that occurred as of November 21, 1996 (see note 2).
           The Partnership was controlled by ZS Mazel L.P. ("ZS"), a limited
           partnership that was also the sole stockholder of Odd-Job Holdings,
           Inc. ("Holdings"), which owned all of the common stock of Odd-Job
           Acquisition Corp., which had been organized to acquire the retail
           business of a commonly owned group of corporations and partnerships
           (collectively, "Odd Job"). On December 9, 1994, ZS acquired Peddler's
           Mart, Inc. ("Peddlers"), which was merged with Odd Job upon the
           acquisition of Odd Job on December 7, 1995. Immediately prior to the
           IPO, the Partnership then exercised its option to acquire the stock
           of Holdings from ZS for $1,400, which included the cancellation of a
           $1,350 note from ZS. Then the Partnership contributed all of its
           assets and liabilities to the Company in exchange for 5,690,600
           shares of common stock.

      (c)  BASIS OF PRESENTATION

      The financial statements of the Company give effect to the common control
      of the Partnership, Peddlers, and Odd Job prior to the IPO and are
      comprised of the operations of the Partnership for all years      
      presented including the Peddlers and Odd Job operations as of December 9,
      1994 and December 7, 1995, respectively. The transfer of assets and
      liabilities

                                       32

<PAGE>   33



           among these commonly controlled entities has been accounted for at
           historical cost in a manner similar to a pooling of interests.

      (d)  PRINCIPLES OF CONSOLIDATION

           The financial statements of the Company are presented on a
           consolidated basis to reflect the economic substance of activities
           arising from their common management and control. All significant
           intercompany balances and transactions have been eliminated in the
           consolidated financial statements.

      (e)  CASH AND CASH EQUIVALENTS

           For financial reporting purposes, the Company considers all
           investments purchased with an original maturity of three months or
           less to be cash equivalents.

      (f)  INVENTORIES

           Wholesale inventories are valued at the lower of cost or market, with
           cost determined by the first-in, first-out (FIFO) method, and retail
           inventories are valued by use of the retail method

      (g)  EQUIPMENT, FURNITURE, AND LEASEHOLD IMPROVEMENTS

           Depreciation and amortization are provided for the cost of
           depreciable properties at rates based on their estimated useful
           lives, which range from 3 to 10 years for furniture and equipment, or
           for leasehold improvements, extending to the life of the related
           lease. The rates so determined are applied on a straight-line basis.

      (h)  GOODWILL

           Goodwill represents the excess of cost over the fair value of net
           assets acquired and is amortized using the straight-line method over
           periods not exceeding 40 years. The Company assesses the
           recoverability of this intangible asset by determining whether the
           amortization of the goodwill balance over its remaining life can be
           recovered through undiscounted future operating cash flows of the
           acquired businesses.

           During the fiscal year ended January 25, 1997, goodwill increased by
           $934 due to the settlement of pre-acquisition contingencies related
           to the Odd Job acquisition and by $1,248 as a result of the
           acquisition of three retail stores. At January 31, 1998 and January
           25, 1997, accumulated amortization amounted to $668 and $393,
           respectively.




                                       33

<PAGE>   34



       (i) INCOME TAXES

           The Company accounts for income taxes in accordance with SFAS No.
           109, Accounting for Income Taxes. Deferred tax assets and liabilities
           are recognized for the estimated future tax consequences attributable
           to differences between the financial statement carrying amounts of
           existing assets and liabilities and their respective tax bases and
           any operating loss, deduction, or tax credit carryforwards. Deferred
           tax assets and liabilities are measured using enacted tax rates
           expected to apply to taxable income in the years in which those
           temporary differences are expected to be recovered or settled. The
           effect on deferred tax assets and liabilities of a change in tax
           rates is recognized in income in the period that includes the
           enactment date.

           Income taxes attributable to the operations of the Partnership were
           obligations of individual partners and have not been reflected in the
           historical amounts shown in the accompanying consolidated financial
           statements. The consolidated financial statements as of January 25,
           1997 reflect a one-time tax benefit of $1,489 arising from cumulative
           differences between the net book and tax basis of the Partnership's
           assets and liabilities upon their transfer to the Company.

       (j) ADVERTISING

           The Company expenses advertising costs as incurred. Advertising
           expense was $1,724 in the year ended January 31, 1998, $598 in the
           year ended January 25, 1997 and $470 in the year ended January 31,
           1996.

       (k) FISCAL YEAR

           Effective February 1, 1996, the Company changed its fiscal year end
           from January 31 to a 52-53 week year ending on the last Saturday in
           January nearest to January 31. Fiscal 1997, fiscal 1996 and fiscal
           1995 are defined as the fiscal years ended January 31, 1998, January
           25, 1997 and January 31, 1996, respectively.

       (l) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

           The preparation of financial statements in conformity with generally
           accepted accounting principles requires management to make estimates
           and assumptions that affect the reported amounts of assets and
           liabilities and the 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 results
           could differ from those estimates.




                                       34

<PAGE>   35



       (m)  RECLASSIFICATIONS

           Certain reclassifications were made to the Company's prior period
           financial statements to conform to the January 31, 1998 presentation.

(2)    INITIAL PUBLIC OFFERING

       On November 21, 1996, the Company completed its IPO of 2,574,000 shares
       of common stock, no par value, at $16.00 per share, generating net
       proceeds of $37,398, after deducting underwriting fees and offering
       expenses. On December 13, 1996, the underwriters exercised their
       over-allotment option to purchase an additional 386,100 common shares,
       generating an additional $5,610 of cash proceeds to the Company. The net
       proceeds were used to repay $33,414 of indebtedness to a senior
       institutional lender and $4,000 of partners' notes and to fund $2,936 in
       tax loans and $900 in compensation buyouts to certain executives, with
       the remainder used for the Company's general corporate purposes.

(3)    ODD JOB ACQUISITION

       On December 7, 1995, the Odd Job retail operations were acquired by ZS
       Fund, L.P. for $10,500 and an additional $1,013 in related expenses, in a
       transaction accounted for by the purchase accounting method. In
       connection with this acquisition, the Company recorded $8,801 of excess
       of the purchase price over the fair value of the net identifiable assets
       acquired.

(4)    EQUIPMENT, FURNITURE, AND LEASEHOLD IMPROVEMENTS

       The major classes of equipment, furniture, leasehold improvements, and
       construction in progress are summarized at cost, as follows:

<TABLE>
<CAPTION>
                                                                            January 31,           January 25,
                                                                               1998                   1997
                                                                            -----------           -----------

<S>                                                                         <C>                      <C>  
       Furniture, fixtures, and equipment                                   $    7,295               4,620
       Leasehold improvements                                                    5,457               3,177
       Construction in progress                                                  1,892               1,016
                                                                             ---------               -----
                                                                                14,644               8,813
       Less accumulated depreciation and amortization                            3,755               2,562
                                                                             ---------               -----
                                                                            $   10,889               6,251
                                                                             =========               =====
</TABLE>



                                       35

<PAGE>   36



(5)    LONG-TERM DEBT

       The Company's long-term debt as of January 31, 1998 and January 25, 1997
       consisted of the following:

<TABLE>
<CAPTION>
                                                                          January 31,             January 25,
                                                                             1998                     1997
                                                                          -----------             -----------

<S>                                                                        <C>                           <C>
       Revolving credit facility                                           $ 19,716                      -
       Other debt                                                                65                       70
       Less current portion                                                     (17)                     (17)
                                                                            --------                 -------
                                                                           $ 19,764                       53
                                                                            ========                 =======
</TABLE>

       At January 31, 1998, the Company maintained a $40,000 revolving line of
       credit with its bank secured by substantially all of its assets and with
       a maturity date of April 30, 1999. On March 10, 1998, the Company entered
       into a new $60,000 credit facility with a bank syndicate providing for a
       $50,000 revolving line of credit and a $10,000 term loan. The new credit
       facility is secured by substantially all of the Company's assets and
       expires on November 15, 2002. The term loan requires 20 consecutive
       quarterly payments of $500 plus accrued interest, commencing May 1, 1998.
       Both agreements call for interest at the banks' prime rate less 50 basis
       points or LIBOR plus a spread, and are subject to a commitment fee on the
       unused portion. Availability on the facilities is the lesser of the total
       credit commitment or a borrowing base calculation based primarily on the
       Company's accounts receivable and inventories. The facilities contain
       restrictive covenants which require minimum net worth levels, maintenance
       of certain financial ratios and limitations on capital expenditures and
       investments. At January 31, 1998, the Company was in compliance with all
       restrictive covenants.

(6)    RELATED PARTY TRANSACTIONS

       As of January 31, 1998 and January 25, 1997, notes receivable consists
       primarily of $2,531 and $2,932, respectively, relating to tax loans
       provided to certain key executives related to stock issued in lieu of
       compensation reductions and to former shareholders of the Company in
       payment of indebtedness at the time of the Company's IPO. Such amounts
       include accrued interest of $99 and $14, respectively, at a rate of 6.6
       percent.

       Prior to the acquisition of Odd Job, the Partnership conducted
       transactions with Odd Job as both vendor and customer. During the year
       ended January 31, 1996, sales by the Partnership to Odd Job amounted to
       $1,835, and purchases from Odd Job of $909.

       During the years ended January 25, 1997 and January 31, 1996, the
       Partnership paid its managing partner a management fee of $289 and $100,
       respectively. The management fee paid for the year ended January 25, 1997
       included a one-time management fee buyout of $200.



                                       36

<PAGE>   37



(7)    FINANCIAL INSTRUMENTS

       The carrying value of cash and cash equivalents, accounts receivable,
       notes and other receivables, accounts payable, and accrued expenses is
       considered to approximate their fair value due to their short maturity.
       The interest rates on debt instruments and notes receivable are
       considered to approximate market rates, and accordingly, their cost is
       reflective of fair value.

(8)    INCOME TAXES

       Income tax expense (benefit) attributable to income from operations is as
       follows:

<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended
                                                           ---------------------------------------------

                                                           January 31,      January 25,      January 31,
                                                              1998             1997             1996
                                                           -----------      -----------      -----------
<S>                                                          <C>              <C>                <C>
           Federal
              Current                                        $4,612              -                -
              Deferred                                          375           (1,975)           (12)
                                                             ------           -------           ----
                                                              4,987           (1,975)           (12)
           State and local
              Current                                           868              316             31
              Deferred                                           64             (328)             -
                                                             ------           -------           ----
                                                                932              (12)            31
                                                             ------           -------           ----
                                                             $5,919           (1,987)            19
                                                             ======           =======           ====
</TABLE>

       The income tax expense (benefit) attributable to income from operations
       for the fiscal years ended January 31, 1998 and January 25, 1997 was
       $5,919 and ($1,987), respectively, which differed from the "expected"
       amount computed by applying the U.S. federal tax rate of 35 percent to
       pretax income from operations as a result of the following:

<TABLE>
<CAPTION>
                                                                           January 31,    January 25,
                                                                              1998           1997
                                                                           -----------    -----------


<S>                                                                          <C>             <C>    
           Computed "expected" tax expense                                    $5,060         2,181
           Corporate state and local taxes, net of federal benefit               606           159
           Non-recurring tax benefit                                           -            (1,489)
           Partnership period earnings taxed to respective partners            -            (2,797)
           Partnership local taxes                                             -                72
           Other                                                                 253          (113)
                                                                              ------        -------

                                                                             $ 5,919        (1,987)
                                                                              ======        =======
</TABLE>

                                       37

<PAGE>   38




       Pretax income for the year ended January 31, 1996 was attributable
       principally to the Partnership, and accordingly, the income tax expense
       recorded for the fiscal year reflects local taxes for which the
       Partnership was responsible.

       The tax effects of the temporary differences that give rise to
       significant portions of the deferred tax assets and liabilities are
       presented below:

<TABLE>
<CAPTION>
                                                                           January 31,    January 25,
                                                                               1998          1997
                                                                           -----------    -----------
<S>                                                                           <C>            <C>  
              Deferred tax assets
                  Current
                     Inventory capitalization and reserve                     $1,941         1,741
                     Accrued expenses                                            522           352
                     Net operating loss carryforward                              34           827
                     Other                                                       340            86
                                                                              ------        ------
                                                                               2,837         3,006

                  Noncurrent
                     Equipment, furniture, and leasehold
                         improvements basis differences                        1,356         1,296
                     Accrued lease obligations                                   966           747
                                                                              ------        ------

                                                                               2,322         2,043
                          Total gross deferred tax assets                      5,159         5,049

              Deferred tax liabilities
                  Noncurrent
                    Goodwill                                                    (830)         (643)
                    Amortizable asset                                           -             (137)

                          Total gross deferred tax liabilities                  (830)         (780)
                                                                               ------        ------

                             Net deferred tax asset                           $4,329         4,269
                                                                              ======         =====
</TABLE>


                Net operating losses of $84 and $4,226 from fiscal years ended
                January 31, 1998 and January 25, 1997, respectively, are
                available to offset future taxable income. The loss
                carryforwards expire in 12 and 15 years, respectively.

                Under SFAS No. 109, a valuation allowance is established to
                reduce the deferred tax asset if it is more likely than not that
                the related tax benefit will not be realized. In

                                       38

<PAGE>   39



                management's opinion, it is more likely that the tax benefits
                will be realized; consequently, no valuation allowance has been
                established as of January 31, 1998 and January 25, 1997.

(9)    COMMITMENTS AND CONTINGENCIES

       (a)   LEASES

             The Company is obligated for office, warehouse, and retail space
             under operating lease agreements which expire at various dates
             through fiscal 2017. Some of these leases are subject to certain
             escalation clauses based upon real estate taxes and other occupancy
             expense, and several leases provide for additional rent based on a
             percentage of sales. One of the lessors is a corporation in which
             certain executives of the Company have a minority ownership
             interest.

             At January 31, 1998, minimum annual rental commitments under
             noncancelable leases for the Company as a whole are as follows, for
             the fiscal year ending:

<TABLE>
<S>                                                        <C>    
                               1999                        $12,281
                               2000                         12,773
                               2001                         12,266
                               2002                         11,561
                               2003                          9,606
                               Thereafter                   38,122
                                                            ------
                                                           $96,609
</TABLE>

           Rent expense under all operating leases for the fiscal years ended
           January 31, 1998, January 25, 1997, and January 31, 1996 was $9,311,
           $7,199 and $6,349, respectively. These amounts include rent paid to a
           related party lessor of $1,533, $1,471 and $1,330, respectively.

           In conjunction with the Odd Job acquisition, a portion of the
           purchase price was assigned to leases based on the excess of the
           contractual lease payments over the estimated current market rentals
           in the amount of $1,782. This amount is shown with other liabilities
           and will be reduced as lease payments are made.

       (b) LETTERS OF CREDIT

           The $40,000 revolving line of credit includes a letter of credit
           facility totaling $15,000 for use in the normal operations of the
           business. At January 31, 1998 and January 25, 1997, the Company had
           outstanding letters of credit issued to various parties aggregating
           $3,083 and $2,461, respectively.


                                       39

<PAGE>   40



       (c) CONTINGENT SUBORDINATED NOTES

           The Company has two subordinated notes due to Peddlers' former owner,
           both of which mature on December 31, 2002. Payments are to be made
           annually to a maximum of $675 and $275, based on Peddlers'
           distribution profits, as defined. No amounts have been paid or are
           payable on these notes through January 31, 1998.

       (d) LITIGATION

           At January 31, 1998, the Company was a party to certain lawsuits
           incurred in the normal course of business, none of which individually
           or in the aggregate is considered material by management in relation
           to the Company's consolidated financial position or results of
           operations.

       (e) RETAIL LEASE OBLIGATIONS

           In connection with the sale of the Ohio retail stores in October 1995
           (see note 11), the Company remains contingently liable for the retail
           store lease obligations in the event that the buyer should default on
           it lease payments. The lease obligations for the remaining fiscal
           years are as follows: 1999 $129; 2000 $74; 2001 $74; 2002 $12.

(10)   RETIREMENT AND SAVINGS PLAN (DOLLARS AS STATED)

       The Company maintains contributory savings plans under Section 401(k) of
       the Internal Revenue Code for the benefit of all of its employees who
       meet certain age and service requirements. Under the plan covering
       collectively bargained employees, the Company is required to make
       contributions up to 25 percent of the employee contributions to an annual
       maximum of $275 per employee. Contributions to this plan by the Company
       have not been material. In early fiscal 1998, the Company amended its
       Section 401(k) plan covering non-union employees. The Company's
       contribution is equal to 25 percent of the first three percent of 
       employee contributions, with the Company's contributions vesting ratably 
       over five years.


(11)   SPECIAL CHARGES

       Special charges for the fiscal year ended January 25, 1997 resulted from
       compensation and other charges arising in connection with the Company's
       IPO. Special charges for the fiscal year ended January 31, 1996 resulted
       from a loss of $1,571 on the Partnership's disposal of the 12 closeout
       stores comprising the Ohio retail business and $632 relating to executive
       signing bonuses.




                                       40

<PAGE>   41



(12)   COMPENSATORY PLANS

       (a) STOCK OPTION PLAN

           The Mazel Stores, Inc. 1996 Stock Option Plan ("Stock Option Plan")
           was adopted by the Board of Directors and approved by the
           shareholders of the Company effective October 1, 1996. The Stock
           Option Plan calls for the issuance of up to 900,000 stock options
           ("Options") to acquire common stock of the Company. Pursuant to the
           provisions of the Stock Option Plan, employees of the Company may be
           granted Options, including both incentive stock options and
           nonqualified stock options ("NQSO"). Consultants may receive only
           NQSO under the Stock Option Plan. Non- employee directors
           automatically receive, upon the date they first become Directors, a
           grant of Options to purchase 15,000 shares of common stock of the
           Company. The purchase price of a share of common stock pursuant to an
           Option shall not be less than the fair market value of a share of
           common stock at the grant date. The Options vest in five equal annual
           installments of 20 percent of the grant, and have a term of 10 years.

           In October 1995, the FASB issued SFAS No. 123, Accounting for
           Stock-Based Compensation. The Company adopted this standard, as
           required for its January 31, 1998 financial statements. The Company
           applies APB Opinion No. 25 and related interpretations in accounting
           for the Stock Option Plan. Accordingly, no compensation expense has
           been recognized. The following table provides net income and net
           income per share reduced to the pro forma amounts calculating
           compensation expense consistent with SFAS No. 123. The fair value of
           each option grant is estimated on the date of grant using the
           Black-Scholes option-pricing model with the following weighted
           average assumptions used for grants in the fiscal years ended January
           31, 1998 and January 25, 1997, respectively: expected volatility of
           40 percent for both fiscal years, risk-free interest rates of 6.0 and
           6.5 percent, expected lives of 9.6 and 8.8 years, and a dividend
           yield of zero percent for both fiscal years. For the fiscal year 
           ended January 31, 1996, net income, basic net income per share and 
           diluted net income per share on an as reported and pro forma basis 
           were the same.

<TABLE>
<CAPTION>
                                                          Fiscal Year Ended
                                                   --------------------------------
                                                                          Pro forma
                                                                         as adjusted
                                                                         -----------
                                                   January 31,           January 25,
                                                     1998                    1997
<S>                                                 <C>                     <C>  
Net income
       As reported                                  $8,517                  8,501
       Pro forma                                    $7,819                  7,839
Basic net income per share
       As reported                                   $0.93                   0.93
       Pro forma                                     $0.85                   0.85
Diluted net income per share
       As reported                                   $0.92                   0.91
       Pro forma                                     $0.84                   0.84
</TABLE>

           The above results may not be representative of the effect of SFAS No.
           123 on net income for future years.


                                       41

<PAGE>   42



           The following is a summary of option activity for the fiscal years
           ended January 31, 1998 and January 25, 1997 and related
           weighted-average exercise price:



<TABLE>
<CAPTION>
                                                           January 31, 1998              January 25, 1997
                                                        ------------------------      -----------------------
                                                                  Weighted Avg.                Weighted Avg.
                                                        Shares    Exercise Price      Shares   Exercise Price
                                                        ------    --------------      ------   --------------

<S>                                                    <C>           <C>              <C>          <C>   
Outstanding at beginning of fiscal year                718,350       $16.00
 Granted at market                                      55,000        20.07           704,250      $16.00
 Granted below market *                                 -                 -            30,000       16.00
 Expired or forfeited                                  (24,900)       16.00           (15,900)      16.00
                                                       --------      ------           --------    -------
Outstanding at end of fiscal year                      748,450       $16.30           718,350      $16.00
                                                       =======       ======           =======      ======
Options available for grant at end of year             151,550                        181,650
Weighted average fair value of options
 granted during the year                                 $7.19                          $7.84
</TABLE>

* Options with an exercise price of $16.00 when the market price on the grant
date was $23.75.


<TABLE>
<CAPTION>
                                                          Options Outstanding                         Options Exercisable
                                            -------------------------------------------------   -------------------------------
                                                             Weighted Avg.
                                            No. of Options     Remaining       Weighted Avg.    No. of Options   Weighted Avg.
                                             Outstanding    Contractual Life   Exercise Price     Exercisable    Exercise Price
                                             -----------    ----------------  ---------------     -----------    --------------

Range of exercise prices:
<S>                                            <C>               <C>              <C>               <C>              <C>   
 Fiscal year 1996 grants at $16.00             693,450           8.81             $16.00            153,690          $16.00
 Fiscal year 1997 grants at $13.87-$25.75       55,000           9.55              20.07                  0
                                               -------           ----             ------            -------
                                               748,450           8.86             $16.30            153,690          $16.00
                                               =======           ====             ======            =======          ======
</TABLE>


       (b) RESTRICTED STOCK PLAN (DOLLARS AS STATED)

           The Company's Restricted Stock Plan ("Restricted Stock Plan") was
           adopted by the Board of Directors and approved by the Company's
           shareholders effective October 1, 1996. The Restricted Stock Plan
           serves as the successor to the Partnership's Employee Equity Plan
           ("Equity Plan"). The Restricted Stock Plan relates to 133,120
           unvested shares of common stock issued, initially as partnership
           units under the Equity Plan. Shares have the same vesting terms as
           provided in the Equity Plan.

           The Equity Plan provided for the purchase of partnership units by key
           executives of the Company, with exercisability subject to vesting
           restrictions, generally over a five-year period. Employees of the
           Company purchased a total of 1,730 units (representing 550,711 shares
           of common stock) under the Equity Plan. A total of 588 units were

                                       42

<PAGE>   43



           vested as of January 31, 1996 and an additional 450 units vested upon
           the effectiveness of the IPO. In conjunction with the IPO, all vested
           units (aggregating 330,426 shares of common stock) were distributed
           to Equity Plan participants and all unvested units (aggregating
           220,285 shares of common stock) were being held pursuant to the
           Restricted Stock Plan. As of January 31, 1998, 133,120 shares are
           being held pursuant to the Restricted Stock Plan. The Company has
           recorded compensation expense in accordance with the vesting
           provisions of the Restricted Stock Plan at a value of $225 per unit,
           which represents the difference between the purchase price and the
           fair value of each unit at the grant date as established by an
           independent appraisal.

(13)   PRO FORMA INFORMATION (UNAUDITED)

       The unaudited pro forma as adjusted data, as shown on the accompanying
       consolidated statements of operations, gives effect to the IPO and the
       combination of the Partnership, Odd Job, and Peddlers to have occurred at
       the beginning of the fiscal years ended January 25, 1997 and January 31,
       1996. Such data excludes certain one-time charges (principally
       compensation adjustments) incurred in connection with the IPO and
       organization of the Company, provides for income taxes at an effective
       rate of 40 percent, and excludes the one-time tax benefit of $1,489
       attributable to the change in the Company's tax status.

(14)   BUSINESS SEGMENT INFORMATION

       Summarized financial information by business segment as of the fiscal 
       years ended January 31, 1998, January 25, 1997 and January 31, 1996, 
       is as follows:

<TABLE>
<CAPTION>
                                                                                      Capital   Depreciation
                                                     Operating        Total           Expen-         and
                                   Net Sales           Profit         Assets          ditures    Amortization
                                   ---------           ------         ------          -------    ------------
<S>                                <C>                 <C>            <C>              <C>            <C>
January 31, 1998
 Wholesale                         $ 95,121            10,648         69,286           1,046          417
 Retail                             113,205             5,393         44,598           4,786        1,102
                                    -------            ------       --------           -----        -----
                                   $208,326            16,041        113,884           5,832        1,519
                                    =======            ======        =======           =====        =====

January 25, 1997
 Wholesale                         $ 95,675             4,633         54,681           1,197          369
 Retail                              84,202             3,817         31,680           2,726          706
                                     ------             -----         ------           -----          ---
                                   $179,877             8,450         86,361           3,923        1,075
                                    =======             =====         ======           =====        =====

January 31, 1996
 Wholesale                         $ 75,652             3,830         35,185             435          497
 Retail                              22,454             1,112         21,449              15          149
                                     ------             -----         ------          ------       ------
                                   $ 98,106             4,942         56,634             450          646
                                    =======             =====         ======           =====       ======
</TABLE>


                                                        43

<PAGE>   44



         For the fiscal years ended January 31, 1998, January 25, 1997 and
         January 31, 1996, sales from the wholesale to the retail segment have
         been eliminated from wholesale net sales in the amounts of $12,414,
         $9,057 and $3,496, respectively. Sales to the Company's largest
         customer accounted for 14.9 percent, 20.0 percent and 18.6 percent of
         total sales, respectively. Wholesale operating profit is shown net of
         corporate expenses and other special charges of $2,173, $9,382 and
         $5,545, respectively.

(15)     UNAUDITED QUARTERLY FINANCIAL DATA

         The following is a summary of unaudited quarterly results of operations
         for the fiscal years ended January 31, 1998, January 25, 1997 and
         January 31, 1996:

<TABLE>
<CAPTION>
                                                                              Quarter
                                                       ---------------------------------------------------
                                                       First          Second          Third         Fourth
                                                       -----          ------          -----         ------
<S>                                                   <C>             <C>             <C>          <C>   
Year ended January 31, 1998
 Net sales                                            $43,128         49,053          48,820       67,325
 Gross profit                                          14,844         16,160          17,342       23,534
 Net income                                             1,531          2,002           1,558        3,426

                                                                              Quarter
                                                       ---------------------------------------------------
                                                       First          Second          Third         Fourth
                                                       -----          ------          -----         ------
Year ended January 25, 1997
 Net sales                                            $42,454         42,711          44,387       50,325
 Gross profit                                          12,899         13,752          14,718       17,126
 Net income                                             2,338          2,194           2,416        1,269
                                                                              Quarter
                                                       ---------------------------------------------------
                                                       First          Second          Third         Fourth
                                                       -----          ------          -----         ------
Year ended January 31, 1996
 Net sales                                            $21,419         19,888          24,850       31,949
 Gross profit                                           6,189          6,081           6,828        8,800
 Net income                                             1,465          1,274            (249)         609
</TABLE>


(16)     INVESTMENT IN VCM, LTD.

         On August 3, 1997, the Company commenced operation of VCM, Ltd.
         ("VCM"), a 50 percent owned joint venture with Value City Department
         Stores, whereby VCM operates the toy, sporting goods, and expanded
         health and beauty care departments for the Value City department store
         chain. The Company coordinates merchandise purchasing on behalf of
         VCM, some of which is sourced from the Company's wholesale segment.
         The Company's investment in VCM, which is accounted for under the
         equity method, was $9,637. In addition to its 50 percent equity share
         of VCM's net profit or loss, the Company receives a management fee
         equal to three percent of net sales. For fiscal 1997, sales to VCM
         amounted to $4,539. At January 31, 1998, the Company recorded an
         account receivable from VCM of $1,421 representing sales, management
         fees and invoices paid on behalf of VCM.




                                       44

<PAGE>   45



(17)     EARNINGS PER SHARE

         In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. The
         Company adopted this standard, as required for its January 31, 1998
         financial statements. For the years presented, the Company presents
         both basic and diluted earnings per share.

         The following data shows the amounts used in computing earnings per
         share and the effect on the weighted-average number of shares of
         dilutive potential common stock.

<TABLE>
<CAPTION>
                                                      Fiscal Year Ended
                                          -------------------------------------------
                                                             Pro forma as adjusted
                                                             ---------------------
                                          January 31,     January 25,     January 31,
                                             1998            1997            1996
                                          -----------     -----------     -----------
<S>                                       <C>             <C>             <C>       
NUMERATOR:
Net income available to
 Common shareholders
 used in basic and diluted
 net income per share                     $    8,517      $    8,501      $    6,442

DENOMINATOR:
Weighted-average number
 of Common Shares used
 in basic earnings per share               9,162,100       9,170,100       9,170,100
Net dilutive effect of stock options         103,300         215,900             -
                                          ----------      ----------      ----------

Weighted-average number of
 Common Shares and dilutive
 potential Common Shares
 used in diluted net income
 per share                                 9,265,400       9,386,000       9,170,100
                                          ==========      ==========      ==========

Basic net income per share                $     0.93            0.93            0.70
Diluted net income per share              $     0.92            0.91            0.70
</TABLE>


                                       45

<PAGE>   46

                                   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.

<TABLE>
<S>                                               <C>
                                                  MAZEL STORES, INC.                       
                                                                                           
                                                  By:  /s/ Reuven D. Dessler               
                                                       ------------------------------------
                                                       Reuven D.  Dessler                  
                                                       Chairman and Chief Executive Officer
</TABLE>
                                                  
        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on April 30, 1998.

<TABLE>
<CAPTION>
                   SIGNATURES                                                  TITLE
                   ----------                                                  -----

<S>                                                           <C>
        /s/ Reuven D.  Dessler                                Chairman and Chief Executive Officer
----------------------------------------                      (Principal Executive Officer) and Director   
            Reuven D.  Dessler                                

        /s/ Susan Atkinson                                    Chief Financial Officer (Principal Financial
----------------------------------------                      and Accounting Officer) 
            Susan Atkinson                                    

        /s/ Charles Bilezikian                                Director
----------------------------------------
            Charles Bilezikian

        /s/ Brady Churches                                    Director
----------------------------------------
            Brady Churches

        /s/ Phillip Cohen                                     Director
----------------------------------------
            Phillip Cohen

        /s/ Robert Horne                                      Director
----------------------------------------
            Robert Horne

        /s/ Jacob Koval                                       Director
----------------------------------------
            Jacob Koval

        /s/ Ned L. Sherwood                                   Director
----------------------------------------
            Ned L. Sherwood

        /s/ Jerry Sommers                                     Director
----------------------------------------
            Jerry Sommers
</TABLE>


                                       46
<PAGE>   47

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                  DESCRIPTION OF DOCUMENT
------                                  -----------------------
<S>           <C>                                                                                            
   3.1        Amended and Restated Articles of Incorporation*                                             
   3.2        Amended and Restated Code of Regulations*                                                   
   4.1        Asset Based Loan and Security Agreement dated March 10, 1998 By and Among the Lending
              Institutions and Registrant and Subsidiaries                                                     
  10.1        Amended and Restated Employment Agreement of Reuven Dessler dated September 30, 1996*       
  10.2        Amended and Restated Employment Agreement of Jacob Koval dated September 30, 1996*          
  10.3        Employment Agreement of Brady Churches dated November 1, 1995*                              
  10.4        Amendment to Brady Churches Employment Agreement dated September 30, 1996*                  
  10.5        Employment Agreement of Jerry Sommers dated November 1, 1995*                               
  10.6        Amendment to Jerry Sommers Employment Agreement dated September 30, 1996*                   
  10.7        Amended and Restated Employment Agreement of Susan Atkinson dated September 30, 1996*       
  10.8        Amendment to Susan Atkinson Employment Agreement dated February 1, 1998
  10.10       1996 Stock Option Plan*                                                                     
  10.11       Restricted Stock Plan*                                                                      
  10.12       Solon, Ohio Facility Lease, dated as of January 1, 1989, including three amendments         
              thereto*                                                                                    
  10.13       Englewood, NJ Facility Lease*                                                               
  10.17       VCM, Ltd. Agreement dated July 14, 1997**                                                   
  21          List of Subsidiaries                                                                        
  23          Consent of Independent Auditors
  24.1        Powers of Attorney                                                                          
  27          Financial Data Schedule                                                                     
<FN>
  *     Incorporated by reference to exhibit with same exhibit number included in the               
        Registrant's Registration Statement on Form S-1 (File #333-11739) as amended.               
                                                                                                    
  **    Incorporated by reference to an exhibit included in the Quarterly Statement on Form 10-Q    
        for the quarter ended October 26, 1996.                                                     
</FN>
</TABLE>
  


                                       47