SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

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

         For fiscal year ended ____________________

(X)      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE  ACT OF 1934 For the  transition  period from March 3, 1997 to
         November 30, 1997.

Commission File No. 1-7013

                            GRISTEDE'S SLOAN'S, 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 [ ]    No [X]

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.    [X]

As of May 1, 1998, 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 that date
was $7,561,456 computed at the closing price on that date.

Documents Incorporated by Reference:  None

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         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  Sloan's,  Inc.  (which is a holding  corporation)  and its
wholly-owned subsidiaries.

         The Company owns and operates 42 supermarkets and one health and beauty
aids store (the "Supermarkets").  37 Supermarkets are located in Manhattan,  New
York,  three  Supermarkets  are located in  Westchester  County,  New York,  two
Supermarkets are located in Brooklyn, New York and one Supermarket is located in
Long Island,  New York. 23 of the  Supermarkets are operated under the "Sloan's"
name and 20 are operated under the "Gristede's"  name. The Company leases all of
its Supermarket locations.

         The Company also owns City Produce Operating Corp., a corporation which
operates a warehouse  and  distribution  center  primarily  for fresh produce on
leased premises in the Bronx, New York.

         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 3,200 to 23,000
square feet of selling space and averaging 8,500 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,  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 apartment door. The

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<PAGE>


Supermarkets  accept payment by Mastercard,  Visa, American Express 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 1997 to reflect its current
business.


Recent Developments

On November 10, 1997 a Merger Agreement,  dated as of July 14, 1997 (the "Merger
Agreement") among Red Apple Group, Inc. ("Group"), Red Apple Supermarkets,  Inc.
("RAS"),   Gristede's   Supermarkets,   Inc.   ("Gristede's"),    City   Produce
Distributors, Inc., Supermarket Acquisition Corp. ("SAC"), John A. Catsimatidis,
the Company, RAS Operating Corp. ("RASOC"),  Gristede's Operating Corp. ("GOC"),
SAC Operating Corp.  ("SACOC") and City Produce Operating Corp. ("City Produce")
was consummated pursuant to which four corporations directly or indirectly owned
by Mr.  Catsimatidis,  the Chairman of the Board and Chief Executive  Officer of
the Company,  merged into four newly formed  wholly  owned  subsidiaries  of the
Company. As a result of the mergers  (collectively,  the "Merger"),  the Company
acquired  the  assets  and  business  of 29  operating  supermarkets  (including
accounts  receivable,   fixtures,  leasehold  improvements  and  inventories  of
supplies and merchandise  located at the supermarkets,  certain leasehold rights
in real property and equipment and certain other  contract  rights in connection
with  the  operation  of  such   supermarkets),   ownership  of  the  tradenames
"Gristede's"  and  "Sloan's" and the  warehouse  and  distribution  business now
operated by City Produce (collectively, the "Food Group").

         Pursuant  to the  Merger  Agreement,  John  Catsimatidis  and  Group (a
corporation wholly owned by John Catsimatidis),  as the sole stockholders of the
four  corporations  acquired  in the  Merger,  became  entitled  to  receive  an
aggregate of  $40,000,000  in market value of the Company's  Common  Stock.  The
aggregate market value of the shares of the Company's Common Stock issued in the
Merger was reduced by an amount  equal to the amount of certain  liabilities  of
RAS,  Gristede's  and SAC to John  Catsimatidis  and entities  controlled by him
which were assumed by the surviving  corporations  in the Merger  ("Intercompany
Liabilities").  The  aggregate  amount  of  such  Intercompany  Liabilities  was
$4,000,000.  Based on a market value of $2.18125 per share (the average  closing
sales price for the Common Stock as reported on the American  Stock Exchange for
the sixty  consecutive  trading days ended on October 29, 1997, the day prior to
the date of a Special and Annual  Meeting of  Stockholders  of the Company  (the
"Stockholders  Meeting") at which the Merger was approved) the aggregate  number
of shares issued to Mr.  Catsimatidis  and Group was  4,173,754 and  12,330,544,
respectively.  As of June 1, 1998 Mr. Catsimatidis beneficially owned 18,250,650
shares of Common Stock (approximately

                                        3

<PAGE>


90.5% of the outstanding shares). By virtue of his stock ownership and positions
as an officer and director of the  Company,  Mr.  Catsimatidis  may be deemed to
control the Company.

         Simultaneously with the consummation of the Merger, the Company entered
into  agreements  with European  American  Bank and certain other  participating
lenders with respect to a $25,000,000  secured bank facility comprised of: (i) a
$12,000,000 five year term loan to refinance the Company's outstanding bank debt
and to  provide  working  capital,  (ii) an  $8,000,000  five  year term loan to
finance the remodelling of the Company's  supermarkets and the installation of a
point-of-sale and management information system, and (iii) a $5,000,000 two year
revolving line of credit for additional working capital. For further information
concerning this bank facility see Item 7. "Management's  Discussion and Analysis
of  Financial  Condition  and  Results of  Operations  -  Liquidity  and Capital
Resources."

         At the  Stockholders  Meeting held on October 30, 1997,  the  Company's
stockholders  approved,  among other things,  amendments to the  Certificate  of
Incorporation of the Company to (a) increase the number of authorized  shares of
Common  Stock  from  10,000,000  to  25,000,000  and (b)  change the name of the
Company to Gristede's  Sloan's,  Inc. (see Item 4.  "Submission  of Matters to a
Vote of  Securityholders").  On  November  4, 1997 the  Company  filed  with the
Delaware  Secretary of State a Certificate  of Amendment of its  Certificate  of
Incorporation to effectuate such amendments.

         In  February  1998,  the Company  acquired  from an  affiliate  of John
Catsimatidis the assets of a Supermarket  located at 1644 York Avenue, New York,
New York. For information  concerning the terms of such acquisition see Item 13.
"Certain  Relationships and Related  Transactions." The Company does not believe
that the acquisition  will have a material  effect on the Company's  revenues or
expenses.


Growth Strategy

         The Company believes that the Merger will allow it to realize synergies
and increasing  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.

         The  Company  has  embarked  on a capital  expenditure  program for its
Supermarkets  that includes  extensive  remodelings  and the  introduction  of a
centralized  point-of-sale  information  system.  The  Company  has  obtained an
$8,000,000 five year term loan from certain banks to provide  financing for such
capital improvements (see "Recent Developments").

         During the  transition  period  ended  November 30, 1997, 4 stores were
remodeled for an aggregate  capital  expenditure of approximately  $3,200,000 (1
store was remodeled  during the prior 12 month period for a capital  expenditure
of  $500,000).  During the fiscal year ending  November  30,  1998,  the Company
anticipates  it  will  spend  approximately  $11,000,000  in  aggregate  capital
expenditures  to complete the  remodeling of 12 additional  stores.  The Company
anticipates that it will continue its store  remodeling  program in fiscal 1999.
The modernized

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<PAGE>


smaller Supermarkets are re-named "Gristede's 2001", and the larger Supermarkets
are re-named "Gristede's Mega Stores".

         The largest of the remodeled stores is located in Roosevelt  Island, in
New York City and has been  expanded  in size to 23,000  square  feet of selling
space from the previous 8,000 square feet.

         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  opening  new
supermarkets,  acquisitions  of supermarkets  and/or  acquisitions of businesses
which 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 a designated
area in  Manhattan.  The order does not restrict  the Company from  acquiring an
interest in a  supermarket  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.  For further  information  concerning the
Settlement  Agreement  and  proceeding  brought by the FTC against the companies
which prompted the Settlement  Agreement,  see Note 12 of Notes to the Financial
Statements of the Company.


Marketing

         The Company  advertises  in local  newspapers  on a weekly  basis.  The
Company's advertising  emphasizes competitive prices and 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
the Supermarkets are in direct competition with Food Emporium,  D'Agostino, 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 which 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. In addition, several of the Company's competitors have announced
plans to open larger stores.


                                        5

<PAGE>


Sources of Supply; Inventory Policy

         During the period  from March 3, 1997 to November  30, 1997  covered by
this  report  (the  "Transition  Period"),  the  Company  obtained  45%  of  the
merchandise sold in its stores from one principal  merchandise  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 time. 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, approximately 76% of the
Company's inventory is sold before the Company is required to pay its suppliers.


Tradenames

         The Company owns the "Gristede's" and "Sloan's" tradenames.  Such names
have 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.  While the Company is
not  aware  that  its use of the  tradename  infringes  upon the  rights  of any
persons, it has not obtained any federal or state trademark registration for the
tradename  "Sloan's."  The assertion by a third party of superior  rights in the
tradename  "Sloan's" or the loss of the Company's right to use either  tradename
could have a material adverse effect on the Company.


Labor Contracts

         All of the  employees  of the  Company  other  than  96  administrative
employees and executives and 58 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.


     Name of Union                                               Expiration Date
--------------------------------------                           ---------------
Retail, Wholesale & Chain Store                                  October 3, 1998
   Food Employees Union, Local 338
Amalgamated Meat Cutters and Retail Food                        October 23, 1999
Store Employees Union, Local 342-50
United Food and Commercial Workers Union                       December 19, 1998
("UFCW"), Local 174
UFCW, Local 1500                                                   June 21, 1998
UFCW, Local 464A                                                     May 1, 2003


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     Name of Union                                               Expiration Date
--------------------------------------                           ---------------
International Brotherhood of Teamsters                             June 30, 1999
("Teamsters"), Local 803
Teamsters, Local 202                                           December 31, 2003


Governmental Approvals

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


Employees

         At June 1, 1998, the Company had approximately  1,123 employees,  1,022
of which are employed at the Supermarkets or the City Produce warehouse, and 101
of which are employed at the Company's  executive offices.  Approximately 390 of
the employees were employed on a full-time basis.


Year 2000 Issue

         The Company has initiated an automation program to install state of the
art computerized  point-of-sale terminals ("POS") which are year 2000 compliant,
in all its  Supermarkets.  Approximately  one-third of the Supermarkets  already
have POS systems installed.  The Company  anticipates that all Supermarkets will
have POS systems installed by the year 2000.

         Corporate  level  systems are being  developed  and  implemented  using
client server  technology to make  efficient and timely use of the data supplied
by store  automation  systems for  management,  marketing and general  corporate
purposes.  Management  believes  that all such systems will be in place so as to
ensure  corporate  wide year 2000  functionality  from its systems.  The Company
estimates that the cost to implement  corporate level systems that are year 2000
compliant will not exceed $100,000.


Seasonality

         The Company's  Supermarkets are predominantly located in the borough of
Manhattan in New York City and serve the more affluent 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.


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<PAGE>


Environmental Compliance

         Compliance  by the Company  with  Federal,  State and local  provisions
which 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 43  Supermarket  locations and the warehouse and
distribution  center operated by City Produce. 11 of such leases expire prior to
2001,  23 of such leases  expire on dates from 2001  through  2010 and 9 of such
leases expire on dates from 2011 through 2018.  The  Supermarkets  range in size
from approximately 3,200 to 23,000 square feet of selling space, averaging 8,500
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 thereat.

ITEM 3.           LEGAL PROCEEDINGS.

         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  alleges,  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  alleges 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 which 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, RMED filed a motion for class
certification,  and discovery was held in abeyance  pending  disposition of that
motion. The motion was granted in March 1996 and discovery is now proceeding and
is scheduled to be completed in June 1998.  Management believes that the lawsuit
is without  merit and  intends to defend the  action  vigorously;  however,  the
outcome cannot be determined.

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<PAGE>


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

         A Special and Annual meeting of stockholders of the Company was held on
October 30, 1997. At the meeting,  John  Catsimatidis was elected as the Class 3
director to serve for a one year term expiring at the annual  meeting to be held
in 1998,  and Leroy  Hemingway II was  reelected and Kishore Lall was elected as
Class 1 Directors for a two year term expiring at the annual  meeting to be held
in 1999.  The number of votes cast in favor of the election of Mr.  Catsimatidis
was  2,587,693  and the number of votes cast against was 166,825.  The number of
votes cast in favor of the  election  of Mr.  Hemingway  was  2,584,527  and the
number of votes cast against was  169,991.  The number of votes cast in favor of
the election of Mr. Lall was  2,584,527 and the number of votes cast against was
169,991.  The terms of Martin  Bring and  Frederick  Selby as  Directors  of the
Company continued after the meeting.

         In addition to the election of the directors, the stockholders approved
the Merger Agreement (see Item 1 "Business - Recent  Developments").  The number
of votes  cast in favor of the Merger  Agreement  was  1,765,609,  the number of
votes cast against the Merger Agreement was 60,051 and the number of abstentions
was 1,486. The stockholders also approved a proposal to amend the Certificate of
Incorporation  of the Company to increase  from  10,000,000  to  25,000,000  the
authorized  number of shares of Common Stock.  The number of votes cast in favor
of the amendment was 1,627,166, the number of votes cast against was 196,766 and
the number of abstentions was 3,214. The  stockholders  also approved a proposal
to amend the Certificate of  Incorporation  to change the name of the Company to
Gristede's, Sloan's, Inc. The number of votes cast in favor of the amendment was
2,672,005,  the  number of votes  cast  against  was  80,446  and the  number of
abstentions  was  2,067.  The  stockholders  also  ratified  the  grant  to John
Catsimatidis of non-qualified options to purchase an aggregate of 250,000 shares
of Common Stock at $2.875 per share through the earlier of August 11, 2006 or 90
days after the termination of Mr.  Catsimatidis'  employment by the Company. The
number of votes cast in favor of the proposal was 1,633,157, the number of votes
cast against was 187,575 and the number of abstentions was 6,414.


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
Transition  Period from March 3, 1997 to  November  30, 1997 and the fiscal year
ended  March 2, 1997,  the  quarterly  high and low price  range for such common
stock is shown in the following tabulation:

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<PAGE>


                              Transition Period from
                                 March 3, 1997 to             Fiscal Year Ended
                                 November 30, 1997              March 2, 1997
                              ----------------------         -------------------
Quarter                        High             Low          High           Low
----------------------         ----             ---          ----           ---
First ................         3-1/8           2-1/4         3-3/4         2-7/8
Second ...............         2-5/8           1-7/8         3-1/2         2-1/2
Third ................         2-11/16             2         3-3/8         2-1/4
Fourth                     Not applicable   Not applicable   3-1/16        1-7/8


         The  approximate  number of holders of record of the  Company's  Common
Stock on June 1, 1998 was 230. 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.


Sales of Unregistered Securities

         Pursuant  to the Merger  Agreement  described  in Item 1.  "Business  -
Recent   Developments,"  on  November  10,  1997  the  Company  issued  to  John
Catsimatidis and Group 4,173,754 and 12,330,544 shares, respectively, of Commons
Stock. The shares were issued in consideration of the acquisition by the Company
in the merger of four corporations  controlled by Mr. Catsimatidis or Group. The
issuance of such shares did not require registration under the Securities Act of
1933,  as amended  (the  "Securities  Act") by virtue of an  exemption  from the
registration  requirements  contained in Section 4(2) of the Securities Act. The
transaction  qualified for such exemption because Mr. Catsimatidis and Group are
sophisticated investors,  acquired the shares for investment and not with a view
to  distribution  of such shares and have full access to information  concerning
the Company.

On July 30,  1997 the  Company  granted  and issued to each of John  Chatzky and
Frank  Linde five year  options to  purchase an  aggregate  of 37,500  shares of
Common  Stock  for a price of $5.00 per  share.  The  options  were  granted  in
connection with the Company's  acquisition of an option to purchase a commercial
condominium  unit for use as a supermarket.  The issuance of the options did not
require  registration  under  the  Securities  Act by  virtue  of the  exception
contained in Section 4(2) of the Securities Act.

                                       10

<PAGE>
<TABLE>
<CAPTION>

ITEM 6.       SELECTED FINANCIAL DATA


                                             39 Weeks Ended                                    Years Ended
                                            ----------------          --------------------------------------------------------------
                                               November 30,              March 2,                March 3,               February 26,
                                                  1997(1)                  1997                    1996                     1995
<S>                                           <C>                     <C>                     <C>                     <C>          
Sales ..............................          $  77,908,693           $ 104,168,864           $ 116,866,063           $ 116,862,727
Cost of sales ......................             48,591,721              63,932,541              72,351,240              72,893,642
Gross profit .......................             29,316,972              40,236,323              44,514,823              43,969,085
Direct operating
   expenses ........................             27,462,628              33,821,475              37,566,143              36,738,453
Corporate overhead .................              3,983,280               6,207,930               6,405,593               8,269,408
Depreciation and
   amortization ....................              1,585,486               2,092,403               2,257,714               2,747,641
Bad debt expense ...................                   --                   113,242                 222,878                 277,952
Excess of expenses
   over sales ......................             (3,714,422)             (1,998,727)             (1,937,505)             (4,064,369)


At End of Period

Total assets .......................             52,705,555              23,119,000              20,152,454              18,281,000
Long-term debt .....................             12,662,910                    --                      --                      --
Total liabilities ..................             38,035,533              20,014,000              17,620,539              16,822,000

<FN>
--------
(1) Includes the  operations  of the Food Group only for the 36 week period from
March 3, 1997 to November 9, 1997 and the  operations  of the  combined  Company
from November 10, 1997 to November 30, 1997.

</FN>
</TABLE>

                                       11

<PAGE>


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

Company Background

         The fiscal year ended March 3, 1996  consisted of 53 weeks.  The fiscal
year ended March 2, 1997 consisted of 52 weeks. The transition period from March
3, 1997 to November 30, 1997 (the "Transition Period") consisted of 39 weeks.


Results of Operations (Transition Period Compared to 1997)

         During the 36 week period from March 3, 1997 until November 9, 1997 the
Company  consisted of 15 stores and filed Quarterly Reports on Form 10-Q for the
quarters ended June 1, 1997 and August 31, 1997.

         On November 10, 1997, as a result of the Merger,  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
principal  stockholder of the Company.  The transaction was accounted for as the
acquisition  of the Company by the Food Group  pursuant to Emerging  Issues Task
Force 90-13 as a result of the Food Group obtaining control of the Company after
the transaction.

         As a result of the reverse  acquisition  the  following  summary of the
Results of Operations for the 39 week period  encompasses  the operations of the
Food Group for 36 weeks,  and the  operations of the new combined  companies for
only 3 weeks after the  Merger.  Therefore,  the 15 stores  owned by the Company
prior to the Merger have  contributed  to sales,  gross  margin and overhead for
only 3 weeks.

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

                                             39 weeks ended       52 weeks ended
                                            November 30, 1997      March 2, 1997
                                           ------------------     --------------
Sales ..................................        100.0%                 100.0%
Cost of sales ..........................         62.4%                  61.4%
                                                -----                  ----- 
Gross profit ...........................         37.6%                  38.6%
Store operating, general and ...........         35.3%                  32.5%
administrative expense                                             
Depreciation and amortization ..........          2.0%                   2.0%
Non-store operating expense ............          5.1%                   6.1%
                                                -----                  ----- 
Operating loss .........................         (4.8%)                 (2.0%)
                                                =====                  ===== 
                                                               

         Sales for the 39 weeks ended November 30, 1997, on an annualized basis,
were  $103,878,260 as compared to  $104,168,864  for the 52 weeks ended March 2,
1997. The net sales decrease was the result of several factors. Sales for the 39
week period did not include the busy Christmas and New Year's

                                       12

<PAGE>


holiday sales  periods.  The favorable  summer weather in the New York City area
during 1997 resulting in prolonged vacations, as well as continuing deflationary
pressures  in food  prices  also  contributed  to the  decrease  in  sales.  The
decreases were partially  offset by increases in sales  attributable to the fact
that 15 stores not  included as part of the prior year's  numbers were  included
for 3 weeks in the November 30, 1997 period. The sales of the 15 stores amounted
to $3,870,221 of the annualized 39 week's sales. In addition,  the remodeling of
4 stores  during the 39 week period  resulted in  substantial  sales  increases.
Sales for the same 29 stores were  $71,379,894  for the 39 weeks ended  November
30, 1997 as compared with $74,119,743 for the 39 weeks ended December 1, 1996, a
decrease  of 3.70%.  The sales  decline  in the 1997  period was due to the same
favorable  weather  conditions  during such period and  continuing  deflationary
pressures in food prices previously noted.

         Gross profit as a percentage of sales was 37.63% for the 39 week period
ended November 30, 1997 as compared to 38.63% for the 52 week period ended March
2, 1997. The decreases in gross profit margin was mainly due to the  curtailment
of our long-term  forward buying  program in the November  period as compared to
the March period.  In addition,  construction  activity  taking place during the
store remodelings and grand opening promotions for the remodeled stores affected
overall gross profit margins during the November period.

         Store operating, general and administrative expenses as a percentage of
sales were 35.25% for the 39 week period ended  November 30, 1997 as compared to
32.47% of sales for the 52 week period ended March 2, 1997.  Operating  expenses
as a percentage  of sales  increased in the November  period due to increases in
occupancy cost,  labor costs  associated with the store remodels and advertising
costs.

         Non-store  operating  expenses,   including  bad  debt  expense,  as  a
percentage of sales were 5.11% for the 39 week period ended November 30, 1997 as
compared  to  6.07%  of  sales  for the 52 week  period  ended  March  2,  1997.
Administrative  payroll and  fringes  were 3.15% of sales for the 39 week period
ended  November 30, 1997 as compared  with 4.06% of sales for the 52 week period
ended  March  2,  1997.   The   decrease  was  the  result  of  a  reduction  in
administrative personnel. General office expense, including bad debt expense, as
a percentage  of sales was 1.59% for the 39 week period ended  November 30, 1997
as  compared  with  1.46%  for the 52 week  period  ended  March  2,  1997.  The
percentage  increase is  attributable  to  additional  travel and related  costs
incurred to monitor the newly  remodeled  stores during the 39 week period which
were  magnified as a  percentage  of sales by the fact that the sales for the 39
week period did not  include the busy  Christmas  and New Year's  holiday  sales
periods.  Professional  fees were  0.36% of sales for the 39 week  period  ended
November  30, 1997 as compared  with 0.55% of sales for the 52 week period ended
March 2, 1997.  The  decrease  was due to the reduced  need for the  services of
outside  legal counsel in connection  with  litigation,  real estate and general
corporate  matters.  The  subcategory  "corporate  expenses" are those  expenses
attributable  only to a public  company and are thus solely  applicable to the 3
week period ended November 30, 1997.

                                       13

<PAGE>


Results of Operations (1997 Compared to 1996)

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

                                             52 weeks ended       53 weeks ended
                                              March 2, 1997        March 3, 1996
                                           ------------------     --------------
Sales ..................................         100.0%                100.0%
Cost of sales ..........................          61.4%                 61.9%
                                                 -----                 ----- 
Gross profit ...........................          38.6%                 38.1%
Store operating, general and ...........          32.5%                 32.1%
administrative expense                                          
Depreciation and amortization ..........           2.0%                  1.9%
Non-store operating expense ............           6.1%                  5.7%
                                                 -----                 ----- 
Operating loss .........................          (2.0%)                (1.6%)
                                                 =====                 ===== 
                                                         
         Sales for the fiscal  year  ended  March 2, 1997 were  $104,168,864  as
compared to  $116,866,023  for the fiscal year ended March 3, 1996. The decrease
in sales was  attributable to the following:  (i) 1996 was comprised of 53 weeks
as compared with 52 weeks in 1997,  (ii) one store that was open for all of 1996
was only open for a portion of 1997 due to a fire, as a result of which sales of
such store were approximately $3,270,000 less in 1997 as compared to 1996, (iii)
beverage sales, which ordinarily represent  approximately 17.0% of summer sales,
were negatively  impacted by the abnormally cool weather in the New York area in
1997  and  (iv)  the  selling  price  of  cereals,   which  typically  represent
approximately  7.50% of grocery  sales,  decreased in 1997.  Sales from the City
Produce  distribution center to outside customers were approximately  $1,525,000
less  in 1997  as  compared  with  1996  mainly  as a  result  of the  increased
utilization of the facility as a distribution center for the Food Group's stores
under the better-buying program.

         Gross profit as a percentage of sales was 38.6% for 1997 as compared to
38.1% for 1996. The improvement in 1997 primarily reflects the implementation of
the better-buying program utilizing the City Produce distribution center to make
bulk purchases,  on a direct basis at better prices, as well as the expansion of
the sales of  value-added,  higher margin  products.  Additionally,  prices were
selectively increased.

         Direct operating  expenses as a percent of sales were 32.5% for 1997 as
compared with 32.1% for 1996. The primary  reasons for the increase in operating
expenses as a percent of sales in 1997 as compared  with 1996 were  increases in
utility costs,  advertising  costs and occupancy costs resulting from new leases
replacing  expired ones. In addition,  fixed monthly  expenses such as occupancy
costs benefitted from 53 weeks of sales in 1996 as compared to 52 weeks of sales
in 1997.

         Corporate  overhead  decreased  to  $6,207,930  in 1997 as  compared to
$6,405,593 in 1996.  Administrative  payroll and fringes were $4,229,800 or 4.1%
of sales for the 1997 period as compared  with  $4,390,196  or 3.8% of sales for
the 1996 period.  While  administrative  payroll and fringes as a dollar  amount
were lower in 1997 as compared to 1996 they  increased as a percentage  of sales
due to the decrease in sales volume previously discussed. General office expense
was $1,405,381 or 1.4% of sales in the 1997

                                       14

<PAGE>


period  as  compared  with  $1,585,819  or 1.4% of  sales  in the  1996  period.
Professional fees increased to $572,749 or 0.55% of sales in 1997 as compared to
$429,578  or 0.37% of sales in 1996 mainly as the result of the  increased  need
for outside legal counsel in connection with litigation, real estate and general
corporate matters.

         Bad debt expense was $113,242 or 0.1% of sales in 1997 as compared with
$222,878 or 0.2% of sales in 1996.  The higher level of bad debt expense in 1996
was primarily due to the  establishment of additional  reserves in such year for
the expanded use of credit cards in the Food Group's stores.

         As a result  of the  above,  the  excess  of  expenses  over  sales was
$1,998,727  for 1997 as  compared  to  $1,937,505  for 1996,  after  charges for
depreciation   and   amortization   expenses  of  $2,092,403   and   $2,257,714,
respectively.


Liquidity and Capital Resources

         On November 10, 1997, the Company completed its financial  arrangements
with a  group  of  banks  for a  credit  facility  in the  aggregate  amount  of
$25,000,000.  Under the credit agreement the Company obtained a term loan in the
amount of  $12,000,000 to refinance  prior bank debt, an  improvement  term loan
line of credit in the amount of $8,000,000 to finance  capital  improvements  to
its  Supermarkets  and a revolving line of credit in the amount of $5,000,000 to
provide working capital.  The $12,000,000 term loan matures on October 31, 2002.
The improvement term loan line of credit and the revolving line of credit mature
on October  31,  2002 and October  31,  1999,  respectively,  at which times all
amounts outstanding thereunder are payable.

         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  from  November  10, 1997 to April 30, 1998 was
8.51% 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.

         By  agreements  dated  April 30, 1998 and June 9, 1998,  the  Company's
banks  extended  the dates by which the Company was  required to deliver to them
the  Company's  Annual  Report  on Form  10-K for the  Transition  Period  ended
November 30, 1997,  and its Quarterly  Report on Form 10-Q for the quarter ended
March 1, 1998.  Such  reports  were  thereafter  delivered  within the  extended
deadline. The banks also consented to the change in the Company's fiscal year to
the Sunday nearest November 30 of each year and waived the Company's  failure to
timely deliver certain financial statements and reports to the banks.

         As of  November  30,  1997,  the  Company  had  taken  down the  entire
$12,000,000 term loan and $1,000,000 was outstanding under the revolving line of
credit. As of May 11, 1998 the entire $5,000,000 of the revolving line of credit
was  outstanding,  but the  Company  still had  available  $5,350,000  under the
improvement  term loan line of credit to finance the Company's  continuing major
store remodeling program. Management of the Company anticipates that the Company
will generate  sufficient  cash flow to finance its future working capital needs
for the foreseeable future.

                                       15

<PAGE>


         The Company  has not  incurred  any  material  commitments  for capital
expenditures,  although it anticipates spending approximately $11,000,000 on its
store  remodeling  program in fiscal  1998.  Management  believes  that  amounts
available  under its  $25,000,000  credit  facility  together with financing the
Company believes it can obtain,  including loans from, and leasing  arrangements
with,  non-affiliated  companies,  will be  sufficient  to enable the Company to
complete its remodeling program.

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

                  Not applicable.


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                        Page No.
                                                                        --------
Report of independent certified public accountants                           F-1

Consolidated balance sheet of Gristede's Sloan's, Inc.
   and its subsidiaries as of November 30, 1997                              F-3

Statement of Assets to be Purchased and Liabilities to
   be assumed as of March 2, 1997                                            F-5

Consolidated Statement of Operations of Gristede's Sloans, Inc.
   and its subsidiaries for the three weeks ended November 30, 1997          F-6

Consolidated Statements of Sales and Expenses of Gristede's Sloan's, Inc.
   and its subsidiaries for the 36 weeks ended November 9, 1997,
   the 53 weeks ended March 2, 1997 and the 53 weeks ended March 3, 1996     F-7

Consolidated Statement of Stockholders' Equity of Gristede's Sloan's,
   Inc. and its subsidiaries for the three weeks ended November 30, 1997     F-8

Consolidated Statement of Cash Flows of Gristede's Sloan's, Inc.
   and its subsidiaries for the three weeks ended November 30, 1997          F-9

Notes to Financial Statements                                               F-10


                                       16

<PAGE>


Report of Independent Certified Public Accountants


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

We have  audited  the  accompanying  consolidated  balance  sheet of  Gristede's
Sloan's,  Inc.  and  subsidiaries  as of  November  30,  1997,  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the three weeks then ended (see Note 1). We have also  audited the  accompanying
statement of assets to be purchased and  liabilities to be assumed by Gristede's
Sloan's,  Inc.  as of March 2,  1997 and the  related  statements  of sales  and
expenses  for the 36 weeks  ended  November 9, 1997 and each of the two years in
the  period  ended  March  2,  1997.   These   financial   statements   are  the
responsibility of Gristede's Sloan's,  Inc.'s management.  Our responsibility is
to express an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the 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.

The  accompanying  statement of assets to be  purchased  and  liabilities  to be
assumed and  statements  of sales and expenses  were prepared for the purpose of
complying  with  the  rules  and  regulations  of the  Securities  and  Exchange
Commission,  and are not intended to be a complete  presentation  of  Gristede's
Sloan's,  Inc.'s  financial  position or results of  operations as of or for the
periods noted above.

                                      F-1


<PAGE>


In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  (i) the  financial  position of  Gristede's
Sloan's, Inc. and subsidiaries as of November 30, 1997, and the results of their
operations  and their cash flows for the three  weeks then  ended,  and (ii) the
assets to be purchased and liabilities to be assumed by Gristede's Sloan's, Inc.
at March 2, 1997 and its sales and expenses  for the 36 weeks ended  November 9,
1997 and each of the two years in the period ended March 2, 1997,  in conformity
with generally accepted accounting principles.


/s/ BDO Seidman, LLP
--------------------
BDO Seidman, LLP


New York, New York

May 15, 1998, except for
  Note 9a and Note 13b, as to
  which the date is June 9, 1998


                                       F-2



<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                                  Balance Sheet


November 30, 1997

Assets
Current:
   Cash .......................................................      $    88,970
   Accounts receivable - net of allowance for
     doubtful accounts of $300,000 ............................        5,110,026
   Inventories ................................................       16,221,465
   Prepaid expenses and other current assets ..................          914,544
   Notes receivable - current portion .........................          584,912
                                                                     -----------
        Total current assets ..................................       22,919,917
                                                                     -----------
Property and equipment:
   Furniture, fixtures and equipment ..........................       13,393,803
   Capitalized equipment leases ...............................        5,574,369
   Leasehold interests and improvements .......................       30,296,510
                                                                     -----------
                                                                      49,264,682
   Less:  Accumulated depreciation and amortization ...........       23,567,986
                                                                     -----------
              Net property and equipment ......................       25,696,696
                                                                     -----------
      Due from affiliate ......................................          351,778
                                                                     -----------
      Deposits and other assets ...............................          717,429
                                                                     -----------
      Deferred costs ..........................................        1,515,004
                                                                     -----------
      Notes receivable - noncurrent portion ...................        1,504,731
                                                                     -----------
                                                                     $52,705,555
                                                                     -----------

See accompanying notes to financial statements.

                                      F-3


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                                  Balance Sheet


November 30, 1997

Liabilities and Stockholders' Equity
Current:
   Accounts payable, trade .......................................   $15,671,962
   Accrued payroll, vacation and withholdings ....................     1,276,535
   Accrued expenses and other current liabilities ................       947,395
   Capitalized lease obligation - current portion ................       389,809
   Current portion of long-term debt .............................     1,714,284
                                                                     -----------
        Total current liabilities ................................    19,999,985
Long-term debt - noncurrent portion ..............................    11,285,716
Due to affiliate .................................................     4,000,000
Deferred advertising .............................................       378,654
Capitalized lease obligation - noncurrent portion ................     1,377,194
Deferred rent ....................................................       993,984
                                                                     -----------
        Total liabilities ........................................    38,035,533
                                                                     -----------
Commitments and contingencies
Stockholders' equity:
   Common stock, $0.02 par value - shares authorized 25,000,000;         392,732
      outstanding 19,636,574
        Additional paid-in capital ...............................    14,136,674
        Retained earnings ........................................       140,616
                                                                     -----------
              Total stockholders' equity .........................    14,670,022
                                                                     -----------
                                                                     $52,705,555


See accompanying notes to financial statements.

                                      F-4


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                       Statement of Assets to be Purchased
                          and Liabilities to be Assumed


March 2, 1997

Assets:
Accounts receivable .........................................        $ 2,999,000
Inventories .................................................          9,457,000
Notes receivable ............................................          1,634,000
Prepaid expenses and other current assets ...................            213,000
Security deposits ...........................................            300,000
Fixed assets, net ...........................................          7,187,000
Capital leases, net .........................................          1,329,000
                                                                     -----------
      Assets purchased ......................................         23,119,000
                                                                     -----------
Liabilities:
Accounts payable ............................................         11,192,000
Due to affiliate ............................................          4,000,000
Accrued vacation and sick pay ...............................            993,000
Due to Sloan's Supermarkets, Inc. ...........................          1,154,000
Capitalized leased obligations to affiliate .................          2,675,000
                                                                     -----------
      Total liabilities .....................................         20,014,000
                                                                     -----------
Net assets purchased ........................................        $ 3,105,000
                                                                     -----------


See accompanying notes to financial statements.

                                      F-5


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                             Statement of Operations


Three weeks ended November 30, 1997

Sales .........................................................      $ 9,225,123
Cost of sales .................................................        5,731,065
                                                                     -----------
        Gross profit ..........................................        3,494,058
Store operating, general and administrative expenses ..........        2,754,563
   Depreciation and amortization ..............................          219,813
                                                                     -----------
   Nonstore operating expenses
      Administrative payroll and fringes ......................          166,539
      General office expense ..................................           86,588
      Professional fees .......................................            7,975
      Corporate expense .......................................            5,378
                                                                     -----------
        Total nonstore operating expenses .....................          266,480
                                                                     -----------
           Operating profit ...................................          253,202
                                                                     -----------
   Other income (expense):
      Interest expense ........................................           82,586
                                                                     -----------
           Total other expenses ...............................           82,586
                                                                     -----------
           Income before provision for income taxes ...........          170,616
   Provision for income taxes .................................           30,000
                                                                     -----------
   Net income .................................................      $   140,616
                                                                     -----------
   Income per share of common stock ...........................      $       .01
                                                                     -----------
   Weighted average common shares outstanding .................       19,636,574
                                                                     -----------

See accompanying notes to financial statements.

                                      F-6


<PAGE>

<TABLE>
<CAPTION>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                        Statements of Sales and Expenses


                                            36 weeks ended            52 weeks ended            53 weeks ended
                                               November 9,                 March 2,                  March 3,
                                                   1997                      1997                      1996
                                              ------------              ------------              ------------
<S>                                          <C>                       <C>                       <C>
Sales .................................      $  68,683,570             $ 104,168,864             $ 116,866,063
Cost of sales .........................         42,860,656                63,932,541                72,351,240
                                              ------------              ------------              ------------
      Gross profit ....................         25,822,914                40,236,323                44,514,823
Direct operating expenses .............         24,708,065                33,821,475                37,566,143
                                              ------------              ------------              ------------
Corporate overhead
   Administrative payroll and fringes .          2,288,915                 4,229,800                 4,390,196
   General office expense .............          1,150,962                 1,405,381                 1,585,819
   Professional fees ..................            276,923                   572,749                   429,578
                                              ------------              ------------              ------------
       Total corporate overhead .......          3,716,800                 6,207,930                 6,405,593
                                              ------------              ------------              ------------
                                                (2,601,951)                  206,918                   543,087
Depreciation and amortization .........          1,365,673                 2,092,403                 2,257,714
Bad debt expense ......................               --                     113,242                   222,878
                                              ------------              ------------              ------------
Excess of expenses over sales .........      $  (3,967,624)            $  (1,998,727)            $  (1,937,505)
                                              ------------              ------------              ------------


See accompanying notes to financial statements.

</TABLE>

                                      F-7


<PAGE>


<TABLE>
<CAPTION>

                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                        Statement of Stockholders' Equity


Three weeks ended November 30, 1997

                                                    Common stock
                                            -----------------------------             Additional                            Total
                                             Number of            Amount               paid-in            Retained     stockholders'
                                              shares                                   capital            earnings         equity
                                             ----------       -----------            -----------       -----------       -----------
<S>                                          <C>              <C>                    <C>               <C>               <C>
Balance, November 10, 1997 ...............         --         $      --              $      --         $      --         $      --
To reflect acquisition of ................   19,636,574           392,732             14,136,674              --          14,529,406
   Sloan's Supermarkets, Inc. -
   Recapitalization (Note 1)
Net income ...............................         --                --                      --            140,616           140,616
                                             ----------       -----------            -----------       -----------       -----------
   Balance, November 30, 1997 ............   19,636,574       $   392,732            $14,136,674       $   140,616       $14,670,022
                                             ==========       ===========            ===========       ===========       ===========

See accompanying notes to financial statements.

</TABLE>

                                      F-8


<PAGE>


<TABLE>
<CAPTION>

                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                             Statement of Cash Flows


Three weeks ended November 30, 1997

<S>                                                                                          <C>
Cash flows from operating activities:
   Net income ..........................................................................     $    140,616
   Adjustments to reconcile net income to net cash used in operating
      activities:
      Depreciation and amortization ....................................................          219,813
      Changes in operating assets and liabilities, net of effect from
        acquisition of supermarkets:
                    Accounts receivable ................................................         (421,106)
                    Inventories ........................................................         (209,130)
                    Prepaid expenses and other current assets ..........................          442,666
                    Notes receivable ...................................................           23,433
                    Receivable from officer ............................................           (1,113)
                    Other assets .......................................................         (399,092)
                    Accounts payable, trade ............................................       (6,529,099)
                    Accrued payroll, vacation and withholdings .........................          397,894
                    Accrued expenses and other current liabilities .....................          270,334
                    Deferred rent ......................................................           34,503
                    Other credits ......................................................          378,654
                                                                                             ------------
                           Net cash used in operating activities .......................       (5,651,627)
                                                                                             ------------
Cash flows from investing activities:
           Capital expenditures - net ..................................................         (362,987)
                                                                                             ------------
                           Net cash used in investing activities .......................         (362,987)
                                                                                             ------------
Cash flows from financing activities:
           Repayments of bank loan .....................................................       (7,100,000)
           Capitalized lease obligations ...............................................           (7,665)
           Proceeds from bank loan .....................................................       13,000,000
                                                                                             ------------
                           Net cash provided by financing activities ...................        5,892,335
                                                                                             ------------
Net decrease in cash ...................................................................         (122,279)
Cash, beginning of period -- acquired from supermarkets ................................          211,249
                                                                                             ------------
Cash, end of period ....................................................................     $     88,970
                                                                                             ============
Supplemental disclosures of cash flow information:
           Cash paid for interest ......................................................     $     21,792
           Cash paid for taxes .........................................................            1,500
                                                                                             ------------


See accompanying notes to financial statements.

</TABLE>

                                      F-9


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


1.  Business and Basis
    of Presentation

                              On November 4, 1997,  Sloan's  Supermarkets,  Inc.
                              ("Sloan's")   changed   its  name  to   Gristede's
                              Sloan's,   Inc.  ("GRI"  or  the  "Company").   On
                              November 10, 1997,  GRI acquired  certain  assets,
                              net of liabilities of 29 selected supermarkets and
                              a  wholesale   distribution  business  ("The  Food
                              Group") controlled by Mr. John Catsimatidis, a 37%
                              shareholder of GRI. 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.  Sloan's assets
                              and  liabilities  are being 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.  16,504,298  shares of  common  stock
                              were issued on the date of the  acquisition  based
                              on a market price of $2.18 per share.

                              The accompanying statement of operations as of and
                              for  the  three  weeks  ended  November  30,  1997
                              represents the consolidated operations of The Food
                              Group and GRI.  Retained  earnings at November 30,
                              1997   represent  the   cumulative  net  operating
                              results  for  both  The  Food  Group  and GRI from
                              November  10, 1997 (the date the  acquisition  was
                              consummated) to November 30, 1997.

                                      F-10


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              The Food Group's financial statements, rather than
                              complete financial statements, are presented as of
                              and for periods  prior to November 9, 1997 because
                              the business acquired consists of only certain net
                              assets of the stores and there are certain  assets
                              of  The  Food  Group   that  were  not   acquired.
                              Accordingly,   the  statements  present  only  the
                              assets  acquired and the  liabilities  assumed and
                              the sales and expenses  directly  attributable  to
                              The Food Group. The financial  statements  consist
                              of  a  historical  consistent  comparison  of  the
                              operating results only of those stores transferred
                              to the public  company.  The  entities  owning The
                              Food Group (the  "Group"),  in  addition to owning
                              the  above  stores,  also  have  other  operations
                              included within its consolidated group.  Corporate
                              overhead  costs for the entire Group are allocated
                              to the Group's  respective  operations,  including
                              The Food Group. Corporate overhead included in the
                              accompanying  statements  of  sales  and  expenses
                              include identified  overhead costs for payroll and
                              other   directly   attributable   overhead   costs
                              pertaining to the retail stores owned by the Group
                              which also  includes  costs  incurred for selected
                              stores not being  sold.  No tax  benefit  has been
                              recognized  due to the fact that the losses remain
                              with the corporate parent of The Food Group.


2.  Summary of                Fiscal Year
    Significant
    Accounting Policies       On  January  13,  1998,  the  Company's  Board  of
                              Directors  elected to change the Company's  fiscal
                              year-end  from the Sunday  closest to the last day
                              of February to the Sunday  closest to the last day
                              of November.

                                      F-11


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              INVENTORIES

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

                              PROPERTY AND EQUIPMENT

                              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
                              improvements  are  amortized  over the  shorter of
                              their estimated  useful lives or the lease term by
                              the straight-line method.

                              The Company recorded approximately $4.4 million to
                              leasehold   rights  on  the  consummation  of  the
                              acquisition  discussed  in Note 1 due to favorable
                              leasing terms.  The leasehold rights are amortized
                              over ten years by the straight-line method.

                              LEASES

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

                              DEFERRED  ADVERTISING

                              Advertising    rebates   and   space    allocation
                              allowances  are deferred and  recognized in income
                              over the period of the agreement, generally one to
                              three years.

                              ADVERTISING EXPENSE

                              The Company expenses  advertisement costs when the
                              advertisement is first shown.

                              DEFERRED COSTS

                              Deferred  costs consist of  noncompete  agreement,
                              acquisition   and   financing   costs.   They  are
                              amortized  on a  straight-line  basis over five to
                              ten years.

                                      F-12


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              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  basis.
                              Deferred tax assets and  liabilities  are measured
                              using  enacted  tax  rates  expected  to  apply to
                              taxable   income  in  the  years  in  which  those
                              temporary differences are expected to be recovered
                              or settled.  The effect on deferred tax assets and
                              liabilities of a change in tax rates is recognized
                              in  income  in  the  period  that   includes   the
                              enactment   date.   No  deferred   tax  assets  or
                              liabilities   from  The  Food   Group   have  been
                              recognized  since  only the  operating  assets and
                              liabilities  of the  stores  have been  sold.  The
                              losses  incurred by these stores being sold remain
                              with the Red Apple Group, Inc.

                              The Company will not  recognize  gain or loss as a
                              result of the completion of the  transactions  set
                              forth in the  merger  agreement  between  The Food
                              Group and the Company.  The Company  believes that
                              it will undergo 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
                              (including  a portion  of any net  operating  loss
                              incurred in the  Company's  current  taxable year)
                              against income earned after the  transaction  will
                              be limited.  (As of November 30, 1997, the Company
                              had   net   operating   loss    carryforwards   of
                              approximately  $3,000,000).  Thus, the transaction
                              could  result in taxation of some  Company  income
                              that,  absent  the  transaction,  might  have been
                              offset by net operating loss carryforwards.

                              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 expense
                              and  disclosures of  contingencies.  Future events
                              could alter such estimates in the near term.

                                      F-13


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              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.

                              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 11.

                              FAIR VALUE OF FINANCIAL INSTRUMENTS

                              SFAS No.  107,  "Disclosure  About  Fair  Value of
                              Financial   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 loan and  revolving  loan  payable  as of
                              November 30, 1997,  approximates the recorded book
                              values 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

                              During  1995,  SFAS No. 121,  "Accounting  for the
                              Impairment of Long-lived Assets and for Long-lived
                              Assets to Be Disposed  Of",  was issued.  SFAS 121
                              requires the Company to review  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
                              November 30, 1997.

                                      F-14


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              INCOME PER SHARE

                              Per share data are based on the  weighted  average
                              number of shares of common  stock and common stock
                              equivalents  outstanding  during each year. Income
                              (loss) per share is computed by the treasury stock
                              method;  primary and fully  diluted  income (loss)
                              per share are the same.

                              Recent Accounting Pronouncements

                              SFAS No. 128,  "Earnings  Per  Share,"  requires a
                              presentation  of  basic  EPS and  diluted  EPS for
                              fiscal years  beginning  after  December 15, 1997.
                              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.  Similar  to  fully
                              diluted  EPS,  diluted EPS assumes  conversion  of
                              convertible  debt and the issuance of common stock
                              for  all  other  potentially  dilutive  equivalent
                              shares outstanding,  unless the effect of issuance
                              would have an  anti-dilutive  effect.  The Company
                              believes  SFAS No. 128 will have  little,  if any,
                              effect on the information already disclosed in the
                              Company's financial statements.

                              SFAS No. 129,  "Disclosure  of  Information  About
                              Capital  Structure"  requires an entity to provide
                              certain    disclosures    within   its   financial
                              statements   about  the   pertinent   rights   and
                              privileges of the various  securities  outstanding
                              for fiscal  years  beginning  after  December  15,
                              1997. The Company  believes SFAS No. 129 will have
                              little, if any, effect on the information  already
                              disclosed in the Company's financial statements.

                              SFAS No. 130,  "Reporting  Comprehensive  Income",
                              requires an entity to report  comprehensive income
                              and its  components  for  fiscal  years  beginning
                              after December 15, 1997. The Company believes SFAS
                              No. 130 will have  little,  if any,  effect on the
                              information  already  disclosed  in the  Company's
                              financial statements.

                              SFAS No. 131,  "Disclosures  About  Segments of an
                              Enterprise  and Related  Information"  requires an
                              entity  to  report   financial   and   descriptive
                              information   about   its   reportable   operating
                              segments for fiscal years beginning after December
                              15, 1997.  The Company  believes SFAS No. 131 will
                              have  little,  if any,  effect on the  information
                              already  disclosed  in  the  Company's   financial
                              statements.

                                      F-15


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              Statement of Position  98-1,  "Accounting  for the
                              Costs of Computer  Software  Developed or Obtained
                              for Internal  Use",  requires an entity to expense
                              all  software  development  costs  incurred in the
                              preliminary project stage, training costs and data
                              conversion  costs for fiscal years beginning after
                              December 15, 1998. The Company  believes that this
                              statement  will not have a material  effect on the
                              Company's   accounting   for   computer   software
                              acquisitions.

                              Statement  of  Position  98-5,   "Accounting   for
                              Start-up Costs", requires an entity to expense all
                              start-up  related  costs as  incurred  for  fiscal
                              years  beginning  after  December  15,  1998.  The
                              Company believes that this statement will not have
                              a material effect on the Company's  accounting for
                              start-up costs.

3.  Acquisition  of The       As  discussed  in  Note 1,  the  following   table
    Food Group                reflects unaudited pro forma  combined  results of
                              operations  of  Sloan's  and The Food Group on the
                              basis that the  acquisition had taken place at the
                              beginning  of the  fiscal  year  for  each  of the
                              periods presented:


                                                      36 weeks       52 weeks
                                                       ended           ended
                                                     November 9,     March 2,
                                                        1997           1997
                              --------------------------------------------------
                              Revenues             $101,157,570     $150,721,403

                              Operating income        1,679,004       11,085,809
                              --------------------------------------------------


                              In management's  opinion,  the unaudited pro forma
                              combined  results of operations are not indicative
                              of the actual results that would have occurred had
                              the acquisition  been consummated on March 4, 1996
                              or of future operations of the combined  companies
                              under the ownership and management of GRI.

                                      F-16


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


4. Related Party              The Company has advanced  funds to a company owned
   Transactions               by the  Chairman  of the  Board  who is  also  the
                              principal   stockholder  of  the  Company.  As  of
                              November   30,   1997,   the   Company   is   owed
                              approximately  $352,000,   including  $148,000  of
                              accrued  interest.  Such advance bears interest at
                              prime plus 1.25% per annum  (9.75% at November 30,
                              1997 and 9.50% at March 2, 1997).

                              The  Company  and  other  affiliated  supermarkets
                              allocate  volume,  advertising  and other rebates.
                              Rebates,  whether allocated or directly attributed
                              to the Company, are recorded as reductions to cost
                              of sales or  advertising  expense over the life of
                              the  related   agreement.   Rebates   recorded  as
                              reductions to expenses  approximated $0.4 million,
                              $1.5  million,  $3.2  million and $2.2 million for
                              the 3 weeks  ended  November  30,  1997,  36 weeks
                              ended  November 9, 1997 and the fiscal years ended
                              1997 and 1996, respectively.

                              Prior to the merger,  Red Apple Management Inc., a
                              company   wholly   owned  by  John   Catsimatidis,
                              provided certain payroll, related employee benefit
                              services  and office  services for The Food Group.
                              Such services include  accounting,  merchandising,
                              human resources,  maintenance,  executive salaries
                              and  employee  benefits.  During the 3 weeks ended
                              November 30, 1997, 36 weeks ended November 9, 1997
                              and the  fiscal  years  ended  1997 and 1996,  the
                              Company incurred  approximately $-0-,  $2,748,000,
                              $3,755,000 and $3,761,000, respectively.

                              Newspaper   advertising   for   the   Company   is
                              frequently   pooled  with  advertising  for  other
                              supermarkets  which are not owned by the  Company.
                              In such cases,  the Company  pays a  proportionate
                              share of such advertising  expenses based upon its
                              number   of    Supermarkets    covered    in   the
                              advertisements.  Such  amounts  allocated  to  the
                              Company approximated $-0-, $388,000,  $319,000 and
                              $317,000  during the 3 weeks  ended  November  30,
                              1997,  36 weeks ended  November  9, 1997,  and the
                              fiscal years ended 1997 and 1996, respectively.

                                      F-17


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              Lowenthal,  Landau,  Fischer & Bring,  P.C., a law
                              firm  of  which a  director  of the  Company  is a
                              member,   charged  the  Company  $-0-,   $341,000,
                              $194,000 and $487,000 in fees for rendering  legal
                              services to the  Company  during the 3 weeks ended
                              November 30, 1997, 36 weeks ended November 9, 1997
                              and the fiscal years ended March 2, 1997 and March
                              3, 1996, respectively.


                              Capitalized Lease Obligations Due to Affiliate

                              Certain  stores  have  entered  into  capital  and
                              operating  leases  with an  affiliate,  Red  Apple
                              Leasing,  Inc.  (a  company  wholly  owned by John
                              Catsimatidis). Such leases are primarily for store
                              operating  equipment.  Obligations  under  capital
                              leases at November  30, 1997 were  $1,206,932  and
                              require monthly  payments of $35,114 through March
                              1, 2001.  Obligations  under  operating  leases at
                              March 2, 1997  require  84  payments  of  $14,594.
                              Obligations under operating leases at June 2, 1997
                              and September 1, 1997 require 60 monthly  payments
                              of $10,783 and $16,297, respectively.

                              Notes Receivable

                              During 1994, the Company sold two stores. Pursuant
                              to the  United  States  Federal  Trade  Commission
                              settlement  agreement  (see Note 11),  the Company
                              also sold four stores during 1996 and 1997. At the
                              time of the  sale,  the  Company  accepted  a note
                              receivable   on  each  store.   These  notes  bear
                              interest at rates of 8.5% to 10% and have terms of
                              4 to 6 years.


5. Deferred Costs             At November 30, 1997, deferred costs consisted of:

<TABLE>
<CAPTION>

                                                                         Amount
                              ----------------------------------------------------------------------
<S>                                                                   <C>                 <C>
                              Acquisition costs                       $  834,316          5-10 years
                              Non-compete covenants                      790,316            10 years
                              Debt costs                                 254,528          5-10 years
                              Other                                      122,263          5-11 years
                              Accumulated amortization                  (486,419)
                              ----------------------------------------------------------------------
                              Net deferred costs                      $1,515,004
                              ----------------------------------------------------------------------

</TABLE>


                                      F-18


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


6.  Due to Affiliate          Amounts due to  affiliate represent liabilities in
                              connection with the  consummation of the merger as
                              discussed in Note 1. The  affiliate has agreed not
                              to demand payment of these liabilities in the next
                              fiscal year.  Accordingly,  the liability has been
                              classified as  noncurrent.  The liability does not
                              bear interest.


7.  Commitments  and          The   Company   operates    primarily   in  leased
    Contingencies             facilities, under noncancelable  operating  leases
                              expiring at various dates  through  2018.  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  fifteen
                              years.  The Company is obligated  under all leases
                              to  pay  for  taxes,  insurance  and  common  area
                              maintenance expenses.

                              Rent expense under noncancelable operating leases,
                              including  leases  with  related  parties  for the
                              fiscal periods ended  November 30, 1997,  November
                              9,  1997,   March  2,  1997  and  March  3,  1996,
                              respectively, is as follows:

<TABLE>
<CAPTION>

                                                3 weeks ended  36 weeks ended   52 weeks ended  53 weeks ended
                                                 November 30,   November 9,         March 2,         March 3,
                                                     1997           1997             1997              1996
                              --------------------------------------------------------------------------------
<S>                                               <C>           <C>              <C>              <C>
                              Base rents          $ 450,460     $ 4,026,056      $ 4,952,840      $ 4,699,012
                              Contingent rents         --           (18,169)          21,461          (27,951)
                              --------------------------------------------------------------------------------
                              Rent expense        $ 450,460     $ 4,007,887      $ 4,974,301      $ 4,671,061
                              --------------------------------------------------------------------------------

</TABLE>

                              Related party rent expense was $51,823,  $446,760,
                              $267,000  and  $348,000  for  the  3  weeks  ended
                              November 30, 1997, 36 weeks ended November 9, 1997
                              and the fiscal years ended March 2, 1997 and March
                              3, 1996, respectively.

                                      F-19


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              Future    minimum    lease    commitments    under
                              noncancelable leases as of November 30, 1997 are:


                              Fiscal year ending
                              ----------------------------------------------
                              1998                              $  8,653,000
                              1999                                 8,351,000
                              2000                                 8,109,000
                              2001                                 7,173,000
                              2002                                 6,600,000
                              Thereafter                          47,155,000
                              ----------------------------------------------
                                                                 $86,041,000
                              ----------------------------------------------


8.  Income Taxes              Deferred tax expense or benefit is  the  change in
                              the computed tax asset or liability balance. As of
                              November 30, 1997,  the Company had total deferred
                              tax assets of approximately  $2,400,000,  of which
                              approximately   $1,000,000   is   related  to  net
                              operating loss  carryforwards  which are available
                              to  offset  income  earned in  future  years,  and
                              approximately  $1,400,000 relates to the different
                              bases of leasehold  rights.  The net deferred  tax
                              assets at November 30, 1997 and March 2, 1997 were
                              offset by valuation allowances of an equal amount.
                              Accordingly,   no  deferred   income   taxes  were
                              recognized in any of the periods.

                              As of November 30, 1997, the Company had available
                              Federal  net  operating  loss   carryforwards   of
                              approximately   $3,000,000,   of  which   the  tax
                              benefits of $1,000,000 when and if realized,  will
                              be  credited   directly  to   additional   paid-in
                              capital.

                                      F-20


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              The income tax expense amounts in the consolidated
                              statements of  operations  consist of state income
                              taxes.


9.  Debt                      (a) Credit Facility and Term Loan Agreement

                                  On November 10, 1997, the Company entered into
                                  an  aggregate   $25,000,000  five-year  credit
                                  facility  with  European   American  Bank,  as
                                  agent, and certain other participating  banks.
                                  The  credit   facility  is   comprised   of  a
                                  $12,000,000  five-year term loan, a $8,000,000
                                  five-year  term loan line for  remodeling  and
                                  capital  improvements to the Company's  stores
                                  and a  $5,000,000  two-year  revolving  credit
                                  facility for general working capital purposes.
                                  Borrowings under the facility bear interest at
                                  a "spread"  over either the bank's  prime rate
                                  or LIBOR rates,  with the spread  dependent on
                                  the  ratio  of the  Company's  funded  debt to
                                  EBITDA   ratio,   as  defined  in  the  credit
                                  agreement.   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.

                                  On June 9, 1998, the Company's  banks extended
                                  the dates by which the Company was required to
                                  deliver to them its Annual  Report on SEC Form
                                  10-K for the nine months  ended  November  30,
                                  1997,  and its  quarterly  report  on SEC Form
                                  10-Q for the quarter ended March 1, 1998.

                                      F-21


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                                  Long-term  debt at November 30, 1997  consists
                                  of the following:

<TABLE>
<CAPTION>

                                  November 30, 1997

                                  --------------------------------------------------------------------------------
<S>                                                                                                    <C>
                                  Term loan  payable  to banks due October 31, 2002.
                                    Interest  on  prime-based  loans is  payable
                                    monthly   in   arrears   and   interest   on
                                    LIBOR-based  loans is  payable at the end of
                                    the applicable  interest  period;  principal
                                    payable  in  59  monthly   installments   of
                                    $142,857 beginning December 1, 1997 with the
                                    60th   such   installment   being  the  then
                                    outstanding  principal  amount.  During  the
                                    three  weeks  ended  November  30,  1997 the
                                    interest  rates  were 8.28% and 9.25% on the
                                    LIBOR-based    and    prime-based     loans,
                                    respectively   (collateralized   by  certain
                                    assets    of    the    Company,    including
                                    receivables, inventory, and
                                    store equipment)                                                   $12,000,000

                                  Revolving  loan  payable to bank,  due October
                                    31, 1999.  Interest on prime-based  loans is
                                    payable  monthly in arrears and  interest on
                                    LIBOR-based  loans is  payable at the end of
                                    the applicable  interest period.  During the
                                    three weeks ended  November  30,  1997,  the
                                    interest rate was 9.25%  (collateralized  by
                                    certain  assets  of the  Company,  including
                                    receivables, inventory, and
                                    store equipment)                                                     1,000,000
                                  --------------------------------------------------------------------------------
                                                                                                        13,000,000
                                  Less:  Current portion                                                 1,714,284
                                  --------------------------------------------------------------------------------
                                                                                                       $11,285,716
                                  ================================================================================

</TABLE>


                                      F-22


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                                  Principal  maturities of long-term  debt as of
                                  November 30, 1997:

                              Fiscal year ending
                              --------------------------------------------------
                              1998                                   $ 1,714,284
                              1999                                     2,714,284
                              2000                                     1,714,284
                              2001                                     1,714,284
                              2002                                     5,142,864
                              --------------------------------------------------
                                                                     $13,000,000
                              --------------------------------------------------


                              (b) In addition to related  party  capital  leases
                                  (Note  4),  the  Company  has  other   capital
                                  equipment  leases.  The net book  value of all
                                  assets under capital  leases is  approximately
                                  $1.4 million.

                                  Future  net  minimum  lease   payments   under
                                  capital leases are as follows:


                              Fiscal year ending
                              --------------------------------------------------
                              1998                                     $ 537,072
                              1999                                       537,072
                              2000                                       537,072
                              2001                                       256,160
                              2002                                       115,704
                              Thereafter                                 212,124
                              --------------------------------------------------
                                                                       2,195,204
                              Less: Amount representing interest         428,201
                              --------------------------------------------------
                              Present value of net minimum
                                lease payments                         1,767,003
                              Due within one year                        389,809
                              --------------------------------------------------
                              Total                                   $1,377,194
                              ==================================================

                                      F-23


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


10.  Retirement Plans         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
                              $153,000, $369,000, $697,000 and $849,000 in the 3
                              weeks  ended  November  30,  1997,  36 weeks ended
                              November 9,  1997, and the fiscal years ended 1997
                              and 1996,  respectively.  The Company could, under
                              certain  circumstances,  be  liable  for  unfunded
                              vested  benefits  or  other  expenses  of  jointly
                              administered union/management plans.


11.  Stock  Option  Plans     The  following  stock  option  plans were  carried
                              forward by The Food Group from Sloan's:

                              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,  subject  to the
                              ratification  of the  Company's  stockholders.  On
                              October  30,  1997,  the  Company's   stockholders
                              ratified the grant.

                              The Company  currently has one incentive grant and
                              four nonqualified grants under which stock options
                              may be  granted  to  officers,  directors  and key
                              employees  of  the  Company  - the  1994  Employee
                              Incentive  Grant  (the  "1994  Grant"),  the  1994
                              Nonqualified Grant (the "1994 NQ Grant"), the 1995
                              Chairman's  Nonqualified  Options (the "Chairman's
                              Grant"),  the 1994 Director's  Nonqualified  Grant
                              (the   "Directors'    Grant"),    and   the   1994
                              Nonqualified    Recruitment   Grant   (the   "1994
                              Recruitment   Grant").  The  options  to  purchase
                              common shares  generally are issued at fair market
                              value on the date of the grant,  begin  vesting on
                              the date of the  grant,  and expire ten years from
                              issuance  and  are   conditioned   upon  continual
                              employment during the vesting period.

                                      F-24


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              Under the 1994  Grant  and the 1994 NQ Grant,  the
                              Company  granted options to purchase up to 100,000
                              and 35,000 shares of common stock, respectively.

                              In  addition  to  the  one  incentive  grant,  the
                              Company has granted  stock  options to certain key
                              executives  and  directors.  The options vest over
                              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  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.

                              The accounting  provisions of SFAS No. 123 did not
                              have an  effect  on the  Company's  pro  forma net
                              income  and  earnings  per share and thus have not
                              been presented.

                                      F-25


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


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

<TABLE>
<CAPTION>

                                                                                              Weighted Average
                                                                                Shares          Exercise Price
                              --------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
                              Balance, February 26, 1995                       473,000               4.29
                                 Granted                                          --                  --
                                 Exercised                                        --                  --
                                 Forfeited                                      (9,000)              5.63
                                                                             ---------           --------
                              Balance, March 3, 1996                           464,000               4.27
                                 Granted                                          --                  --
                                 Exercised                                        --                  --
                                 Forfeited                                      (8,000)              5.63
                                                                             ---------           --------
                              Balance, March 2, 1997                           456,000               4.24
                                 Granted                                       325,000               3.36
                                 Exercised                                        --                  --
                                 Forfeited                                      (1,000)              5.63
                                                                             ---------           --------
                              Balance, November 9, 1997                        780,000               3.87
                                 Granted                                          --                  --
                                 Exercised                                        --                  --
                                 Forfeited                                        --                  --
                                                                             ---------           --------
                              Balance, November 30, 1997                       780,000               3.87
                                                                             =========           ========

</TABLE>


                              Options  exercisable  as of November  30, 1997 and
                              March  2,   1997   were   773,400   and   442,800,
                              respectively.

                              All  options  prior  to  November  10,  1997  were
                              assumed from Sloan's by the Company.

                                      F-26


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              The following table  summarizes  information as of
                              November  30,  1997  concerning   outstanding  and
                              exercisable options:

<TABLE>
<CAPTION>

                                                        Options Outstanding                Options Exercisable
                                              --------------------------------------     ---------------------
                                    Weighted
                                                              Average      Weighted                   Weighted
                                 Range of                    Remaining     Average                     Average
                                 Exercise       Number      Contractual   Exercise          Number    Exercise
                                  Prices      Outstanding      Life        Price         Exercisable     Price
                              --------------------------------------------------------------------------------
<S>                                            <C>             <C>          <C>           <C>             <C>
                                   3.75        275,000         5.94         3.75          275,000         3.75
                                   5.63         33,000         6.06         5.63           33,000         5.63
                                   5.63         84,000         6.06         5.63           84,000         5.63
                                   3.81         30,000         6.94         3.81           30,000         3.81
                                   3.81         33,000         1.94         3.81           26,400         3.81
                                   2.87        250,000         9.75         2.87          250,000         2.87
                                   5.00         75,000         4.75         5.00           75,000         5.00
                              --------------------------------------------------------------------------------
                              2.87-5.63        780,000         6.61         3.87          773,400         6.65
                              --------------------------------------------------------------------------------

</TABLE>


12.  Litigation               In June 1994,  the  United  States  Federal  Trade
                              Commission   (the  "FTC")   commenced   an  action
                              alleging that certain acquisitions  consummated by
                              Mr. John  Catsimatidis,  Sloan's,  and three other
                              entities (the "Red Apple entities")  controlled by
                              Mr.  Catsimatidis,  including  corporations  which
                              presently    own    the     acquisition     stores
                              (collectively,  the  "companies")  of  32  Sloan's
                              supermarkets   between  1991  and  1993   violated
                              Federal  antitrust  laws because the effect of the
                              acquisitions  might  be  substantially  to  lessen
                              competition   among   supermarkets   within   four
                              Manhattan residential neighborhoods. The complaint
                              indicated  that the FTC could seek  divestiture of
                              up to ten supermarkets owned by the companies.

                                      F-27


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              In  order  to  avoid  the   costs  of   protracted
                              litigation  in the  matter and  without  admitting
                              that any  antitrust law was violated as alleged in
                              the complaint, on November 21, 1994, the companies
                              entered into a settlement  agreement  against them
                              (the "Settlement Agreement"). The companies agreed
                              in the  Settlement  Agreement  that within  twelve
                              months  from  the  date  of a final  order  in the
                              proceeding  they  would  divest  themselves  of an
                              aggregate of six supermarkets in Manhattan, chosen
                              by  them  from  a  list  of  sixteen  supermarkets
                              specifically    designated   in   the   Settlement
                              Agreement  (none of which were  owned by  Sloan's)
                              and certain alternate  supermarkets  referenced in
                              the Settlement  Agreement (five of which were then
                              owned  by  Sloan's).  Nothing  in  the  Settlement
                              Agreement required Sloan's to divest itself of any
                              of its supermarkets, but any supermarkets divested
                              by Sloan's  counted  towards  satisfaction  of the
                              divesture obligations.

                              An order  embodying the  Settlement  Agreement was
                              made  effective   March  6,  1995  (the  "Order").
                              Pursuant to that Order,  for a period of ten years
                              from March 6, 1995, the companies cannot,  without
                              prior FTC  approval,  acquire any  interest in any
                              existing  supermarket  in a designated  area.  The
                              Order  does  not  restrict  the   companies   from
                              acquiring an interest in a supermarket  by leasing
                              or  purchasing a new location  that at the time of
                              acquisition  (and  for  six  months  prior  to the
                              acquisition)   is   not   being   operated   as  a
                              supermarket.

                              In March 1996, an application (the  "Application")
                              was  made to  modify  the  Order so as to lift the
                              divesture  requirements other than with respect to
                              one  store on the Upper  West  Side  which was not
                              owned by Sloan's.  The FTC approved the  divesture
                              of that store and its  divesture  was completed on
                              May 9, 1996.  On April 29, 1996,  the  Application
                              was revised;  and it was further revised in August
                              and  September  so as to seek  relief  solely with
                              respect to the  requirement  of  divesture  of any
                              supermarkets  in the Chelsea section of Manhattan.
                              On  September  13,  1996,   the  FTC  granted  the
                              Application   as   modified,   and   deleted   the
                              requirement    of    divestiture    in    Chelsea.
                              Simultaneously,  the FTC  appointed  a trustee  to
                              divest four supermarkets pursuant to the Order, as
                              modified.   The   trustee   was  not  granted  any
                              authority  to  divest  until  the FTC  approved  a
                              trustee  agreement  between  the  trustee  and the
                              companies.

                                      F-28


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


                              Subsequent to the  modification of the Order,  The
                              Food Group  sold an  aggregate  of four  stores in
                              compliance  with the  divestiture of the Order, as
                              modified. Based thereon, the trustee agreement did
                              not become effective.

                              A settlement of FTC claims based on the companies'
                              failure  to divest  supermarkets  pursuant  to the
                              Order was agreed to,  pursuant  to which  $600,000
                              was paid to the FTC. The $600,000  payment was not
                              included in The Food Group or Sloan's.

                              The  companies may at times be involved in various
                              legal proceedings which are routine and incidental
                              to the conduct of its  business.  The companies do
                              not believe  that any of this  litigation,  either
                              individually  or in the  aggregate,  could  have a
                              material adverse effect on the financial condition
                              or results of operations of the companies.

                              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  alleges,  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   alleges   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 which disclosed the FTC action.

                              In June 1995,  Plaintiff  filed a motion for class
                              certification,  and discovery was held in abeyance
                              pending disposition of that motion. The motion was
                              granted in March 1996. Discovery is now proceeding
                              and it is  scheduled to be completed in June 1998.
                              Management  believes  that the  lawsuit is without
                              merit and intends to vigorously defend the action;
                              however, the outcome cannot be determined.

                                      F-29


<PAGE>


                            Gristede's Sloan's, Inc.
                                and Subsidiaries

                          Notes to Financial Statements


13.  Subsequent Events        (a) On March  17,  1998,  the  board of  directors
                                  approved  an  options   program   whereby  key
                                  employees  and  directors   would  be  granted
                                  options to acquire up to 500,000 shares of the
                                  Company.  The options  vest ratably over three
                                  years and are exercisable at $2.63.

                              (b) On June 9, 1998, Mr. John Catsimatidis  issued
                                  a  limited   $1  million   guarantee   of  the
                                  collection  of all accounts  receivable  as of
                                  November    10,   1997.    Furthermore,    Mr.
                                  Catsimatidis has also agreed not to permit the
                                  level of the  Company's  liability  due to the
                                  affiliate  to fall below  $1,000,000  prior to
                                  the  issuance of fiscal  year ending  November
                                  29, 1998 audited financial statements.

                              (c) During 1998,  three union  contracts  covering
                                  approximately  900 employees will expire.  The
                                  Company   expects   to  enter   into   similar
                                  contracts with the unions as they expire.

                              (d) On  February 6, 1998,  the  Company  purchased
                                  substantially  all of the assets  and  assumed
                                  certain of the  liabilities  of a  supermarket
                                  located  at 1644 York  Avenue,  New York,  New
                                  York owned by a corporation  controlled by Mr.
                                  John Catsimatidis. The purchase price is to be
                                  the  value of the  supermarket  based  upon an
                                  appraisal to be  conducted by a firm  selected
                                  by a committee of independent directors of the
                                  Company less the amount of certain liabilities
                                  assumed by the Company.

                                      F-30

<PAGE>


                                    PART III

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

None.

Item 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Set forth below is certain  information  as of June 1, 1998 with  respect to all
directors and executive officers of the Company.


                                            Position with the Company or
                        Director             Other Principal Occupation
Name and Age             Since                 for the Past Five Years
------------             -----              -----------------------------

John A. Catsimatidis    1988(1)     Chairman of the  Board, President and Chief
     (49)                           Executive Officer of the Company since July
                                    28,  1988;  Treasurer  of the Company  from
                                    July 28, 1988 to March 17, 1998;  President
                                    and Chief  Executive  Officer  of Red Apple
                                    Group,    Inc.    (holding    company   for
                                    supermarket  chains)  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  is  traded  over-the-counter,  since
                                    December 4, 1991.

Martin R. Bring          1988       Member of  the  law firm  of  Wolf,  Block,
     (55)                           Schorr and Solis-Cohen  LLP, New York, N.Y.
                                    and  predecessor  firm for more  than  five
                                    years.

Frederick Selby          1978       Chairman of Selby Capital Partners
     (60)                           (acquisition  and sale of  privately  owned
                                    firms and  divisions  of public  companies)
                                    for more than five years.

Leroy Hemingway II       1991       Chairman of the Board of The Famous Carpet 
     (66)                           Barns of Florida,  Inc. (a firm  engaged in
                                    retail  sales of carpets)  and  Chairman of
                                    the Board of Hemingway Properties, Inc. (an
                                    owner and operator of shopping centers) for
                                    more than five years.

--------

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


                                       17


<PAGE>


Kishore Lall             1997       Director of the  Registrant  since  October,
     (50)                           1997;  consultant  to Red Apple Group,  Inc.
                                    from January 1997 to October  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.

Stuart Spivak             --        Executive Vice President and Chief Financial
     (61)                           Officer of the Company since March 17, 1998;
                                    Chief  Financial  Officer  of the Food Group
                                    for more than ten years prior thereto.

Michael Seltzer           --        Vice  President and Secretary of the Company
     (48)                           since March 17,  1998;  Vice  President  and
                                    Controller  of the Food  Group for more than
                                    10 years prior thereto.

Franklin Georges          --        Treasurer  of the  Company  since  March 17,
     (43)                           1998; Financial consultant to the Food Group
                                    from May 1996 to March 17, 1998;  Controller
                                    of  Telecom  Satellite   Systems,   Inc.,  a
                                    privately-held   cable  television  company,
                                    from  February  1994 to May  1996;  division
                                    accounting    manager   for   K.   Hovnanian
                                    Companies,  a public real estate development
                                    company,  from  February  1991  to  February
                                    1994.


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 other
reports were required during the Transition  Period ended November 30, 1997, all
Section 16(a) filings  applicable  to its  directors,  officers and more than 10
percent beneficial owners were timely filed.


                                       18


<PAGE>


Item 11.          EXECUTIVE COMPENSATION.

     The following table sets forth for the two fiscal years ended March 2, 1997
and the  Transition  Period  from March 3, 1997 to  November  30,  1997  certain
information  concerning the compensation  paid or accrued to the Chief Executive
Officer of the Company. As of November 30, 1997 there were no persons serving as
executive officers of the Company whose total salary and bonus exceeded $100,000
for the transition  period or who were being paid salary during such period at a
rate that would have exceeded  $100,000 had the period been for a full year. The
table  below does not  include  any  information  concerning  any person in such
person's  capacity as an  executive  officer of any entity  comprising  the Food
Group.

<TABLE>
<CAPTION>

                                                                                      Long-term Compensation
                                                                              -------------------------------------
                                                 Annual Compensation                  Awards                Payouts
                                           ----------------------------       -----------------------       -------
                                                                Other                                                   All
                                                                annual        Restricted                               other 
Name and                                                        compen-           stock       Options        LTIP      compen-
principal                                  Salary     Bonus     sation           award(s)     /Sar's        payouts    sation 
position                    Year             ($)       ($)       ($)               ($)         (#)            ($)       ($)   
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>       <C>       <C>               <C>     <C>                <C>       <C>
John Catsimatidis,      Transition           $-        $-        $-                $-            -            $-        $-
  Chairman of the       Period from
  Board, President      March 3, 1997
  and Chief             to November
  Executive             30, 1997
  Officer

                            1997              -         -         -                 -            -             -         -

                            1996              -         -         -                 -      250,000             -         -
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


Stock Options

     No stock  options were granted to or exercised by Mr.  Catsimatidis  during
the  Transition  Period from March 3, 1997 to November 30, 1997.  The  following
table sets forth certain  information with respect to options to purchase Common
Stock held by John Catsimatidis on November 30, 1997.

                      Number of Unexercised            Value of Unexercised
                         Options Held on              in-the-Money Options on
                        November 30, 1997                November 30, 1997
                     --------------------------     ---------------------------
Name                 Exercisable/Unexercisable       Exercisable/Unexercisable
--------------------------------------------------------------------------------
John Catsimatidis            525,000/0                           0/0
--------------------------------------------------------------------------------


     The closing sales price of the Common Stock on the American  Stock Exchange
on November 28, 1997 (the last trading day before  November 30, 1997) was $2.25.
On November 30, 1997 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.


                                       19

<PAGE>



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 $250 for each
meeting attended.

Compensation Committee Interlocks and Insider Participation

     The Board of Directors  has a  Compensation  Committee  of which  Frederick
Selby is  currently  the sole  member.  Mr.  Selby is not and has never  been an
employee or officer of the Company.  During and after the Transition  Period Mr.
Selby has had no relationship with the Company  requiring  disclosure under Item
13. "Certain Relationships and Related Transactions."


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

     The following table sets forth certain  information  regarding ownership of
Common  Stock on June 1, 1998 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;  and (iii) all officers and  directors of the
Company  as a group.  The number of shares  listed in the table as  beneficially
owned by John Catsimatidis includes all shares acquired in the Merger. Except as
otherwise indicated, the address of each person is c/o Gristede's Sloan's, Inc.,
823 Eleventh  Avenue,  New York,  N.Y.  10019-3535.  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.

Name and Address of                        Number of
 Beneficial Owner                            Shares             Percent of Class
-------------------------------          -------------          ----------------

John Catsimatidis                        18,250,650(1)                   90.5%
Leroy Hemingway II                           18,150(2)                       *
Frederick Selby                              10,910(2)                       *
Martin Bring                                  8,800(2)                       *
Kishore Lall                                  9,100                          *
All officers and directors as a          18,297,610(3)                   90.6%
  group (8 persons)

-----
*    Less than 1%.

(1)  Includes an aggregate of 12,391,574 shares held by corporations  controlled
     by Mr.  Catsimatidis,  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 retirement accounts and currently exercisable options
     to purchase an aggregate of 525,000 shares of Common Stock.

(2)  Includes for each of Messrs. Selby,  Hemingway  and  Bring  an aggregate of
     8,800 shares of Common  Stock which may be  purchased  upon the exercise of
     currently exercisable stock options.

(3)  Includes  an  aggregate  of  551,400  shares of Common  Stock  which may be
     purchased upon the exercise of currently exercisable stock options.


                                       20

<PAGE>


Item 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     For  information  concerning  the Merger On November  10, 1997  whereby the
Company  acquired  from  corporations  directly or  indirectly  owned by John A.
Catsimatidis,   29  operating   Supermarkets,   ownership   of  the   tradenames
"Gristede's"  and  "Sloan's" and the  warehouse  and  distribution  business now
operated by City Produce, see Item 1. Business - Recent  Developments," which is
incorporated herein by reference.

     From March 19,  1993 to  November  10,  1997 the  Company  was a party to a
Management   Agreement  with  Group  pursuant  to  which  Group  supervised  all
operations of the  Supermarkets  then owned by the Company subject to the policy
goals and decisions prescribed by a committee of the independent directors. Such
agreement required the Company to pay to Group a quarterly fee equal to 1.25% of
all  sales  made in or from the  Supermarkets  and to  reimburse  Group  for all
expenses  incurred  by  Group  in the  performance  of its  services  under  the
agreement.  For the  Transition  Period Group earned a fee of $398,206 under the
agreement.

     Under a Management  Agreement,  dated  November  10, 1997 (the  "Management
Agreement"),  Namdor Inc., a subsidiary of the Company,  performs consulting and
managerial  services for two  supermarkets  owned by corporations  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.

     On February 6, 1998 the Company  purchased  substantially all of the assets
and assumed  certain of the  liabilities  of a supermarket  located at 1644 York
Avenue,  New  York,  New  York  owned  by  a  corporation   controlled  by  John
Catsimatidis.  The purchase  price is to be the value of the  supermarket  based
upon  an  appraisal  to be  conducted  by a  firm  selected  by a  committee  of
independent  directors  of the  Company  less the amount of certain  liabilities
assumed by the Company.  The appraisal  will be based on, among other things,  a
review  of the  operating  statement  of the  supermarket  for the  period  from
February 6, 1998 to a date no earlier than January 31, 1999.  The purchase price
will be subject to  adjustment  to the extent  that the  acquired  inventory  is
greater or less than the sum of trade  payables  and  liabilities  for  employee
vacation and sick pay that have been assumed by the Company.  The purchase price
will be paid at such  time  and by such  method  as shall  be  recommended  by a
committee of the independent  directors of the Company and approved by the Board
of Directors of the Company, John Catsimatidis abstaining.

     Group provides maintenance services to the Company,  including  supermarket
refrigeration,  electrical  and  equipment  maintenance.  During the  Transition
Period, the Company did not incur expenses for such services.

     Prior to its  acquisition  by the Company in November  1997,  City  Produce
Distributors, Inc., a corporation indirectly wholly owned and controlled by John
Catsimatidis,  sold produce and certain  grocery  items to the Company at prices
consistent with those obtainable from non-affiliated  third parties.  During the
Transition Period, such sales aggregated approximately $2,705,135.

     Prior to the  acquisition by the Company in November 1997 of the Food Group
from corporations controlled by Mr. Catsimatidis,  newspaper advertising for the
Supermarkets   was  frequently   pooled  with   advertising   for  the  acquired
Supermarkets.  In such  cases,  the Company  paid a portion of such  advertising
expenses  based  upon the  number  of  Supermarkets  and  supermarkets  of other
companies covered in the


                                       21

<PAGE>


advertisements.  Such  amounts  allocated to the Company  approximated  $130,321
during the Transition  Period.  The pooling  arrangement  ceased on the date the
Merger was consummated.

     In consideration of  accommodations  extended to the Company by H.S. Realty
Corp. ("H.S.  Realty"),  a corporation  wholly owned by John Catsimatidis  which
enabled the Company to consummate the sale of assets of the Company's  Howard H.
Sweet & Son Inc.  subsidiary  ("Sweet") to Tiffco Jewelry and Chain Crafts, Inc.
("Tiffco"),  on January 23, 1990, the Company,  among other things,  advanced to
H.S. Realty approximately $204,000.

     The  $204,000  advance was  originally  to be  repayable  on the earlier of
January 23, 1991 or five days after the sale by H.S. Realty to Tiffco of certain
real property  leased to Tiffco by H.S.  Realty after the sale of assets.  Since
January 23, 1991,  the Board of Directors has extended the repayment date of the
advance on an annual basis,  the most recent  extension  being until January 23,
1999 or five days after the sale by H.S. Realty to Tiffco of the Sweet Property.
As of November 30, 1997,  H.S.  Realty was indebted to the Company on account of
the  advance  in the  amount of  $351,776  and such  indebtedness  was  accruing
interest at the rate of 9.75% per annum (1-1/4% per annum over the prime rate of
interest charged by Chemical Bank, N.A. as of November 30, 1997).

     Effective as of January 1, 1994, the Company  entered into  Indemnification
Agreements  with each of its directors and officers other than Kishore Lall. The
Company entered into an Indemnification Agreement with Kishore Lall effective as
of October 30, 1997, and also entered into Indemnification  Agreements with each
of Stuart Spivak, Michael Seltzer and Franklin Georges effective March 17, 1998.
Said  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.

     Red Apple Leasing,  Inc., a corporation  wholly owned by John Catsimatidis,
leases  equipment to the Company.  Such leases are primarily for store operating
equipment. Obligations under capital leases at November 30, 1997 were $1,206,932
and require monthly payments of $35,114 through March 1, 2001. Obligations under
operating  leases at March 2, 1997  require 84 payments of $14,594.  Obligations
under operating  leases at June 2, 1997 and September 1, 1997 require 60 monthly
payments of $10,783 and $16,297, respectively.

     On May 15, 1998, John Catsimatidis issued a limited $1,000,000 guarantee of
the collection of accounts receivable assigned to the Company as a result of the
Merger on November 10, 1997.  In order to cover his  contingent  liability,  Mr.
Catsimatidis  agreed  not to permit  the  liabilities  to Mr.  Catsimatidis  and
certain of his  affiliates  which were  assumed by the  Company in the Merger to
fall below $1,000,000 prior to the issuance of the Company's  audited  financial
statements for the fiscal year ending November 29, 1998.

     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.


                                       22

<PAGE>


     Lowenthal, Landau, Fischer & Bring, P.C., a law firm of which Martin Bring,
a director of the Company, was a member (until the firm merged with Wolf, Block,
Schorr and  Solis-Cohen LLP in February  1998),  received fees of  approximately
$341,279  for  rendering  legal  services to the Company  during the  Transition
Period.

     The following four paragraphs set forth information concerning transactions
between John Catsimatidis and entities owned by him with entities comprising the
Food Group.

     During  the  Transition  Period,  Red  Apple  Management,  Inc.,  a company
wholly-owned by John  Catsimatidis,  provided certain payroll,  related employee
benefit  services and office services to the Food Group.  Such services  include
accounting,  merchandising, human resources, maintenance, executive salaries and
employee benefits in the approximate aggregate amount of $3,755,000.

     During the Transition Period advertising services were provided to the Food
Group  by  M.C.V.  Advertising  Associates,   Inc.,  a  company  of  which  John
Catsimatidis is the Chairman of the Board.  For the Transition  Period the costs
incurred by the Food Group were $553,435.

     The Food Group leased several locations from Red Apple Real Estate, Inc., a
company  wholly-owned by John  Catsimatidis.  During the Transition  Period, the
Food Group paid to Red Apple Real Estate, Inc. $241,716 for rent and real estate
taxes under such leases.

     The Food Group has entered into capital and operating leases with Red Apple
Leasing,  Inc., a company  wholly-owned  by John  Catsimatidis.  Such leases are
primarily for store operating equipment. During the Transition Period, the costs
recognized  by the Food Group  under  capital  leases  were  $291,693  and costs
recognized by the Food Group under operating leases were $212,393.


                                     PART IV

Item 14.          EXHIBITS AND REPORTS ON FORM 8-K.

(a)  (1)          Financial Statements

     A list  of all  financial  statements  filed  as part  of  this  report  is
contained  in the  index  to Item 8,  which  index  is  incorporated  herein  by
reference.

     (2)      Financial Statement Schedules

              None.

     (3) Exhibits

Number        Description

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").


                                       23


<PAGE>


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

3.4           Certificate of Amendment of Certificate  of  Incorporation  of the
              Company, dated November 4, 1997.*

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          Loan  Agreement  dated as of November 7, 1997 between the Company,
              European  American Bank ("EAB"),  Israel Discount Bank of New York
              ("IDBNY"), Keybank National Association ("Keybank") and Bank Leumi
              Trust  Company  of New  York  ("Bank  Leumi").  All  exhibits  and
              schedules to the Loan  Agreement are omitted,  but the  Registrant
              undertakes  to  provide  copies  of any  or  all of the  foregoing
              exhibits and schedules to the Securities  and Exchange  Commission
              upon its request.

10.7          Management  Agreement dated November 10, 1997 between Namdor Inc.,
              G Remainder Corp. and S Remainder Corp.

10.8          Asset Purchase  Agreement between G Remainder Corp. and Gristede's
              Operating  Corp.  All exhibits and schedules to the Asset Purchase
              Agreement are omitted,  but the  Registrant  undertakes to provide
              copies of any or all of the  foregoing  exhibits and  schedules to
              the Securities and Exchange Commission upon its request.

10.9          First  Amendment and Waiver to Loan Agreement dated April 30, 1998
              between the Company, IDBNY, Keybank and Bank Leumi.

10.10         1998 Stock Option Plan.
-----------------------
*       Filed herewith.


                                       24

<PAGE>


10.11         Agreement  dated May 15, 1998  between John  Catsimatidis  and the
              Company.

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.

              Subsidiaries                           State of Incorporation
              ------------                           ----------------------
              Namdor Inc.                            New York
              SAC Operating Corp.                    New York
              Gristede's Operating Corp.             New York
              City Produce Operating Corp.           New York
              RAS Operating Corp.                    New York

The  Registrant  has one  other  wholly-owned  subsidiary,  the name of which is
omitted  herein  because as of June 1, 1998 it did not  constitute a significant
subsidiary.

23.           Consent  of  BDO  Seidman,   LLP  Independent   Certified   Public
              Accountants.*

27.           Financial Data Schedule.

----------------------
*        Filed herewith.

(b)  Reports on Form 8-K

              The Company  filed one Current  Report on Form 8-K during the last
quarter of the Transition  Period.  Such Current Report on Form 8-K was filed on
November 12, 1998 to report the Merger and contained certain pro forma financial
information of the Company and the businesses acquired.


                                       25

<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 SLOAN'S, INC.


Dated: February 18, 1999                      By:      /s/ John A. Catsimatidis
                                                       ------------------------
                                                       John A. Catsimatidis
                                                       Chairman of the Board



                                       26

<PAGE>


                                                                     Exhibit 3.4

                            CERTIFICATE OF AMENDMENT
                                       OF
                          CERTIFICATE OF INCORPORATION
                                       OF
                           SLOAN'S SUPERMARKETS, INC.



              It is hereby certified that:

              1. The  name  of  the   corporation   (hereinafter   called   the
"Corporation") is Sloan's Supermarkets, Inc.

              2. Article 1 the Certificate of  Incorporation  of the Corporation
is hereby amended in its entirety to read as follows:

                 "1.  The name of the Corporation is Gristede's Sloan's, Inc."

              3. Section A. of Article 4 of the Certificate of Incorporation
is hereby amended in its entirety to read as follows:

                 "4.A. The total number of shares of stock which the Corporation
              shall  have  authority  to issue is  25,500,000  shares,  of which
              25,000,000  shall be  Common  Stock  of the par  value of $.02 per
              share and  500,000  shall be  Preferred  Stock of the par value of
              $50.00 per share, issuable in series."

              4. The  amendments  of the  Certificate  of  Incorporation  herein
certified  have been duly adopted in accordance  with the  provisions of Section
242 of the General Corporation Law of the State of Delaware.



Signed and attested to on                         /s/ John A. Catsimatidis
November 4, 1997                                  ------------------------
-------------------------                         John A. Catsimatidis, 
                                                  Chairman of the Board



                                       27

<PAGE>



Attest:

  /s/ Mark Kassner
-----------------------
Mark Kassner, Secretary




STATE OF NEW YORK                       )
                                        ) SS.:
COUNTY OF NEW YORK                      )


                  BE IT  REMEMBERED  that,  on  November  4, 1997,  before me, a
Notary  Public  duly  authorized  by  law  to  take  acknowledgement  of  deeds,
personally  came  John  A.  Catsimatidis,  Chairman  of  the  Board  of  Sloan's
Supermarkets,  Inc.,  who duly  signed the  foregoing  instrument  before me and
acknowledged  that such  signing is his act and deed,  that such  instrument  as
executed  is the act and deed of said  corporation  and that  the  facts  stated
therein are true.

                  GIVEN under by hand on November 4, 1997.



                         /s/
                  -----------------------------------
                  Notary Public




                                       28

<PAGE>


                                                                      Exhibit 23


Consent of Independent Certified Public Accountants


Sloan's Supermarkets, Inc.
New York, New York

We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement  on Form S-8 dated  January 23,  1996,  relating  to the  consolidated
financial statements appearing in Amendment No. 1 to the Company's Annual Report
on Form 10-K for the transition period from March 3, 1997 to November 30, 1997.

     /s/ BDO Seidman, LLP

BDO Seidman, LLP


New York, New York

February 11, 1999



                                       29