SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

          For  fiscal  year  ended  December  1,  2002

(   )     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.  1-7013

                             GRISTEDE'S FOODS, INC.
             (Exact name of registrant as specified in its charter)

                   DELAWARE                                  13-1829183
        (State or Other Jurisdiction of                   (I.R.S. Employer
         incorporation or organization)                  Identification No.)

      823 ELEVENTH AVENUE, NEW YORK, NEW YORK                10019-3535
      (Address of Principal Executive Offices)               (Zip Code)

                                 (212) 956-5803
              (Registrant's Telephone Number, Including Area Code)

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

     Title of each class               Name of each exchange on which registered
COMMON STOCK, $0.02 PAR VALUE                   AMERICAN STOCK EXCHANGE

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

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by  Section  13,  or 15(d) of the Securities Exchange Act of 1934
during  the  preceding 12 months (or for such shorter period that the registrant
was  required  to  file  such  reports), and (2) has been subject to such filing
requirements  for  the  past  90  days.
                                    Yes  X   No
                                        ---

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  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. [ ]

As  of  February  25,  2003, 19,636,574 shares of the registrant's common stock,
$0.02  par  value,  were  outstanding.

The  aggregate  market  value  of  the common stock held by nonaffiliates of the
registrant  (i.e.,  excluding  shares held by executive officers, directors, and
control  persons  as defined in Rule 405) on May 31, 2002 (the last business day
of  the  second fiscal quarter)  was $1,678,553 computed at the closing price on
that  date.


<PAGE>
DOCUMENTS  INCORPORATED  BY  REFERENCE:  NONE

     This  annual  report  on  Form  10-K  contains  both  historical  and
"forward-looking  statements"  within  the  meaning  of  the  Private Securities
Litigation  Reform  Act  of  1995.  Words  such  as  "anticipates",  "believes",
"expects", "intends", "future", and similar expressions identify forward-looking
statements.  Any  such  "forward-looking"  statements in this report reflect the
Company's current views with respect to future events and financial performance,
and  are  subject to a variety of factors that could cause the actual results or
performance to differ materially from historical results or from the anticipated
results  or performance expressed or implied by such forward-looking statements.
Because  of  such  factors, there can be no assurance that the actual results or
developments  anticipated  by  the  Company  will  be  realized  or,  even  if
substantially  realized, that they will have the anticipated results.  The risks
and  uncertainties  that  may affect the Company's business include, but are not
limited  to:  economic  conditions,  governmental  regulations,  technological
advances,  pricing  and  competition,  acceptance  by  the  marketplace  of  new
products,  retention of key personnel, the sufficiency of financial resources to
sustain and expand the Company's operations, and other factors described in this
report  and  in  prior  filings  with  the  Securities  and Exchange Commission.
Readers  should  not  place  undue  reliance on such forward-looking statements,
which  speak  only as of the date hereof, and should be aware that except as may
be  otherwise  legally  required  of  the  Company,  the  Company  undertakes no
obligation  to  publicly  revise  any such forward-looking statements to reflect
events  or  circumstances  that  may  arise  after  the  date  hereof.

ITEM  1.     BUSINESS.

GENERAL

     The Company is a Delaware corporation whose principal executive offices are
located  at  823  Eleventh  Avenue,  New  York,  New York 10019-3535. Unless the
context  otherwise  requires, the terms "Company" or "Registrant" as used herein
refer  to Gristede's Foods, Inc. (which is a holding corporation) and its wholly
owned  subsidiaries.

     The  Company  operates  49  supermarkets (the "Supermarkets"), and two free
standing  pharmacies  offering  health  and beauty aids and general merchandise.
(Two  supermarkets  opened  in December 2002, subsequent to year end). Forty-one
Supermarkets  and  the  two pharmacies are located in Manhattan, New York, three
Supermarkets  are  located  in  Westchester County, New York, one Supermarket is
located in Brooklyn, New York, one Supermarket is located in the Bronx, New York
and  one  Supermarket  is  located  in  Long  Island,  New  York.  All  of  the
supermarkets / pharmacies are operated under the "Gristede's" name.  The Company
leases  all  of its Supermarket locations and its two pharmacies.  During fiscal
1999  the  Company  embarked  on  a  plan to open in-store pharmacies  in select
Supermarket  locations.  The  Company  is  currently  operating  nine  in-store
pharmacies  and  two  free  standing  pharmacies.

     During fiscal 2002 the Company opened one new in-store  pharmacy and opened
two  additional  in-store  pharmacies  subsequent  to  the  end  of fiscal 2002.

     The  Company  also  owns  City  Produce Operating Corp. ("City Produce"), a
corporation  that operates a warehouse used as an  internal distribution center,
on  leased premises in Bronx County, New York.  The warehouse operation supplies
the  Company's  Supermarkets  with  groceries  and fresh produce.  The warehouse
also  sells  wholesale  fresh  produce  to  third  parties.


                                      -2-
<PAGE>
     The  Company  competes  on  the  basis  of  providing customer convenience,
service  and  a  wide  assortment  of  food  products,  including those that are
appealing  to  the  clientele  in  the  neighborhoods where its Supermarkets are
located.  The  Supermarkets,  like most Manhattan supermarkets, are smaller than
their suburban counterparts, ranging in size from approximately 6,000  to 24,500
square  feet of selling space and averaging 10,200 square feet of selling space.

     The  Supermarkets offer, at competitive prices, broad lines of merchandise,
including nationally and regionally advertised brands, private label and generic
brands.  Merchandise  sold includes food items such as fresh meats, produce, dry
groceries,  dairy  products,  baked  goods,  poultry  and fish, fresh fruits and
vegetables,  frozen  foods,  and delicatessen and gourmet foods, as well as many
non-food items such as  cigarettes, soaps, paper products, and health and beauty
aids.  Check-cashing  services  are  available  to  qualified  customers holding
check-cashing  cards and, for a small fee, the Company will deliver groceries to
a  customer's  residence.  The  Supermarkets accept payment by Mastercard, Visa,
American  Express,  IGT  and Discover credit cards. Most of the Supermarkets are
open  sixteen  hours  per  day,  seven  days  a  week and on holidays, including
Christmas, New Year's and Thanksgiving. Most of the Supermarkets close two hours
earlier  on  Sundays.

     The  Company's  predecessor  was incorporated in 1956 in New York. In 1985,
the  Company's  domicile  was  changed  to  Delaware  by merging the predecessor
corporation  into  a  newly  formed  Delaware corporation, incorporated for such
purpose. The Company became a public company in 1968 and listed its common stock
on  the  American Stock Exchange in 1972. Until 1992, the Company engaged in the
jewelry business, operating under the name Designcraft Industries, Inc. for most
of  such  time.  The  Company changed its name to Sloan's Supermarkets, Inc., in
September  1993 and to Gristede's Sloan's, Inc., in November 1997.   The Company
changed  its  name  to  Gristede's  Foods,  Inc.  in  August 1999 to reflect its
strategy  of  changing its "Sloan's" banner locations to "Gristede's" subsequent
to  a  store  remodeling.

GROWTH  STRATEGY

     On  November 10, 1997, a Merger Agreement was consummated pursuant to which
29  Supermarkets  indirectly  owned  by  Mr.  Catsimatidis,  (the  "majority
shareholder")  merged  into  wholly  owned  subsidiaries  of  the  Company  (the
"Merger").  The  Company  believes  that  the  Merger  has allowed it to realize
synergies  and  increased operating leverage while providing management with the
necessary  resources and focus to streamline operations, automate facilities and
capitalize  on  strategic  opportunities.  The  Company  also  believes that the
Merger  has  enabled  it  to  achieve the critical mass necessary to execute its
future  growth  strategy.

     Subsequent  to  the  Merger,  the Company embarked on a capital expenditure
program  for  its  Supermarkets  that  included  extensive  remodelings,  the
introduction  of  a centralized point-of-sale information system and the opening
of  in-store  pharmacies  in  select  Supermarket  locations.  The Company has a
$32,500,000 revolving credit and term loan facility  from certain banks maturing
in  November  2004  and December 2006, respectively, and finance facilities from
leasing  companies  to  finance  such  capital  improvements.  (see  Item  7,
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operation-Liquidity  and  Capital  Resources").


                                      -3-
<PAGE>
     During  the  fiscal  year  ended  December  1,  2002, three new stores were
opened,  four  stores  were remodeled, and one new in-store pharmacy opened. Two
new  stores  were opened in December 2002 subsequent to the fiscal year-end. The
aggregate  capital  expenditures for fiscal 2002, including such remodelings and
new  store  openings, was approximately $19,000,000.  Included in this amount is
$6.4  million  for three stores purchased from A&P for $5.5 million.  Subject to
the  availability of financing, during the fiscal year ending November 30, 2003,
the  Company  anticipates  it  will  spend  approximately  $8  to $10 million in
aggregate  capital  expenditures, including additional remodelings and new store
and  pharmacy  openings.  The  Company anticipates that it will continue opening
new  stores  and pharmacies in future years.  The modernized larger Supermarkets
are  being  re-named  "Gristede's  Mega  Stores".

     Average  sales  increases  at  the  remodeled  stores  have  exceeded  50%.
Modernization  has  resulted  in  a more enjoyable shopping atmosphere with more
rapid  check-out  lines  due  to  scanners  and  improved  lighting  facilities.

     The  Company  may  also  expand  its  operations through the acquisition of
supermarkets  and/or  the  acquisition  of  businesses that the Company believes
would  complement  its core supermarket business.  However, pursuant to an order
embodying  a  Settlement  Agreement  between  the  Federal Trade Commission (the
"FTC"), John Catsimatidis, the Company and certain other companies controlled by
Mr. Catsimatidis (collectively, the "Companies"), for a period of ten years from
March  6,  1995,  the  Company  cannot,  without prior FTC approval, acquire any
interest  in any existing supermarket in certain  designated areas in Manhattan.
The  order  does  not  restrict  the  Company  from  acquiring  an interest in a
supermarket  (in such designated areas)  by leasing or purchasing a new location
that at the time of acquisition (and for six months prior to the acquisition) is
not  (or was not) being operated as a supermarket.  There are no restrictions on
the  Company  acquiring  supermarkets  that  are  located outside the designated
areas.

The  Company has been attempting to acquire Kings Supermarkets, Inc., a chain of
29  stores,  mainly  located  in  Northern  New  Jersey.  The Company intends to
continue  such  efforts. No assurance can be given that this acquisition will be
consummated.

MARKETING

     The Company advertises in local newspapers on a weekly basis. The Company's
advertising emphasizes competitive prices and a variety of merchandise.  Some of
the  Company's  vendors  offer  cooperative  advertising  allowances,  which the
Company  receives  for  advertising  particular  products  in  its  newspaper
advertisements.

COMPETITION

     The  Company's  retail  business  is  subject  to  intense  competition,
characterized  by  low  profit margins and requiring regular advertising. All of
our  Supermarkets  are  in  direct competition with Food Emporium, D'Agostino's,
A&P,  Pathmark  and  independent supermarket/grocery operators which do business
under the names "Pioneer", "Key Food" and "Associated", many of which are larger
and  have  substantially  greater  resources than the Company.  The Supermarkets
also  compete  with other outlets that sell products sold by supermarkets in New
York  City.  Those  outlets  include  gourmet food stores, health and beauty aid
stores,  drug  stores,  produce  stores, bodegas, delicatessens and other retail
food  establishments.


                                      -4-
<PAGE>
SOURCES  OF  SUPPLY;  INVENTORY  POLICY

     During  fiscal  2002  the  Company  obtained  approximately  40%  of  the
merchandise  sold  in  its  stores  from one supplier, White Rose Foods, and the
balance  from  other  vendors,  none  of  which  accounted  for more than 10% of
merchandise  purchased  by  the Company.  The Company believes that its supplier
relationships  are currently satisfactory. The Company is not dependent on these
supplier  relationships  since  merchandise  is  readily available from numerous
sources  under  different  brand  names,  subject  to  conditions affecting food
supplies  generally.

     The  Company's  policy  is  to  have  its  Supermarkets  fully stocked with
merchandise at all times.  This policy requires the Company to carry significant
amounts  of  inventory.  As  stated  above, replenishment merchandise is readily
available  from  the  Company's  suppliers,  and,  on average, nearly 90% of the
Company's inventory is sold before the Company is required to pay its suppliers.

TRADENAMES

     The  Company owns the "Gristede's" tradename.  Such name has an established
reputation  in the areas served by the Supermarkets for convenience, competitive
prices,  service  and  a  wide  variety  of  quality  produce  and  merchandise.
"Gristede's"  is  a  federally  registered  trademark.


LABOR  CONTRACTS

     All of the employees of the Company other than 161 administrative employees
and  executives and 95 store managers and co-managers are represented by unions.
The  table  below sets forth the name of each union with which the Company has a
collective  bargaining  agreement  and  the  expiration  date of such agreement.

<TABLE>
<CAPTION>
Name of Union                                                       Expiration Date
-------------                                                       -----------------
<S>                                                                 <C>
Retail, Wholesale & Chain Store Food Employees Union, Local 338       October 7, 2006
Amalgamated Meat Cutters and Retail Food Local 342 Store Employees
   Union, Local 342-50                                                October 5, 2003
United Food and Commercial Workers Union ("UFCW"), Local 174        December 20, 2006
UFCW, Local 1500                                                        June 25, 2006
UFCW, Local 464A                                                          May 1, 2003
International Brotherhood of Teamsters ("Teamsters"), Local 803        month-to-month
Teamsters, Local 202                                                December 31, 2003
</TABLE>

GOVERNMENTAL  APPROVALS

     All  of  the  Supermarkets  have  obtained  all  necessary  governmental
approvals,  licenses  and  operating  permits  to  operate  the  stores.


                                      -5-
<PAGE>
EMPLOYEES

     At  February  1, 2003, the Company had approximately 2,288 employees, 2,086
of which are employed at the Supermarkets or the City Produce warehouse, and 202
of  which  are  employed  at the Company's executive offices.  Approximately 717
employees  were  employed  on a full-time basis, of which 460 employees work  in
the  Supermarkets.

SEASONALITY

     The  Company's  Supermarkets  are  predominantly  located in the borough of
Manhattan in New York City and serve a more affluent clientele often referred to
as  the  "carriage  trade."   Owing  to the significant exodus of such customers
during  the  summer  months for vacation and holiday, together with an increased
propensity  by resident customers for out of home dining during such period, the
Company  traditionally  incurs  up  to  a  20% seasonal drop in sales during the
months  of  July  and  August each year.  The seasonal decline in sales does not
have  a  material  impact  on  the  level of inventories carried by the Company.

ENVIRONMENTAL  COMPLIANCE

     Compliance  by  the  Company  with Federal, State and local provisions that
have  been  enacted  or  adopted  regarding  the discharge of materials into the
environment,  or  otherwise  relating to the protection of the environment, does
not  have  a  material  financial  impact  on  the  Company.

ITEM  2.     PROPERTIES.

     The  Company  leases  all  49  supermarket locations, its two free standing
pharmacies  and  the  warehouse and distribution center operated by City Produce
(two  supermarkets  opened in December 2002, subsequent to year end).  Including
option  renewals,  two  of  such  leases expire prior to 2004, 14 of such leases
expire  on  dates  from  2004 through 2012 and 36 of such leases expire on dates
from  2013  through  2040  (the  warehouse is subject to three leases).  Several
leases  have  optional renewal periods.  It is generally the Company's intention
to  exercise  such  options.  The  supermarkets range in size from approximately
6,000  to  24,500  square feet of selling space, averaging 10,200 square feet of
selling  space.  All  of  the  stores  are  air-conditioned,  have all necessary
fixtures  and  equipment  and  are  suitable for the retail operations conducted
therein.


                                      -6-
<PAGE>
ITEM  3.     LEGAL  PROCEEDINGS.

  1) RMED International Inc. v. Sloan's Supermarkets Inc. and John A.
     Catsimatidis.

On  August  8,  1994,  a  lawsuit  against  the Company and Mr. Catsimatidis was
instituted  in the United States District Court for the Southern District of New
York  by RMED International, Inc. ("RMED"), a former stockholder of the Company.

The  complaint  alleged,  among  other  things,  that RMED and a purported class
consisting of persons who purchased the Company's common stock on or after March
19,  1993  were damaged by alleged nondisclosures in certain filings made by the
Company  with  the  Securities  and Exchange Commission between January 1993 and
June  1994  relating  to an investigation by the FTC. The complaint alleged that
such  nondisclosures  constituted  violations  of  Federal  and  New  York State
securities  laws,  as  well  as  common  law fraud, and seeks damages (including
punitive  damages)  in an unspecified amount (although in discovery proceedings,
the named plaintiff has claimed that its damages were approximately $800,000) as
well  as  costs  and  disbursements  of the action. On June 2, 1994, the Company
issued  a  press  release  that  disclosed  the  FTC  action.

On  September  30, 1994, the defendants filed a motion to dismiss for failure to
state  a  cause  of  action and for lack of subject matter jurisdiction over the
state  claims.  The  motion  was  denied.  In  June  1995, the plaintiff filed a
motion  for  class  certification,  which motion was granted in March 1996. Fact
discovery was completed by the end of June 1998.  Expert discovery was completed
by  the  end  of  1998.  Plaintiff's  expert  prepared  a  report  claiming that
plaintiffs  have  suffered  damages  in  an  amount in excess of $3,000,000.  In
August 1999, defendants moved to exclude plaintiff's expert report, which motion
was  denied.  In June 2000, the Company filed a motion for summary judgment.  In
February  2002,  the  court  dismissed plaintiff's state law claim under Article
23-A  of  the General Business Law of New York, as well as plaintiff's claim for
breach  of  fiduciary  duty, but denied the Company's motion with respect to the
plaintiff's claim under Section 10(b) of the Securities Exchange Act of 1934, as
amended and Rule 10(b)-5 promulgated thereunder, as well as plaintiff's claim of
fraud under state common law, finding that there were outstanding issues of fact
which  needed  to  be  determined  at  trial.

After a week of trial, in January 2003, the matter was settled.  The full amount
of the settlement, together with a portion of the Company's legal fees, was paid
by  the  Company's  D&O  insurance  carrier.  Neither  the  Company,  nor  Mr.
Catsimatidis  paid  any  portion  of  the  settlement  amount.

2.) Ansoumana v. Great Atlantic & Pacific Tea Company, Inc. d/b/a/ A&P, Shopwell
Inc.  -  d/b/a  Food  Emporium,  Gristede's  Operating  Corp, Duane Reade, Inc.,
Charlie  Bauer,  individually and d/b/a B&B Delivery Service a/k/a Citi Express,
Scott Weinstein and Steven Pilavan, ind. and d/b/a Hudson Delivery Service Inc.,
Chelsea  Trucking,  Inc.  a/k/a  Hudson  York.

On  January  13,  2000,  plaintiffs commenced a class action lawsuit in the U.S.
District Court for the Southern District of New York (hereinafter referred to as
the  "Ansoumana  Action").  Their complaint alleged violations of the Fair Labor
Standards  Act  and  the New York Labor Law. Plaintiffs are claiming damages for
the  differential  between  the  amount  they  were  paid  by the Great American
Delivery  Service  Company  and  what the minimum wage was in each specific year
dating  back  to 1994.  To date, about 35 to 40 delivery workers have opted into
the  class  action.

Specifically,  the  Company  was  one  of the parties sued in this litigation by
delivery  workers  claiming  they  were  not  being  paid the minimum wage.  The
delivery  workers are employees of the Great American Delivery Company (formerly
known  as B&B Delivery Service or Citi Express)("Great American"), not employees
of  the  Company.  The Company was under contract with Great American to deliver
groceries  to  the  Company's  customers.


                                      -7-
<PAGE>
In  its answer, the Company denied the allegations and cross-claimed against the
delivery  service  co-defendants  Weinstein  and  Baur,  based  upon  their  own
negligence,  theories  of  contribution  and  contractual  indemnity.

When  allegations of underpayment first emerged, the Company, on August 2, 2000,
entered into a new contract with Great American.  This contract was entered into
in order to assure the Company that these delivery workers would be properly and
legally  paid  for  their  services.  The  legal hourly wages referred to in the
contract  were  discussed  with  the  New  York  Attorney  General's  Office.

On  July  23,  2001,  the  Company  terminated  its contract with Great American
because  Great  American  breached  the  terms of the contract.  Based upon that
termination,  Great  American  commenced  a breach of contract action in Supreme
Court,  Nassau County, against the Company and obtained a preliminary injunction
compelling  the  Company  to  retain  Great  American  as  its  delivery service
contractor.

Thereafter,  Great  American  was  found to be in contempt of several orders and
added  as  a  party-defendant  by motion to amend the complaint in the Ansoumana
Action.  In  response to those proceedings, Great American filed for bankruptcy.
Hence,  the  breach  of  contract action commenced by Great American against the
Company  was  stayed.  The  Company  transferred  the  case to the United States
Bankruptcy  Court  in  the  Eastern  District  of  New  York.  Great  American's
bankruptcy  petition  was dismissed.  Great American's breach of contract action
commenced in Nassau County has been stayed pending a resolution of the Ansoumana
Action.  Nevertheless,  Great  American  posted a $400,000 bond in the breach of
contract  action pending in Nassau County to obtain a preliminary injunction and
the  Company  intends  to  recoup  these  monies  from  Great  American.

A  tentative  settlement  has  been  reached.  The Company estimates that such a
possible  settlement  could  result  in  potential  payments  of  approximately
$2,600,000  plus  plaintiffs'  legal  expenses,  payable over a number of years,
without  interest,  which  amount  would  be  shared  approximately 50-50 by the
Company with its predecessor private companies. Any amount paid on behalf of the
Company  will  be  reflected as a capital contribution. Additionally, recoveries
from  a  $400,000  security bond posted by Great American / Baur shall be solely
for the Company's benefit. However, any final settlement must be approved by the
Company's  banks, the state, the courts, and the plaintiffs. The Company and its
legal  counsel  are not presently able to predict whether the settlement will be
implemented.  Accordingly, the Company has not recorded any contingent liability
in  its consolidated financial statements related to this matter. The Company is
also  pursuing  an  insurance  contribution  to  the  settlement  under  various
policies.

In  the  meantime,  the  Company's co-defendant Duane Reade who has continued to
aggressively  defend  itself in this case, without pursuing settlement, has been
found  liable  by  summary  judgment  to  be  a joint employer with its delivery
service  provider  Weinstein.

3.)  Red  Apple  Supermarkets,  Inc., Gristede's Supermarkets, Inc., Supermarket
Acquisition  Corp.,  and  Gristede's  Sloan's Inc., Plaintiffs, against Rite Aid
Corporation  and  Rite  Aid  of  New  York,  Inc.,  Defendants

Pursuant  to  a  settlement  agreement  dated  February 22, 1999 (the Settlement
Agreement"),  between  the  Company and Rite Aid Corporation ("Rite Aid"),  Rite
Aid  agreed to compromise a dispute between the parties arising out of a written
lease  purchase  agreement  dated  September  2,  1994  (the  "Lease  Purchase
Agreement). Pursuant to the Settlement Agreement, Rite Aid agreed to pay the sum
of  $400,000 (the Settlement Sum") to the Company in full and final satisfaction
of  certain  claims  and  disputes  regarding  defendants' breaches of the Lease
Purchase  Agreement.  However, Rite Aid failed and refused to pay any portion of
the  Settlement  Sum  as  required by the Settlement Agreement. Consequently, on
June  5, 2000, plaintiffs filed a complaint in the Supreme Court of the State of
New  York  (New  York  County)  which  alleged:  breach of Settlement Agreement,
Breach  of  Good  Faith and Fair Dealing and Breach of Lease Purchase Agreement.
Such  complaint  seeks  judgment  against  Rite  Aid  in  the full amount of the
Settlement  Sum,  together  with  interest  from  February  22,  1999.


                                      -8-
<PAGE>
As  alleged  in  the  complaint,  the  Lease  Purchase  Agreement  contemplated
defendants'  purchase  of  certain  commercial  leasehold  interests  held  by
plaintiffs, in two stores.  Pursuant to the Lease Purchase Agreement, defendants
agreed  to  purchase  plaintiffs'  leasehold  interest  in  the  two  stores for
$1,950,000.  However,  in violation of the Lease Purchase Agreement - as well as
their duty of good faith and fair dealing thereunder - defendants negotiated and
obtained  their  own  leasehold  interest  for  both  stores  directly from each
landlord,  and  failed  to  compensate  plaintiffs  as  agreed.

The  Company  has  recently  settled  this  litigation  where  Rite  Aid will be
returning  a  store to the Company at 113-119 Fourth Avenue, Manhattan, New York
City,  which  was  previously  operated  by  an  affiliate  of  the  Company, in
settlement  of  the  litigation.

The Company will be purchasing Rite Aid's prescription records and inventory for
this  location.   In addition, the Company will pay a nominal fee for Rite Aid's
furniture and equipment and the Company will also have the benefit of Rite Aid's
leasehold  improvements  at the store at no additional cost. It is expected that
Rite  Aid  will  surrender  the  store within 30 days of the finalization of the
settlement.  The  Company  believes  that  the fair market value of the acquired
store  lease  and  leasehold  improvements to be in excess of the Settlement Sum
plus  interest.


                                      -9-
<PAGE>
ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITYHOLDERS.

An  Annual  Meeting of Stockholders of the Company was held on January 31, 2003.
The  stockholders  approved  the  re-election  of  the  Company's existing seven
directors  for another term expiring at the next Annual Meeting of Stockholders.
18,485,250 shares voted in favor of the election of each of the directors; 6,089
shares  voted  against  the  election  of  each  of the directors; there were no
abstentions.

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

MARKET  INFORMATION

     The  Company's  Common  Stock  is  listed  and traded on the American Stock
Exchange.  Since  November 12, 1997 the Common Stock has been quoted under stock
symbol  "GRI."  Prior  thereto  it  was  quoted under the symbol "SLO."  For the
years  ended  December  1, 2002 and December 2, 2001, the quarterly high and low
price  range  for  such  common  stock  is  shown  in  the following tabulation.


<TABLE>
<CAPTION>
                             Fiscal Year Ended          Fiscal Year Ended
                              December 1, 2002          December 2, 2001
---------------------------------------------------------------------------
       Quarter               High          Low          High          Low
       -------               -----         -----        -----         -----
<S>                          <C>           <C>          <C>           <C>
First                        $1.92         $0.45        $1.63         $0.85

Second                        1.33          0.90         1.47          0.85

Third                         1.65          0.90         1.85          0.91

Fourth                        1.00          0.65         1.45          0.78
---------------------------------------------------------------------------
</TABLE>

     The  approximate  number of holders of record of the Company's Common Stock
on  February 24, 2003 was 212. The Company believes that there are a significant
number  of  shares  of  the  Company's  Common  Stock  held  in street name and,
consequently, the Company is unable to determine the actual number of beneficial
owners.

DIVIDENDS

     The Company has never paid a cash dividend on its Common Stock and does not
expect  to  pay  a  cash  dividend  in  the  near  future.


                                      -10-
<PAGE>
ITEM  6.     SELECTED  FINANCIAL  DATA

<TABLE>
<CAPTION>
                                       ------------------  -----------------  Year Ended     --------------  --------------
                                                                               December 3,    November 28,    November 29,
                                        December 1, 2002   December 2, 2001       2000            1999            1998
                                       ------------------  -----------------  -------------  --------------  --------------
<S>                                    <C>                 <C>                <C>            <C>             <C>
Sales                                  $     250,732,767   $     229,988,315  $216,325,214   $ 181,980,204   $ 157,462,869

Cost of sales                                151,435,010         139,180,967   131,259,228     112,565,940      94,282,306

Gross profit                                  99,297,757          90,807,349    85,065,986      69,414,264      63,180,563

Direct operating expenses                     79,175,726          71,596,708    67,550,165      57,632,921      53,490,803

Corporate overhead                             9,830,478           8,329,559     7,435,949       5,917,305       4,742,810

Depreciation and amortization                  7,989,625           7,204,281     6,284,971       4,668,645       3,948,000

Bad debt expense (credits)                        72,000             250,354      (350,000)        500,000               -

Interest expense                               2,967,181           3,537,281     3,761,941       2,528,677       1,832,036

---------------------------------------------------------------------------------------------------------------------------
Net income (loss)                      $        (926,407)  $         275,057  $   (190,908)  $  (2,873,331)  $    (288,339)
---------------------------------------------------------------------------------------------------------------------------
Net Income (loss) per share            $           (0.05)  $            0.01  $      (0.01)  $       (0.15)  $       (0.01)

At End of Period
----------------
Total assets                           $     120,612,141   $     101,131,361  $ 96,446,057   $  76,432,518   $  60,706,509

Long-term debt *                              58,137,496          46,682,929    42,378,525      41,800,050      25,681,336

Total liabilities                            109,946,047          89,538,860    85,128,613      64,924,166      46,324,826
</TABLE>


Certain  reclassifications  were  made  to  fiscal  2001  consolidated financial
statements  to  conform  to  the  fiscal  2002  presentation.
*  Includes  amounts  due to affiliates of $14,842,437, $14,525,904, 12,129,031,
$9,113,500  and $4,031,394, respectively, for the fiscal years 2002, 2001, 2000,
1999 and 1998, respectively. The affiliates have agreed not to demand payment of
these  liabilities  in the next fiscal year.  There is no stated  final maturity
date,  and  $14,200,000  of this amount has been subordinated to the banks as of
December  1,  2002.


                                      -11-
<PAGE>
ITEM  7.        MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

COMPANY  BACKGROUND

     The fiscal year ended December 3, 2000 consisted of 53 weeks and the fiscal
years  ended  December  1, 2002 and December 2, 2001 consisted of 52 weeks each.


     The following table sets forth, as a percentage of sales, components of the
Results  of  Operations:

                                         2002    2001    2000
                                        ------  ------  ------
Sales                                   100.0%  100.0%  100.0%
Cost of sales                            60.4%   60.5%   60.7%
                                        ------  ------  ------
Gross profit                             39.6%   39.5%   39.3%
Store operating, general and
   administrative expense                31.6%   31.1%   31.2%
Pre-store opening startup costs           0.3%    0.1%    0.2%
Bad debt expense (credits)                 --      --   (0.2%)
Depreciation and amortization             3.2%    3.1%    2.9%
Insurance proceeds - terrorist attack   (0.2)%  (0.7%)     --
Casualty loss - terrorist attack           --     0.5%     --
Non-store operating expense               3.9%    3.6%    3.4%
                                        ------  ------  ------
Operating profit (loss)                   0.8%    1.6%    1.7%
Other expense                             1.2%    1.4%    1.7%
                                        ------  ------  ------
Profit (loss) from operations before
   income taxes                         (0.4%)    0.2%  (0.1%)
                                                ------  ------
Income taxes                               --     0.1%     --
                                                ------
Net income (loss)                       (0.4%)    0.1%  (0.1%)
                                        ------  ------  ------


     Percentages  of  individual  line  items  (as a percent of sales) have been
rounded to the nearest tenth of a percent, and therefore, the totals may not add
to100%.

RESULTS  OF  OPERATIONS  (2002  COMPARED  TO  2001)

     Sales for the year 2002 were $250,732,767 as compared to sales for the year
2001 of $229,988,315. The sales increase in fiscal 2002 compared to the sales in
fiscal  2001  is  mainly attributable to sales increases due to new or remodeled
stores  opened  in  fiscal  2002  or full years sales for those new or remodeled
stores opened during 2001. Same store sales for the year 2002 were 7.1% ahead of
2001.  Gross  profit  was  $99,297,757  or  39.6%  of  sales  as  compared  with
$90,807,349  or  39.5%  of  sales for 2001.  The increase in gross profit during
2002  period  was  primarily  due  to higher proportion of perishable sales with
higher  margins,  offset  by promotional pricing on new store openings and major
remodel  re-openings.


                                      -12-
<PAGE>
     Store  operating,  general  and administrative expenses were $79,175,726 or
31.58%  of sales for the year 2002 as compared to $71,596,708 or 31.13% of sales
for  the year 2001.  The increase in store operating, general and administrative
expenses  as  a percentage of sales in the 2002 period was mainly due to new and
remodeled  stores  opening in the latter part of the year.  Advertising expenses
included  in store operating, general and administrative expense were $2,180,285
and  $1,572,963  for  the  years  2002  and  2001,  respectively.

     Pre-store opening startup costs were $741,570 or 0.3% of sales for the year
2002  as  compared  to  $165,000 or 0.1% of sales for the year 2001.  There were
three  new stores and six remodeled stores in 2002 compared to no new stores and
six  remodeled  stores  in  2001, leading to increased pre-store opening startup
costs in 2002.  Furthermore, costs incurred for the year 2002 also included some
costs  for  two  stores which opened in December 2002, following the fiscal year
end.  New  stores  generally  are given heavier promotion than remodeled stores.

     Non-store  operating expenses were $9,830,478 or 3.9% of sales for the year
2002  as  compared  to  $8,329,559  or  3.6%  of  sales  for  the  year  2001.
Administrative  payroll  and  fringes  were 2.8% of sales for the 2002 period as
compared with 2.4% of sales for the 2001 period. The increase in the 2002 period
reflects  the  addition  of  department  and  divisional  managers to handle the
additional  business generated by the store remodeling program and higher health
costs.  General  office expenses as a percentage of sales were 0.8% for the 2002
period  as  compared  to  0.9% for the 2001 period. The decrease during the 2002
period  was  primarily  due  to  effective  control  of  back office expenses in
relation  to  the increased sales.  Professional fees were 0.2% of sales for the
2001  period  as  compared to 0.3% for the 2001 period.  Corporate expenses as a
percentage  of  sales  were  0.1%  for both the 2002 period and the 2001 period.

     Depreciation  expense  was $7,989,625 or 3.2% of sales for the year 2002 as
compared  to $7,204,281 or 3.1% of sales for the year 2001.  The increase in the
2002  period was primarily a result of significant capital expenditures incurred
in  connection  with  the  Company's  store  renovation  and remodeling program.

     Management  has  filed  claims  with its insurance carriers as a result the
September  11 terrorist attacks for its losses, including business interruption.
The  Company settled these claims with the insurance company in October 2002 for
approximate  net  proceeds  of $1.5 million, and incurred costs of approximately
$1.1  million  which  amounts were reflected in fiscal 2001. The Company further
has  applied  for  various government grants amounting to approximately $400,000
net of fees and expects to receive these in full during fiscal 2003. The grants,
which  along  with  an insurance claim for a theft loss from its warehouse, were
recorded  in  fiscal  2002.

     Interest  expense was $2,967,181 or 1.2% of sales for year 2002 as compared
to  $3,537,281  or 1.5% of sales for year 2001.  The decrease in the 2002 period
was  primarily  attributable  to  lower  prevailing  interest  rates  under  the
Company's  bank  credit  facility,  partially  offset  by  increased capitalized
equipment  leasing.

     Interest  income  for  the year 2002 was $5,116 as compared with $9,016 for
the  year  2001.  The  decrease  in  the 2002 period was due to lower prevailing
interest  rates  in  the  2002  period.

     Other  income  for  the  year 2002 was $0 as compared with $173,112 for the
year  2001.  This mainly results from the sale of a store lease resulting from a
closed  store  in  2001.


                                      -13-
<PAGE>
     Bad  debt  expense  was $72,000 for the year 2002 as compared with $250,354
for  the year 2001.  Bad debt expense was higher in the year 2001 primarily as a
result  of the Company's expansion of its pharmacy business and systems relating
thereto  and  the  resulting  increase  in  third  party  receivables.

     As  a  result  of  the  items  discussed  above,  the  income (loss) before
provision  for  income  taxes  for  the  year 2002 was ($886,407) as compared to
$373,897  for  the  year  2001.


RESULTS OF OPERATIONS (2001 COMPARED TO 2000)

     Sales for the year 2001 were $229,988,315 as compared to sales for the year
2000 of $216,325,214. The sales increase in fiscal 2001 compared to the sales in
fiscal  2000,  offset  by  the  sales  for  the  extra  week  in  fiscal 2000 of
approximately $4.5 million, is mainly attributable to sales increases due to new
or  remodeled  stores opened in fiscal 2001 or full years sales for those new or
remodeled  stores  opened  during  2000. Same store sales for the year 2001 were
5.5%  ahead  of 2000. Gross profit was $90,807,349 or 39.5% of sales as compared
with  $85,065,986  or  39.3%  of  sales  for 2000.  The increase in gross profit
during  2001  period  was primarily due to fewer promotional price reductions in
connection  with  the  grand  re-opening  periods of the new and newly remodeled
stores.

     Store  operating,  general  and administrative expenses were $71,596,708 or
31.13%  of sales for the year 2001 as compared to $67,550,165 or 31.23% of sales
for  the  year 2000.  The virtually unchanged result in store operating, general
and  administrative  expenses  as  a  percentage of sales in the 2001 period was
mainly  due  to  effective  cost  controls  in  relation to the increased sales.
Advertising  expenses  included  in  store operating, general and administrative
expense were $1,572,963 and 1,555,707 for the years 2001 and 2000, respectively.

     Pre-store opening startup costs were $165,000 or 0.1% of sales for the year
2001 as compared to $518,981 or 0.2% of sales for the year 2000.  There were six
stores remodeled in 2001 compared to eight in 2000, leading to reduced pre-store
opening  startup  costs  in  2001.

     Non-store  operating expenses were $8,329,559 or 3.6% of sales for the year
2001  as  compared  to  $7,435,949  or  3.4%  of  sales  for  the  year  2000.
Administrative  payroll  and  fringes  were 2.4% of sales for the 2001 period as
compared with 2.3% of sales for the 2000 period. The increase in the 2001 period
reflects  the  addition  of  department  and  divisional  managers to handle the
additional  business  generated  by the store remodeling program. General office
expenses  as  a percentage of sales were 0.9% for the 2001 period as compared to
0.8%  for the 2000 period. The increase during the 2001 period was primarily due
to  additional  back  office  expenses  in  relation  to  the  increased  sales.
Professional  fees  were  0.3%  of  sales  for both the 2001 period and the 2000
period.  Corporate expenses as a percentage of sales were 0.1% for both the 2001
period  and  the  2000  period.

     Depreciation  expense  was $7,204,281 or 3.1% of sales for the year 2001 as
compared  to  $6,284,971  or  2.9% of sales for the year 2000.  The increase was
primarily  a  result  of significant capital expenditures incurred in connection
with  the  Company's  store  renovation  and  remodeling  program.


                                      -14-
<PAGE>
     Management  has  filed  claims  with its insurance carriers as a result the
September  11 terrorist attacks for its losses, including business interruption,
and  estimates  net  proceeds  of  approximately  $1.5 million, along with costs
incurred of approximately $1.1 million. The Company has suffered property damage
losses,  including  inventory, costs to repair and clean fixtures and facilities
and  loss  of revenue. The Company received an advance of $300,000 against these
claims  in  October  2001.

     Interest  expense was $3,537,281 or 1.5% of sales for year 2001 as compared
to  $3,761,941  or 1.7% of sales for year 2000.  The decrease in the 2001 period
was  primarily  attributable  to  lower  prevailing  interest  rates  under  the
Company's  bank  credit  facility,  partially  offset  by  increased capitalized
equipment  leasing.

     Interest  income  for the year 2001 was $9,016 as compared with $24,113 for
the  year  2000.  The  decrease  in  the 2001 period was due to lower prevailing
interest  rates  in  the  2001  period.

     Other  income  (expenses)  for  the year 2001 was $173,112 as compared with
($27,000) for the year 2000.  This mainly results from the sale of a store lease
resulting  from  a  closed  store.

     Bad  debt expense (credits) was $250,354 for the year 2001 as compared with
($350,000)  for the year 2000.  As a result of the increase in the amount of the
Company's  receivables,  in the 1999 period, management deemed it prudent to set
up  an  allowance  for  doubtful  accounts in the amount of $500,000 in the 1999
period,  and to reduce that amount by $350,000 in the 2000 period as a result of
progress  in  pursuing  collection  of  a $400,000 receivable.  Bad debt expense
increased  in  the year 2001 primarily as a result of the Company's expansion of
its pharmacy business and systems relating thereto and the resulting increase in
third  party  receivables.

     As  a  result of the items discussed above, the income before provision for
income  taxes  for  the year 2001 was $373,897 as compared to a loss of $138,908
for  the  year  2000.


LIQUIDITY  AND  CAPITAL  RESOURCES

Liquidity:
----------

The  consolidated  financial statements of the Company indicate that at December
1,  2002  current  assets  exceed  current  liabilities  by  $2,162,426  and
stockholders'  equity  was  $10,666,094.  Management  believes  that  cash flows
generated  from  operations,  supplemented  by financing from its bank facility,
third  party  leasing  companies  and/or additional financing from the Company's
majority  shareholder, will be sufficient to pay the Company's debts as they may
come  due,  provide  for its capital expenditure program and meet its other cash
requirements.

Debt  and  Debt  Service:
-------------------------

Effective October 2001, the Company's credit agreement with a group of banks was
amended  and  increased  to  an  aggregate total of $32,500,000, consisting of a
$15,500,000 term loan and a $17,000,000 revolving line of credit. As of December
1,  2002,  the  credit  facility as amended, provides for (i) a maturity date of
November 28, 2004 for the revolving line of credit, and December 3, 2006 for the
term  loan,  at  which  time  all  amounts  outstanding thereunder are due, (ii)
certain financial covenants, and  (iii) amortization of the term loan in monthly


                                      -15-
<PAGE>
amortizations  totaling  $2,000,000,  $2,300,000,  $2,600,000,  $2,900,000  and
$3,200,000  respectively  in each year during its term, and a $2,500,000 balloon
payment  at  maturity.

     Borrowings  under  the  facility  bear interest at a spread over either the
prime  rate  of the bank acting as agent for the group of banks or a LIBOR rate,
with  the  spread  dependent on the ratio of the Company's funded debt to EBITDA
ratio, as defined in the credit agreement.  The average interest rate on amounts
outstanding  under  the  facility  during  the  year  2002  was 5.09% per annum.

The  credit  facility  contains covenants, representations and events of default
typical  of  credit  facility  agreements,  including  financial covenants which
require  the  Company to meet, among other things, a minimum tangible net worth,
debt  service  coverage ratios and fixed charge coverage ratios, and which limit
transactions with affiliates.  The facility is secured by equipment, inventories
and  accounts  receivable.

The  following  is  a  summary  of  the  Company's  significant contractual cash
obligations  for  the periods indicated that existed as of December 1, 2002, and
is  based  on  information  appearing  in  the  notes  to consolidated financial
statements  (amounts  in  thousands).

<TABLE>
<CAPTION>
                                      2003      2004     2005     2006     2007    THEREAFTER    TOTAL
                                     -------  --------  -------  -------  -------  -----------  --------
<S>                                  <C>      <C>       <C>      <C>      <C>      <C>          <C>
Long-term debt                       $ 2,501  $19,675*  $ 2,975  $ 3,200  $ 2,500  $        --  $ 30,851
Operating leases                      17,972    18,235   17,854   17,569   15,975      116,522   204,127
Capital lease obligations              6,887     6,113    4,055    3,096    1,966        1,867    23,984
                                     -------  --------  -------  -------  -------  -----------  --------
Total contractual cash  obligations  $27,360  $ 44,023  $24,884  $23,865  $20,441  $   118,389  $258,962
                                     =======  ========  =======  =======  =======  ===========  ========
<FN>
     *    Includes $17,000 revolving credit presently maturing in November 2004.
          The  Company is negotiating an extension of the maturity of the
          revolving  credit.
</TABLE>

     The  Company's  majority  shareholder,  through affiliates, has contributed
$14,842,437  through  December  1,  2002,  in the form of unsecured non-interest
bearing  loans,  of  which  $14,200,000  is subordinated to the Company's banks.
The  liability  presently does not bear interest.  However, the Company's credit
agreement  with  its  banks  permits  the  Company  to  pay  interest  on  such
subordinated  debt  provided  the  Company  has  a  positive  net  income.

     The  Company  has available affiliate leasing lines of credit sufficient to
lease  finance equipment for its ongoing store remodeling and expansion program.

Capital  Expenditures:
----------------------

     Capital  expenditures  for  fiscal  2002, including property acquired under
capital leases, were $18.8 million compared to $12.2 million for fiscal 2001 and
$14.3 million for fiscal 2000.  During fiscal 2002, the Company opened three new
stores,  remodeled  six stores,  added one new in-store pharmacy and funded much
of the cost of two additional new stores which opened in December 2002 after the
close  of  fiscal  2002.

     The  Company  has  not  incurred  any  material  commitments  for  capital
expenditures,  although  it anticipates spending approximately $8 million to $10
million  on  its  store  remodeling and expansion  program in fiscal 2003.  Such
amount  is  subject  to  adjustment  based  on  the  availability  of  funds.


                                      -16-
<PAGE>
Cash  Flows:
------------

     Cash  provided  by  operating activities amounted to $6.7 million in fiscal
2002  compared  to  $7.1 million in fiscal 2001 (exclusive of change in due from
related parties - other).  The change in cash flow from operating activities was
primarily  due  to  cash  provided by operating assets and liabilities and a net
loss  compared to a profit.  Cash used for investing activities was $8.5 million
in  2002  compared  to  $6.3  million  in 2001, resulting from increased capital
expenditures.  Cash provided by (used in) financing acitivities was $1.9 million
in 2002 compared with ($3.8) million in 2001 reflecting the bank financing drawn
upon, the additional proceeds  provided by an affiliate, offset by repayments of
bank  loans  and  capital  leases.

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

In June 2001, the Financial Accounting Standards Board finalized FASB Statements
No.  141,  Business  Combinations  (SFAS  141),  and No. 142, Goodwill and Other
Intangible  Assets (SFAS 142).  SFAS 141 requires the use of the purchase method
of  accounting  and  prohibits  the  use  of  the pooling-of-interests method of
accounting  for  business  combinations initiated after June 30, 2001.  SFAS 141
also  requires  that the Company recognize acquired intangible assets apart from
goodwill  if  they  meet  certain  criteria.  SFAS  141  applies to all business
combinations  initiated  after  June  30,  2001  and  for  purchase  business
combinations  completed  on  or  after  July  1,  2001.  It  also requires, upon
adoption  of  SFAS  142  that  the  Company  reclassify  the carrying amounts of
intangible  assets  and  goodwill based on the criteria in SFAS 141. The Company
adopted SFAS 141  in the first quarter of fiscal 2002 with no material effect on
the  financial  statements  of  the  Company.

SFAS  142  requires,  among  other  things,  that  companies  no longer amortize
goodwill,  but  instead  test  goodwill  for  impairment  at least annually.  In
addition,  SFAS  142  requires that the Company identify reporting units for the
purposes  of  assessing  potential  future impairments of goodwill, reassess the
useful  lives  of  other  existing  recognized  intangible  assets,  and  cease
amortization of intangible assets with an indefinite useful life.  An intangible
asset  with  an  indefinite  useful  life  should  be  tested  for impairment in
accordance  with the guidelines in SFAS 142.  SFAS 142 is required to be applied
in  fiscal  years  beginning  after  December 15, 2001 to all goodwill and other
intangible  assets recognized at that date, regardless of when those assets were
initially  recognized.  It  also requires the Company to complete a transitional
goodwill  impairment  test  within  six  months  from the date of adoption.  The
Company is also required to reassess the useful lives of other intangible assets
within the first interim quarter after adoption of SFAS 142. The Company adopted
SFAS  142  in  the  first  quarter of fiscal 2002 with no material effect on its
financial  statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 develops an accounting model, based
upon  the  framework  established  in  SFAS No. 121, for long-lived assets to be
disposed  by  sales.  The  accounting  model  applies  to all long-lived assets,
including discontinued operations, and it replaces the provisions of ABP Opinion
No.  30, "Reporting Results of Operations-Reporting the Effects of Disposal of a
Segment  of  a  Business  and  Extraordinary, Unusual and Infrequently Occurring
Events  and  Transactions," for disposal of segments of a business. SFAS No. 144
requires  long-lived  assets  held  for  disposal to be measured at the lower of
carrying  amount  or  fair  values  less  costs  to  sell,  whether  reported in
continuing  operations or in discontinued operations. The statement is effective
for fiscal years beginning after December 15, 2001. The Company intends to adopt
this  standard  at  the  beginning  of its fiscal 2003. The Company believes the
adoption  of  SFAS  No.  144  will  not  have a material impact on its financial
position  or  results  of  operations.

In  July  2002,  the  FASB issued SFAS No. 146, "Accounting for Costs Associated
with  Exit  or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and replaces
EITF  Issue  No.  94-3,  "Liability Recognition for Certain Employee Termination


                                      -17-
<PAGE>
Benefits  and  Other Costs to Exit an Activity (including Certain Costs Incurred
in  a  Restructuring)."  SFAS  No.  146  requires  that  a  liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  SFAS  No.  146  also establishes that fair value is the objective for
initial  measurement  of  the  liability. The statement is effective for exit or
disposal  activities initiated after December 31, 2002. The Company believes the
adoption  of  SFAS  No.  146  will  not  have a material impact on its financial
position  or  results  of  operations.

In  December  2002,  the  FASB  issued SFAS No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and Disclosure". SFAS 148 amends FASB Statement No.
123, "Accounting for Stock-Based Compensation." Although it does not require use
of  fair  value  method  of accounting for stock-based employee compensation, it
does  provide  alternative  methods of transition. It also amends the disclosure
provisions  of  Statement  123  and  APB  Opinion  No.  28,  "Interim  Financial
Reporting,"  to  require  disclosure  in  the  summary of significant accounting
policies  of  the  effects  of  an  entity's  accounting  policy with respect to
stock-based  employee compensation on reported net income and earnings per share
in  annual  and  interim  financial  statements. SFAS No. 148's amendment of the
transition  and  annual  disclosure  requirements are effective for fiscal years
ending  after  December  15,  2002.  The amendment of disclosure requirements of
Opinion  No.  28  are effective for interim periods beginning after December 15,
2002.  The Company will continue to use the intrinsic value method of accounting
as allowed under SFAS No. 148 for stock-based compensation for its first quarter
of  fiscal  year  2003.

CRITICAL  ACCOUNTING  POLICIES

Financial  Reporting  Release  No.  60,  which  was  recently  released  by  the
Securities  and  Exchange  Commission,  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial  statements.  Note  2  of  the  Notes  to  the  Consolidated Financial
Statements includes a summary of the significant accounting policies and methods
used  in the preparation of our Consolidated Financial Statements. The following
is  a  brief  discussion of the more significant accounting policies and methods
used by us.

General

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 dates of the financial statements and
the  reported amounts of revenues and expenses during the reporting periods. The
most  significant  estimates  and  assumptions  relate  to the recoverability of
internally  developed  software  costs,  fixed  assets  and  other  intangibles,
inventories, realization of deferred income taxes and the adequacy of allowances
for  doubtful  accounts.  Actual  amounts  could differ significantly from these
estimates.

Accounts  Receivable

We continuously monitor collections and payments from our customers, third party
and  vendor  receivables  and  maintain  a provision for estimated credit losses
based  upon our historical experience and any specific collection issues that we
have  identified.  While  such  credit  losses have historically been within our
expectations  and  the  provisions established, we cannot guarantee that we will
continue  to  experience  the  same  credit loss rates that we have in the past.


                                      -18-
<PAGE>
Inventories

We value our inventory at the lower of cost or market with cost determined under
the retail method. We regularly review inventory quantities on hand and record a
provision for excess and obsolete inventory where appropriate based primarily on
our  historical  shrink  and  spoilage  rates.

Intangibles and Other Long-Lived Assets

Property,  plant  and equipment,  intangible and certain other long-lived assets
are  amortized  over  their useful lives. Useful lives are based on management's
estimates of the period that the assets will generate revenue. Intangible assets
are reviewed for impairment whenever events or changes in circumstances indicate
that  the  carrying  amount  of  an  asset  may  not  be  recoverable.

Accrued  Self-Insurance

Insurance  expense for employee-related health care benefits are estimated using
historical  experience.


ITEM  7A.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET
              RISK.

     Market  risk  represents  the risk of loss that may impact the consolidated
financial  position,  results  of  operations or cash flow of the Company due to
adverse  changes  in  financing rates.  The Company is exposed to market risk in
the  area of interest rates.  This exposure is directly related to its term loan
and  borrowing  activities under the working capital facility.  The Company does
not  currently  maintain  any  interest  rate  hedging  arrangements  due to the
reasonable  risk that near-term interest rates will not rise significantly.  The
Company  is  continuously  evaluating  this  risk and will consider implementing
interest  rate  hedging  arrangements  when  deemed  appropriate.


                                      -19-
<PAGE>
ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

                                                                       Page  No.
                                                                       ---------

Independent  auditors'  report                                         F-1

Consolidated  Balance  Sheets  as  of  December  1,  2002  and         F-2
  December  2,  2001

Consolidated  Statements  of  Operations                               F-4
  for  the  years  ended  December  1,  2002,
  December  2,  2001  and  December  3,  2000

Consolidated  Statements  of  Stockholders'  Equity                    F-5
  for  the  years  ended  December  1,  2002,
  December  2,  2001  and  December  3,  2000

Consolidated  Statements  of  Cash  Flows                              F-6
  for  the  years  ended  December  1,  2002,
  December  2,  2001  and  December  3,  2000

Notes  to  Financial  Statements                                       F-7


                                      -20-
<PAGE>
ITEM  9     CHANGES  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
            FINANCIAL  DISCLOSURE.

            None.


                                    PART III

ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

Set  forth  below is certain information as of February 24, 2003 with respect to
all  directors  and  executive  officers  of  the  Company.



<TABLE>
<CAPTION>
                                               POSITION WITH THE COMPANY OR
                     DIRECTOR                   OTHER PRINCIPAL OCCUPATION
NAME AND AGE          SINCE                       FOR THE PAST FIVE YEARS
-------------------  --------  -------------------------------------------------------------
<S>                  <C>       <C>

John A.               1988(5)  Chairman of the Board, President and Chief Executive
Catsimatidis                   Officer of the Company since July 28, 1988; Treasurer of
   (54)                        the Company from July 28, 1988 to March 17, 1998 and
                               since November 15, 1999; President and Chief Executive
                               Officer of Red Apple Group, Inc. (holding company) and
                               Chairman of the Board and Chief Executive Officer and
                               Director of United Refining Company (a refiner and retailer
                               of petroleum products) for more than five years; Director of
                               News Communications Inc., a public company whose stock
                               1988  is traded over-the-counter, since December 4, 1991.

Martin R. Bring       1988     Stockholder in the law firm of Anderson Kill & Olick, PC.,
   (60)                        since February 1, 2002; Partner in the law firm of Wolf,
                               Block, Schorr and Solis-Cohen LLP and predecessor firm
                               for more than five years prior thereto; Director of United
                               Refining Company since 1988.

Frederick Selby       1978     Chairman of Selby Capital Partners (acquisition and sale of
   (64)                        privately owned firms and divisions of public companies)
                               for more than five years; Managing Director and senior
                               officer of mergers and acquisitions division of Bankers
                               Trust Company; Senior Vice President of Corporate
                               Finance of  B.A.I.I. Banking (Paris) and Director of
                               Corporate Finance of Legg Mason Wood Walker prior thereto.


------------------------------
(5)  Mr. Catsimatidis also served as a director of the Company from November 4,
     1986 to November 27, 1987.


                                      -21-
<PAGE>
Kishore Lall          1997     Executive Vice President - Finance and Administration and
   (55)                        Secretary of the Company since May 2002; Director of the
                               Company since October, 1997; consultant to Red Apple Group,
                               Inc. from January 1997 to October 1997;
                               Director of United Refining Company since 1997;  private
                               investor from June 1994 to December 1996; Senior Vice
                               President and Head of Commercial Banking of ABN
                               AMRO Bank, New York branch from January 1991 until May 1994

Martin Steinberg       1998    Independent consultant.  Mr. Steinberg also served as a
   (69)                        director of the Company from May 1974 to January 1991.

Edward P. Salzano      1999    Executive Vice President and Director of Cantisano Foods,
                               Inc., a privately held sauce and salsa manufacturing
                               company, for more than 15 years.

Andrew Maloney (70)    2002    Counsel to DeFeiss O'Connell & Rose since January 2003;
                               Counsel to Kramer Levin Naftalis & Frankel LLP from
                               April 1998 to December 2002, and a partner of Brown &
                               Wood, LLP from December 1992 until April 1998; United
                               States Attorney for the Eastern District of New York from
                               June 1986 until December 1992; Director of United
                               Refining Company since 1997.

Gary Pokrassa            --    Chief Financial Officer of the Company since August 14,
                               2000; Chief Financial Officer of Syndata Technologies,
                               Inc., from February 1997 to July 2000; Vice President -
                               Finance of Innovir Laboratories, Inc. from March 1993 to
                               February 1997.
</TABLE>

SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

     Section  16(a)  of  the  Securities  Exchange  Act of 1934, as amended (the
"Exchange  Act"), requires directors and officers of the Company and persons who
own  more  than  10  percent  of  the  Company's  common  stock to file with the
Securities  and  Exchange  Commission  (the  "Commission")  initial  reports  of
ownership  and  reports  of changes in ownership of the common stock. Directors,
officers  and more than 10 percent stockholders are required by the Exchange Act
to  furnish  the  Company  with  copies  of  all  Section 16(a) forms they file.

     To  the Company's knowledge, based solely on a review of the copies of such
reports  furnished  to  the  Company and written representations that no reports
were  required  during  fiscal 2001, all Section 16(a) filings applicable to its
directors,  officers  and  more  than  10  percent beneficial owners were timely
filed.


                                      -22-
<PAGE>
ITEM  11.     EXECUTIVE  COMPENSATION.

The  following  table  sets  forth  for the fiscal years ended December 1, 2002,
December  2,  2001  and  December  3,  2000,  certain information concerning the
compensation  paid  or  accrued  to  certain  executive  officers of the Company
(collectively,  the  "Named Executive Officers").  The Company believes that the
aggregate  amount of perquisites and other personal benefits paid to each of the
Named  Executive Officers did not exceed the lesser of (i) 10% of such officer's
total  annual  salary  and  bonus  or  (ii) $50,000.  Thus, such amounts are not
reflected  in  the  following  table.

<TABLE>
<CAPTION>
                                         SUMMARY COMPENSATION TABLE

                                                                                Long-term compensation
                                       Annual Compensation                      Awards          Payouts
                              --------------------------------------------------------------------------     All
                                                        Other annual    Restricted                          other
Name and                                                  compen-         stock      Options     LTIP     compensa-
principal                                      Bonus       sation        award(s)     /Sar's    payouts     tion
position               Year      Salary ($)     ($)         ($)            ($)         (#)        ($)        ($)
-------------------------------------------------------------------------------------------------------------------
<S>                 <C>          <C>          <C>      <C>             <C>           <C>       <C>        <C>
John Catsimatidis,  Fiscal 2002  $   100,000  $     -  $            -  $          -         -  $       -  $       -
 Chairman of the    Fiscal 2001      100,000        -               -             -         -          -          -
 Board, President   Fiscal 2000      101,923        -               -             -         -          -          -
 and Chief
 Executive Officer

Gary Pokrassa       Fiscal 2002  $   150,000        -               -             -         -          -         -
 Chief Financial    Fiscal 2001      150,000        -               -             -         -          -         -
 Officer *          Fiscal 2000       46,154        -               -             -         -          -         -

*Mr.  Pokrassa's  joined  the  Company  on  August  14,  2000 as Chief Financial
Officer.
</TABLE>


OPTIONS  GRANTED  IN  LAST  FISCAL  YEAR

     The  following  table  sets  forth  certain  information concerning options
granted  during  fiscal  2002  to  the  Named  Executive  Officers.

<TABLE>
<CAPTION>
                                                                         Market
                    Number of                                           Price of                Potential Realizable Value
                   Securities     Percentage of                          Common                  At Assumed Annual Rates
                   Underlying     Total Options                         Stock on               of Stock Price Appreciation
                     Options       Granted to                            Date of                           for
Name               Granted (#)  Employees in       Exercise Price         Grant    Expiration          Option Term
                                      2002           (($/Share)         ($/Share)     Date        5% ($)         10%($)
--------------------------------------------------------------------------------------------------------------------------
<S>                <C>          <C>                <C>                  <C>        <C>         <C>

John Catsimatidis            0            --                 --               --           --        --             --

Gary Pokrassa                0            --                 --               --           --        --             --
</TABLE>


                                      -23-
<PAGE>
AGGREGATE  OPTIONS  EXERCISED  IN  LAST  FISCAL  YEAR AND FISCAL YEAR END OPTION
VALUES

     During  fiscal  2002,  no  stock options were exercised by any of the Named
Executive  Officers.  The  following  table  sets  forth the number and value of
options  outstanding  at  December 1, 2002 held by the Named Executive Officers:

<TABLE>
<CAPTION>
                                  Number of Unexercised      Value of Unexercised
                                      Options Held on       in-the-Money Options on
                                     December 1, 2002           December 1, 2002
                                -------------------------  -------------------------
<S>                             <C>                        <C>
             Name               Exercisable/Unexercisable  Exercisable/Unexercisable
                                -------------------------  -------------------------
             John Catsimatidis                  525,000/0                        0/0

             Gary Pokrassa                            0/0                        0/0
</TABLE>


The  closing  sales  price of the Common Stock on the American Stock Exchange on
November  29, 2002 (the last trading day before December 1, 2002) was $0.78.  On
December  1,  2002  Mr.  Catsimatidis held options to purchase 275,000 shares of
Common Stock at $3.75 per share and options to purchase 250,000 shares at $2.875
per  share.  Mr.  Pokrassa  held  no  options.

COMPENSATION  OF  DIRECTORS

Non-officer  directors  receive  a quarterly stipend of $1,500 and $500 for each
meeting  attended.  Directors  who  serve  on  committees  receive $500 for each
meeting  attended.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The  Board  of  Directors  has  a Compensation Committee consisting of Frederick
Selby  and  Martin  Steinberg.  During fiscal 2002, none of the Directors on the
Compensation  Committee  were  employees  or  officers  of the Company nor had a
relationship  with  the Company requiring disclosure under applicable Commission
disclosure  rules.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

PHILOSOPHY.  The  Company's  executive  compensation  philosophy  is  to provide
competitive  levels  of  compensation,  integrate  management's  pay  with  the
achievement  of  the Company's long-term performance goals, recognize individual
initiative  and  achievement, and assist the Company in attracting and retaining
qualified  management.  Executive  compensation consists of base salary and long
term  incentive  compensation  in the form of stock options. The compensation of
the  Company's  executive  officers is reviewed and approved by the Compensation
Committee,  which  is  composed  entirely  of non-employee directors. Management
compensation  is  intended  to  be set at levels that the Compensation committee
believes  is  consistent  with  others  in  the  Company's  industry.

In  reviewing  compensation  levels  of  the  Company's  key  executives,  the
Compensation  Committee  considers,  among other items, corporate profitability;
previous years' and competitors' profitability; revenues; and the quality of the
Company's  services.  No  specific  weight  is  accorded  to  any single factor.
Relative weights differ from executive to executive and change from time to time
as  circumstances  warrant.

BASE  SALARIES.  Base  salaries  for  new  management  employees  are determined
initially  by  evaluating  the  responsibilities  of  the  position held and the
experience  of  the individual, and by reference to the competitive market place
for  managerial  talent.  Salary  adjustments  are  determined by evaluating the


                                      -24-
<PAGE>
performance  of  the  executive  and any increased responsibility assumed by the
executive,  the  competitive  marketplace  and  the  performance of the Company.

EQUITY  OWNERSHIP.  The  Company  established  a  stock  option plan for its key
employees  in October 1994 and in March 1998 the Board of Directors approved the
1998 Option Plan for key employees, directors and consultants. In April 1999 the
Board of Directors approved an amendment to the 1998 Option Plan to increase the
number  of  shares  of  stock reserved under the plan from 500,000 to 1,500,000,
which  amendment was approved by the stockholders of the Company in August 1999.
The  Compensation  Committee  believes  that equity ownership by management is a
means of aligning management's and stockholders' interests in the enhancement of
stockholder  value.

COMPENSATION  OF  CHIEF  EXECUTIVE  OFFICER.  Mr.  Catsimatidis is the principal
stockholder  of the Company and from August 1991 to November 10, 1997 served the
Company without receiving a salary. Since November 10, 1997 Mr. Catsimatidis has
been  earning  a  salary  at  the  rate  of  $100,000  per  year.

During  fiscal  2002,  the Compensation Committee did not meet.  Compensation of
the Company's executive officers for fiscal 2002 was determined by the Company's
Board  of  Directors.



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

     The  following  table sets forth certain information regarding ownership of
Common  Stock on February 24, 2003 by: (i) each stockholder known to the Company
to own beneficially more than 5% of the outstanding shares of Common Stock; (ii)
each of the Company's directors; (iii) each of the Named Executive Officers; and
(iv) all executive officers and directors of the Company as a group. The address
of  each  person  is  c/o Gristede's Foods, Inc., 823 Eleventh Avenue, New York,
N.Y.  10019.  The  Company  believes that ownership of the shares by the persons
named  below  is both of record and beneficial and such persons have sole voting
and  investment  power  with  respect  to  the  shares  indicated.

<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner                                   Number of Shares   Percent of Class
-------------------------------------------------  -----------------  -----------------
<S>                                                <C>                <C>

John Catsimatidis                                     18,675,150 (1)              92.1%
Martin Steinberg                                         127,642 (2)                 *

Kishore Lall                                              70,000 (3)                 *
Martin Bring                                              26,000 (4)                 *
Frederick Selby                                           13,110 (5)                 *
Edward P. Salzano                                          3,000                     *

Andrew J. Maloney, Esq.                                        0                     *
Gary Pokrassa                                                  0                     *
All officers and directors as a group (8 persons)  18,914,902 (1)(6)              93.3%
</TABLE>

*    Less  than  1%.
(1)  Includes  an aggregate of 12,573,974 shares held by corporations controlled
     by  Mr.  Catsimatidis, 81,900 shares held by Mr. Catsimatidis as custodian,
     2,057  shares  held by a profit sharing plan of which Mr. Catsimatidis is a
     trustee,  605  shares  held  by Mr. Catsimatidis as a trustee of individual


                                      -25-
<PAGE>
     retirement  accounts  and  currently  exercisable  options  to  purchase an
     aggregate  of  525,000  shares  of  Common  Stock.
(2)  Includes  an  aggregate  of  15,000  shares  of  Common  Stock which may be
     purchased  upon  the  exercise  of  currently  exercisable  stock  options.
(3)  Includes  an  aggregate  of  55,000  shares  of  Common  Stock which may be
     purchased  upon  the  exercise  of  currently  exercisable  options.
(4)  Includes  an  aggregate  of  26,000  shares  of  Common  Stock which may be
     purchased  upon  the  exercise  of  currently  exercisable  stock  options.
(5)  Includes  an  aggregate  of  11,000  shares  of  Common  Stock which may be
     purchased  upon  the  exercise  of  currently  exercisable  options.
(6)  Includes  an  aggregate  of  632,000  shares  of  Common Stock which may be
     purchased  upon  the  exercise  of  currently  exercisable  stock  options.


                                      -26-
<PAGE>
EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth additional information as of December 1, 2002,
about shares of our Common Stock that may be issued upon the exercise of options
and other rights under our existing equity compensation plans and arrangements,
divided between plans approved by our stockholders and plans or arrangements not
submitted to the stockholders for approval.

<TABLE>
<CAPTION>
                         (a)                       (b)                     (c)
<S>                      <C>                       <C>                     <C>
Plan Category            Number of Securities to   Weighted-average        Number of Securities
                         be issued upon exercise   exercise price of       remaining available for
                         of outstanding options,   outstanding options,    future issuance under
                         warrants and rights       warrants and rights     equity compensation
                                                                           plans (excluding
                                                                           securities reflected in
                                                                           column (a)).

Equity compensation                     1,253,000                $ 3.14                   247,000
plans approved by
security holders

Equity compensation                            --                    --                        --
plans not approved by
security holders

Total                                   1,253,000                $ 3.14                   247,000
</TABLE>


                                      -27-
<PAGE>
ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     The  Company  has  entered into indemnification agreements with each of its
directors  and  officers.  These  indemnification  agreements  supplement  the
indemnification  provisions  of  the  Company's By-laws and the Delaware General
Corporation Law. The stockholders of the Company authorized the Company to enter
into  such  agreements  with  each  of  its  directors  at the Annual Meeting of
Stockholders  held on August 21, 1987. The Board of Directors has authorized the
Company  to  enter  into  such  agreements  with  each  of  its  officers

     By  virtue  of  his  ownership  of  Common  Stock  (see  Item 12. "Security
Ownership  of  Certain  Beneficial  Owners  and Management") and his position as
Chairman  of  the  Board of the Company, John Catsimatidis may be deemed to be a
"parent"  of  the  Company  under  rules  promulgated  by  the  Commission.

     Certain  stores  have  entered  into  capital  and operating leases with an
affiliate,  Red  Apple  Lease  Corporation,  a  company  wholly  owned  by  John
Catsimatidis).  Such  leases  are  primarily  for  store  operating  equipment.
Obligations  under  capital leases at December 1, 2002 and December 2, 2001 were
$3,435,385  and $1,409,251, respectively and require monthly payments of $76,790
through  March  2007.

     The  Company  leases  ten  locations:  a  25,000 square foot warehouse, its
office  facilities and eight store locations from Red Apple Real Estate, Inc., a
corporation  wholly  owned  by John Catsimatidis. During fiscal 2002 the Company
paid  to  Red  Apple  Real Estate, Inc.$2,469,000 for rent and real estate taxes
under  such  leases.  The lease terms provide for an aggregate of $2,734,800 per
year  in  lease  payments for fiscal 2003. The leases are triple net whereby the
tenant  pays  all  real  estate  taxes,  insurance  and  maintenance.

     Certain  stores  have entered into capital leases with an affiliate, United
Acquisition  Leasing Corp. (a company wholly owned by the majority shareholder).
Such leases are primarily for store equipment.  Obligations under capital leases
at  December  1,  2002  were  $4,030,094 and require monthly payments of $92,443
through  December  2007.

     In  October  2002, the Company and an affiliate of the Company acquired the
fixtures, leasehold improvements and store leases of three stores from the Great
Atlantic  &  Pacific  Tea Company for a total purchase price of $5,500,000.  The
affiliate  has  leased the acquired assets to the Company.  Such stores had been
closed  for  more  than  six  months prior to the transaction. Obligations under
these  capital  leases  at  December 1, 2002 were $5,000,214 and require monthly
payments of $79,156 through February 2008 and a balloon payment of $1,629,156 at
such  time.


     Amounts  due  to  affiliates,  primarily  United  Acquisition  Corp.,  a
corporation  indirectly  wholly  owned  by  the  majority shareholder, represent
liabilities  in  connection  with the consummation of the merger as discussed in
Note 1 of the financial statements and additional advances made by the affiliate
since  the  merger.  The  affiliates  have agreed not to demand payment of these
liabilities  in  the  next  fiscal  year.  Accordingly,  the  liability has been
classified  as  noncurrent.  As  part  of post-closing adjustments in connection
with  the  Food  Group acquisition, approximately $3,600,000 in due from certain
other  affiliates  has been offset against the amounts due to United Acquisition
Corp.  The net amount due to affiliates at December 1, 2002 and December 2, 2001
was  $14,842,437 and $14,525,904, respectively. Of these amounts $14,200,000 and
$12,800,000,  respectively,  was  subordinated  to  the  Company's  banks.  The
liability  presently  does  not  bear  interest.  However,  the Company's credit
agreement  with  its  banks  permits  the  Company  to  pay  interest  on  such
subordinated  debt  provided  the  Company  has  a  positive  net  income.

     MCV  Advertising  Associates  Inc.,  a  company  owned  by  the  majority
shareholder,  had  provided  advertising  services to the Company.  During 2000,
costs  incurred  were  $1,306,218.  The  Company  no  longer  uses  MCV and buys
advertising  directly  instead.

     Due  from  related  parties - trade, represents amounts due from affiliated
companies  for  merchandise  shipped  from the Company's subsidiary City Produce
Operating  Corp.  in  the ordinary course of business and for which payments are


                                      -28-
<PAGE>
made  to  such subsidiary on a continuous basis under extended terms, as well as
management  fees receivable for administrative and managerial services performed
for  the  affiliated  companies  by  the  Company.  During  2002, 2001 and 2000,
merchandise  sales  to  affiliates  were  $1,053,662,  $1,792,174  and $636,562,
respectively.  Of  the  total trade receivable due from an affiliate, $1,225,000
has  been  classified  as  non-current  on the balance sheet due to the extended
payment  terms  granted.

     On  February  6,  1998, the Company agreed to purchase substantially all of
the  assets  and  assumed certain of the liabilities of a supermarket located at
1644  York  Avenue, New York City, that was owned by a corporation controlled by
John Catsimatidis.  On March 1, 2000 the Company and the affiliate determined to
restructure  the transaction by rescinding the purchase effective as of February
6,  1998,  and entering into an operating agreement which gives the Company full
control  of  the  supermarket  and  the right to operate the supermarket for the
account  of  the  Company.  The  operating  agreement  presently  terminates  on
December 1, 2003, but the term shall be extended for additional one year periods
unless  either party gives notice of termination not later than 90 days prior to
the  end  of  the  then  current  term  of  the  agreement.  Under the operating
agreement,  the  Company  shall  pay to the affiliate $1.00 per annum, plus such
other  consideration  as  may  be approved by the Company's directors (excluding
John  Catsimatidis).  Pursuant  to  the  operating  agreement the Company or any
designee of the Company, also has the option until December 31, 2005 to purchase
the  supermarket  for  $2,778,000,  which  price is the fair market price of the
supermarket  established  on  October  11,  1999  by  the  Company's  directors
(excluding  John  Catsimatidis).

     In  May  2000,  another  affiliate  and  the Company entered into a similar
operating  agreement  for  a store owned by the affiliate. As consideration, the
affiliate  receives  the  nominal  amount  of  $1  per  annum,  plus  such other
consideration  as  may  be  approved  by the Company's directors (excluding John
Catsimatidis). The operating agreement presently terminates on May 10, 2004, but
the  term  shall be extended for additional one year periods unless either party
gives  notice of termination not later than 90 days prior to the end of the then
current term of the agreement. Pursuant to the operating agreement, the Company,
or  any  designee of the Company, also has the option until December 31, 2005 to
purchase  the  supermarket  for  the  fair  market  price  of the supermarket as
established  by  the  Company's  directors (excluding John Catsimatidis) using a
valuation  criterion  similar  to that issued for valuing the store at 1644 York
Avenue,  New York City. It is management's opinion that the fair market value of
this  store  is  approximately  $3  million.

     The  affiliates'  intention in entering into these two operating agreements
where  the  Company  enjoys  full  benefits  of  ownership  for  the  nominal
consideration  of  $1 per annum per store was to effect post closing adjustments
in  connection  with  the  Food Group acquisition. If the option to purchase the
supermarkets  is  exercised,  the excess of the purchase price over the net book
value  of  the  assets  will  be  shown  as  a  charge  to  equity.

     Under  a  management  agreement  dated  November  10, 1997 (the "Management
Agreement"),  Namdor  Inc., a subsidiary of the Company, performs consulting and
managerial  services  for  one  supermarket  (three supermarkets in prior years)
owned  by  a  corporation  controlled by John Catsimatidis.  In consideration of
such  services, Namdor Inc. is entitled to receive, on a quarterly basis, a cash
payment  of  one  and  one-quarter (1.25%) percent of all sales of inventory and
merchandise  made at or from the managed supermarkets.  During fiscal 2002, 2001
and  2000,  management  fee  income  was  $0, $47,222 and $66,244, respectively.

     The  Company  uses  the  services  of  an  affiliate  Red  Apple Medical, a
corporation  wholly-owned  by  John Catsimatidis, as an agent for self-insurance
purposes.  All  employee  medical  claims  are  submitted  to  a  third  party
administrator  who processes claims to be remitted through a controlled account.
Such  amounts are reimbursed by the Company to the agent. No fees have been paid
to this entity for the fiscal years 2002, 2001 and 2000.


                                      -29-
<PAGE>
ITEM  14.  CONTROLS  AND  PROCEDURES

     (a)  Evaluation of Disclosure Controls and Procedures.

Within  the 90 days prior to the date of this report, the Company carried out an
evaluation,  under  the  supervision and with the participation of the Company's
management, including the Company's Chairman and Chief Executive Officer and its
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  "disclosure  controls  and  procedures,"  which are defined under SEC
rules  as controls and other procedures of a company that are designed to ensure
that  information  required  to be disclosed by a company in the reports that it
files  under  the  Exchange  Act is recorded, processed, summarized and reported
within required time periods. Based upon that evaluation, the Company's Chairman
and  Chief  Executive Officer and its Chief Financial Officer concluded that the
Company's  disclosure  controls  and  procedures  were  effective.

     (b)  Changes in Internal Controls

There  were  no  significant changes in the Company's internal controls or other
factors that could significantly affect these controls subsequent to the date of
their  evaluation.


                                     PART IV

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

     (a)  The following documents are filed as part of this Annual Report on
          Form 10-K.

          1.   Consolidated Financial Statements:

     The  Consolidated  Financial Statements filed as part of this Form 10-K are
listed in the "Index to Consolidated Financial Statements" in Item 8."

          2.   Consolidated Financial Statement Schedule:

     The  Consolidated Financial Statement Schedule filed as part of this report
is  listed  in  the  "Index  to  S-X  Schedule".

     Schedules other than those listed in the accompanying Index to S-X Schedule
are  omitted for the reason that they are either not required, not applicable or
the required information is included in the Consolidated Financial Statements or
notes  thereto.


                                      -30-
<PAGE>
                     GRISTEDE'S FOODS, INC. AND SUBSIDIARIES

                              INDEX TO S-X SCHEDULE

                                                                           Page
                                                                           ----

Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . 31
Schedule II -- -Valuation & Qualifying Accounts . . . . . . . . . . . . . . 32


<PAGE>
================================================================================
--------------------------------------------------------------------------------


INDEPENDENT  AUDITORS'  REPORT



Board of Directors of
Gristede's Foods, Inc.
New York, New York

We  have  audited  the  accompanying  consolidated  balance sheets of Gristede's
Foods, Inc. and subsidiaries (the "Company") as of December 1, 2002 and December
2,  2001,  and  the related consolidated statements of operations, stockholders'
equity,  and cash flows for each of the three years in the period ended December
1,  2002.  These  financial  statements  are the responsibility of the Company's
management.  Our  responsibility  is  to  express  an  opinion  on the financial
statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audits  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 Gristede's Foods,
Inc.  and  subsidiaries  as  of  December  1, 2002 and December 2, 2001, and the
results  of their operations and their cash flows for each of the three years in
the  period  ended  December  1,  2002, in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.



New York, NY                             /s/ BDO Seidman, LLP
                                         -----------------------
March 3, 2003                            BDO Seidman, LLP
                                         -----------------------


<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
-------------------------------------------------------------------------------------------
                                                                     GRISTEDE'S FOODS, INC.
                                                                           AND SUBSIDIARIES

                                                                CONSOLIDATED BALANCE SHEETS


                                                        December 1, 2002   December 2, 2001
-------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>
ASSETS
CURRENT:
  Cash                                                 $         576,358  $         475,873
  Accounts receivable - net of allowance for doubtful
    accounts of $481,000 and $413,000, respectively            7,659,552          6,702,715
  Inventories                                                 37,601,170         32,378,606
  Due from related parties - trade                               251,665          1,092,571
  Prepaid expenses and other current assets                    2,825,984          2,233,876
-------------------------------------------------------------------------------------------
         TOTAL CURRENT ASSETS                                 48,914,729         42,883,641
-------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
  Furniture, fixtures and equipment                           20,159,016         18,067,058
  Capitalized equipment leases                                34,300,805         23,970,127
  Leasehold interests and improvements                        59,323,240         52,901,265
-------------------------------------------------------------------------------------------
                                                             113,783,061         94,938,450
  Less: Accumulated depreciation and amortization             48,474,655         41,193,533
-------------------------------------------------------------------------------------------
         NET PROPERTY AND EQUIPMENT                           65,308,406         53,744,917
DEPOSITS AND OTHER ASSETS                                      1,120,028          1,044,141
DUE FROM RELATED PARTIES - TRADE                               1,225,000                 --
OTHER ASSETS                                                   4,043,978          3,458,662
===========================================================================================
                                                       $     120,612,141  $     101,131,361
===========================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
---------------------------------------------------------------------------------------------

                                                                        GRISTEDE'S FOODS, INC
                                                                             AND SUBSIDIARIES

                                                                  CONSOLIDATED BALANCE SHEETS


                                                         December 1, 2002    December 2, 2001
---------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
  Accounts payable, trade                              $      33,438,962   $      26,978,700
  Accrued payroll, vacation and withholdings                   3,177,933           2,435,312
  Accrued expenses and other current liabilities               2,343,654           2,067,031
  Capitalized lease obligation - current portion               4,892,101           3,950,221
  Current portion of long-term debt                            2,500,740           2,378,262
  Due to affiliates - trade                                      398,913             792,939
---------------------------------------------------------------------------------------------
         TOTAL CURRENT LIABILITIES                            46,752,303          38,602,465
  Long-term debt-noncurrent portion                           28,349,802          23,108,333
  Due to affiliates                                           14,842,437          14,525,904
  Capitalized lease obligation - noncurrent portion           14,945,257           9,048,692
  Deferred rent                                                5,056,248           4,253,466
---------------------------------------------------------------------------------------------
                     TOTAL LIABILITIES                       109,946,047          89,538,860
---------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  Common stock, $0.02 par value - shares authorized
    25,000,000; issued and outstanding 19,636,574                392,732             392,732
  Additional paid-in capital                                  14,136,674          14,136,674
  Retained earnings (deficit)                                 (3,863,312)         (2,936,905)
---------------------------------------------------------------------------------------------
          TOTAL STOCKHOLDERS' EQUITY                          10,666,094          11,592,501
---------------------------------------------------------------------------------------------
                                                       $     120,612,141   $     101,131,361
=============================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================
---------------------------------------------------------------------------------------------------------
                                                                                   GRISTEDE'S FOODS, INC.
                                                                                         AND SUBSIDIARIES
                                                                    CONSOLIDATED STATEMENTS OF OPERATIONS


                                                    52 WEEKS ENDED     52 WEEKS ENDED     53 WEEKS ENDED
                                                   DECEMBER 1, 2002   DECEMBER 2, 2001   DECEMBER 3, 2000
---------------------------------------------------------------------------------------------------------
<S>                                                <C>                 <C>                 <C>
SALES                                              $     250,732,767   $     229,988,315   $216,325,214
COST OF SALES                                            151,435,010         139,180,967    131,259,228
---------------------------------------------------------------------------------------------------------
    GROSS PROFIT                                          99,297,757          90,807,349     85,065,986
Store operating, general and administrative
  expenses                                                79,175,726          71,596,708     67,550,165
Pre-store opening startup costs                              741,570             165,000        518,981
Bad debt expense (credit)                                     72,000             250,354       (350,000)
Depreciation and amortization                              7,989,625           7,204,281      6,284,971
Insurance proceeds and grants - terrorist attack
and theft                                                   (587,300)         (1,536,510)            --
Casualty loss - terrorist attack                                  --           1,068,908             --
Nonstore operating expenses:
  Administrative payroll and fringes                       7,125,070           5,445,675      4,930,755
  General office expense                                   1,993,196           1,998,374      1,679,382
  Professional fees                                          477,749             709,448        649,983
  Corporate expense                                          234,463             176,062        175,829
---------------------------------------------------------------------------------------------------------
           OPERATING INCOME                                2,075,658           3,729,050      3,625,920
---------------------------------------------------------------------------------------------------------
Other income (expense):
  Interest expense                                        (2,967,181)         (3,537,281)    (3,761,941)
  Interest income                                              5,116               9,016         24,113
  Other income (expense)                                          --             173,112        (27,000)
---------------------------------------------------------------------------------------------------------
           TOTAL OTHER EXPENSE                            (2,962,065)         (3,355,153)    (3,764,828)
---------------------------------------------------------------------------------------------------------
Income (loss) before provision
   for income taxes                                         (886,407)            373,897       (138,908)
Provision for income taxes                                    40,000              98,840         52,000
=========================================================================================================
NET INCOME (LOSS)                                  $        (926,407)  $         275,057   $   (190,908)
Net income (loss) per share of common
  stock - basic and diluted:
NET INCOME (LOSS)                                  $           (0.05)  $            0.01   $      (0.01)
=========================================================================================================
Weighted average common shares
   outstanding                                            19,636,574          19,636,574     19,636,574
=========================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
-------------------------------------------------------------------------------------------------
                                                                           GRISTEDE'S FOODS, INC.
                                                                                 AND SUBSIDIARIES

                                                                       CONSOLIDATED STATEMENTS OF
                                                                             STOCKHOLDERS' EQUITY


                                Common stock
                            --------------------                        Retained     Total Stock-
                            Number of    Amount        Additional       Earnings       holders'
                              Shares                paid- in capital    (deficit)       equity
=================================================================================================
<S>                         <C>         <C>       <C>                <C>           <C>
BALANCE, NOVEMBER 29, 1999  19,636,574  $392,732  $      14,136,674  $(3,021,054)  $  11,508,352

Net loss                             -         -                  -     (190,908)       (190,908)

BALANCE, DECEMBER 3, 2000   19,636,574   392,732         14,136,674   (3,211,962)     11,317,444

Net income                           -         -                  -      275,057         275,057

BALANCE, DECEMBER 2, 2001   19,636,574   392,732         14,136,674   (2,936,905)     11,592,501

Net loss                             -         -                  -     (926,407)       (926,407)
=================================================================================================
BALANCE, DECEMBER 1, 2002   19,636,574  $392,732  $      14,136,674  $(3,863,312)  $  10,666,094
=================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
----------------------------------------------------------------------------------------------------------------------------
                                                                                                      GRISTEDE'S FOODS, INC.
                                                                                                            AND SUBSIDIARIES

                                                                                        CONSOLIDATED STATEMENTS OF CASH FLOW


                                                                    52 Weeks Ended      52 Weeks Ended      53 Weeks Ended
                                                                   December 1, 2002    December 2, 2001    December 3, 2000
----------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                 $        (926,407)  $         275,057   $        (190,908)
Adjustments to reconcile loss to net cash provided by operating
activities:
  Depreciation and amortization                                           7,989,625           7,204,281           6,284,971
  Allowance for doubtful accounts                                            68,245             262,807            (350,000)
  Gain on sale of store                                                          --            (192,177)                 --
Changes in operating assets and liabilities:
  Accounts receivable                                                    (1,025,081)           (101,193)         (1,314,582)
  Due from related parties - trade                                         (384,094)           (213,571)           (879,000)
  Due from related parties - other                                               --           3,072,000          (3,072,000)
  Inventories                                                            (5,222,564)         (2,273,651)         (4,863,279)
  Prepaid expenses and other current assets                                (592,108)            254,461            (726,959)
  Notes receivable                                                               --                  --             562,826
  Other assets                                                           (1,099,707)           (677,252)         (1,205,321)
  Accounts payable, trade                                                 6,460,262              22,302          12,531,049
  Accrued payroll, vacation and withholdings                                742,622              37,719             970,442
  Accrued expenses and other current liabilities                            309,716             723,610            (167,269)
  Due to affiliates - trade                                                (394,026)            792,939                  --
  Deferred rent                                                             802,781             951,673             909,040
----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                 6,729,264          10,139,005           8,489,010
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of store                                                    --             225,000                  --
  Capital expenditures                                                   (8,513,933)         (6,475,969)         (8,583,643)
----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                    (8,513,933)         (6,250,969)         (8,583,643)
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of bank loans                                               (1,910,757)         (3,429,483)         (1,366,667)
  Repayments of capitalized lease obligations                            (3,945,327)         (3,291,959)         (2,390,405)
  Proceeds from bank loans                                                7,424,704             500,000             950,000
  Net proceeds from affiliates                                              316,534           2,396,873           3,015,531
----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                       1,885,154          (3,824,569)            208,459
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                                             100,485             (63,465)            113,826
Cash, beginning of period                                                   475,873             412,408             298,582
============================================================================================================================
Cash, end of period                                               $         576,358   $         475,873   $         412,408
============================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  Cash paid for interest                                          $       2,901,513   $       3,764,726   $       3,814,882
  Cash paid for (received from) income taxes                                (77,002)             97,135              84,930
============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
  Capital leases - property and equipment and other assets        $      10,783,771   $       5,706,573   $       5,752,726
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   BUSINESS  AND  BASIS  OF  PRESENTATION

     Gristede's  Foods,  Inc.  and  subsidiaries  (the  "Company")  operates  49
supermarkets,  two  pharmacies  and  a  distribution  facility  in  the New York
Metropolitan area. (Two supermarkets opened in December 2002, subsequent to year
end).  On  August 12, 1999, the Company changed its name from Gristede's Sloan's
Inc.,  ("Sloan's") to Gristede's Foods, Inc. to reflect its strategy of changing
its "Sloan's" banner locations to "Gristede's" subsequent to a store remodeling.

     On  November  10,  1997,  the  Company  acquired  certain  assets,  net  of
liabilities,  of  29 selected supermarkets and a wholesale distribution business
("The  Food Group") controlled by John Catsimatidis (the "majority shareholder")
of  the Company. The transaction was accounted for as the acquisition of Sloan's
by  The  Food  Group pursuant to Emerging Issues Task Force 90-13 as a result of
The  Food  Group  obtaining control of Sloan's after the transaction. The assets
and  liabilities  of  The  Food  Group  (the  "Acquiror")  are recorded at their
historical  cost.  The  assets and liabilities of Sloan's were recorded at their
fair  value  to the extent acquired. Consideration for the transaction was based
on an aggregate of $36,000,000 in market value of the Company's common stock and
the  assumption  of  $4,000,000  of  liabilities.  The Company issued 16,504,298
shares of common stock on the date of the acquisition based on a market price of
$2.18  per  share.

     The  Company  did  not  recognize any gain or loss as a result of the above
acquisition.  The  Company underwent an "Ownership Change" within the meaning of
Section  382  of the Internal Revenue Code of 1986, as amended, as a consequence
of  the  transaction.  As  a  result,  the  Company's  ability to offset its net
operating  loss  carryforwards  against  income  earned after the transaction is
limited.

2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

PRINCIPLES  OF  CONSOLIDATION
The  consolidated financial statements include the accounts of Gristede's Foods,
Inc.  and  its wholly-owned subsidiaries. All material intercompany accounts and
transactions  have  been  eliminated  in  consolidation.

FISCAL  YEAR
The  Company's fiscal year ends on the Sunday closest to November 30. The fiscal
years  ended December 1, 2002, December 2, 2001 and December 3, 2000 include 52,
52  and  53  weeks  respectively.

CASH  AND  CASH  EQUIVALENTS
Cash and cash equivalents consist of cash on hand, and highly liquid investments
which are readily convertible to known amounts of cash and which have maturities
of  three  months  or  less.

REVENUE  RECOGNITION
The  Company  recognizes  revenues  from  the  sale  of  merchandise at the time
merchandise  is  sold.

DEFERRED  INCOME
Rebates  received  from vendors that are based on future purchases are initially
deferred  and  are  recognized  as  a  reduction  of cost of goods sold when the
related  inventory  is  purchased.  Rebates  not  tied directly to purchases are
recognized  as  a  reduction of cost of goods sold on a straight-line basis over
the  related  contract  term.

STORE PRE-OPENING EXPENSES AND CLOSING COSTS
Costs  incurred prior to the opening of a new store, associated with a remodeled
store,  or related to the opening of a distribution facility are charged against
earnings  as  pre-store  opening  start-up  costs when incurred. When a store is
closed,  the  Company expenses unrecoverable costs and accrues a liability equal
to  the  present  value  of  the  remaining  lease  obligations, net of expected
sublease  income.

SIGNIFICANT  CONCENTRATIONS
During  fiscal 2002, 2001 and 2000, the Company purchased approximately 40%, 39%
and  38%,  respectively,  of  its  merchandise  from  a  single supplier. If the
Company's  relationship  with  this  supplier  were disrupted, the Company could
purchase  from  other  suppliers  without  negative  impact  on  its  business.


                                      F-7
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVENTORIES
Store  inventories  are  valued  principally at the lower of cost or market with
cost  determined  under  the  retail  method.

PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost.   Depreciation of furniture, fixtures
and  equipment is computed by the straight-line method over the estimated useful
lives  of  the  assets,  with  lives  ranging from seven to ten years. Leasehold
interest  and  improvements  are  amortized  over the shorter of their estimated
useful  lives  or  the  lease term, on a straight-line basis, including optional
periods where the Company intends to exercise its option.  The Company maintains
its  own  internal  construction  crew.  Amounts capitalized for these employees
related  to  store  renovations  and  new store construction were $2,493,677 and
$2,678,833  for  fiscal  2002  and  2001,  respectively.

SOFTWARE  COSTS
The  Company  follows  the provisions of Statement of Position 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1").  SOP  98-1  requires  the capitalization of certain internally generated
software  costs.  In fiscal 2002 and 2001 the Company capitalized $1,175,000 and
$500,000  of  such  software  costs, respectively. In previous years the amounts
were  not  material.  Such software is amortized over three years and for fiscal
2002 and 2001 the Company recorded amortization expense of $210,000 and $18,000,
respectively.

LEASES
The  Company  charges  the  cost  of  operating  lease  payments  and beneficial
leaseholds  to operations on a straight-line basis over the lives of the leases.

ADVERTISING  EXPENSE
The  Company expenses advertisement costs when the advertisement is first shown.
During 2002, 2001 and 2000, $2,180,285, $1,572,963 and $1,555,707 of advertising
costs  were  expensed,  respectively.

OTHER  ASSETS
Other  assets  consist  mainly  of acquisition, prescription lists and financing
costs  and  are  amortized  on  a  straight-line  basis  over five to ten years.
Non-compete agreements generally are amortized over the life of the agreement up
to  ten  years.

INCOME  TAXES
Deferred  tax  assets  and  liabilities  are  recognized  for  the  future  tax
consequences  attributable  to  differences  between  the  financial  statement
carrying  amounts  of  existing  assets and liabilities and their respective tax
bases.  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 operations in
the  period  that  includes  the  enactment  date.

ACCRUED  SELF-INSURANCE
Insurance  expense for employee-related health care benefits are estimated using
historical  experience.

USE  OF  ESTIMATES
The  preparation  of  financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  certain reported amounts of assets, liabilities, income and expenses and
disclosures  of contingencies. Actual results could differ from those estimated.

STOCK-BASED  COMPENSATION  PLANS
Statement  of  Financial  Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based  Compensation"  allows  either  adoption  of  a fair value method of
accounting  for  stock-based  compensation  plans  or continuation of accounting
under  Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations with supplemental disclosures.


                                      F-8
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The  Company has chosen to account for all stock-based compensation arrangements
under  APB Opinion No. 25 with related disclosures under SFAS No. 123. Pro forma
net  earnings  (loss)  per  common share amounts as if the fair value method had
been  adopted  are  presented  in  Note  10.

FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS  No. 107, "Disclosure About Instruments" requires companies to disclose the
fair  value  of  financial  instruments.  The  carrying  values of cash and cash
equivalents,  accounts  receivable  and  accounts  payable  reported  in  the
accompanying  consolidated  balance  sheets  approximate  fair  value due to the
short-term  maturities  of  these  assets.

The  fair  value  of  long-term debt, consisting of the term loans and revolving
loan  payable  as  of  December  1,  2002 and December 2, 2001, approximates the
recorded  book  value  because  of  the  fluctuating  interest rates. It was not
practical to determine the fair value of the amount due to affiliate, because of
the  uncertain  repayment  terms.

LONG-LIVED  ASSETS
The Company reviews long-lived assets and certain identifiable assets related to
those  assets  for  impairment whenever circumstances and situations change such
that  there  is  an indication that the carrying amounts may not be recoverable.
If  the  undiscounted  future  cash  flows of the enterprise are less than their
carrying  amounts,  their  carrying  amounts  are  reduced  to fair value and an
impairment  loss is recognized. No impairment losses have been necessary through
December  1,  2002.

EARNINGS  (LOSS)  PER  SHARE
The Company follows SFAS No. 128, "Earnings Per Share," ("EPS") which requires a
presentation  of  basic EPS and diluted EPS.  Basic EPS excludes dilution and is
computed  by  dividing earnings available to common stockholders by the weighted
average number of common shares outstanding for the period.  Diluted EPS assumes
conversion  of  convertible  debt and the issuance of common stock for all other
potentially  dilutive equivalent shares outstanding.  Diluted EPS is the same as
basic  EPS  since  the  options  which  could  potentially dilute basic EPS were
anti-dilutive  for  the  periods  presented.

RECLASSIFICATION
Certain  reclassifications  were  made  to the fiscal 2001 and 2000 consolidated
financial  statements  to  conform  to  the  fiscal  2002  presentation.

RECENT  ACCOUNTING  PRONOUNCEMENTS
In  June  2001,  SFAS  No.  141,  Business Combinations (SFAS 141), and No. 142,
Goodwill  and  Other  Intangible  Assets  (SFAS  142)  were finalized.  SFAS 141
requires  the  use of the purchase method of accounting and prohibits the use of
the  pooling-of-interests  method  of  accounting  for  business  combinations
initiated  after  June  30,  2001.  SFAS  141  also  requires  that  the Company
recognize  acquired  intangible  assets apart from goodwill if they meet certain
criteria.  SFAS  141  applies  to all business combinations initiated after June
30,  2001  and  for purchase business combinations completed on or after July 1,
2001.  It  also requires, upon adoption of SFAS 142, that the Company reclassify
the  carrying amounts of intangible assets and goodwill based on the criteria in
SFAS  141. The Company adopted SFAS 141 in the first quarter of fiscal 2002 with
no  material  effect  on  its  financial  statements.

SFAS  142  requires,  among  other  things,  that  companies  no longer amortize
goodwill,  but  instead  test  goodwill  for  impairment  at least annually.  In
addition,  SFAS  142  requires that the Company identify reporting units for the
purposes  of  assessing  potential  future impairments of goodwill, reassess the
useful  lives  of  other  existing  recognized  intangible  assets,  and  cease
amortization of intangible assets with an indefinite useful life.  An intangible
asset  with  an  indefinite  useful  life  should  be  tested  for impairment in
accordance  with the guidelines in SFAS 142.  SFAS 142 is required to be applied
in  fiscal  years


                                      F-9
<PAGE>
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--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


beginning  after  December  15, 2001 to all goodwill and other intangible assets
recognized  at  that  date,  regardless  of  when  those  assets  were initially
recognized.  It  also  requires  the Company to complete a transitional goodwill
impairment  test  within  six  months from the date of adoption.  The Company is
also required to reassess the useful lives of other intangible assets within the
first  interim  quarter after adoption of SFAS 142. The Company adopted SFAS 142
in  the  first  quarter  of fiscal 2002 with no material effect on its financial
statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 develops an accounting model, based
upon  the  framework  established  in  SFAS No. 121, for long-lived assets to be
disposed  by  sales.  The  accounting  model  applies  to all long-lived assets,
including discontinued operations, and it replaces the provisions of ABP Opinion
No.  30, "Reporting Results of Operations-Reporting the Effects of Disposal of a
Segment  of  a  Business  and  Extraordinary, Unusual and Infrequently Occurring
Events  and  Transactions," for disposal of segments of a business. SFAS No. 144
requires  long-lived  assets  held  for  disposal to be measured at the lower of
carrying  amount  or  fair  values  less  costs  to  sell,  whether  reported in
continuing  operations or in discontinued operations. The statement is effective
for fiscal years beginning after December 15, 2001. The Company intends to adopt
this  standard  at  the  beginning  of its fiscal 2003. The Company believes the
adoption  of  SFAS  No.  144  will  not  have a material impact on its financial
position  or  results  of  operations.

In  July  2002,  the  FASB issued SFAS No. 146, "Accounting for Costs Associated
with  Exit  or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and replaces
EITF  Issue  No.  94-3,  "Liability Recognition for Certain Employee Termination
Benefits  and  Other Costs to Exit an Activity (including Certain Costs Incurred
in  a  Restructuring)."  SFAS  No.  146  requires  that  a  liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  SFAS  No.  146  also establishes that fair value is the objective for
initial  measurement  of  the  liability. The statement is effective for exit or
disposal  activities initiated after December 31, 2002. The Company believes the
adoption  of  SFAS  No.  146  will  not  have a material impact on its financial
position  or  results  of  operations.

In  December  2002,  the  FASB  issued SFAS No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and Disclosure". SFAS No. 148 amends FASB Statement
No. 123, "Accounting for Stock-Based Compensation." Although it does not require
use of fair value method of accounting for stock-based employee compensation, it
does  provide  alternative  methods of transition. It also amends the disclosure
provisions  of  Statement  123  and  APB  Opinion  No.  28,  "Interim  Financial
Reporting,"  to  require  disclosure  in  the  summary of significant accounting
policies  of  the  effects  of  an  entity's  accounting  policy with respect to
stock-based  employee compensation on reported net income and earnings per share
in  annual  and  interim  financial  statements. SFAS No. 148's amendment of the
transition  and  annual  disclosure  requirements are effective for fiscal years
ending  after  December  15,  2002.  The amendment of disclosure requirements of
Opinion  No.  28  are effective for interim periods beginning after December 15,
2002.  The Company will continue to use the intrinsic value method of accounting
as allowed under SFAS No. 148 for stock-based compensation for its first quarter
of  fiscal  year  2003.


                                      F-10
<PAGE>
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                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.   RELATED  PARTY  TRANSACTIONS

(a)On  February 6, 1998, the Company agreed to purchase substantially all of the
assets  and  assumed certain of the liabilities of a supermarket located at 1644
York  Avenue,  New York City, that was owned by a corporation controlled by John
Catsimatidis.  On  March  1,  2000  the  Company and the affiliate determined to
restructure  the transaction by rescinding the purchase effective as of February
6,  1998,  and entering into an operating agreement which gives the Company full
control  of  the  supermarket  and  the right to operate the supermarket for the
account  of  the  Company.  The  operating  agreement  presently  terminates  on
December 1, 2003, but the term shall be extended for additional one year periods
unless  either party gives notice of termination not later than 90 days prior to
the  end  of  the  then  current  term  of  the  agreement.  Under the operating
agreement,  the  Company  shall  pay to the affiliate $1.00 per annum, plus such
other  consideration  as  may  be approved by the Company's directors (excluding
John  Catsimatidis).  Pursuant  to  the  operating  agreement the Company or any
designee of the Company, also has the option until December 31, 2005 to purchase
the  supermarket  for  $2,778,000,  which  price is the fair market price of the
supermarket  established  on  October  11,  1999  by  the  Company's  directors
(excluding  John  Catsimatidis).

     In  May  2000,  another  affiliate  and  the Company entered into a similar
operating  agreement  for a store owned by the affiliate.  As consideration, the
affiliate  receives  the  nominal  amount  of  $1  per  annum,  plus  such other
consideration  as  may  be  approved  by the Company's directors (excluding John
Catsimatidis).  The  operating  agreement  presently terminates on May 10, 2004,
but  the  term  shall  be extended for additional one year periods unless either
party gives notice of termination not later than 90 days prior to the end of the
then  current  term  of  the agreement. Pursuant to the operating agreement, the
Company,  or any designee of the Company, also has the option until December 31,
2005 to purchase the supermarket for the fair market price of the supermarket as
established  by  the  Company's  directors (excluding John Catsimatidis) using a
valuation  criterion  similar  to that issued for valuing the store at 1644 York
Avenue,  New York City. It is management's opinion that the fair market value of
this  store  is  approximately  $3  million.

     The  affiliates'  intention in entering into these two operating agreements
where  the  Company  enjoys  full  benefits  of  ownership  for  the  nominal
consideration  of  $1 per annum per store was to effect post closing adjustments
in  connection  with  the  Food Group Acquisition. If the option to purchase the
supermarkets  is  exercised,  the excess of the purchase price over the net book
value  of  the  assets  will  be  shown  as  a  charge  to  equity.

     In  connection  with  the  restructure  of  the transaction relating to the
supermarket  located  at  1644 York Avenue, $3,072,000 was included in "Due from
related  parties  -  other"  on  the  balance sheet as of December 3, 2000. Such
amount has been paid or offset against amounts due from affiliates during fiscal
2001.

(b)  Under  a  management  agreement  dated  November  10, 1997 (the "Management
Agreement"),  Namdor  Inc., a subsidiary of the Company, performs consulting and
managerial  services  for  one  supermarket  (three supermarkets in prior years)
owned  by  a  corporation  controlled by John Catsimatidis.  In consideration of
such  services, Namdor Inc. is entitled to receive, on a quarterly basis, a cash
payment  of  one  and  one-quarter (1.25%) percent of all sales of inventory and
merchandise made at, in or from the managed supermarkets.  During 2002, 2001 and
2000,  management  fee  income  was  $0,  $47,222  and  $66,244,  respectively.

(c)  Certain  stores  have  entered  into  capital  and operating leases with an
affiliate,  Red  Apple  Lease  Corporation,  a  company  wholly  owned  by  John
Catsimatidis.  Such  leases  are  primarily  for  store  operating  equipment.
Obligations  under  capital leases at December 1, 2002 and December 2, 2001 were


                                      F-11
<PAGE>
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--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


$3,435,385  and $1,409,251, respectively and require monthly payments of $76,790
through  March  2007.

     The  Company  leases  ten  locations:  a  25,000 square foot warehouse, its
office  facilities and eight store locations from Red Apple Real Estate, Inc., a
corporation  wholly  owned  by  John  Catsimatidis. During fiscal 2002, 2001 and
2000,  respectively, the Company paid to Red Apple Real Estate, Inc. $2,469,000,
$1,610,000  and  $1,236,420,  respectively  for rent and real estate taxes under
such  leases. The lease terms provide for an aggregate of $2,734,800 per year in
lease  payments  for  fiscal  2003. The leases are triple net whereby the tenant
pays  all  real  estate  taxes,  insurance  and  maintenance.  (See  Note  6.)

(d)  Certain  stores  have entered into capital leases with an affiliate, United
Acquisition  Leasing Corp. (a company wholly owned by the majority shareholder).
Such leases are primarily for store equipment.  Obligations under capital leases
at  December  1,  2002  were  $4,030,094 and require monthly payments of $92,443
through  December  2007.

     In  October  2002, the Company and an affiliate of the Company acquired the
fixtures, leasehold improvements and store leases of three stores from the Great
Atlantic  &  Pacific  Tea Company for a total purchase price of $5,500,000.  The
affiliate  has  leased the acquired assets to the Company.  Such stores had been
closed  for  more  than  six  months prior to the transaction. Obligations under
these  capital  leases  at  December 1, 2002 were $5,000,214 and require monthly
payments of $79,156 through February 2008 and a balloon payment of $1,629,156 at
such  time.

(e)  MCV  Advertising  Associates  Inc.,  a  company  owned  by  the  majority
shareholder,  had  provided  advertising  services to the Company.  During 2000,
costs  incurred  were  $1,306,218.  The  Company  no  longer  uses  MCV and buys
advertising  directly  instead.

(f)  Due  from  related  parties - trade, represents amounts due from affiliated
companies  for  merchandise  shipped  from the Company's subsidiary City Produce
Operating  Corp.  in  the ordinary course of business and for which payments are
made  to  such subsidiary on a continuous basis under extended terms, as well as
management  fees receivable for administrative and managerial services performed
for  the  affiliated  companies  by  the  Company.  During  2002, 2001 and 2000,
merchandise  sales  to  affiliates  were  $1,053,662,  $1,792,174  and $636,562,
respectively.  Of  the  total trade receivable due from an affiliate, $1,225,000
has  been  classified  as  non-current  on the balance sheet due to the extended
payment  terms  granted.

(g)  The  Company  uses  the  services  of  an  affiliate  Red  Apple Medical, a
corporation  wholly-owned  by  John Catsimatidis, as an agent for self-insurance
purposes.  All  employee  medical  claims  are  submitted  to  a  third  party
administrator  who processes claims to be remitted through a controlled account.
Such  amounts are reimbursed by the Company to the agent. No fees have been paid
to this entity for the fiscal years 2002, 2001 and 2000.


                                      F-12
<PAGE>
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--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.   OTHER  ASSETS

Additions  in  2002  totaling  $1,781,188  consist  of $102,808 in debt costs, a
$50,000  covenant  not  to compete, $475,000 in customer lists and $1,153,380 of
deferred  acquisition  and  financing  costs.  None of these items have residual
value  and all except deferred acquisition costs have a weighted average life of
five  years.

<TABLE>
<CAPTION>
                                                                            Amortization
                                            Accumulated                     ------------
AT DECEMBER 1, 2002:              Cost     amortization   Net book value         expense
-----------------------------  ----------  -------------  ---------------  -------------
<S>                            <C>         <C>            <C>              <C>
ACQUISITION COSTS, CONSISTING
MAINLY OF PROFESSIONAL FEES    $1,471,848  $   1,205,381  $       266,467  $     192,161

NON-COMPETE COVENANTS           1,565,316      1,017,133          548,183        182,493

DEBT COSTS                      1,222,722        812,036          410,686        222,265

COSTS RELATING TO KINGS
ACQUISITION                     1,153,380             --        1,153,380             --

PRESCRIPTION LISTS              2,175,582        528,146        1,647,436        269,427

OTHER                             114,204         96,378           17,826         17,873
----------------------------------------------------------------------------------------
TOTALS                         $7,703,052  $   3,659,074  $     4,043,978  $     884,219
----------------------------------------------------------------------------------------

                                                                            Amortization
                                            Accumulated                     ------------
AT DECEMBER 1, 2001:              Cost     amortization   Net book value         expense
-----------------------------  ----------  -------------  ---------------  -------------
ACQUISITION COSTS, CONSISTING
MAINLY OF PROFESSIONAL FEES    $1,471,848  $   1,056,434  $       415,414  $     251,092

NON-COMPETE COVENANTS           1,515,316        834,640          680,676        169,031

DEBT COSTS                      1,119,914        546,558          573,356        156,191

PRESCRIPTION LISTS              1,700,582        258,719        1,441,863        201,174

OTHER                             601,572        254,219          347,353        186,641
----------------------------------------------------------------------------------------
TOTALS                         $6,409,232  $   2,950,570  $     3,458,662  $     964,129
----------------------------------------------------------------------------------------
</TABLE>

Estimated total amortization expense for the next five years is as follows:
                2003                  $882,973
                2004                   878,023
                2005                   716,585
                2006                   716,585
                2007                   716,585

COSTS  RELATING  TO  KINGS  ACQUISITION  -  The Company has incurred costs in an
effort to acquire Kings Supermarkets, Inc., a chain of 29 stores, mainly located
in  Northern New Jersey. The Company intends to continue such efforts to acquire
this  company.  No  assurance  can  be  given  that  this  acquisition  will  be
consummated. In connection with the proposed acquisition and required financing,
the Company incurred certain costs (principally professional fees) in the amount
of  $1,153,380  (included  in  other  assets on the accompanying balance sheet).
$708,175  of  such costs are reimbursable to the Company by its affiliate United
Acquisition Corp. The deferred costs will be allocated to the purchase price and
financing upon completion of the transaction.


                                      F-13
<PAGE>
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--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Should  the  transaction  be unsuccessful, the deferred costs will be charged to
operations. Any costs reimbursed by the affiliate will be reflected as a capital
contribution.

PRESCRIPTION LISTS - Prescription lists consist of customer lists purchased from
other  pharmacies.  There  was one additional pharmacy purchased in fiscal 2002.

5.   DUE  TO  AFFILIATES

Amounts  due  to  affiliates,  primarily United Acquisition Corp., a corporation
indirectly  wholly  owned  by the majority shareholder, represent liabilities in
connection  with  the  consummation  of  the  merger  as discussed in Note 1 and
additional advances made by the affiliate since the merger.  The affiliates have
agreed  not  to  demand  payment  of  these liabilities in the next fiscal year.
Accordingly,  the  liability  has  been  classified  as  noncurrent.  As part of
post-closing  adjustments  in  connection  with  the  Food  Group  Acquisition,
approximately  $3,600,000  in  due from certain other affiliates has been offset
against  the  amounts  due  to  United  Acquisition  Corp. The net amount due to
affiliates  at  December  1,  2002  and  December  2,  2001  was $14,842,437 and
$14,525,904,  respectively.  Of  these  amounts  $14,200,000  and  $12,800,000,
respectively,  was  subordinated  to  the  Company's  banks.  (See Note 8.)  The
liability  presently  does  not  bear  interest.  However,  the Company's credit
agreement  with  its  banks  permits  the  Company  to  pay  interest  on  such
subordinated  debt  provided  the  Company  has  a  positive  net  income.

6.   COMMITMENTS  AND  CONTINGENCIES

The  Company  operates  primarily  in  leased  facilities  under non-cancellable
operating  leases expiring at various dates through 2022. Certain leases provide
for  contingent rents (based upon store sales exceeding stipulated amounts or on
the  Consumer  Price Index), escalation clauses and renewal options ranging from
five  to  twenty  years.  The  Company  is obligated under all leases to pay for
taxes,  insurance  and  common  area  maintenance  expenses.

The Company also leases operating equipment.  The Company is obligated under all
equipment  leases  to pay for taxes, insurance and maintenance costs incurred in
the  operation  of  such  equipment.

Rent  expense,  including  taxes,  insurance  and  maintenance  costs,  under
non-cancelable  operating  leases,  (including leases with related parties), for
the  fiscal years ended December 1, 2002, December 2, 2001 and December 3, 2000,
respectively,  is  as  follows:

<TABLE>
<CAPTION>
                                  2002         2001         2000
----------------------------------------------------------------
<S>                        <C>          <C>          <C>
Facilities:  Base rents    $16,979,121  $15,805,048  $13,245,918
Contingent rent                 48,000       48,000       76,671
----------------------------------------------------------------
Rent expense - facilities  $17,027,121  $15,853,048  $13,322,589
================================================================
Equipment rental           $   246,294  $   644,961  $ 1,159,178
================================================================
</TABLE>


                                      F-14
<PAGE>
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--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Related  party  rent  expense  for  facilities  was  $2,418,054,  $1,610,022 and
$1,236,420  for  the years ended December 1, 2002, December 2, 2001 and December
3,  2000,  respectively.

     Related  party  rent expense for equipment leases was $484,856 for the year
ended December 3, 2000.  By the terms of amendments to these leases, they became
capital  leases  in  the  year  ended  December  2,  2001.

Future  minimum  lease commitments under noncancellable leases as of December 1,
2002  are:


                           EQUIPMENT OPERATING   FACILITIES-MINIMUM
       FISCAL YEAR ENDING         LEASES             COMMITMENT
       -------------------------------------------------------------
       2003                $            182,694  $        17,788,870
       2004                             161,822           18,073,295
       2005                              57,338           17,796,868
       2006                               2,217           17,566,696
       2007                                  --           15,975,328
       THEREAFTER                            --          116,521,920
       -------------------------------------------------------------
                           $            404,071  $       203,722,977
       =============================================================

The  above  table  includes  renewal periods where used to determine depreciable
asset  life.

The  net  book  value of all assets under capital leases including related party
capital leases at December 1, 2002 is approximately $23.2 million.


      The future net minimum lease payments under capital leases are as follows:
      ---------------------------------------------------------------------
      FISCAL YEAR ENDING
      ---------------------------------------------------------------------
          2003                                                   $6,887,446
          2004                                                    6,112,945
          2005                                                    4,055,551
          2006                                                    3,095,925
          2007                                                    1,965,682
          THEREAFTER                                              1,866,623
      ---------------------------------------------------------------------
                                                                 23,984,172
      LESS:  AMOUNT REPRESENTING INTEREST                         4,146,814
      ---------------------------------------------------------------------
      PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS                19,837,358
      LESS CURRENT OBLIGATION                                     4,892,101
      =====================================================================
      LONG TERM LEASE OBLIGATIONS                               $14,945,257
      =====================================================================


                                      F-15
<PAGE>
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                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.   INCOME  TAXES

The  Company reports the effects of income taxes under SFAS No. 109, "Accounting
for  Income  Taxes".  The  objective of income tax reporting is to recognize (a)
the  amount of taxes payable or refundable for the current year and (b) deferred
tax  liabilities  and assets for the future tax consequences of events that have
been recognized in the financial statements or tax returns.  Under SFAS No. 109,
the  measurement  of deferred tax assets is reduced, if necessary, by the amount
of  any  tax  benefits that, based on available evidence, are not expected to be
realized.  Realization  of  deferred  tax  assets  is  determined  on  a
more-likely-than-not  basis.

The  Company  has  net  operating  loss carryforwards for tax purposes and other
deferred  tax  benefits  that are available to offset future taxable income. The
net  operating loss carryforwards are attributable only to operating activities.

As  of  December  1,  2002,  the Company had net operating loss carryforwards of
approximately  $6.8  million,  which  expire  through  fiscal  2020.

Internal  Revenue Code Section 382 provides for the limitation on the use of net
operating  loss  carryforwards in years subsequent to a more than 50% cumulative
change in ownership. The Company believes that a more than 50% cumulative change
in  ownership occurred in November 1997. (See Note 1) As a future consequence of
the  transaction,  the  Company's ability to offset its net operating loss carry
forwards of approximately $5.7 million at the merger against income earned after
the  transaction  may  be  limited.  If  any  of  the Federal net operating loss
carryforwards  are  realized,  any  tax  benefit  will be credited to additional
paid-in  capital.

The  Company had net deferred tax assets of approximately  $8.2 million and $9.4
million  at  December 1, 2002 and December 2, 2001, respectively. At December 1,
2002  and  December 2, 2001, a valuation allowance has been provided against the
deferred  tax  assets  since  management  cannot predict, based on the weight of
available  evidence,  that  it  is more likely than not that such assets will be
ultimately realized. Accordingly no deferred income taxes were recognized in any
of  the  periods.

The  provision  for  income  taxes  for  fiscal 2002, 2001 and 2000 consisted of
state  and  local  income  taxes  only  which amounted to approximately $40,000,
$99,000  and  $52,000,  respectively.


                                      F-16
<PAGE>
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--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Deferred  tax  (assets) liabilities at December 1, 2002 and December 2, 2001 are
comprised  of  the  following  elements:

                                            2002          2001
                                        --------------------------
Net operating loss carryforwards        $(3,409,000)  $(4,294,000)
Deferred revenue taxable currently          (55,000)     (384,000)
Allowance for uncollectable accounts       (241,000)     (207,000)
Depreciation and amortization            (1,969,000)   (2,595,000)
Deferred rent not currently deductible   (2,528,000)   (1,963,000)
                                        ------------  ------------
Deferred tax (assets) liabilities, net   (8,202,000)   (9,443,000)
Less valuation allowance                  8,202,000     9,443,000
                                        ------------  ------------
Net deferred tax                        $        --   $        --
                                        ============  ============


                                      F-17
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   DEBT

Effective October 2001, the Company's credit agreement with a group of banks was
amended  and  increased  to  an  aggregate total of $32,500,000, consisting of a
$15,500,000 term loan and a $17,000,000 revolving line of credit. As of December
1,  2002,  the  credit  facility as amended, provides for (i) a maturity date of
November 28, 2004 for the revolving line of credit, and December 3, 2006 for the
term  loan,  at  which  time  all  amounts  outstanding thereunder are due, (ii)
certain financial covenants, and  (iii) amortization of the term loan in monthly
amortizations  totaling  $2,000,000,  $2,300,000,  $2,600,000,  $2,900,000  and
$3,200,000  respectively  in each year during its term, and a $2,500,000 balloon
payment  at  maturity.

Long-term  debt  at  December  1,  2002  and  December  2,  2001 consists of the
following:

<TABLE>
<CAPTION>
                                                       2002         2001
----------------------------------------------------------------------------
<S>                                                 <C>          <C>
Note payable in annual installments of $66,666      $    66,666  $    36,595
plus accrued interest commencing September 30,
2000 at an interest rate of 9%

Note payable $75,000 that was due on January 29,             --      150,000
2001; $75,000 that was due June 14, 2001, plus
accrued interest commencing September 14, 2000
at an interest rate of 9%

Note payable $224,704 in three equal annual             224,704           --
installments plus interest at 7.5%; final payment
due September 2005

Term loan payable to banks due December 3, 2006      13,559,172   15,500,000

Revolving loans payable to banks due November        17,000,000    9,800,000
28, 2004
----------------------------------------------------------------------------
                                                     30,850,542   25,486,595
----------------------------------------------------------------------------
LESS:  CURRENT PORTION                                2,500,740    2,378,262

----------------------------------------------------------------------------
                                                    $28,349,802  $23,108,333
----------------------------------------------------------------------------
</TABLE>


                                      F-18
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest  on  prime-based  loans under the credit facility is payable monthly in
arrears;  interest  on LIBOR-based loans under the credit facility is payable at
the  end  of  the  applicable  interest  period.

During  the  year ended December 1, 2002 the interest rates ranged from 4.38% to
5.19%  on  the  LIBOR-based  loans  (total  principal  balance of $30,200,000 at
December  1,  2002)  and  from  5.5%  to  6.25%  on the prime-based loans (total
principal  balance  of  $359,172  at  December  1,  2002).  The overall weighted
average  interest  rate paid to the banks during the year ended December 1, 2002
was  5.09%.

The  loans  are  collateralized  by  certain  assets  of  the Company, including
receivables,  inventory  and  store  equipment.

Principal maturities of long-term debt as of December 1, 2002 are as follows:

                  FISCAL YEAR ENDING
                  -------------------------------------------------
                  2003                                  $ 2,500,740
                  2004                                   19,674,900
                  2005                                    2,974,902
                  2006                                    3,200,000
                  2007                                    2,500,000
                  -------------------------------------------------
                  TOTAL MATURITIES                      $30,850,542
                  =================================================

9.   RETIREMENT  PLAN

The  Company  participates  in various defined contribution multi-employer union
pension  plans,  which  are  administered  jointly  by  management  and  union
representatives,  and  which  sponsor most full-time and certain part-time union
employees.  The  pension  expense  for  these  plans  approximated  $1,161,000,
$1,052,000  and  $999,000  for  2002,  2001 and 2000, respectively.  The Company
could,  under  certain  circumstances, be liable for unfunded vested benefits or
other  expenses  of  jointly  administered  union-  management  plans.

10.  STOCK  OPTION  PLANS

On  October  7,  1994,  the  Company  granted the Chairman a non-qualified stock
option  to purchase an aggregate of 275,000 shares of common stock at a price of
$3.75  per  share  (the  fair  market  value  at  that  date).

On  August  12,  1996,  the  Company  granted the Chairman a non-qualified stock
option  to purchase an aggregate of 250,000 shares of common stock at a price of
$2.875  per  share.

The Company currently has one incentive grant and five nonqualified grants under
which  stock  options may be granted to officers, directors and key employees of
the Company. The options to purchase shares of common stock generally are issued
at  fair market value on the date of the grant, begin vesting over three to five
years,  and  expire  ten  years from issuance and are conditioned upon continual
employment  during  the  vesting  period.

In addition to the one incentive grant, the Company has granted stock options to
certain key executives and directors.  The options vest over three to five years
and contractual lives of these grants are similar to that of the incentive plan.

The  Company  applies  APB  Opinion  No.  25,  "Accounting  for  Stock Issued to
Employees,"  and related interpretations for its stock option grants. Generally,
compensation  expense  is  not  recognized  for  stock  option  grants.

In  accordance with SFAS No. 123, "Accounting for Stock-based Compensation", the
Company  discloses  the  pro  forma  impact  of  recording  compensation expense


                                      F-19
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


utilizing the Black-Scholes model.  The Black-Scholes option valuation model was
developed  for use in estimating the fair value of traded options, which have no
vesting  restrictions  and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the expected
stock price volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective  input  assumptions can materially affect the fair value estimate, in
management's  opinion,  the  Black-Scholes  model does not necessarily provide a
reliable  measure  of  the  fair  value  of  its  stock  options.
SFAS No. 123 requires the Company to provide pro forma information regarding net
loss  and  earnings  per  share  as  if compensation cost of the Company's stock
option  plans had been determined in accordance with the fair value based method
prescribed  in SFAS No. 123.  The Company estimates the fair value of each stock
option  at  the  grant date by using the Black Scholes option-pricing model with
the  following  weighted average assumptions used for grants.  During 2002, 2001
and  2000  there  were  no  options  granted.

Under the accounting provisions of SFAS No. 123, the Company's loss and earnings
per  share  would  have  been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                              2002       2001       2000
---------------------------------------------------------------------------
<S>                                        <C>         <C>       <C>
Income (loss) before cumulative effect of
change in accounting principle
As reported                                $(926,407)  $275,057  $(190,908)
Pro forma                                  $(929,307)   240,487   (310,861)
Net earnings (loss) per share - basic and
diluted:
As reported                                $   (0.05)  $    .01  $    (.01)
Pro forma                                  $   (0.05)  $    .01  $    (.02)
</TABLE>


                                      F-20
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A summary of the status of the Company's stock option plans is presented below:

<TABLE>
<CAPTION>
                                                  Weighted Average
                                        Shares     Exercise Price
===================================================================
<S>                                   <C>         <C>
Balance, November 28, 1999            1,422,500              $ 3.21
   Granted:                                   -                   -
   Exercised:                                 -                   -
   Forfeited:                           (22,000)               2.90
-------------------------------------------------------------------
Balance, December 3, 2000             1,400,500                3.21
   Granted:                                   -                   -
   Exercised:                                 -                   -
   Forfeited:                           (45,000)               3.33
-------------------------------------------------------------------
Balance, December 2, 2001             1,355,500                3.21
   Granted:                                   -                   -
   Exercised:                                 -                   -
   Forfeited:                          (102,500)               4.25
-------------------------------------------------------------------
Balance, December 1, 2002             1,253,000              $ 3.14
-------------------------------------------------------------------
</TABLE>

Options  exercisable  as of December 1, 2002 and December 2, 2001 were 1,253,000
and  1,322,167,  respectively.

All options prior to November 10, 1997 were assumed from Sloan's by the Company.
The  following  table  summarizes  information as of December 1, 2002 concerning
outstanding  and  exercisable  options:

<TABLE>
<CAPTION>
               OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
            ========================                   ============================
                          Weighted
                           Average
Range of                  Remaining      Weighted                      Weighted
exercise      Number     Contractual      Average        Number         Average
prices      Outstanding     Life      Exercise Price   Exercisable  Exercise Price
-----------------------------------------------------------------------------------
<S>         <C>          <C>          <C>              <C>          <C>
$ 3.75          275,000          1.9           $ 3.75      275,000           $ 3.75
  5.63          101,000          2.0             5.63      101,000             5.63
  3.81           22,000          2.0             3.81       22,000             3.81
  2.87          250,000          3.7             2.87      250,000             2.87
  2.63          520,000          5.3             2.63      520,000             2.63
$ 1.88           85,000          6.3             1.88       85,000             1.88
-----------------------------------------------------------------------------------
$ 1.88-5.63   1,253,000          4.0           $ 3.14    1,253,000           $ 3.14
-----------------------------------------------------------------------------------
</TABLE>


                                      F-21
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.  LITIGATION
1)  RMED  International  Inc.  v.  Sloan's  Supermarkets  Inc.  and  John  A.
Catsimatidis.

On  August  8,  1994,  a  lawsuit  against  the Company and Mr. Catsimatidis was
instituted  in the United States District Court for the Southern District of New
York  by RMED International, Inc. ("RMED"), a former stockholder of the Company.

The  complaint  alleged,  among  other  things,  that RMED and a purported class
consisting of persons who purchased the Company's common stock on or after March
19,  1993  were damaged by alleged nondisclosures in certain filings made by the
Company  with  the  Securities  and Exchange Commission between January 1993 and
June  1994  relating  to an investigation by the FTC. The complaint alleged that
such  nondisclosures  constituted  violations  of  Federal  and  New  York State
securities  laws,  as  well  as  common  law fraud, and seeks damages (including
punitive  damages)  in an unspecified amount (although in discovery proceedings,
the named plaintiff has claimed that its damages were approximately $800,000) as
well  as  costs  and  disbursements  of the action. On June 2, 1994, the Company
issued  a  press  release  that  disclosed  the  FTC  action.

On  September  30, 1994, the defendants filed a motion to dismiss for failure to
state  a  cause  of  action and for lack of subject matter jurisdiction over the
state  claims.  The  motion  was  denied.  In  June  1995, the plaintiff filed a
motion  for  class  certification,  which motion was granted in March 1996. Fact
discovery was completed by the end of June 1998.  Expert discovery was completed
by  the  end  of  1998.  Plaintiff's  expert  prepared  a  report  claiming that
plaintiffs  have  suffered  damages  in  an  amount in excess of $3,000,000.  In
August 1999, defendants moved to exclude plaintiff's expert report, which motion
was  denied.  In June 2000, the Company filed a motion for summary judgment.  In
February  2002,  the  court  dismissed plaintiff's state law claim under Article
23-A  of  the General Business Law of New York, as well as plaintiff's claim for
breach  of  fiduciary  duty, but denied the Company's motion with respect to the
plaintiff's claim under Section 10(b) of the Securities Exchange Act of 1934, as
amended and Rule 10(b)-5 promulgated thereunder, as well as plaintiff's claim of
fraud under state common law, finding that there were outstanding issues of fact
which  needed  to  be  determined  at  trial.


After a week of trial, in January 2003, the matter was settled.  The full amount
of the settlement, together with a portion of the Company's legal fees, was paid
by  the  Company's  D&O  insurance  carrier.  Neither  the  Company,  nor  Mr.
Catsimatidis  paid  any  portion  of  the  settlement  amount.

2.) Ansoumana v. Great Atlantic & Pacific Tea Company, Inc. d/b/a/ A&P, Shopwell
Inc.  -  d/b/a  Food  Emporium,  Gristede's  Operating  Corp, Duane Reade, Inc.,
Charlie  Bauer,  individually and d/b/a B&B Delivery Service a/k/a Citi Express,
Scott Weinstein and Steven Pilavan, ind. and d/b/a Hudson Delivery Service Inc.,
Chelsea  Trucking,  Inc.  a/k/a  Hudson  York.

On  January  13,  2000,  plaintiffs commenced a class action lawsuit in the U.S.
District Court for the Southern District of New York (hereinafter referred to as
the  "Ansoumana  Action").  Their complaint alleged violations of the Fair Labor
Standards  Act  and  the New York Labor Law. Plaintiffs are claiming damages for
the  differential  between  the  amount  they  were  paid  by the Great American
Delivery  Service  Company  and  what the minimum wage was in each specific year
dating  back  to 1994.  To date, about 35 to 40 delivery workers have opted into
the  class  action.

Specifically,  the  Company  was  one  of the parties sued in this litigation by
delivery  workers  claiming  they  were  not  being  paid the minimum wage.  The
delivery  workers are employees of the Great American Delivery Company (formerly
known as B&B Delivery Service or Citi Express) ("Great American"), not employees
of  the  Company.  The Company was under contract with Great American to deliver
groceries  to  the  Company's  customers.

In  its answer, the Company denied the allegations and cross-claimed against the
delivery  service  co-defendants  Weinstein  and  Baur,  based  upon  their  own
negligence,  theories  of  contribution  and  contractual  indemnity.


                                      F-22
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


When  allegations of underpayment first emerged, the Company, on August 2, 2000,
entered into a new contract with Great American.  This contract was entered into
in order to assure the Company that these delivery workers would be properly and
legally  paid  for  their  services.  The  legal hourly wages referred to in the
contract  were  discussed  with  the  New  York  Attorney  General's  Office.

On  July  23,  2001,  the  Company  terminated  its contract with Great American
because  Great  American  breached  the  terms of the contract.  Based upon that
termination,  Great  American  commenced  a breach of contract action in Supreme
Court,  Nassau County, against the Company and obtained a preliminary injunction
compelling  the  Company  to  retain  Great  American  as  its  delivery service
contractor.

Thereafter,  Great  American  was  found to be in contempt of several orders and
added  as  a  party-defendant  by motion to amend the complaint in the Ansoumana
Action.  In  response to those proceedings, Great American filed for bankruptcy.
Hence,  the  breach  of  contract action commenced by Great American against the
Company  was  stayed.  The  Company  transferred  the  case to the United States
Bankruptcy  Court  in  the  Eastern  District  of  New  York.  Great  American's
bankruptcy  petition  was dismissed.  Great American's breach of contract action
commenced in Nassau County has been stayed pending a resolution of the Ansoumana
Action.  Nevertheless,  Great  American  posted a $400,000 bond in the breach of
contract  action pending in Nassau County to obtain a preliminary injunction and
the  Company  intends  to  recoup  these  monies  from  Great  American.

A  tentative  settlement  has  been  reached.  The Company estimates that such a
possible  settlement  could  result  in  potential  payments  of  approximately
$2,600,000  plus  plaintiffs'  legal  expenses,  payable over a number of years,
without  interest,  which  amount  would  be  shared  approximately 50-50 by the
Company with its predecessor private companies. Any amount paid on behalf of the
Company  will  be  reflected as a capital contribution. Additionally, recoveries
from  a  $400,000  security bond posted by Great American / Baur shall be solely
for the Company's benefit. However, any final settlement must be approved by the
Company's  banks, the state, the courts, and the plaintiffs. The Company and its
legal  counsel  are not presently able to predict whether the settlement will be
implemented.  Accordingly, the Company has not recorded any contingent liability
in  its consolidated financial statements related to this matter. The Company is
also  pursuing  an  insurance  contribution  to  the  settlement  under  various
policies.

In  the  meantime,  the  Company's co-defendant Duane Reade who has continued to
aggressively  defend  itself in this case, without pursuing settlement, has been
found  liable  by  summary  judgment  to  be  a joint employer with its delivery
service  provider  Weinstein.


3.)  Red  Apple  Supermarkets,  Inc., Gristede's Supermarkets, Inc., Supermarket
Acquisition  Corp.,  and  Gristede's  Sloan's Inc., Plaintiffs, against Rite Aid
Corporation  and  Rite  Aid  of  New  York,  Inc.,  Defendants

Pursuant  to  a  settlement  agreement  dated  February 22, 1999 (the Settlement
Agreement"),  between  the  Company and Rite Aid Corporation ("Rite Aid"),  Rite
Aid  agreed to compromise a dispute between the parties arising out of a written
lease  purchase  agreement  dated  September  2,  1994  (the  "Lease  Purchase
Agreement). Pursuant to the Settlement Agreement, Rite Aid agreed to pay the sum
of  $400,000 (the Settlement Sum") to the Company in full and final satisfaction
of  certain  claims  and  disputes  regarding  defendants' breaches of the Lease
Purchase  Agreement.  However, Rite Aid failed and refused to pay any portion of
the  Settlement  Sum  as  required by the Settlement Agreement. Consequently, on
June  5, 2000, plaintiffs filed a complaint in the Supreme Court of the State of
New  York  (New  York  County)  which  alleged:  breach of Settlement Agreement,
Breach  of  Good  Faith and Fair Dealing and Breach of Lease Purchase Agreement.
Such  complaint  seeks  judgment  against  Rite  Aid  in  the full amount of the
Settlement  Sum,  together  with  interest  from  February  22,  1999.

As  alleged  in  the  complaint,  the  Lease  Purchase  Agreement  contemplated
defendants'  purchase  of  certain  commercial  leasehold  interests  held  by
plaintiffs, in two stores.  Pursuant to the Lease Purchase Agreement, defendants
agreed  to  purchase  plaintiffs'  leasehold  interest  in  the  two  stores for
$1,950,000.  However, in violation of the  Lease Purchase Agreement - as well as
their duty of good faith and fair dealing thereunder - defendants negotiated and
obtained  their  own  leasehold  interest  for  both  stores  directly from each
landlord,  and  failed  to  compensate  plaintiffs  as  agreed.


                                      F-23
<PAGE>
================================================================================
--------------------------------------------------------------------------------
                                                          GRISTEDE'S FOODS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The  Company  has  recently  settled  this  litigation  where  Rite  Aid will be
returning  a  store to the Company at 113-119 Fourth Avenue, Manhattan, New York
City,  which  was  previously  operated  by  an  affiliate  of  the  Company, in
settlement  of  the  litigation.

The Company will be purchasing Rite Aid's prescription records and inventory for
this  location.   In addition, the Company will pay a nominal fee for Rite Aid's
furniture and equipment and the Company will also have the benefit of Rite Aid's
leasehold  improvements  at the store at no additional cost. It is expected that
Rite  Aid  will  surrender  the  store within 30 days of the finalization of the
settlement.  The  Company  believes  that  the fair market value of the acquired
store  lease  and  leasehold  improvements to be in excess of the Settlement Sum
plus  interest.

12.  IMPACT OF THE TERRORIST ATTACKS OF SEPTEMBER 11, 2001
The  Company  has  two stores in the World Trade Center area of Manhattan, which
were forced to close as a result of the terrorist attacks of September 11, 2001.
One  store reopened for business on October 1, 2001, the other was renovated and
reopened in May 2002. The Company has suffered property damage losses, including
inventory,  costs  to  repair  and  clean  fixtures  and  facilities and loss of
revenue.  Management  has  filed  claims for the above losses with its insurance
carriers, including business interruption. The Company settled these claims with
the  insurance  company  in  October  2002  for approximate net proceeds of $1.5
million,  and  incurred  costs  of approximately $1.1 million which amounts were
reflected in fiscal 2001. The Company further has applied for various government
grants  amounting  to  approximately $400,000 net of fees and expects to receive
these  in  full  during  fiscal  2003. The grants, which along with an insurance
claim  for  a  theft  loss  from  its  warehouse,  were recorded in fiscal 2002.


                                      F-24
<PAGE>
<TABLE>
<CAPTION>
13.  QUARTERLY  FINANCIAL  DATA
(UNAUDITED)  ($000S)

Financial data for the interim periods of Fiscal 2002 and Fiscal 2001 is as
follows:

                                 13 weeks       13 weeks        13 weeks       13 weeks
                                  ended           ended          ended           ended       Fiscal
                                                              September 2,    December 2,
                              March 4, 2001   June 3, 2001        2001           2001         2001
-----------------------------------------------------------------------------------------------------
<S>                           <C>             <C>            <C>             <C>            <C>

Sales                         $       59,586  $      56,949  $      53,570   $     59,883   $229,988
Gross Profit                          23,098         22,731         21,539         23,439     90,807
Net Income (loss)             $          461  $         330  $        (473)  $        (43)  $    275
Net Income (loss) per share   $         0.02  $        0.02  $       (0.02)  $      (0.00)  $    .01


                                13 weeks        13 weeks       13 weeks        13 weeks
                                  ended           ended          ended           ended       Fiscal
                                                              September 1,    December 1,
                              March 3, 2002   June 2, 2002        2002           2002         2002
-----------------------------------------------------------------------------------------------------

Sales                         $       59,791  $      61,879  $      60,506   $     68,557   $250,733
Gross Profit                          23,761         24,908         24,221         26,408     99,298
Net Income (loss)             $          761  $         206  $        (777)  $     (1,116)  $   (926)
Net Income (loss) per share   $         0.04  $        0.01  $       (0.04)  $      (0.06)  $  (0.05)
</TABLE>

The  fourth  quarter  included  significant  adjustments  of  the  following: an
inventory  adjustment  of $304,000 to reflect the lower of cost or market and an
accrual of $213,000 relating to self-insurance health care costs.


                                      F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and Stockholders of Gristedes's Foods, Inc.

     The  audits  referred to in our report dated March 3, 2003, relating to the
consolidated  financial  statements  of Gristede's Foods, Inc. and subsidiaries,
which  is  contained  in  Item  8  of this Form 10-K, included the audits of the
financial  statement  schedule  listed in the accompanying index for each of the
three  fiscal  years  in  the  period  ended  December  1, 2002.  This financial
statement  schedule  is the responsibility of management.  Our responsibility is
to express an opinion on this schedule based on our audits.

     In  our  opinion,  the  financial  statement  Schedule  II  - Valuation and
Qualifying  Accounts, presents fairly, in all material respects, the information
set  forth  therein.

BDO Seidman, LLP
New York, NY
March 3, 2003


                                      -31-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                       Balance At        Additions          Additions
                                      Beginning of   Charged to Costs    <Deductions> For   Balance At End
DESCRIPTION OF DEDUCTIONS                Period        and Expenses         Write-Offs         of Period
                                                                           <Recoveries>
-----------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>                <C>                 <C>

YEAR ENDED Dec. 3, 2000:
Reserve and allowances deducted
  from asset accounts:
Allowance for uncollectible accounts  $     500,000  $          50,000  $        (400,000)  $       150,000

YEAR ENDED Dec. 2, 2001:
Reserve and allowances deducted
  from asset accounts:
Allowance for uncollectible accounts  $     150,000  $         250,354  $          12,646   $       413,000

YEAR ENDED Dec. 1, 2002:
Reserve and allowances deducted
  from asset accounts:
Allowance for uncollectible accounts  $     413,000  $          72,000  $          (4,000)  $       481,000
</TABLE>


                                      -32-
<PAGE>
<TABLE>
<CAPTION>
        Exhibits
        --------

Number  Description
------  -----------
<C>     <S>

   3.1  Amended and Restated Certificate of Incorporation of the Registrant. Incorporated by
          reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K of the fiscal
          year ended February 28, 1990 (the "1990 10-K").

   3.2  Certificate of Amendment to Amended and Restated Certificate of Incorporation of the
          Registrant. Incorporated by reference to Exhibit 3.2 to the Registrant's Annual
          Report on Form 10-KSB for the fiscal year ended February 27, 1994 (the
          "1994 10-KSB").

   3.3  Certificate of Amendment of Certificate of Incorporation of the Company, dated November 4,
          1997.   Incorporated by reference to Exhibit 3.4 to the Registrant's
          Annual Report on Form 10-K for the transition period ended November 30, 1997
          (the "Transition Period 10-K").

   3.4  Certificate of Amendment of Certificate of Incorporation of the Company, dated August
          13, 1999.

   3.5  Certificate of Amendment of Certificate of Incorporation of the Company dated
           November 10, 2000.

   3.6  Amended and Restated Bylaws of the Registrant. Incorporated by reference to Exhibit
           3.2 to the 1990 10-K.

  10.1  Form of Indemnification Agreement dated as of January 1, 1994 between the Registrant
          and each director of the Registrant. Incorporated by reference to Exhibit 10.11 to the
          1994 10-KSB.

  10.2  Form of Indemnification Agreement dated as of January 1, 1994 between the Registrant
          and each officer of the Registrant. Incorporated by reference to Exhibit 10.12 to the
          1994 10-KSB.

  10.3  1994 Stock Option Plan. Incorporated by reference to Exhibit 10.12 of the Company's
          Annual Report on Form 10-KSB for the fiscal year ended
          February 26, 1995 ("1995 10-KSB").

  10.4  Director Stock Option Plan. Incorporated by reference to Exhibit 10.13 of the
          Company's 1995 10-KSB.

  10.5  Merger Agreement. Incorporated by reference to Exhibit A to the Company's definitive
          Proxy Statement for the Special and Annual Meeting of Stockholders of the Company
          held on October 31, 1997.

  10.6  Management Agreement dated November 10, 1997 between Namdor Inc., G Remainder
          Corp. and S Remainder Corp.  Incorporated by reference to Exhibit 10.7 to the Transition
          Period 10-K.

  10.7  Agreement dated as of March 1, 2000 between G Remainder Corp. and Gristede's Operating
          Corp.  Incorporated by reference to Exhibit 10.8 to the Company's annual report in
          Form 10-K for the fiscal year ended November 28, 1999 (the "1999 10-K").

  10.8  1998 Stock Option Plan.  Incorporated by reference to Exhibit 10.10 to the
          Transition Period 10.K.


                                      -33-
<PAGE>
  10.9  Agreement dated March 1, 2000 between John Catsimatidis and the Company.
          Incorporated by reference to Exhibit 10.11 to the 1999 10-K.

 10.10  Agreement dated May 10, 2000  between S Remainder Corp and Namdor Inc.  Incorporated
          by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the
          fiscal year ended December 3, 2000.

 10.11  Agreement dated December 3, 2000 between John Catsimatidis and the
          Company. Incorporated by reference to Exhibit 10.18 to the Company's Annual Report on
          Form 10-K for the fiscal year ended December 3, 2000.

 10.12  Amended and Restated Loan Agreement dated as of October 31, 2001 among the Company,
          Citibank,  Israel Discount Bank of New York, and Bank Leumi USA.  Incorporated by
          reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the
          fiscal year ended December 2, 2001.

   11.  Statement re: computation of per share income (loss). Not required.

   21.  Listing of the Company's subsidiaries all of which are wholly owned by the Company.
</TABLE>

         Subsidiaries                      State of Incorporation
         ------------                      ----------------------

         Namdor Inc.                            New York
         City Produce Operating Corp.           New York
         Gristede's Foods NY Inc                New York
         Gristede's Delivery Service, Inc       New York


*Filed  herewith.

b)   The  Company  did  not  file  any  Current  Reports  on  Form  8-K
during  the  last  quarter  of  the  period  covered  by  this  report.


                                      -34-
<PAGE>
                                   SIGNATURES
                                   ----------

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned,  thereunto  duly  authorized.

                                    GRISTEDE'S FOODS, INC.


Dated:  March 4, 2003               By:  /s/ John A. Catsimatidis
                                       ---------------------------------
                                         John A. Catsimatidis
                                         Chairman of the Board


<TABLE>
<CAPTION>
Signature                                           Title                        Date
--------------------------------  -----------------------------------------  -------------
<S>                               <C>                                        <C>

     /s/ John A. Catsimatidis     Chairman of Board, President and           March 4, 2003
--------------------------------  Chief Executive Officer (Chief Executive
JOHN A. CATSIMATIDIS              Officer and Chief Operating Officer)

     /s/ Martin Bring             Director                                   March 4, 2003
--------------------------------
MARTIN BRING

                                  Director
--------------------------------
FREDERICK SELBY

     /s/ Kishore Lall             Director                                   March 4, 2003
--------------------------------
KISHORE LALL

     /s/ Gary Pokrassa            Chief Financial Officer                    March 4, 2003
--------------------------------  (Chief Financial Officer
GARY POKRASSA                     and Chief Accounting Officer)

     /s/ Martin Steinberg         Director                                   March 4, 2003
--------------------------------
MARTIN STEINBERG


     /s/ Edward P. Salzano        Director                                   March 4, 2003
--------------------------------
EDWARD P. SALZANO


     /s/ Andrew J. Maloney, Esq.  Director                                   March 4, 2003
--------------------------------
ANDREW J. MALONEY, ESQ.
</TABLE>


                                      -35-
<PAGE>
ANNUAL AND QUARTERLY CERTIFICATIONS
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John A. Catsimatidis, certify that:

     1.   I  have  reviewed this annual report on Form 10-K of Gristede's Foods,
          Inc.

     2.   Based  on my knowledge, this annual report does not contain any untrue
          statement  of  a  material  fact  or  omit  to  state  a material fact
          necessary  to  make the statements made, in light of the circumstances
          under  which such statements were made, not misleading with respect to
          the  period  covered  by  this  annual  report;

     3.   Based  on  my knowledge, the financial statements, and other financial
          information  included  in  this  annual  report, fairly present in all
          material  respects  the financial condition, results of operations and
          cash  flows of the registrant as of, and for, the periods presented in
          this  annual  report;

     4.   The  registrant's  other certifying officers and I are responsible for
          establishing  and  maintaining  disclosure controls and procedures (as
          defined  in  Exchange  Act Rules 13a-14 and 15d-14) for the registrant
          and  have:
          a)  designed  such  disclosure  controls and procedures to ensure that
          material  information  relating  to  the  registrant,  including  its
          consolidated  subsidiaries, is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is  being  prepared;
          b) evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this  annual  report  (the  "Evaluation  Date");  and
          c)  presented  in  this  annual  report  our  conclusions  about  the
          effectiveness  of  the disclosure controls and procedures based on our
          evaluation  as  of  the  Evaluation  Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on  our  most  recent evaluation, to the registrant's auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing  the  equivalent  function):
          a) all significant deficiencies in the design or operation of internal
          controls  which  could  adversely  affect  the registrant's ability to
          record,  process,  summarize  and  report  financial  data  and  have
          identified  for  the  registrant's auditors any material weaknesses in
          internal  controls;  and
          b)  any  fraud,  whether  or not material, that involves management or
          other  employees  who  have  a  significant  role  in the registrant's
          internal  controls;  and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this  annual  report  whether or not there were significant changes in
          internal  controls or in other factors that could significantly affect
          internal  controls  subsequent  to  the  date  of  our  most  recent
          evaluation,  including  any  corrective  actions  with  regard  to
          significant  deficiencies  and  material  weaknesses.


/s/ John A. Catsimatidis

Date:  March 4 2003
Title: Chief Executive Officer

================================================================================


                                      -36-
<PAGE>
ANNUAL AND QUARTERLY CERTIFICATIONS
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary Pokrassa, certify that:
     1.   I  have  reviewed this annual report on Form 10-K of Gristede's Foods,
          Inc.

     2.   Based  on my knowledge, this annual report does not contain any untrue
          statement  of  a  material  fact  or  omit  to  state  a material fact
          necessary  to  make the statements made, in light of the circumstances
          under  which such statements were made, not misleading with respect to
          the  period  covered  by  this  annual  report;

     3.   Based  on  my knowledge, the financial statements, and other financial
          information  included  in  this  annual  report, fairly present in all
          material  respects  the financial condition, results of operations and
          cash  flows of the registrant as of, and for, the periods presented in
          this  annual  report;

     4.   The  registrant's  other certifying officers and I are responsible for
          establishing  and  maintaining  disclosure controls and procedures (as
          defined  in  Exchange  Act Rules 13a-14 and 15d-14) for the registrant
          and  have:
          a)  designed  such  disclosure  controls and procedures to ensure that
          material  information  relating  to  the  registrant,  including  its
          consolidated  subsidiaries, is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is  being  prepared;
          b) evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this  annual  report  (the  "Evaluation  Date");  and
          c)  presented  in  this  annual  report  our  conclusions  about  the
          effectiveness  of  the disclosure controls and procedures based on our
          evaluation  as  of  the  Evaluation  Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on  our  most  recent evaluation, to the registrant's auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing  the  equivalent  function):
          a) all significant deficiencies in the design or operation of internal
          controls  which  could  adversely  affect  the registrant's ability to
          record,  process,  summarize  and  report  financial  data  and  have
          identified  for  the  registrant's auditors any material weaknesses in
          internal  controls;  and
          b)  any  fraud,  whether  or not material, that involves management or
          other  employees  who  have  a  significant  role  in the registrant's
          internal  controls;  and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this  annual  report  whether or not there were significant changes in
          internal  controls or in other factors that could significantly affect
          internal  controls  subsequent  to  the  date  of  our  most  recent
          evaluation,  including  any  corrective  actions  with  regard  to
          significant  deficiencies  and  material  weaknesses.


/s/ Gary Pokrassa
Date:  March 4 2003
Title:  Chief Financial Officer

================================================================================


                                      -37-
<PAGE>
================================================================================
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States
Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the
undersigned officers of Gristede's Foods, Inc., a Delaware corporation (the
"Company"), does hereby certify, to such officer's knowledge, that:
The Annual Report of Form 10-K for the year ended December 1, 2002 (the "Form
10-K") of the Company fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained
in the Form 10-K fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Dated:   March 4 2003
/s/ John A. Catsimatidis
Name: John A. Catsimatidis
Chief Executive Officer
Dated:  March 4 2003

/s/ Gary Pokrassa
Name: Gary Pokrassa
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to section 906 of
the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter
63 of Title 18, United States Code) and is not being furnished as part of Form
10-K or as a separate disclosure document.


                                      -38-
<PAGE>