FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C, 20549

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1997.

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to

Commission File No. 33-8070-LA

                                MAXI GROUP, INC.
               (Exact name of Issuer as specified in its charter)

           Nevada                                                     87-0420448
State or other jurisdiction of                                  (I.R.S. Employer
incorporation or organization                                Identification No.)

         10 West 100 South, Ste 450  Salt Lake City, Utah 84101
         (Address of principal executive offices)   (Zip Code)

Issuer's telephone number, including area code: (801) 355-0252

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

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

Check  whether  the Issuer  (1) has filed all  reports  required  to be filed by
Section  13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or such
shorter period that the Issuer was required to file such  reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes X No

Check  if no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation  S-B is contained in this form,  and none will be  contained,  to the
best of the Issuer's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

The aggregate market value of the common voting stock held by
non-affiliates as of March 31, 1998:  Not Determinable.

Shares outstanding of the Issuer's common stock as of December 31,
1997: 25,925,000

The issuer had no  significant  revenue for its fiscal year ended  December  31,
1997.


                                                                               1

<PAGE>



                                     PART I

Item 1.  Description of Business.

         (a)  General Development of Business.

         Maxi Group,  Inc. (the "Issuer" or "Company"),  was incorporated  under
the laws of the State of Nevada on June 17,  1986.  The Issuer was  organized to
raise  capital and then seek out,  investigate  and acquire any suitable  asset,
property or other business  opportunity  without regard to any specific business
or industry.

         In connection with its corporate purposes, the Issuer effected a public
offering of its $.001 par value common stock which became  effective  January 5,
1988,  pursuant  to which it sold  2,155,000  shares of common  stock and raised
gross  proceeds of $107,750.  This  offering was closed on April 22, 1988.  This
offering  was  registered  under  the  Securities  Act  of  1933  pursuant  to a
Registration  Statement  on Form  S-18  which was filed  with the  Securities  &
Exchange  Commission  at  the  regional  office  in  Los  Angeles,   California.
Subsequent to the close of the  offering,  the Issuer has been in the process of
investigating  potential  acquisitions,  but has not made any  acquisition.  The
Company has not yet engaged in any significant business activities.

         The Company  formed a  wholly-owned  subsidiary,  Zoe Capital  Corp., a
public  blind pool  (blank  check)  company,  for the  purpose of  allowing  the
shareholders of the company to participate in another company which would seek a
business  acquisition  of its own. This was intended to diversify the number and
type of  acquisitions  which can  potentially  benefit the  shareholders  of the
Company.  In connection with its formation,  Zoe Capital Corp.  issued 3,655,000
shares of common stock to the Company in exchange  for $30,000.  The shares were
issued as units with  warrants to purchase  another  3,655,000  shares of common
stock at $1.00 per share. The Company distributed all 3,655,000 of the Zoe units
to its  shareholders on a 1 for 1 basis (one Zoe unit for every one Maxi share).
The shares were distributed at no cost to the individual Maxi Group shareholders
who were shareholders of record as of June 19, 1989, the Record Date.

         (b)  Financial Information about Industry Segments.

         The Issuer does not presently have separate industry segments.

         (c)  Narrative Description of the Business.

General Discussion

         The Company's  business plan is to seek one or more potential  business
ventures, anywhere in the United States, which, in the

                                                                               2

<PAGE>



opinion of management may warrant  involvement by the Company.  The Company will
only  acquire  businesses  which  can  generate  or  provide  audited  financial
statements.  This will limit the types of  businesses  which the  Company  could
acquire to those firms which have previously had audited  financial  statements.
The Company  recognizes  that because of its limited  financial,  managerial and
other resources, the number of suitable potential business ventures which may be
available to it will be extremely  limited.  The  Company's  principal  business
objective will be to seek long-term  growth potential in the business venture in
which it participates  rather than to seek immediate,  short-term  earnings.  In
seeking to attain the  Company's  business  objective,  it will not restrict its
search to any particular  business or industry,  but may participate in business
ventures  of  essentially  any kind or nature,  including,  but not  limited to,
finance, high technology,  manufacturing,  natural resources,  service, research
and  development,  communications,   insurance,  brokerage,  transportation  and
others.  Management's  discretion is unrestricted  and it may participate in any
business venture whatsoever,  which may meet the business  objectives  discussed
herein.  It is emphasized that the business  objectives  discussed are extremely
general  and  are  not  intended  to  be  restrictive  upon  the  discretion  of
management.

         The Company will seek one or more potential  business ventures from its
known  sources,  but will rely heavily on personal  contacts of its officers and
directors as well as indirect  associations  between them and other business and
professional  people.  It is  not  anticipated  that  the  Company  will  engage
professional firms specializing in business acquisitions or reorganizations.  In
some  instances,  the Company may publish  notices or  advertisements  seeking a
potential business venture in financial or trade publications.

         The Company will not restrict its search to any specific kind of firms,
but  may  acquire  a  venture  in its  preliminary  or  development  stage,  may
participate  in a business  which is already in  operation  or in a business  in
various stages of its corporate  existence.  It is impossible to predict at this
stage the status of any venture in which the Company  may  participate,  in that
the venture may need  additional  capital,  may merely desire to have its shares
publicly  traded,  or may seek other perceived  advantages which the Company may
offer. In some instances,  the business endeavors may involve the acquisition of
or merger with a corporation which does not need substantial additional cash but
which desire to establish a public trading market for its common stock.

         Firms  which  seek the  Company's  participation  in  their  operations
through a reorganization,  asset acquisition,  or some other means may desire to
do so to avoid  what  such  firms  may deem to be  adverse  factors  related  to
undertaking  a  public   offering.   Such  factors  include   substantial   time
requirements and legal costs,

                                                                               3

<PAGE>



along with other conditions or requirements imposed by various
state laws.

         To a large extent,  a decision to  participate  in a specific  business
endeavor  may be made upon  management's  analysis  of the  quality of the other
firm's management and personnel,  the anticipated  acceptability of new products
or marketing concepts,  the merit of technological  changes,  and numerous other
factors  which  are  difficult,  if  not  impossible,  to  analyze  through  the
application of any objective criteria. In many instances, it is anticipated that
the results of a specific firm to date may not  necessarily be indicative of the
potential  for the future  because of the  requirement  to  substantially  shift
marketing approaches,  expand significantly,  change product emphasis, change or
substantially  augment  management,  and other factors.  Because the Company may
participate in business endeavors with newly organized firms or with firms which
are  entering  a new phase of their  growth,  it should be  emphasized  that the
Company will incur further risks since  management  in many  instances  will not
have proved its abilities or  effectiveness,  the eventual market of such firm's
product or services will likely not be established, and the profitability of the
firm will be unproved and cannot be predicted.

         As part of the Company's  investigation,  officers and  directors  will
meet  personally  with  management and key personnel of the firm  sponsoring the
business  opportunity,  may  visit  and  inspect  material  facilities,   obtain
independent  analysis or verification  of certain  information  provided,  check
references  of  management  and key  personnel,  and  conduct  other  reasonable
measures,  to the  extent  of the  Company's  limited  financial  resources  and
management and technical expertise.

         Generally,  the  Company  will  analyze  all  available  factors in the
circumstances  and make a  determination  based upon a  composite  of  available
facts, without reliance upon any single factor as controlling.

         It is  anticipated  that  business  endeavors  will be available to the
Company from various sources, including its officers and directors, professional
advisors,  securities  broker-dealers,   venture  capitalists,  members  of  the
financial community, and other who may present unsolicited proposals. In certain
circumstances,  the  Company  may agree to pay a  finder's  fee or to  otherwise
compensate  investment  banking or other  services  provided  by persons who are
unaffiliated  with the Company but who submit a potential  business  endeavor in
which the Company  participates.  No such finder's or other fees will be paid to
any person who is an officer,  director,  owner of record or to the knowledge of
the  Company  owner  beneficially,  of 10% or more of the  Company's  issued and
outstanding  stock,   without  the  approval  of  a  majority  of  disinterested
shareholders.


                                                                               4

<PAGE>



         The   Company  may  acquire  a  business   venture  by   conducting   a
reorganization  involving the issuance of securities in the Company.  Due to the
requirements  of certain  provisions  of the  Internal  Revenue Code of 1954 (as
amended)  in  order  to  obtain  certain  beneficial  tax  consequences  in such
reorganizations, the number of shares held by all of the present shareholders of
the Company  prior to such  transaction  or  reorganization,  including  persons
purchasing  shares in this offering,  may be  substantially  less than the total
outstanding shares held by such shareholders in any reorganized entity. As noted
above, such a transaction may be based upon the sole determination of management
without any vote or approval by the  shareholders of the Company.  The result of
any such reorganization  could be additional dilution to the shareholders of the
Company prior to such  reorganization.  If the Company were to issue substantial
additional  securities in any such reorganization,  or otherwise,  such issuance
may have an  adverse  effect on any  trading  market  which may  develop  in the
Company's securities in the future.

         It is anticipated that the investigation of specific business endeavors
and the negotiation,  drafting and execution of relevant agreements,  disclosure
documents and other  instruments  will require  substantial  management time and
attention and  substantial  costs for  accountants,  attorneys and others.  If a
decision is made not to participate in a specific business  endeavor,  the costs
theretofore  incurred in the  related  investigation  would not be  recoverable.
Furthermore, even if an agreement is reached for the participation in a specific
business  venture,  the failure to consummate that transaction may result in the
loss to the Company of the related costs incurred.

         The Company  will not  participate  in a business  endeavor  wherein it
invests the proceeds of this offering in an affiliate of the Company.

         The Issuer has not yet engaged in any business activities.  The Company
has no formal  business  plan or any  particular  area of  business  in which it
intends to engage.  Management  of the Company will attempt to acquire on behalf
of the Company assets,  properties  and/or ongoing  businesses which it believes
are potential for successful development.  This may include businesses or assets
related to manufacturing,  retail and wholesale sales,  industrial  development,
and  natural  resource  development  or any other  field of business or endeavor
which  Management of the Company may  encounter.  Management of the Company have
not  adopted any formal  business  plan or  conducted  any market  studies  with
respect to any business or industry.  No  representation is made that Management
of the Company have any  particular  expertise in  connection  with the proposed
activities  of the  Company  or  any  particular  industry  or  business  field.
Management of the Company may rely on independent  experts or consultants in any
business  field in  connection  with  their  examination  and  investigation  of
potential acquisitions.

                                                                               5

<PAGE>




         Management of the Company presently have no specific assets, properties
or business operation which it has in mind for potential acquisition nor does it
have any  particular  areas of  business or industry in which it intends to look
for such business acquisitions.

Item 2.  Properties.

         The Issuer has no significant  properties or assets. The Company has no
office  facilities  or employees.  The Company uses the business  address of its
Secretary, who also provides accounting services, clerical and secretarial help,
for which the Company accrues $100 per month.

Item 3.  Legal Proceedings.

         There are not currently  any material  pending  legal  proceedings,  to
which the Issuer is a party or of which any of its  property  is subject  and no
such  proceedings are known to the Issuer to be threatened or contemplated by or
against it.

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

         No matter was  submitted  to a vote of the  security  holders,  through
solicitation  of proxies or otherwise  during the 4th quarter of the fiscal year
covered by this report.

                                     PART II

Item 5.           Market for Common Equity and Related Stockholder Matters.

         (a)  Market Information.

         The Issuer's common stock has not been publicly traded.

         (b)  Holders.

     The approximate number of holders of the Issuer's common stock as of May 6,
1997, is 15.

     (c)  Dividends.

     The Issuer has not paid any cash  dividends to date and does not anticipate
or contemplate  paying  dividends in the foreseeable  future.  It is the present
intention of management to utilize all available  funds for the  development  of
the Company's business.

     The Company is authorized by its certificate of  incorporation  to issue up
to 100,000,000 shares of common stock, $.001 par value.

     All shares of stock, when issued, will be fully-paid and
nonassessable.  All shares are equal to each other with respect to

                                                                               6

<PAGE>



voting,  liquidation and dividend rights.  Holders of shares of common stock are
entitled  to one vote  for each  share  they own at any  stockholders'  meeting.
Holders of shares of common stock are entitled to receive such  dividends as may
be declared by the Board of Directors out of funds legally  available  therefor,
and upon  liquidation are entitled to participate  pro-rata in a distribution of
assets  available  for  such  a  distribution  to  stockholders.  There  are  no
conversion,  pre-emptive or other subscription rights or privileges with respect
to any shares.  Reference  is made to the  Company's  Articles of  Incorporation
together  with  the  Amendments  thereto  and  its  By-Laws  as  well  as to the
applicable  statutes of the State of Nevada for a more complete  description  of
the rights and  liabilities of holders of common stock.  The common stock of the
Company does not have  cumulative  voting rights which means that the holders of
more than 50% of the shares  voting for the election of directors  may elect all
of the  directors  if they  choose to do so. In such  event,  the holders of the
remaining  shares  aggregating  less  than 50%  will  not be able to  elect  any
directors.

Item 6 . Management's Discussion and Analysis or Plan of Operation.

         The Company was formed to  effectuate a public stock  offering and then
to look for potential  acquisitions.  It has not yet made any acquisitions.  The
Company has no significant assets.

         The  Company's  plan  of  operations  is to  actively  seek a  business
combination  with an ongoing private business  enterprise,  although no specific
combination is presently contemplated.

Item 7.  Financial Statements.

         See attached financial statements.

Item 8.           Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure.

         During the two most recent fiscal years,  there has not been any change
in the principal  independent  accountant for the Issuer,  and there has been no
disagreement  on any matter of accounting  principles  or  practices,  financial
statement disclosure, or auditing scope or procedure.

                                    PART III

Item 9.           Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the Exchange
                  Act.

         (a)  Identification of Directors.


                                                                               7

<PAGE>



         The  current  directors  of the  Issuer,  who will serve until the next
annual  meeting,  or  until  their  successors  are  elected  or  appointed  and
qualified, are set forth below:

                              YEAR FIRST ELECTED
    NAME          AGE             AS DIRECTOR                    POSITION

Robert W. Mann     49           Since Inception               President and
                                                                 Director

Gary B. Peterson   50           Since Inception                 Secretary-
                                                              Treasurer and
                                                                 Director


         (b)  Identification of Executive Officers.

         Same as above.

         (c)  Significant Employees.

         The Issuer has no  significant  employees  other than its  officers and
directors.

         (d)  Family Relationships.

         None

         (e)  Business Experience.

     (1) Background

     Robert W. Mann,  graduated from Harvard University in 1970. He received his
MBA in finance at Northeastern University (Boston, Mass.) in 1973, his J.D. from
Southwestern  University  (Los  Angeles) in 1977 and an LLM in taxation from New
York  University in 1980.  Since 1980 he has engaged in the private  practice of
law in Los Angeles  specializing  in  corporate  taxation  and  finance.  At the
present  time Mr.  Mann's  principal  efforts are  devoted to  managing  his own
financial affairs.

     Gary B.  Peterson,  is  currently  associated  with the CPA firm of  Smith,
Peterson & Associates,  LLC and was  previously the chief  financial  officer of
Digitran Systems, Inc., a public company. During 1995 and 1996, he was the chief
executive  officer of Data Security  Corporation,  a public  company.  From 1982
through 1995, Mr. Peterson was the  shareholder/officer  in the Utah C.P.A. firm
of Peterson,  Siler & Stevenson.  Mr. Peterson is qualified to practice as a CPA
in California  and Utah and is a member of the Utah Society of Certified  Public
Accountants  and the  American  Institute  of CPA's.  Prior to starting  his own
practice in 1982 he worked as a tax senior and manager  with Price  Waterhouse &
Company  from 1972 to 1976,  Touche Ross & Company from 1976 to 1977 and Charles
Huber &

                                                                               8

<PAGE>



Associates from 1977 to 1978.  Mr. Peterson worked as a controller
for Newbery Engineering and Construction Company from 1978 to 1982,
where he was responsible for all of the company's financial
matters.  Mr. Peterson graduated with honors from Brigham Young
University in Provo, Utah in 1972.   Mr. Peterson is the President
and a Director of Capital Growth, Inc., a company which effectuated
a Regulation A blind pool/blank check public offering.  Mr.
Peterson's primary obligation will be to take potential
acquisitions first to Capital Growth.  His principal role with Maxi
Group is to handle its financial, recordkeeping and bookkeeping
affairs and to review potential acquisitions from a financial point
of view.

     (2) Directorships

     Except as described herein, none of the Issuer's directors,  nor any person
nominated or chosen to become a director  holds any other  directorships  in any
other company with class of securities  registered pursuant to Section 12 of the
Exchange Act or subject to the  requirements of Section 15(d) of such Act or any
company  registered as an investment company under the Investment Company Act of
1940.

     (f)  Involvement in Certain Legal Proceedings.

     None of the officers or directors  have been involved in any material legal
proceedings  which occurred  within the last five years of any type as described
in Section 401(f) of Regulation S-K.

Item 10.  Executive Compensation.

         (a)  Cash Compensation.
     Other than the $100 per month being accrued for the Company's president for
use of office  facilities and accounting  services,  during the last fiscal year
none of the  Issuer's  officers or directors  individually  received any salary,
wage or other  compensation.  During  1997 a total of $1,200 was accrued for the
Company's president pursuant to this arrangement. During the current fiscal year
the Issuer will  continue this  arrangement  but has no present plans to pay any
other compensation to officers or directors.

         (b)  Compensation Pursuant to Plans.

     There are  presently  no  ongoing  pension or other  plans or  arrangements
pursuant  to which  remuneration  is proposed to be paid in the future to any of
the officers and directors of the Issuer.

     (c)  Other Compensation.

     None.


                                                                               9

<PAGE>



     (d)  Compensation to Directors.

         None.

Item 11.  Security Ownership of Certain Beneficial Owners &
          Management.

     The  following  table  sets forth the  beneficial  stock  ownership  of all
persons known by the Issuer to own more than 5% of the outstanding common stock,
and the officers and directors, both individually and as a group.

Name and Address of     Position with    Amount and Nature of     % of
Beneficial Owner           Company        Beneficial Ownership   Class
---------------------   --------------   ---------------------   ------
Robert W. Mann          President and        23,976,000 (1)        93%
737 Westholme Ave         Director
Los Angeles, CA 90024

Gary B. Peterson         Secretary-           18,750               --
2726 E. 2500 N.        Treasurer and
Layton, UT 84041         Director

All officers &
directors as a 
group                   2 persons            23,994,750            93%


(1) Includes all shares beneficially owned, regardless of the form of ownership.

Changes in Control.

     There are no arrangements  including pledges by any person of securities of
the Company,  the operation of which may at a subsequent date result in a change
in control of the Company.

Item 12. Certain Relationships & Related Transactions.

         During  1997,  the Company  issued  2,000,000  shares to the  Company's
President for $2,000.  The Company uses the office of an officer and director of
the Company, who also provides accounting,  clerical and secretarial services as
needed,  for $100 per month. The terms of these transactions were not determined
on an arms length basis.

     No officer, director,  promoter, or affiliate of the Issuer has or proposes
to  have  any  direct  or  indirect  material  interest  by  security  holdings,
contracts,  options,  or  otherwise  in the Issuer or any asset  proposed  to be
acquired by the Issuer other than as described herein.


                                                                              10

<PAGE>



                                     PART IV

Item 13.  Exhibits and Reports on Form 8-K.

         (a) The following documents are filed as a part of this report:

         1. Audited Financial Statements are included as part of this report.

         2.  Financial Statement Schedules.

         None.

         3.  Exhibits.

         None

         Reports on Form 8-K.

         The Company filed no reports on Form 8-K during the last quarter of the
year ended December 31, 1997.




                                                                              11

<PAGE>




                                   SIGNATURES

         Pursuant to the  requirements of Section 12 of the Securities  Exchange
Act of 1934, the Issuer has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                MAXI GROUP, INC.



Date:     May  22 , 1998                              /s/ Robert W. Mann
      -------------------                            -------------------
                                                     Robert W. Mann, President



Date:     May  22 , 1998                              /s/ Gary B. Peterson
      -------------------                            ---------------------
                                                    Gary B. Peterson, Secretary-
                                                    Treasurer


         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
Issuer and in the capacities and on the dates indicated.



Date:      May 22 , 1998                              /s/ Robert W. Mann
      -------------------                            -------------------
                                                     Robert W. Mann, Director




Date:      May 22 , 1998                              /s/ Gary B. Peterson
      -------------------                            ---------------------
                                                     Gary B. Peterson, Director




<PAGE>

                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                                           Index
--------------------------------------------------------------------------------









                                                                            Page


Independent auditors' report                                                 F-1


Balance sheet, December 31, 1997 and 1996                                    F-2


Statement of operations for the years
ended December 31, 1997 and 1996 and
cumulative amounts since inception                                           F-3


Statement of stockholders' deficit
from inception                                                               F-4


Statement of cash flows for the years
ended December 31, 1997 and 1996 and
cumulative amounts since inception                                           F-6


Notes to financial statements                                                F-7


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



<PAGE>




                                                    INDEPENDENT AUDITORS' REPORT





To the Board of Directors of
Maxi Group, Inc.


We have  audited  the  accompanying  balance  sheet  of  Maxi  Group,  Inc.,  (a
development  stage  company) as of December  31, 1997 and 1996,  and the related
statements  of  operations,  stockholders'  deficit and cash flows for the years
then  ended  and  the  cumulative  amounts  since  inception.   These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our 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 financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Maxi  Group,  Inc.,  (a
development  stage  company) as of December 31, 1997 and 1996 and the results of
its  operations  and its cash flows for the years then ended and the  cumulative
amounts  since  inception  in  conformity  with  generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the  Company  has  suffered  recurring  losses and has a
stockholders'  deficit.  These  conditions  raise  substantial  doubt  about its
ability to continue  as a going  concern.  Management's  plans  regarding  these
matters also are  described in Note 2. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


TANNER+Co.

Salt Lake City, Utah
March 13, 1998

                                                                             F-1

<PAGE>

<TABLE>

<S>                                                                    <C>             <C>                 
                                                                                        MAXI GROUP, INC.
                                                                           (A Development Stage Company)
                                                                                           Balance Sheet

                                                                                            December 31,
--------------------------------------------------------------------------------------------------------








              Assets                                                         1997              1996
              ------                                                                               
                                                                       ---------------------------------

Current assets -
     cash                                                              $         1,810 $           2,475
                                                                       ---------------------------------

--------------------------------------------------------------------------------------------------------   
              Liabilities and Stockholders' Deficit

Current liabilities:
     Accounts payable                                                  $         4,970 $           4,220
     Payable to related party                                                    6,620             5,420
                                                                       ---------------------------------

                  Total current liabilities                                     11,590             9,640
                                                                       ---------------------------------

Stockholders' deficit:
     Common stock, $.001 par value;  100,000,000  shares 
       authorized;  25,925,000 and 23,925,000 shares issued 
       and outstanding as of December 31, 1997 and 1996, respectively           25,925            23,925
     Additional paid-in capital                                                 47,042            47,042
     Accumulated deficit                                                       (82,747)          (78,132)
                                                                       ---------------------------------

                  Total stockholders' deficit                                   (9,780)           (7,165)
                                                                       ---------------------------------

                  Total liabilities and stockholders' deficit          $         1,810 $           2,475
                                                                       ---------------------------------





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


See accompanying notes to financial statements.
                                                                                                       F-2
</TABLE>

<PAGE>

<TABLE>
<S>                                                  <C>                <C>              <C>             

                                                                                          MAXI GROUP, INC.
                                                                             (A Development Stage Company)
                                                                                   Statement of Operations

                                                           Years Ended December 31, and Cumulative Amounts
----------------------------------------------------------------------------------------------------------






                                                                                            Cumulative
                                                                                             Amounts
                                                                                              Since
                                                            1997             1996           Inception
                                                     -----------------------------------------------------

Revenue - interest income                            $               98 $             90 $           7,167
                                                     -----------------------------------------------------

Expenses:
     Professional fees                                            2,800            1,620            55,904
     Administrative expenses                                      1,913            2,238            15,583
     Travel expenses                                                  -                -            17,517
     Amortization expense                                             -                -               160
                                                     -----------------------------------------------------

              Total expenses                                      4,713            3,858            89,164
                                                     -----------------------------------------------------

Loss before income taxes                                         (4,615)          (3,768)          (81,997)

Income tax expense                                                    -                -                 -
                                                     -----------------------------------------------------

              Net loss                               $           (4,615)          (3,768)          (81,997)
                                                     -----------------------------------------------------

              Loss per share                         $             (.00)            (.00)             (.01)
                                                     -----------------------------------------------------





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


See accompanying notes to financial statements.
                                                                                                       F-3
</TABLE>

<PAGE>

<TABLE>
<S>                        <C>              <C>            <C>             <C>             <C>            

                                                                                          MAXI GROUP, INC.
                                                                             (A Development Stage Company)
                                                                        Statement of Stockholders' Deficit

                                                                    From Inception (June 17, 1986) Through
                                                                                         December 31, 1997
----------------------------------------------------------------------------------------------------------




                                                             Additional        Stock
                                    Common Stock               Paid-In     Subscriptions    Accumulated
                           -------------------------------
                                Shares         Amount         Capital        Receivable       Deficit
                           -------------------------------------------------------------------------------

Balance, June 17, 1986                    - $            - $             - $             - $             -

Shares issued to initial
stockholders for cash,
June 1986, at $.005               3,000,000          3,000          12,000               -               -

Net loss for the period 
ended December 31, 1986                   -              -               -               -            (129)
                           -------------------------------------------------------------------------------

Balance, December 31, 1986        3,000,000          3,000          12,000               -            (129)

Contribution of initial
stockholders' shares for
cancellation                     (1,500,000)        (1,500)          1,500               -               -

Net loss for the year 
ended December 31, 1987                   -              -               -               -            (289)
                           -------------------------------------------------------------------------------

Balance, December 31, 1987        1,500,000          1,500          13,500               -            (418)

Shares issued pursuant to
public offering for cash, 
April , at $.05 per share         2,155,000          2,155          63,325               -               -

Net loss for the year 
ended December 31, 1988                   -              -               -               -         (19,221)
                           -------------------------------------------------------------------------------

Balance, December 31, 1988        3,655,000          3,655          76,825               -         (19,639)

Distribution of stock                     -              -         (30,000)              -               -

Net loss for the year 
ended December 31, 1989                   -              -               -               -         (16,066)
                           -------------------------------------------------------------------------------

Balance, December 31, 1989        3,655,000          3,655          46,825               -         (35,705)

Net loss for the year 
ended December 31, 1990                   -              -               -               -          (8,830)
                           -------------------------------------------------------------------------------

Balance, December 31, 1990        3,655,000          3,655          46,825               -         (44,535)

Shares issued in private
placement                         2,000,000          2,000           8,000          (9,000)              -



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


See accompanying notes to financial statements.
                                                                                                       F-4
</TABLE>

<PAGE>
<TABLE>
<S>                        <C>              <C>            <C>             <C>             <C>            


                                                                                          MAXI GROUP, INC.
                                                                             (A Development Stage Company)
                                                                        Statement of Stockholders' Deficit
                                                                                                 Continued

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


                                                             Additional        Stock
                                    Common Stock               Paid-In     Subscriptions    Accumulated
                           -------------------------------
                                Shares         Amount         Capital        Receivable       Deficit
                           -------------------------------------------------------------------------------

Net loss for the year 
ended December 31, 1991                   -              -               -               -          (7,238)
                           -------------------------------------------------------------------------------

Balance, December 31, 1991        5,655,000          5,655          54,825          (9,000)        (51,773)

Payments received on 
stock subscription 
receivable                                -              -               -           1,567               -

Net loss for the year 
ended December 31, 1992                   -              -               -               -          (5,256)
                           -------------------------------------------------------------------------------

Balance, December 31, 1992        5,655,000          5,655          54,825          (7,433)        (57,029)

Cancellation of 2,000,000
shares, June 1993                (2,000,000)        (2,000)         (5,433)              -               -

Shares issued in private
placement, June 1993             18,270,000         18,270          (2,350)          7,433               -

Net loss for the year 
ended December 31, 1993                   -              -               -               -          (5,506)
                           -------------------------------------------------------------------------------

Balance, December 31, 1993       21,925,000         21,925          47,042               -         (62,535)

Net loss for the year 
ended December 31, 1994                   -              -               -               -          (7,358)
                           -------------------------------------------------------------------------------

Balance, December 31, 1994       21,925,000         21,925          47,042               -         (69,893)

Net loss for the year 
ended December 31, 1995                   -              -               -               -          (4,471)
                           -------------------------------------------------------------------------------

Balance, December 31, 1995       21,925,000         21,925          47,042               -         (74,364)

Shares issued in private
placement, August 1996            2,000,000          2,000               -               -               -

Net loss for the year
ended December 31, 1996                   -              -               -               -          (3,768)
                           -------------------------------------------------------------------------------

Balance, December 31, 1996       23,925,000         23,925          47,042               -         (78,132)

Shares issued in private
placement, February 1997          2,000,000          2,000               -               -               -

Net loss for the year 
ended December 31, 1997                   -              -               -               -          (4,615)
                           -------------------------------------------------------------------------------

                                 25,925,000 $       25,925 $        47,042 $             - $       (82,747)
                           -------------------------------------------------------------------------------
                                          
                                                                                                       F-5
</TABLE>

<PAGE>
<TABLE>
<S>                                                  <C>                 <C>                <C>            


                                                                                          MAXI GROUP, INC.
                                                                             (A Development Stage Company)
                                                                                   Statement of Cash Flows

                                                           Years Ended December 31, and Cumulative Amounts
----------------------------------------------------------------------------------------------------------




                                                                                               Cumulative
                                                                                                 Amounts
                                                                                                  Since
                                                            1997             1996               Inception
                                                     -----------------------------------------------------
Cash flows from operating activities:
     Net loss                                        $           (4,615) $          (3,768) $      (82,747)
     Adjustments to reconcile net loss to
       net cash used in operating activities:
         Amortization expense                                         -                  -             160
         Increase in accounts payable                               750                  -           4,970
                                                     -----------------------------------------------------

                  Net cash used in
                  operating activities                           (3,865)            (3,768)        (77,617)
                                                     -----------------------------------------------------

Cash flows from investing activities:
     Organization costs                                               -                  -            (160)
     Investment                                                       -                  -         (30,000)
     Increase in related party payable                            1,200              1,200           6,620
                                                     -----------------------------------------------------

                  Net cash provided by (used in)
                  investing activities                            1,200              1,200         (23,540)
                                                     -----------------------------------------------------

Cash flows from financing activities:
     Proceeds from initial issuance of
       common stock                                                   -                  -          15,000
     Net proceeds from issuance of
       common stock                                               2,000              2,000          96,377
     Public offering costs                                            -                  -          (8,410)
                                                     -----------------------------------------------------

                  Net cash provided by
                  financing activities                            2,000              2,000         102,967
                                                     -----------------------------------------------------

Net (decrease) increase in cash                                    (665)              (568)          1,810

Cash, beginning of period                                         2,475              3,043               -
                                                     -----------------------------------------------------

Cash, end of period                                  $            1,810  $           2,475  $        1,810
                                                     -----------------------------------------------------




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


See accompanying notes to financial statements.
                                                                                                       F-6
</TABLE>

<PAGE>


                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                   Notes to Financial Statements

                                                      December 31, 1997 and 1996
--------------------------------------------------------------------------------



1.   Summary of Significant Accounting Policies

Organization
The  Company  was  organized  under  the laws of the State of Nevada on June 17,
1986. The Company has not commenced  planned principal  operations.  The Company
proposes  to seek  business  ventures  which  will allow for  long-term  growth.
Further,  the Company is  considered a  development  stage company as defined in
SFAS No. 7 and has not,  thus far,  engaged in business  activities of any kind.
The Company has, at the present  time,  not paid any dividends and any dividends
that may be paid in the future will depend upon the  financial  requirements  of
the Company and other relevant factors.


Cash and Cash Equivalents
Cash  equivalents are generally  comprised of certain highly liquid  investments
with maturities of less than three months.


Loss Per Share
The  computation  of loss per  share of  common  stock is based on the  weighted
average number of shares outstanding.


Use of Estimates in  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  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.


2.   Going Concern
The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going  concern.  Because of significant  losses,  the
excess of current liabilities over current assets, and a stockholders'  deficit,
the  Company's  ability to continue as a going concern is dependent on attaining
future profitable operations, and obtaining additional financial and/or capital.
As shown in the  statement  of  operations,  the Company  reported a net loss of
$4,615 for the year ended  December 31, 1997, and as of December 31, 1997, has a
deficit in equity of $9,780.


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

                                                                             F-7

<PAGE>


                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------



2.   Going Concern
     Continued
Management  of the Company is currently  developing a plan to attempt to resolve
these  uncertainties.  The financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.


3.   Related Party Transactions
Commencing  January  1,  1996,  the  Company  agreed  to pay $100 per month to a
shareholder,  officer and  director of the  Company  for  accounting  and office
expenses. The Company incurred expenses under the agreement of $1,200 and $1,200
for the years  ending  December 31, 1997 and 1996,  respectively.  At January 1,
1996, the Company owed $8,440 to an accounting  firm whose managing  partner was
an officer  and  director  of the  Company.  On January  1,  1996,  the  officer
terminated  his  employment  with  the  accounting  firm  and  at  the  time  of
termination  agreed to accept one-half of the outstanding  obligation,  with the
balance to be paid to the accounting firm. The Company owed $6,620 and $5,420 to
the officer as of December 31, 1997 and 1996, respectively.

During the year ended  December  31,  1993,  the Company  issued and  additional
18,270,000  shares of  restricted  common  stock to the  Company's  president in
exchange for  $18,270.  During the year ending  December 31, 1997 and 1996,  the
Company  issued an additional  2,000,000  shares per year of  restricted  common
stock to the Company's president for $2,000 each year.


4.   Common Stock
The initial issuance of the Company's common stock occurred in June 1986. During
April 1988, the Company completed the sale of 2,155,000 shares of its previously
authorized  but unissued  common stock.  This offering was  registered  with the
Securities  and  Exchange  Commission  on Form  S-18,  in  accordance  with  the
Securities  Act of 1933.  The  stock was sold at an  offering  price of $.05 per
share.  Proceeds net of offering  costs  amounted to $65,480.  The proceeds were
deposited in an interest bearing account.


In November 1991, the Company issued  2,000,000 shares at $.005 per share to the
Company's  president.  The Company received $1,000 in cash and $9,000 receivable
due on demand for such issuance.


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


                                                                             F-8

<PAGE>


                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------



4.   Common Stock Continued
During the year ended December 31, 1993, the Company  received back and canceled
2,000,000 shares of common stock and the related subscription  agreement with an
officer of the Company.  The amounts previously paid for the stock ($2,567) were
applied to the purchase of 18,270,000  shares of restricted  common stock during
June 1993 by the same officer.


In 1997 and 1996, the Company issued  2,000,000 shares at $.001 per share to the
Company's president. The Company received $2,000 in cash for each such issuance.


5.   Supplemental Cash Flow Disclosure
The Company has not paid any amounts  for  interest or income  taxes  during the
years ended December 31, 1997 and 1996, and since inception.


6.   Income Taxes
The difference  between income taxes at statutory rates and the amount presented
in the financial statements is a result of the following:


                                     Year Ended
                                    December 31,             Cumulative
                           -------------------------------
                                 1997           1996          Amounts
                           -----------------------------------------------

Income tax benefit at
  statutory rate           $      1,000  $         1,000  $         28,000
Change in valuation
  allowance                      (1,000)          (1,000)          (28,000)
                           -----------------------------------------------

                           $          -  $             -  $              -
                           -----------------------------------------------




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


                                                                             F-9

<PAGE>


                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------



6.   Income Taxes Continued
Deferred tax assets are as follows:


                                                    December 31,
                                        -----------------------------------
                                               1997             1996
                                        -----------------------------------

Operating loss carryforward             $        28,000  $          27,000
Valuation allowance                             (28,000)           (27,000)
                                        -----------------------------------

                                        $             -  $               -
                                        -----------------------------------



The Company has net operating loss carryforwards of approximately $82,000, which
begin to expire in the year 2001. The amount of net operating loss  carryforward
that can be used in any one year  will be  limited  by  significant  changes  in
ownership of the Company and by the  applicable  tax laws which are in effect at
the time such carryforwards can be utilized.


7.   Earnings Per Share
In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128 (SFAS 128)  "Earnings Per Share," which
requires  companies  to  present  basic  earnings  per share  (EPS) and  diluted
earnings per share,  instead of the primary and fully  diluted EPS as previously
required. The new standard also requires additional  informational  disclosures,
and makes certain  modifications  to the previously  applicable EPS calculations
defined in Accounting  Principles  Board No. 15. The new standard is required to
be adopted by all public  companies for reporting  periods ending after December
15, 1997, and requires restatement of EPS for all prior periods reported. During
the year ended December 31, 1997, the Company adopted this standard.


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


                                                                            F-10

<PAGE>


                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------




7.   Earnings Per Share Continued
Earnings per share information in accordance with SFAS 128 is as follows:


                                          Year Ended December 31, 1997
                                 -----------------------------------------------
                                       Loss           Shares        Per-Share
                                   (Numerator)     (Denominator)      Amount
                                 -----------------------------------------------

Net loss                         $         (4,615)
Less preferred stock
  dividends                                     -
                                 ----------------
Basic EPS
Loss available to
  common stockholders                      (4,615)      25,758,000 $       (.00)
                                                                   -------------
Effect of Dilutive Securities
Stock options                                   -                -
                                 ---------------------------------
Diluted EPS
Loss available to common
  stockholders plus assumed
  conversions                    $         (4,615)      25,758,000 $       (.00)
                                 -----------------------------------------------




                                           Year Ended December 31, 1996
                                 -----------------------------------------------
                                       Loss           Shares        Per-Share
                                   (Numerator)     (Denominator)      Amount
                                 -----------------------------------------------

Net loss                         $         (3,768)
Less preferred stock
  dividends                                     -
                                 ----------------
Basic EPS
Loss available to
  common stockholders                      (3,768)      21,925,000 $       (.00)
                                                                   -------------
Effect of Dilutive Securities
Stock options                                   -                -
                                 ---------------------------------
Diluted EPS
Loss available to common
  stockholders plus assumed
  conversions                    $         (3,768)      21,925,000 $       (.00)
                                 -----------------------------------------------



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


                                                                            F-11
<PAGE>


                                                                MAXI GROUP, INC.
                                                   (A Development Stage Company)
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------


7.   Earnings Per Share Continued

                                                Cumulative Amounts
                                 -----------------------------------------------
                                       Loss           Shares        Per-Share
                                   (Numerator)     (Denominator)      Amount
                                 -----------------------------------------------

Net loss                         $        (82,747)
Less preferred stock
  dividends                                     -
                                 ----------------
Basic EPS
Loss available to
  common stockholders                     (82,747)      11,258,000 $       (.01)
                                                                   -------------
Effect of Dilutive Securities
Stock options                                   -                -
                                 ---------------------------------
Diluted EPS
Loss available to common
  stockholders plus assumed
  conversions                    $        (82,747)      11,258,000 $       (.01)
                                 -----------------------------------------------


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