<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                                    FORM 10-K

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

                   For the fiscal year ended February 2, 2002

                        Commission file number 333-81307

                                G+G RETAIL, INC.
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                   <C>
                         Delaware                                                   22-3596083
     ------------------------------------------------                ---------------------------------------
     (State or other jurisdiction of incorporation or                (I.R.S. Employer Identification Number)
                       organization)

              520 Eighth Avenue, New York, NY                                         10018
     ------------------------------------------------                ---------------------------------------
         (Address of principal executive offices)                                   (Zip Code)

</TABLE>


       Registrant's telephone number, including area code: (212) 279-4961

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

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, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of 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, 2002 all of the common stock of the registrant was held by
an affiliate. On May 1, 2002, 10 shares of the registrant's Class B common
stock, par value $.01 were outstanding.




<PAGE>


         As used in this Annual Report on Form 10-K, the terms "we," "us," "our"
and "G+G Retail" mean G+G Retail, Inc., a Delaware corporation, and its
subsidiaries, unless the context indicates a different meaning. The term "common
stock" means our Class B common stock, $.01 par value per share. The term
"Holdings" means our parent company, G&G Retail Holdings, Inc.

         Except as otherwise specified, the financial data described in this
report is derived from the combined financial statements of the business that we
acquired in August 1998, comprised of G&G Shops, Inc. and the stores operated by
G&G Shops that were owned by subsidiaries of Petrie Retail, Inc. through August
28, 1998 and from the consolidated financial statements of G+G Retail after that
date.

                                     PART I

Item 1.  Business

General

         We are a leading national mall-based retailer of popular-price female
apparel. We sell substantially all of our merchandise under private label names,
including Rave, Rave Up, Rave Girl, R4R and Shut Eye, and provide our customers
with fashionable, high quality apparel and accessories at lower prices than
brand name merchandise. We emphasize the purchasing of merchandise domestically
and seek to keep inventory lead times short in order to respond quickly to
fashion trends and minimize mark-downs. Our pricing strategy, which emphasizes
delivering consistent value to our customers rather than driving sales with
periodic promotions, is also intended to contribute to a low rate of markdowns.

         As of April 2002, we had 548 stores, generally in major enclosed
regional shopping malls, throughout the United States, Puerto Rico and the U.S.
Virgin Islands which operate primarily under the G+G, Rave and Rave Girl names.
We use the same store format for our G+G/Rave stores and apply this format in
all of our markets. Our G+G/Rave stores average approximately 2,400 gross square
feet and are designed to create a lively and exciting shopping experience for
our teenaged customers.

         In July 1999, we opened our first Rave Girl store which sells apparel
primarily for 7- to 12-year-old girls. We believe that the market for the sale
of popularly priced fashion apparel to this age group is currently under served.
We entered this market at a relatively low incremental cost by leveraging our
existing administrative, distribution and marketing infrastructure. As of April
2002, we had 84 Rave Girl stores located in 22 states coast to coast and Puerto
Rico. Our Rave Girl stores are approximately 2,000 gross square feet and are
designed with bright colors, unique lighting and exciting graphics.

         Our Internet web sites provide information about our company history,
merchandise offerings and store locations. The sites also provide an opportunity
for visitors to see the latest fashion trends for the season as well as
available employment opportunities with our company. The web sites addresses are
www.gorave.com and goravegirl.com.

         Our principal executive offices are located at 520 Eighth Avenue, New
York, New York 10018, telephone number (212) 279-4961.

Business Strategy

         Our business strategy is to expand our operations and increase our
sales and earnings through the opening of new stores, including through the
acquisition of individual or multiple leases, primarily in mall locations that
we believe are favorable for business. During the fiscal years 2000, 2001 and
2002, we opened 86 G+G/Rave stores and 82 Rave Girl stores. We opened six
G+G/Rave stores and three Rave




                                       2





<PAGE>

Girl stores to date in fiscal 2003 and expect to open between 30 and 40
additional stores, in total, in the fiscal year. We believe that our strong
relationships with our existing landlords provide us with a good opportunity to
negotiate favorable lease terms in new locations.

Merchandising and Marketing

Merchandising Strategy

         Our merchandising strategy is to deliver the latest fashions to our
customers more quickly and at lower prices than our competitors. Our G+G/Rave
store merchandise is designed primarily to appeal to young women between the
ages of 13 and 19 years old who desire fashion, quality and value. However, due
to our merchandise and our geographic diversity, over the past few years our
G+G/Rave stores also have increasingly attracted the 20- to 30-year-old female
customer. Our Rave Girl store merchandise is designed primarily to appeal to the
fashion desires of girls between the ages of 7 and 12 years old and the quality
and value demands of parents who regularly replenish a growing child's wardrobe.
A portion of our merchandise is private label that is manufactured to our
specifications. This strategy gives us tighter control over apparel production
and delivery than we would have if we purchased and sold brand-name merchandise.
We offer the latest fashion in both apparel and accessories in stores that are
designed to be bright, energetic and welcoming to create a fun and enjoyable
shopping experience. Our apparel offerings include tops, bottoms, dresses,
lingerie, coordinates, accessories, shoes and outerwear. We utilize an everyday
value pricing strategy, as opposed to offering discounts on marked-up
merchandise.

         In order to react quickly to teenagers' and girls' changing tastes and
to keep our stores stocked with current fashions, we purchase most of our
merchandise domestically. Maintaining current merchandise allows us to turn over
our inventory frequently and to achieve high sales per square foot while
improving profitability. The speed of our merchandising and buying capability
enables us to change our product mix in season. As a result, we seek to respond
immediately to, rather than to try to anticipate, fashion trends.

         Our merchandise team identifies and targets fashion trends and customer
demand by, among other things, shopping domestic and foreign markets, reviewing
magazines and catalogs and viewing television shows and movies directed to our
customers, monitoring sell-through trends and attending selected fashion shows.
We also maintain an office in California to ensure proper coverage of the
trend-setting West Coast market. We review inventory levels constantly. Our
planning and distribution staff plans our inventory on a store-by-store basis
and is responsible for understanding the fashion demands of our customers.

Visual Presentation and Advertising

         We believe that effective and strong visual merchandising is critical.
Our goal is to capture a customer's interest in the few seconds that she is
exposed to the store front. Merchandise presentation is a product of store
design, use of fixtures and in-store marketing that complements our merchandise.
Our merchants and the marketing department jointly design the merchandise floor
plan, which is integral to merchandise presentation. Once approved, we
communicate a consistent presentation to all of our G+G/Rave or Rave Girl stores
through a formal layout. We finalize the merchandise layout based on seasonal
and climatic differences among regional markets. We prepare major floor changes
for each major selling season and sale period. We forward modifications to the
layout to all of our stores on a bi-weekly basis.

         We primarily advertise in our stores, stressing fashion, quality and
value in support of our everyday value pricing strategy. Our marketing
department creates a seasonal set of store signs that




                                       3





<PAGE>

accentuates the merchandise presentation. Each season, we select and highlight
key items with a comprehensive program of in-store posters and signs. The set of
signs reflects new merchandise colors and fashion trends to keep the stores
looking current and visually stimulating. The merchandise package also targets
the customer with value pricing slogans in the form of large store-spanning
banners and rack-top signs. Our store bags, boxes, name badges and other store
peripherals emphasize our brand recognition.

Merchandise Planning

         Our financial department prepares seasonal merchandise plans that are
approved by senior management. Our merchandise planning department then
allocates these plans by merchandise category based on historical and current
trends. The preparation and monitoring of merchandise plans independent of
purchasing functions is essential for controlling inventory levels. We monitor
our inventory through an automated inventory system.

Purchasing and Suppliers

         We purchase all of our inventory from third-party suppliers or
manufacturers. We do not own or operate any manufacturing facilities. Most of
our private label merchandise is manufactured domestically, with the remainder
manufactured overseas. We supply the designs and specifications to the
manufacturers. Our manufacturers continually consult with us regarding
developing fashion trends so that they can respond quickly to our merchandise
orders. Prior to delivery, we regularly inspect samples of our manufactured
goods for quality based on materials, color and sizing specifications.

         We believe that we have established relationships with an adequate
number of suppliers to meet our ongoing inventory needs and that we have strong
relationships with these suppliers. During fiscal 2002, we purchased our
inventory from more than 300 suppliers. We have been purchasing inventory from
our top three suppliers for more than five years. We do not have long-term
contracts with our suppliers, and we transact business principally on an
order-by-order basis. During fiscal 2002, our top three suppliers accounted for
11%, 11% and 5% of our inventory purchases. No other supplier accounted for more
than 5% of our inventory purchases.

Distribution and Transportation

         We maintain a 165,000 square foot leased distribution center in North
Bergen, New Jersey. All of our vendors ship the merchandise that we purchase to
our distribution center, which is then shipped to our stores.

         We employ an internally developed allocation system that interfaces
with our store cash registers, order and receiving system and distribution
system. The allocation system maintains unit inventory and sales data by store
at the style level, enabling us to identify specific store needs for
replenishment. We use national and regional package carriers to ship merchandise
to our stores, and we also use air freight to ship merchandise to stores in
certain regions. Transit time to stores generally is two to three days, and
merchandise is available for sale by stores on the day it is received.
Therefore, the time period from receipt of goods at the distribution center to
display in our stores is generally less than five days. A majority of
merchandise coming into our distribution center is pre-ticketed, and a
substantial portion of this merchandise is vendor pre-packed. Pre-ticketing and
pre-packing save time, reduce labor costs and enhance inventory management.



                                       4





<PAGE>

Locations and Format of Our Stores

Store Locations

         As of April 2002, we had 548 stores in 42 states in the United States,
Puerto Rico and the U.S. Virgin Islands as set forth below:

<TABLE>
<CAPTION>

State/Territory             Number of Stores
---------------             ----------------

<S>                         <C>
Alabama                            9
Arkansas                           2
Arizona                            4
California                        38
Colorado                          11
Connecticut                        9
Delaware                           2
Florida                           59
Georgia                           19
Hawaii                             1
Idaho                              1
Illinois                          26
Indiana                            6
Kansas                             1
Kentucky                           4
Louisiana                         13
Maine                              1
Maryland                          20
Massachusetts                     19
Michigan                          18
Minnesota                          2
Mississippi                        4
Missouri                          11
Nebraska                           1
Nevada                             1
New Hampshire                      4
New Jersey                        20
New Mexico                         3
New York                          45
North Carolina                     9
Ohio                              19
Oklahoma                           1
Oregon                             2
Pennsylvania                      27
Puerto Rico                       58
Rhode Island                       1
South Carolina                     5
Tennessee                          8
Texas                             36
Virginia                          11
Virgin Islands                     2
Washington                        11
Wisconsin                          3
West Virginia                      1

</TABLE>

Store Format

         We use a similar store format for our G+G/Rave stores. Our Rave Girl
stores have their own unique store format. We consistently apply our store
formats in all the markets that we serve. In general, the G+G name is used in
the New York, New Jersey and Connecticut markets, and the Rave name is used in
other markets.

         Our stores are predominantly located in major enclosed regional
shopping malls. Within such malls, we seek locations for our G+G/Rave stores in
proximity to stores and areas having high teen traffic flow, such as music
stores, shoe stores and food courts. We locate our Rave Girl stores both in
major regional shopping malls and in strip centers where we seek locations in
proximity to other specialty stores that sell products to young girls. Our
G+G/Rave stores are typically 2,400 gross square feet in size. Our Rave Girl
stores are approximately 2,000 gross square feet.

         Our stores are designed to create a lively and exciting shopping
experience for the customer. All of our stores are bright, colorful and fitted
with various fixtures to display the merchandise in an appealing manner.
Approximately 15% of the total space is committed to fitting rooms and storage
space. Our merchandising staff centrally controls the store layout and
merchandise placement. Typically, we update store and merchandise layouts on a
bi-weekly basis, or sooner when necessary, to stay current with the seasons and
fashion trends.



                                       5





<PAGE>

         Sales have been evenly balanced among our store base, with our highest
volume store accounting for less than 1% of gross sales during fiscal 2002.

Store Operations

         Our district/area managers manage all aspects of store operations other
than purchasing. Each of these district/area managers is responsible for
approximately six to ten stores and reports to a regional manager who oversees
seven to eight district/area managers. The regional managers, in turn, report to
our Senior Vice President-Store Operations.

         Generally, each of our stores employs five to ten employees, consisting
of a store manager who is in charge of all aspects of operations, including
recruiting, training, customer service and merchandising, two assistant managers
and sales employees. Store managers report to a district/area manager, and
assistant managers and sales employees report to a store manager. We seek to
hire sales employees who have prior retail sales experience and have an
entrepreneurial spirit. Sales personnel are knowledgeable about our merchandise.
Our sales personnel and assistant store managers are trained by experienced
store managers, and our store managers are trained by experienced district/area
managers, in order to offer customers courteous and knowledgeable service.

         Our customers may pay for merchandise with cash, checks or third-party
credit cards. In July 2002, we introduced our own Rave Girl Credit Card, which
is accepted at our Rave Girl Stores. Our merchandise return policy permits
returns to be made within 30 days from the date of purchase. We give refunds if
the customer has a receipt. Otherwise, we issue a store credit.

Store Openings and Closings

         We have implemented an ongoing program of opening new stores in
locations that we believe are favorable for our business and closing under
performing stores. Since the beginning of fiscal 2002, we have opened 55 stores.
During this same period, we have closed 18 stores. We plan to open between 30
and 40 additional stores and we anticipate that we will close approximately 12
stores during fiscal 2003.

         In deciding whether to open or close a store, we project store
profitability based on the following:

         o    the location of the store in the mall;

         o    the rental rate for the property where the store is or will be
              located;

         o    the performance of other apparel retail stores in the mall;

         o    mall location and whether the particular mall environment is
              suitable for the store;

         o    the quality of anchor stores in the mall in which the store is or
              will be located; and

         o    the extent of competition from other mall tenants.

Competition

         The retail apparel business is highly competitive, with fashion,
quality, price, location, store environment and customer service being the
principal competitive factors. We compete with a number of mall-based
popular-priced junior and girls fashion retailers. Our competitors in the junior
and girls retail apparel businesses include Wet Seal, Inc. and Limited Too,
Inc., respectively, both of which are mall-based apparel retailers that offer
current fashions at generally higher price points than we offer. In addition, we
compete with several discount department stores, local and regional department
store chains and other apparel retailers that overlap with our merchandise
offerings and price points. Some of our




                                       6





<PAGE>

competitors are larger and may have greater financial, marketing and other
resources than we have. In addition, we compete for favorable site locations and
lease terms in shopping malls.

Seasonality

         Our fourth fiscal quarter, which includes the Christmas shopping
season, historically accounts for the largest percentage of our annual net
sales. Our first fiscal quarter historically accounts for the smallest
percentage of annual net sales. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Seasonality and
Quarterly Results."

Management Information Systems

         Our management information and control systems provide our management,
buyers, planners and distributors with information by the next business day to
identify sales trends, replenish depleted store inventories, re-price
merchandise and monitor merchandise mix. Our automated and integrated allocation
and material handling systems enable us to move the majority of our merchandise
through our distribution center within 24 hours of receipt.

         All of our stores have point-of-sale terminals that record sales at the
style level, markdowns, distribution center receipts, interstore transfers and
store payroll. This information is transmitted daily to our host systems.

Trademarks and Service Marks

         We own various trademarks, service marks and trade names, including
G+G, Rave, Rave Up, Rave Girl, Rave City, R4R, In Charge, American High and Shut
Eye.

Employees

         As of April 2002, we had a total of approximately 4,700 employees,
consisting of approximately 800 full-time salaried employees, approximately
1,400 full-time hourly employees and approximately 2,500 part-time hourly
employees. The number of part-time hourly employees fluctuates due to the
seasonal nature of our business.

         As of April 2002, Local 2326 of the UAW/AFL/CIO represented
approximately 160 hourly employees in our distribution center. The collective
bargaining agreement covering these employees expires on January 31, 2005. None
of our other employees are members of a union. We consider our relations with
both our union and non-union employees to be satisfactory.

Forward Looking Statements and Factors Affecting Future Performance.

         This report contains "forward-looking statements," within the meaning
of the Federal securities laws. These statements describe our beliefs concerning
future business conditions and the outlook for our business based on currently
available information. Wherever possible, we have identified these
forward-looking statements by using words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and similar expressions. While these
statements reflect our current judgment about the direction of our business, our
actual results could differ materially from the estimates, assumptions and other
future performance contained in the forward-looking statements due to a number
of risks and uncertainties. These risks and uncertainties include the strength
of the women's and girls' apparel industries and the other risks and
uncertainties described below. We do not intend to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.




                                       7





<PAGE>

Forward-looking statements in this report may be found in the materials set
forth under "Item 1. Business," "Item 2. Properties," "Item 3. Legal
Proceedings" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," among others.


         We have significant debt. Our level of debt and the resulting amount of
leverage may:

         o    make it more difficult for us to make required payments under our
              outstanding notes and revolving credit facility;

         o    require us to dedicate a substantial portion of cash flow from
              operations to principal and interest payments with respect to our
              debt, thereby reducing the availability of cash flow to fund
              working capital, capital expenditures or other general corporate
              purposes;

         o    limit our ability to obtain additional financing to fund future
              working capital, capital expenditures and other general corporate
              requirements;

         o    increase our vulnerability to general adverse economic and
              industry conditions;

         o    limit our flexibility in planning for, or reacting to, changes in
              our business and industry; and

         o    place us at a competitive disadvantage compared to our
              competitors that have less debt.

         The junior and girls retail apparel business is highly competitive. We
compete for sales in the junior retail apparel business primarily with specialty
apparel retailers. We also compete with several discount department stores and
local and regional department store chains and other apparel retailers with
which our merchandise offerings and price points overlap. Some of our
competitors are larger and may have greater financial, marketing and other
resources than we do. In addition, we compete with retailers and other
businesses for favorable site locations and lease terms in shopping malls and
strip centers. Competition from our current competitors, as well as from catalog
and Internet retailers, may increase in the future.

         Our profitability largely depends upon our ability to identify the
fashion tastes of our customers and to provide merchandise that appeals to their
preferences in a timely manner. The fashion preferences of our core customers
change frequently. Our failure to identify or react appropriately to changes in
styles or trends could lead to, among other things, excess inventories and
higher markdowns than we expect. In addition, our fashion misjudgments could
decrease our profitability and affect our image with our customers.

         Our continued growth significantly depends upon our ability to open new
stores on a profitable basis and to manage growth and expanded operations.
Accomplishing our expansion goals will depend upon a number of factors,
including the availability of funds and our ability to identify favorable
geographical locations and suitably sized locations for new stores at acceptable
costs.

         General economic conditions, including business conditions, levels of
employment and consumer confidence in future economic conditions affect the
level of consumer spending. In addition, because our stores are located
primarily in malls, we depend upon the continued popularity of malls as a
shopping destination, and the ability of mall anchor tenants and other
attractions to generate customer traffic to our stores. Mall traffic or economic
conditions in the markets in which our stores are located may decline and may
result in lower revenues and profits. A terrorist attack or threat could affect
the level of mall traffic, shopping activity, and/or general economic conditions
and have the same result.

         We handle distribution functions for all of our stores from a single
facility. We rely upon our existing management information systems in operating
and monitoring all major aspects of our business. Any significant disruption in
either the operation of our distribution facility or our management information
systems would decrease our profitability.



                                       8




<PAGE>

         Our results of operations fluctuate based on the seasons. In addition,
comparisons to prior-period results of operations may not be indicative of
results for future periods. Historically, the fourth fiscal quarter has
generated the largest percentage of our annual net sales. In contrast, the first
fiscal quarter historically has generated the smallest percentage of our net
sales. Our quarterly results of operations also may fluctuate significantly as a
result of a variety of other factors, including the number and timing of store
openings and closings, the level of markdowns taken and the amount of revenue
contributed by new stores.

         Our success depends significantly upon the performance of our senior
management and merchandising staff. The loss of a number of persons in that
group could affect our strategic and operational capabilities.

         A significant number of our stores are located in Florida, California
and the Caribbean. In addition, we plan to open more stores in these areas. As a
result, we are susceptible to fluctuations in our business caused by the severe
weather or natural disasters, which occur from time to time in these geographic
regions. Also, unseasonable weather conditions such as an unusually cold spring
or warm fall may have a negative effect on sales of or profit margin on
seasonable merchandise.

Item 2.  Properties

         Our corporate headquarters is located in New York City and consists of
40,000 square feet of leased office space. From our headquarters, we administer
our purchasing, merchandising, finance, store operations, management information
systems, marketing, real estate, human resources and store construction
functions. The lease for our headquarters expires on January 31, 2006. We have
one five-year renewal option under which the rent will be equal to 90% of the
fair market value rent on the premises at the time of renewal.

         As of April 2002, we had 548 stores in 42 states in the United States,
Puerto Rico and the U.S. Virgin Islands. All of our store sites are leased. This
table shows the number of store leases expiring during the years indicated,
assuming the exercise of all available renewal options:

<TABLE>
<CAPTION>

            Fiscal Year                        Leases Expiring
            -----------                        ---------------
            <S>                                <C>
                2003                                  87
                2004                                  71
                2005                                  56
                2006                                  76
                2007                                  51
             thereafter                              179
</TABLE>

         As of April 2002, we also had 28 stores with expired leases, many of
which we have reached agreement to extend subject to final documentation. We
occupy those premises on a month-to-month basis. As of April 2002, we leased
approximately 18% and 9% of our stores from our two largest landlords.

         We lease our distribution center located in North Bergen, New Jersey.
The lease expires in August 2004. We have one five-year renewal option under
which the rent will be equal to 90% of the fair market value rent on the
premises at the time of renewal.


                                       9





<PAGE>


Item 3.  Legal Proceedings.

         From time to time, we are involved in litigation relating to claims
arising out of our operations in the normal course of business. As of May 1,
2002, we were not engaged in any legal proceedings that are expected to have a
material adverse effect on us.



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

         None.







                                       10





<PAGE>



                                     PART II



Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         There is no public trading market for our common stock. Holdings is the
only record holder of our common stock. We have not paid any dividends on our
common stock during the last three fiscal years. Holdings has four authorized
classes of common stock, and three authorized series of preferred stock, none of
which are traded publicly. For more information about Holdings stock, see "Item
12. Security Ownership of Certain Beneficial Owners and Management" and "Item
13. Certain Relationships and Related Transactions."

Item 6.  Selected Financial Data

         We account for our operations on a fiscal year rather than a calendar
year basis. Each reference in this report to a "fiscal" year means the 52- or
53-week fiscal year that ends on the Saturday nearest January 31 in the
particular calendar year. Fiscal 2001 consisted of 53 weeks, all other years
presented consisted of 52 weeks. The combined financial statements include the
accounts of G&G Shops and stores operated by G&G Shops that were owned by Petrie
Retail. We purchased the assets of all of the stores that G&G Shops operated and
the trademarks used in that business in an acquisition that occurred on August
28, 1998.

         We derived the following selected financial and operating data from:

         o        the combined balance sheets as of January 31, 1998 and the
                  related combined statements of operations and cash flows for
                  fiscal 1998 and the seven months ended August 28, 1998 from
                  the audited financial statements of the business we acquired
                  in the acquisition; and

         o        the consolidated balance sheets as of January 30, 1999,
                  January 29, 2000, February 3, 2001 and February 2, 2002 and
                  the related consolidated statements of operations and cash
                  flows for the five months ended January 30, 1999, fiscal 2000,
                  2001 and 2002 from our audited financial statements.

         We did not conduct operations from the date of our incorporation on
June 26, 1998 to August 28, 1998, when we completed the acquisition. We
completed our private offering of notes on May 17, 1999. On November 2, 1999,
the notes that we issued in the private placement were exchanged for our senior
notes.

         Our selected financial and operating data should be read in conjunction
with "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our combined and consolidated financial statements
and related notes included elsewhere in this report.



                                       11





<PAGE>


                                G+G Retail, Inc.
                      Selected Financial and Operating Data

<TABLE>
<CAPTION>

                                                 Acquired Assets                        G+G Retail, Inc.
                                          -------------------------  -------------------------------------------------------

Dollars in thousands except for sales                  Feb. 1, 1998  Aug. 29, 1998
  per gross square foot                   Fiscal Year    to Aug. 28,   to Jan. 30, Fiscal Year  Fiscal Year    Fiscal Year
                                             1998           1998         1999        2000          2001           2002
                                           --------       --------     --------    --------      --------       --------
<S>                                        <C>            <C>          <C>         <C>           <C>            <C>
Statement of Operations Data:
Net Sales                                  $286,938       $162,823    $ 131,567    $318,506      $350,040       $380,428
Cost of sales (including occupancy
  costs)                                    177,765        106,056       79,267     196,330       217,032        234,525
Selling, general, administrative, and
  buying expenses (1)                        79,702         49,330       36,170      89,352       107,928        119,893
Depreciation and amortization expense         4,489          2,845        5,141      11,800        13,178         14,824
                                           --------       --------    ---------    --------      --------       --------
Operating income                             24,982          4,592       10,989      21,024        11,902         11,186
Interest expense, net                             -              -        7,395      12,983        14,012         14,311
                                           --------       --------    ---------    --------      --------       --------

Income (loss) before extraordinary
  loss and provision (benefit) for
  income taxes                               24,982          4,592        3,594       8,041        (2,110)        (3,125)
Provision (benefit) for income taxes         10,293          1,892        1,581       3,428          (808)        (1,327)
                                           --------       --------    ---------    --------      --------       --------

Income (loss) before extraordinary
  loss                                       14,689          2,700        2,013       4,613        (1,302)        (1,798)
Extraordinary loss, net of $354 of
  income tax                                      -              -            -        (450)       -              -
                                           --------       --------    ---------    --------      --------       --------
Net income (loss)                          $ 14,689       $  2,700    $   2,013    $  4,163      $ (1,302)      $ (1,798)
                                           ========       ========    =========    ========      ========       ========

Other Operating Data:
Sales per gross square foot (2)            $    295       $    160    $     130    $    296      $    291       $    297
Inventory turnover (3)                         6.6X           6.0X         6.5X        5.6X          6.1X           6.2X
Same store net sales increase
  (decrease) (4) (5)                            4.5%          (3.0)%       (1.1)%      (0.5)%        (3.7)%          2.1%
Capital expenditures:
  New stores                               $  2,972       $  1,299    $   1,027    $ 10,200      $ 13,615       $  5,518
  Remodels                                    3,320          1,809        1,341       6,680         7,877          4,104
  POS equipment                                   -              -            -       2,469         4,164            684
  Non-store assets and systems                  713            292          411       1,276           639          1,234
                                           --------       --------    ---------    --------      --------       --------
Total capital expenditures                 $  7,005       $  3,400    $   2,779    $ 20,625      $ 26,295       $ 11,540
                                           ========       ========    =========    ========      ========       ========

Number of Stores
  Beginning balance                             395            408          415         422           456            511
  New stores opened                              25              9           13          48            74             46
  Existing stores closed                         12              2            6          14            19             18
                                           --------       --------     --------    --------      --------       --------
  Ending balance                                408            415          422         456           511            539
                                           ========       ========    =========    ========      ========       ========

Other Financial Data:
EBITDA as adjusted (6)                     $ 31,305       $  8,449    $  16,130    $ 32,824      $ 25,080       $ 26,010
EBITDA margin as adjusted (7)                  10.9%           5.2%        12.3%       10.3%          7.2%           6.8%
Cash provided by operating activities      $ 25,588       $ 15,793    $  11,943    $ 20,592      $ 18,908       $ 13,657
Cash used in investing activities            (7,005)        (3,400)    (137,658)    (20,625)      (26,295)       (11,540)
Cash (used in) provided by financing
  activities                                (19,069)       (14,140)     137,069       5,997         2,862         (1,357)

</TABLE>

<TABLE>
<CAPTION>

                                     Acquired Assets                      G+G Retail, Inc.
                                     ---------------    -----------------------------------------------------
Dollars in thousands                     Jan. 31,        Jan. 30,      Jan. 29,        Feb. 3,        Feb. 2,
                                           1998           1999          2000            2001           2002
                                        ---------       ---------     ---------      ---------      ---------
<S>                                     <C>             <C>           <C>            <C>            <C>
Balance Sheet Data:
Total assets                             $28,157         $167,664     $186,742        $197,169       $194,960
Total long-term debt                      20,866           90,000      101,480         104,465        104,166
</TABLE>


                                       12





<PAGE>


                 Notes to Selected Financial and Operating Data

(1)      Selling, general, administrative and buying expenses include royalty
         expense and store closing expenses. Royalty expense represents an
         amount charged by Petrie Retail for the use of trademarks that we
         purchased in the acquisition.
(2)      Our sales per gross square foot was $287 for the first 52 weeks of
         fiscal year 2001.
(3)      Calculated by dividing the sum of monthly net retail sales by average
         monthly retail inventory. The fiscal 2000 inventory turn was negatively
         impacted by the off-season inventory purchases made during the fiscal
         year. Without these off-season purchases, inventory turn for fiscal
         2000 would have been 6.1 times.
(4)      A store becomes comparable after it is open 12 full months.
(5)      Our same store net sales decreased 5.3% for the first 52 weeks of
         fiscal year 2001.
(6)      We define EBITDA as operating income plus depreciation and
         amortization. In addition, we have further adjusted EBITDA to add back
         royalty expense. See note (1). EBITDA as adjusted does not represent
         cash flow from operations. You should not consider EBITDA as adjusted
         to be an alternative to operating or net income computed in accordance
         with generally accepted accounting principles, an indicator of our
         operating performance, an alternative to cash from operating activities
         as determined in accordance with GAAP or a measure of liquidity. We
         believe that EBITDA is a standard measure commonly reported and widely
         used by analysts, investors and other interested parties in the retail
         industry. As a result, we present this information to give you a more
         complete comparative analysis of our operating performance relative to
         other companies in the industry. Not all companies calculate EBITDA
         using the same methods. Therefore, the EBITDA figures as adjusted that
         we present may not be comparable to EBITDA reported by other companies.
(7)      Computed by dividing EBITDA as adjusted by net sales.

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

         You should read the following in conjunction with the selected
financial data and our combined and consolidated financial statements and the
related notes included elsewhere in this report.

Overview

         We are a leading national mall-based retailer of popular-price female
junior and pre-teen apparel. For over 30 years, we and our predecessors have
built a reputation for providing fashion apparel and accessories distinctly
targeted primarily at teenaged women. During fiscal 2000, we began to sell
fashion apparel and accessories targeted at pre-teens aged 7- to 12-years old.
In August 1998, we acquired the business of G&G Shops and the stores operated by
subsidiaries of Petrie Retail and the trademarks and other assets used in that
business.

Results of Operations

         The following table sets forth selected operating statement data,
expressed as a percentage of net sales:

<TABLE>
<CAPTION>

                                                       Fiscal Year 2000  Fiscal Year 2001   Fiscal Year 2002
                                                       ----------------  ----------------   ----------------

<S>                                                    <C>               <C>                <C>
      Net Sales                                               100.0%            100.0%             100.0%
      Cost of Sales (including occupancy costs)                61.6              62.0               61.6
      Selling, general, administrative and
       buying expenses                                         28.1              30.8               31.5
      Depreciation and amortization expense                     3.7               3.8                3.9
      Operating income                                          6.6               3.4                3.0
      Interest expense, net                                     4.1               4.0                3.8
      Income (loss) before extraordinary loss
       and provision (benefit) for income taxes                 2.5              (0.6)              (0.8)
      Extraordinary loss, net of tax                            0.1               -                  -
      Net income (loss)                                         1.3              (0.4)              (0.5)
      EBITDA as adjusted                                       10.3               7.2                6.8

</TABLE>



                                       13





<PAGE>

Comparison of Fiscal 2002 and Fiscal 2001

         Our fiscal year ends on the Saturday closest to January 31 and
generally results in a 52-week fiscal year. However, every five or six years,
our fiscal year is 53 weeks. Fiscal 2001 included 53 weeks. For purposes of
annual comparisons, unless otherwise noted, we have not adjusted for this
difference.

         Net sales increased to $380.4 million in fiscal 2002 from $350.0
million in fiscal 2001. The $30.4 million or 8.7% increase in net sales was due
to the opening of new stores, which contributed $28.2 million to the net sales
increase, together with a $6.9 million or 2.1% increase in same store net sales
(comparing 52 weeks) less $4.7 million applicable to the extra week in fiscal
2001. Average sales per gross square foot increased 2.1%, to $297 in fiscal 2002
from $291 in fiscal 2001. We operated 539 stores as of February 2, 2002 as
compared to 511 stores as of February 3, 2001. This increase was the result of
opening 46 stores and closing 18 stores during the period.

         Cost of sales, including occupancy costs, increased 8.1% to $234.5
million in fiscal 2002 from $217.0 million in fiscal 2001. As a percentage of
net sales, cost of sales including occupancy costs decreased 0.4%, from 62.0% in
fiscal 2001 to 61.6% in fiscal 2002. This 0.4% decrease resulted from a 1.0%
decrease in cost of sales, which was offset by a 0.6% increase in occupancy
costs as a percentage of sales. The decrease in cost of sales as a percentage of
net sales was due to an increase in the initial mark-on and a $1.7 million
increase in vendor allowances received in fiscal 2002 as compared to fiscal
2001, offset in part by an increase in markdowns. Vendor allowances for fiscal
2002 were $5.3 million, as compared to $3.6 million in fiscal 2001. The
occupancy cost increase as a percent of sales resulted from an overall increase
in occupancy costs.

         Selling, general, administrative and buying expenses increased $12.0
million or 11.1% to $119.9 million in fiscal 2002 from $107.9 million, in fiscal
2001. As a percentage of net sales, these expenses increased to 31.5% of sales
in fiscal 2002, as compared to 30.8% in fiscal 2001. Fiscal 2002 expenses
reflect additional selling costs related to new store openings, an increase in
same store selling expenses and an increase in administrative costs.

         Depreciation and amortization expense for fiscal 2002 was $14.8 million
compared to $13.2 million for fiscal 2001. The increase is mainly attributable
to the additional depreciation and amortization expense related to new stores,
remodels and relocations.

         Net interest expense in fiscal 2002 was $14.3 million or 3.8% of net
sales, as compared to $14.0 million or 4.0% of net sales for fiscal 2001. Both
fiscal 2002 and fiscal 2001 reflect interest on our senior notes and the
amortization of the $7.3 million original issue discount on our senior notes,
the $470,000 value assigned to the warrants issued by Holdings and deferred
financing costs, capital lease interest and interest expense on our short-term
borrowings.

         The income tax benefit for fiscal 2002 was $1.3 million or a 42.5%
income tax benefit rate as compared to income tax benefit of $808,000, or an
income tax benefit rate of 38.3% for fiscal 2000. The higher income tax benefit
rate in fiscal 2002 was due to additional tax credits received in fiscal 2002.

         There was a net loss of $1.8 million in fiscal 2002 as compared to a
net loss of $1.3 million in fiscal 2001. The difference was caused by the
factors discussed above.


                                       14





<PAGE>


Comparison of Fiscal 2001 and Fiscal 2000

         Net sales increased to $350.0 million in fiscal 2001 from $318.5
million in fiscal 2000. The $31.5 million or 9.9% increase in net sales was due
to the opening of new stores, which contributed $42.9 million to the net sales
increase in fiscal 2001 and was offset by a $11.4 million, or a 3.7%, decrease
in same store sales compared to fiscal 2000 (a 5.3% same store sales decrease
based on the first 52 weeks of fiscal 2001). The same store sales decline for
the fiscal year 2001 was positively impacted by the same store sales increase of
3.9% in the fourth quarter of fiscal 2001 (comparing the first 13 weeks of the
fourth quarter of fiscal 2001 to the 13 weeks of fiscal 2000). Average sales per
gross square foot decreased 1.7%, to $291 in fiscal 2001 from $296 in fiscal
2000. We operated 511 stores as of February 3, 2001 as compared to 456 stores as
of January 29, 2000. This was the result of opening 74 stores and closing 19
stores during the period.

         Cost of sales, including occupancy costs, increased 10.6% to $217.0
million in fiscal 2001 from $196.3 million in fiscal 2000. As a percentage of
net sales, cost of sales including occupancy costs increased 0.4%, from 61.6% in
fiscal 2000 to 62.0% in fiscal 2001. This 0.4% increase resulted from a 0.7%
decrease in cost of sales, which was offset by a 1.1% increase in occupancy
costs as a percentage of sales. The decrease in cost of sales as a percentage of
net sales was due to an increase in initial mark-on and a $500,000 increase in
vendor allowances received in fiscal 2001 as compared to fiscal 2000 offset in
part by an increase in markdowns. Vendor allowances for fiscal 2001 were $3.6
million, as compared to $3.1 million in fiscal 2000. The occupancy cost increase
as a percent of sales resulted from an overall increase in occupancy costs
coupled with a decrease in same store sales.

         Selling, general, administrative and buying expenses increased $18.5
million or 20.7% to $107.9 million in fiscal 2001 from $89.4 million, in fiscal
2000. As a percentage of net sales, these expenses increased to 30.8% of sales
in fiscal 2001, as compared to 28.1% in fiscal 2000. Fiscal 2001 expenses
reflects additional selling costs related to new store openings, an increase in
same store selling expenses and an increase in administrative costs.

         Depreciation and amortization expense for fiscal 2001 was $13.2 million
compared to $11.8 million for fiscal 2000. The increase is mainly attributable
to the additional depreciation and amortization expense related to new stores,
remodels and relocations.

         Net interest expense in fiscal 2001 was $14.0 million or 4.0% of net
sales, as compared to $13.0 million or 4.1% of net sales for fiscal 2000. The
period January 31, 1999 through May 17, 1999 reflects interest on our senior
bridge notes and amortization of the related issuance costs. The period May 18,
1999 through January 29, 2000 and fiscal 2001 reflects interest on our senior
notes and the amortization of the $7.3 million original issue discount on our
senior notes, the $470,000 value assigned to the warrants issued by Holdings and
deferred financing costs. In fiscal 2001, there was capital lease interest of
$456,000 as compared to $36,000 in fiscal 2000. In fiscal 2001, there was
interest expense of approximately $200,000 on our short-term borrowings. In
fiscal 2000 there were no short-term borrowings.

         The income tax benefit for fiscal 2001 was $808,000 or a 38.3% income
tax benefit rate as compared to income tax expense of $3.4 million, excluding
$354,000 of income tax benefit from the extraordinary loss, or a income tax rate
of 42.6% for fiscal 2000. The lower income tax benefit rate in fiscal 2000 was
due the mix of income between U.S. and foreign sources.

         There was a net loss of $1.3 million in fiscal 2001 as compared to a
net income of $4.2 million in fiscal 2000. The net loss for fiscal 2001 was
positively impacted by the $6.9 million of net income in the fourth quarter of
fiscal 2001 as compared to the net income of $5.7 in the fourth quarter of
fiscal 2000.


                                       15





<PAGE>


Liquidity and Capital Resources

         Our primary sources of liquidity are cash flow from operating
activities and borrowings under our revolving credit facility. Our primary cash
requirements are for (i) seasonal working capital, (ii) the construction of new
stores, (iii) the remodeling or upgrading of existing stores and (iv) upgrading
and maintaining computer systems.

         On May 2, 2001, we replaced our revolving credit facility with a new
three-year facility that provides for a line of credit in an amount of up to
$30.0 million (including a sublimit of $10.0 million for letters of credit). We
may use the revolving credit facility for general operating, working capital and
other proper corporate purposes. Amounts available under the revolving credit
facility are subject to the value of our eligible inventory and credit card
receivables subject to certain conditions. The borrowing base provides for
seasonal fluctuations in inventory with peak borrowing availability during the
months July through November. Interest on outstanding borrowings can range
either from prime to prime plus 0.25% or from 1.50% over the Eurodollar Rate to
a maximum 2.25% over the Eurodollar rate, based on the profitability and amount
of indebtedness of the Company. The revolving credit facility subjects us to a
minimum net worth (as defined) covenant of $40.0 million if excess availability
under the facility is $7.5 million or less during any month. The facility also
contains other customary restrictive covenants. Our obligations under the
revolving credit facility are secured by a lien on all or substantially all of
our assets, excluding our leasehold interests. As of February 2, 2002, we had no
borrowings outstanding under the revolving credit facility, but had
approximately $449,300 of letters of credit outstanding.

         Net cash provided by operating activities in fiscal 2002 was $13.7
million, as compared to $18.9 million in fiscal 2001. The decrease in net cash
provided by operating activities in fiscal 2002, as compared to fiscal 2001, was
principally due to the fact that our accounts payable and accrued expenses
decreased by $329,000 in fiscal 2002, as compared to a $8.9 million increase in
fiscal 2001.

         Capital expenditures for fiscal 2002, 2001 and 2000 were $11.5 million,
$26.3 million, and $20.6 million, respectively. The decrease in capital
expenditures for fiscal 2002 was due to our opening of fewer stores and a
reduction in our store remodeling spending. For fiscal 2003, management
estimates capital expenditures will be between $12.0 million and $14.0 million.

         We have an agreement from a lending institution for $6.5 million of
capital lease financing for the purchase of the point of sale equipment and
software. The lease provides for monthly payments that depend on the amount of
equipment leased. The lease terms include variable interest rates based on the
purchase date and leases expire five years from the date of the initial
equipment financed. As of February 2, 2002, $6.4 million of lease financing was
incurred under this arrangement. The capital lease obligation outstanding as of
February 2, 2002 was $4.2 million.

         We review the operating performance of our stores on an ongoing basis
to determine which stores, if any, to expand or close. We closed 14 stores in
fiscal 2000, 19 stores in fiscal 2001 and 18 stores in fiscal 2002.

         As of February 2, 2002, we had $15.3 million in cash. We historically
have maintained negligible accounts receivable balances since our customers
primarily pay for their purchases with cash, checks and third-party credit cards
which are promptly converted to cash.

         On May 17, 1999, we and Holdings completed a private placement of an
aggregate of $107.0 million face amount of outstanding notes issued by us and
warrants issued by Holdings to purchase 8,209 shares of nonvoting Class D Common
Stock at an exercise price of $.01 per share. The net proceeds from this private
placement were $93.9 million, after deducting the original issue discount of
$7.3 million and




                                       16





<PAGE>

fees of $5.8 million. We used the net proceeds to repay the senior bridge notes
and for general corporate purposes. On November 2, 1999, our privately placed
notes were exchanged for notes that are freely tradable. As of February 2, 2002,
our indebtedness under our senior notes totaled $101.5 million, which reflects
the aggregate face amount of the senior notes of $107.0 million, net of $5.2 of
unamortized original issue discount, and approximately $288,000 of unamortized
value assigned to the warrants issued by Holdings. The interest on the senior
notes is 11% per annum, payable semi-annually.

         We have minimum annual rental commitments of approximately $28.6
million in fiscal 2003 under existing store leases and the leases for our
corporate headquarters and distribution center.

         We believe that our cash flow from operating activities, cash on hand
and borrowings available under the revolving credit facility will be sufficient
to meet our operating and capital expenditure requirements through the end of
fiscal 2003. In addition, we believe that cash flow from operations will be
sufficient to cover the interest expense arising from the revolving credit
facility, our capitalized lease and our long-term debt. However, the sufficiency
of our cash flow is affected by numerous factors affecting our operations,
including factors beyond our control.

         If a "change of control" (as defined in the indenture agreement for our
senior notes) occurs, we will be required under the indenture to offer to
repurchase all our notes. However, we may not have sufficient funds at the time
of the change of control to make the required repurchases, or restrictions in
our revolving credit facility may prohibit the repurchases. We may not be able
to raise enough money to finance the change of control offer required by the
indenture related to the senior notes. If there is a change in control, we could
be in default under the indenture. In addition, upon a change of control, our
parent company may not have sufficient funds to redeem its preferred stock as
required in such event unless we pay a dividend of such amount to it.

Seasonality and Quarterly Operating Results

         Our fourth fiscal quarter historically accounts for the largest
percentage of our annual net sales. Our first fiscal quarter historically
accounts for the smallest percentage of annual net sales. In fiscal 2002, our
fourth quarter accounted for approximately 30.4% of annual net sales, as
compared to 32.5% in fiscal 2001.

         Our quarterly results of operations may also fluctuate significantly as
a result of a variety of factors, including the timing of store openings, the
amount of revenue contributed by new stores, changes in the mix of products
sold, the timing and level of mark-downs, the timing of store closings and
expansions, competitive factors and general economic conditions.

Inflation

         We do not believe that inflation has had a material effect on the
results of operations during the past three fiscal years. However, our business
may be affected by inflation in the future.

Critical Accounting Policies and Estimates

         Management's Discussion and Analysis of Financial Position and Results
of Operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. We believe the application of our accounting
policies, and the estimates inherently required therein, are reasonable. Our



                                       17





<PAGE>

accounting policies and estimates are reevaluated on an ongoing basis, and
adjustments are made when facts and circumstances dictate a change is warranted.
Our accounting policies are more fully described in Note 1 to the Consolidated
Financial statements included herein.

         Management believes the critical accounting policies and areas that
require the most significant judgments and estimates to be used in the
preparation of the consolidated financial statements are inventory valuation,
valuation of long-lived and intangible assets and goodwill, vendor allowances
and income tax accounting.

Inventory Valuation

         Merchandise inventories, which consist of finished goods, are valued at
the lower of cost as determined by the retail inventory method (average cost
basis) or market value. Inventories include items that have been marked down to
management's best estimate of their fair market value. Markdowns are taken
regularly to affect the rapid sale of slow moving inventory and to allow for
daily delivery of new merchandise to the stores. To the extent that management's
estimates differ from actual results, additional markdowns may be required which
could reduce our gross margin and operating income. Our success is largely
dependent on our ability to anticipate the changing fashion tastes of our
customers and to respond to those changing tastes in a timely manner. If we fail
to anticipate, identify or react appropriately to changing styles, trends or
brand preferences of our customers, we may experience lower sales, excess
inventories and more frequent markdowns, which would adversely affect our
operating results.

Valuation of Long-Lived and Intangible Assets and Goodwill

         We assess the impairment of identifiable intangibles, long-lived assets
and goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors we consider important that could
trigger an impairment review include the following:

         o    a significant underperformance relative to expected historical or
              projected future operating results;

         o    a significant change in the manner of our use of the acquired
              asset or the strategy for our overall business;

         o    a significant negative industry or economic trend;

         o    our market capitalization relative to net book value.

         When we determine that the carrying value of intangibles, long-lived
assets and goodwill may not be recoverable based upon the existence of one or
more of the above indicators of impairment, we measure any impairment based on a
projected discounted cash flow method using a discount rate determined by our
management to be commensurate with the risk inherent in our current business
model. Net intangible assets (including goodwill) and long-lived assets amounted
to $159.7 million and $163.9 million as of February 2, 2002 and February 3,
2001, respectively.

         In June 2001, the FASB issued SFAS No. 141, Business Combinations ("FAS
141"), and SFAS No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. With the adoption of FAS 142, goodwill
and other intangible assets that have indefinite useful lives will no longer be
amortized, but will be subject to at least an annual assessment of impairment by
applying a fair value based test, as specifically provided in the statement.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The Company will adopt FAS 142
beginning in the first quarter of fiscal 2003 and does not believe an impairment
of goodwill or indefinite lived intangible




                                       18





<PAGE>

assets will be required. Management estimates that the pre-tax effect of
implementing the non-amortization provisions of FAS 142 will be to reduce
amortization expense and increase operating income by approximately $3.9 million
in fiscal 2003.

Vendor Allowances

         Vendor allowances are recognized when the Company receives an executed
allowance agreement from its vendors and are recorded as a reduction of cost of
sales in the period in which the allowances are received. These allowances
primarily benefit our fourth quarter in each year. Allowances recognized in the
first three quarters of our fiscal year are markdown allowances received from
vendors for specific poor-performing styles of merchandise and have historically
aggregated less than 20% of total vendor allowances received in a fiscal year.
Year-end allowances, which represent the balance of vendor allowances, are
negotiated and recorded in the fourth quarter based on vendor profitability and
volume for the calendar year. Vendor allowances for fiscal 2002 were $5.3
million, as compared to $3.6 million in fiscal 2001.

Income Taxes

         The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes (FAS 109), which requires that deferred tax assets
and liabilities be recognized using enacted tax rates for the effect of
temporary differences between the book and tax bases of recorded assets and
liabilities FAS 109 also requires that deferred tax assets be reduced by a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax asset will not be realized.

         The Company evaluates quarterly the realizability of its deferred tax
assets by assessing its valuation allowance and by adjusting the amount of such
allowance, if necessary. The factors used to assess the likelihood of
realization are the Company's forecast of future taxable income and available
tax planning strategies that could be implemented to realize the net deferred
tax assets. The Company has used tax planning strategies to realize or renew net
deferred tax assets in order to avoid the potential loss of future tax benefits.

Recently Issued Accounting Pronouncements

         In June 2001, the FASB issued SFAS No. 141, Business Combinations ("FAS
141"), and SFAS No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. With the adoption of FAS 142, goodwill
and other intangible assets that have indefinite useful lives will no longer be
amortized, but will be subject to at least an annual assessment of impairment by
applying a fair value based test, as specifically provided in the statement.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The Company will adopt FAS 142
beginning in the first quarter of fiscal 2003 and does not believe an impairment
of goodwill or indefinite lived intangible assets will be required. Management
estimates that the pre-tax effect of implementing the non-amortization
provisions of FAS 142 will be to reduce amortization expense and increase
operating income by approximately $3.9 million in fiscal 2003.

         In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations ("FAS 143"), which requires entities to record the fair
value of the estimated liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes an amount equal to the present value of the estimated
liability by increasing the carrying amount of the related long-lived asset.
Over time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an




                                       19






<PAGE>

entity either settles the obligation for its recorded amount or incurs a gain or
loss upon settlement. FAS 143 is effective for fiscal years beginning after June
15, 2002, with earlier application encouraged. The Company will adopt FAS 143 in
the first quarter of fiscal 2003. Management does not believe the adoption of
this standard will have a material impact on the Company's consolidated
financial statements.

         In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("FAS 144"). FAS 144 addresses
financial accounting and reporting for the impairment of disposal of long-lived
assets. This statement supersedes SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the
accounting and reporting provisions of APB Opinion No. 30, Reporting the Results
of Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary and Unusual and Infrequently Occurring Events and Transaction,
for the disposal of a segment of a business (as previously defined in the
Opinion). FAS 144 is effective for fiscal years beginning after December 15,
2001, with earlier application encouraged. The Company will adopt FAS 144 in the
first quarter of fiscal 2003. Management does not believe the adoption of this
standard will have a material impact on the Company's consolidated financial
statements.

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk.

         Not applicable.

Item 8.  Financial Statements and Supplementary Data.

         Our Consolidated Financial Statements are included in this report
immediately following Part IV.

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

         Not applicable.





                                       20






<PAGE>


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

         Our directors and executive officers are:

<TABLE>
<CAPTION>

Name                            Age    Position
----                            ---    --------
<S>                             <C>    <C>
Jay Galin                       66     Chairman of the Board of Directors and Chief Executive Officer
Scott Galin                     43     President, Chief Operating Officer and Director
Craig Cogut                     48     Director
Donald D. Shack                 73     Director
Lenard B. Tessler               49     Director
Michael Kaplan                  48     Senior Vice President, Chief Financial Officer, Treasurer and Secretary
James R. Dodd                   60     Senior Vice President Store Operations
Robert W. Tinbergen             54     Senior Vice President Merchandise Planning and Distribution
Jeffrey Galin                   40     Senior Vice President/Merchandise Manager
</TABLE>

Biographical Information

         Jay Galin worked for G&G Shops for over 40 years and served as
President of G&G Shops from 1972 to August 1998. He became our Chairman of the
Board and Chief Executive Officer in August 1998. Mr. Galin also served as
Senior Vice President of Petrie Retail from 1981 to 1990 and Executive Vice
President of Petrie Retail from 1990 to 1995. Mr. Galin served as a board member
of Petrie Stores, Petrie Retail's predecessor, from 1980 to 1995 and is a member
of the Board of Directors of Ark Restaurants Corp. Mr. Galin is the father of
Scott Galin and Jeffrey Galin.

         Scott Galin worked for G&G Shops for over 20 years and served as
Executive Vice President and Chief Operating Officer of G&G Shops from 1992 to
August 1998. He became our President, Chief Operating Officer and a director in
August 1998. From 1985 to 1992, Mr. Galin served as a Senior Vice President of
G&G Shops and held executive positions in real estate, finance and store
operations. Mr. Galin also served as Senior Vice President of Petrie Retail from
1985 to 1995. Scott Galin is the son of Jay Galin and the brother of Jeffrey
Galin.

         Craig Cogut is a senior founding principal of Pegasus Capital Advisors,
L.P., which, with its affiliates, manages approximately $800 million in equity
capital. Pegasus' first investment partnership was formed in August 1996. He
joined our Board of directors in August 1998 and was our President from July
1998 to August 1998. From 1990 to 1995, Mr. Cogut was a senior principal of
Apollo Advisors, L.P. and Lion Advisors, L.P., partnerships which managed
several billion dollars of equity capital for investment partnerships and
private accounts. Mr. Cogut serves as a member of the Board of Directors of Vail
Resorts, Inc.

         Donald D. Shack is a founding member of the law firm of Shack Siegel
Katz Flaherty & Goodman, P.C., general counsel to G+G Retail and Holdings. He
joined our Board of directors in August 1998. Before the formation of Shack
Siegel Katz Flaherty & Goodman, P.C. in April 1993, Mr. Shack was a member of
the law firm of Whitman & Ransom from 1990 to 1993 and a member of the law firm
of Golenbock & Barell from 1959 to 1989. Mr. Shack is a member of the Board of
Directors of Ark Restaurants Corp.


                                       21





<PAGE>

         Lenard B. Tessler is a Managing Director of Cerberus Capital
Management, L.P., an investment management firm, which he joined in May 2001.
Prior to joining Cerberus Capital Management, L.P., he was a founding partner of
TGV Partners, a private investment partnership formed in April 1990. He joined
our Board of Directors in August 1998. Mr. Tessler served as Chairman of the
Board of Empire Kosher Poultry from 1994 to 1997, after serving as its President
and Chief Executive Officer from 1992 to 1994. Before founding TGV Partners, Mr.
Tessler was a founding partner of Levine, Tessler, Leichtman & Co., a leveraged
buyout firm formed in 1987. Mr. Tessler serves as a member of the Board of
Directors of Garfield & Marks Designs, Ltd., Inc., Opinion Research Corporation,
Inc., and Meridian Rail LLC.

         Michael Kaplan served as Vice President and Chief Financial Officer of
G&G Shops from 1988 to August 1998. He became our Vice President, Chief
Financial Officer, Treasurer and Secretary in August 1998 and Senior Vice
President in October 1999. Mr. Kaplan is a certified public accountant and from
1976 to 1980 held various auditing positions with Ernst & Young LLP.

         James R. Dodd has worked in the apparel industry for over 30 years. He
served as Vice President of Store Operations of G&G Shops from April 1998 to
August 1998. He became our Vice President Store Operations in August 1998 and
Sr. Vice President Store Operations in October 1999. From July 1995 to May 1998,
he was Vice President--Retail Division for JH Collectibles in Milwaukee,
Wisconsin. On October 4, 1996, JH Collectibles filed a voluntary petition
pursuant to Chapter 11 of the United States Bankruptcy Code with the United
States Bankruptcy Court. As of March 31, 1999, the plan of liquidation for that
company was substantially consummated. From 1994 to May 1995, Mr. Dodd was Vice
President of Operations for Tommy Hilfiger.

         Robert W. Tinbergen has worked in the apparel industry for over 25
years. He served as Vice President of Planning and Distribution of G&G Shops
from March 1988 to August 1998. He became our Vice President Warehouse and
Distribution in August 1998 and Senior Vice President Merchandise Planning and
Distribution in October 1999. From 1982 to 1987, he served as director of
distribution for Orbachs.

         Jeffrey Galin served as divisional merchandise manager of G&G Shops
from 1991 to August 1998. He became our Vice President Merchandising in August
1998 and Senior Vice President/Merchandise Manager in October 1999. From 1989 to
1991, Mr. Galin was employed as a sales associate for Bergdorf Goodman. From
1985 to 1988, Mr. Galin worked as a commercial real estate salesperson. Mr.
Galin started his career as an associate buyer for G&G Shops from 1983 to 1984.
Jeffrey Galin is the son of Jay Galin and the brother of Scott Galin.

         Our executive officers were elected to serve in their capacities until
the next annual meeting of our Board of Directors and until their respective
successors are elected and qualified. We employ Jay Galin and Scott Galin under
employment agreements. See "Item 11. Executive Compensation--Employment
Contracts and Severance Agreements."

         All of our executive officers were also executive officers of G&G Shops
prior to the acquisition. In addition, Jay and Scott Galin were executive
officers of Petrie Retail. In October 1995, Petrie Retail and its affiliates,
including G&G Shops, filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code. In August 1998, we purchased the assets of
G&G Shops from these companies.

Board of Directors

         Under the certificate of incorporation of Holdings, so long as Holdings
controls us, Holdings is required to cause our Board of directors to be
identical to its board of directors. The board of directors of Holdings and, as
a result, our board of directors each consists of five members. All of our
Directors hold




                                       22





<PAGE>

office until the next annual meeting of stockholders and until their successors
are duly elected and qualified. Holders of class A common stock of Holdings are
currently entitled to elect three directors, and holders of class B common stock
of Holdings are currently entitled to elect two directors. Messrs. Jay and Scott
Galin and Mr. Shack were elected to the Board of Directors of Holdings by the
holders of class A common stock of Holdings. Mr. Cogut and Mr. Tessler were
elected to the Board of Directors of Holdings by the holders of class B common
stock. As of May 1, 2002, Jay and Scott Galin collectively owned, assuming the
exercise of their vested stock options, approximately 84.5% of the outstanding
class A common stock of Holdings. Affiliates of Pegasus Investors owned 100% of
the class B common stock of Holdings. See "Item 12. Security Ownership of
Certain Beneficial Owners and Management." See "Item 13. Certain Relationships
and Related Transactions" for descriptions of agreements relating to the stock
ownership and management of our business.

         Holders of class A common stock of Holdings will be entitled to elect
two of our directors, and holders of class B common stock of Holdings will be
entitled to elect three of our directors, upon the occurrence of any of the
following events:

         o    the consolidated earnings of Holdings before interest, taxes,
              depreciation and amortization for the most recent 12 full months
              being less than $15.0 million;

         o    the occurrence of defaults under any debt facilities of G+G
              Retail or Holdings;

         o    termination of the employment of either of Jay Galin or Scott
              Galin by us for cause or by either of them without good reason,
              as these terms are defined in each executive's employment
              agreement; or

         o    certain events set forth in Holding's certificate of
              incorporation including the failure of Holdings to perform
              specified obligations to the holders of its series B preferred
              stock.

         From and after the time that there are no longer any shares of the
class B, class C or class D common stock of Holdings outstanding, the Board of
Directors of Holdings will be elected at each annual meeting of stockholders by
a plurality of the votes cast by holders of the class A common stock of
Holdings.

         Under an agreement dated August 28, 1998 among Pegasus Investors, G+G
Retail, Pegasus Partners, L.P. and Pegasus Related Partners, L.P., the Pegasus
entities agreed that they will elect Lenard Tessler as a director of G+G Retail
and Holdings, for as long as:

         o    TGV/G+G Investors LLC, an affiliate of TGV Partners of which
              Lenard Tessler is a principal, is a limited partner of Pegasus
              G&G Retail; and

         o    the Pegasus entities have the power to elect at least two
              Directors to the Board of Directors of Holdings.

         In the event that Lenard Tessler votes, or after inquiry indicates his
intention to vote, on any issue brought before the Board of Directors of
Holdings differently than the other director elected by the Pegasus entities,
then the obligation of the Pegasus entities to elect Lenard Tessler to the Board
of Directors of Holdings will terminate, Mr. Tessler will immediately resign
from our Board of Directors and from the Board of Directors of Holdings, and the
Pegasus entities will be entitled to elect a new director to replace Mr.
Tessler. In this event, the Pegasus entities will appoint Mr. Tessler or another
individual acceptable to the Pegasus entities as an observer at meetings of the
Board of Directors of Holdings until the time that their obligation to elect Mr.
Tessler as a director would otherwise have terminated.



                                       23





<PAGE>

Item 11.  Executive Compensation

         The table below contains information on the fiscal 2000, 2001 and 2002
compensation for services to us by the individuals who served as our chief
executive officer and our four next most highly compensated executive officers
at the end of fiscal 2002.

<TABLE>
<CAPTION>

                                            Summary Compensation Table

                                                                                  Long-Term
                                                 Annual Compensation             Compensation
                                         -----------------------------------    --------------
                                                                                    Shares
                                                                                  Underlying       All Other
     Name and Principal Position         Year        Salary          Bonus       Options (#)      Compensation
     ---------------------------         ----        ------          -----       -----------      ------------
<S>                                      <C>         <C>             <C>            <C>               <C>

     Jay Galin
        Chairman of the Board of         2002       $1,110,417      $     --           --            $59,400
        Directors and Chief Executive    2001        1,085,417        65,125           --             25,800
        Officer                          2000        1,060,417       212,083        2,500             23,246

     Scott Galin                         2002       $  860,417      $     --           --            $31,700
        President, Chief Operating       2001          835,417        38,125           --             25,800
        Officer and Director             2000          535,417       107,083        2,500             23,246

     Michael Kaplan
        Sr. Vice President, Chief        2002       $  299,432      $     --           --            $18,900
        Financial Officer, Treasurer     2001          281,004        17,529           --             20,600
        and Secretary                    2000          268,006        53,600          200             19,182

     Jeffrey Galin                       2002       $  240,692      $     --           --            $15,400
        Sr. Vice President               2001          220,385        13,749           --             17,100
        Merchandise Manager              2000          208,462        41,692          150             16,499

     James Dodd                          2002       $  224,904      $     --           --            $18,900
        Sr. Vice President               2001          211,442        13,200           --             20,600
        Store Operations                 2000          200,000        40,000          150             19,182
</TABLE>

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

         The figures in the column "All Other Compensation" include medical
reimbursement and premiums paid under our executive medical reimbursement plan.
These medical costs for the following officers in 2002, 2001 and 2000,
respectively, were: Jay Galin $45,800, $10,500 and $8,123; Scott Galin $18,100,
$10,500 and $8,123; Mr. Kaplan $5,300, $5,300 and $4,059; Jeffrey Galin $1,800,
$1,800, and $1,376; and Mr. Dodd $5,300, $5,300, and $4,059. Also includes
contributions to the G+G Retirement Plan and Trust made for the benefit of the
following officers in 2002, 2001 and 2000 respectively, as follows: Jay Galin
$13,600, $15,300 and, $15,123; Scott Galin $13,600, $15,300 and $15,123; Mr.
Kaplan $13,600, $15,300 and $15,123; Jeffrey Galin $13,600, $15,300 and $15,123;
and Mr. Dodd $13,600, $15,300 and $15,123.

         The following table sets forth certain information about the exercise
of options to purchase the class A common stock of Holdings and the number and
value of outstanding options owned by persons named in the Summary Compensation
Table.


                                       24





<PAGE>


                 Aggregate Option Exercises in Last Fiscal Year
                        and Fiscal-year-end Option Values

<TABLE>
<CAPTION>

                                                                                                  Value of Unexercised
                                                                            Shares Underlying        In-the-Money
                                                                         Unexercised Options at       Options at
                                                                              02/02/02 (#)           02/02/02 ($)
                                 Shares Acquired on         Value             Exercisable/           Exercisable/
Name                                 Exercise(#)         Realized($)          Unexercisable          Unexercisable
------------------------------   ------------------    ---------------   ----------------------   ---------------------
<S>                              <C>                   <C>               <C>                      <C>
Jay Galin                                0                    0                 2,500/0                   0/0
Scott Galin                              0                    0                 2,500/0                   0/0
Michael Kaplan                           0                    0                   133/67                  0/0
Jeffrey Galin                            0                    0                   100/50                  0/0
James Dodd                               0                    0                   100/50                  0/0
</TABLE>

Stock Option Plan of Holdings

         Effective as of March 15, 1999, Holdings adopted a stock option plan
providing for the granting of options to purchase up to 7,000 shares of its
class A common stock to its employees and employees of its subsidiaries. This
option plan is administered by the Board of Directors of Holdings, which is
authorized under the plan to grant incentive stock options and non-qualified
stock options.

         Effective as of March 15, 1999, Holdings granted non-qualified options
under the plan to each of Jay Galin and Scott Galin to purchase 2,500 shares of
its class A common stock, all of which are currently exercisable. Effective as
of October 19, 1999, Holdings granted an aggregate of 2,000 non-qualified
options under its option plan to various employees, of which 1,334 are currently
exercisable. The exercise price of each of the options is $300 per share, and
each option has a term of 10 years. The exercise price of the options exceeded
the fair market value of Holdings stock on the date of grant. The stock options
are non-transferable other than by a will or the laws of descent and
distribution, unless the Board of Directors of Holdings permits transfer and the
transfer is described in the option instrument.

         This option plan automatically terminates on March 14, 2009, unless the
Board of Directors of Holdings terminates it earlier. Termination of the option
plan will not terminate any option that was granted before termination.

Employment Contracts and Severance Agreements

         We employ Jay Galin as the Chairman of our Board and our Chief
Executive Officer under an employment agreement, as amended, that expires on
August 28, 2003. Under his employment agreement, Mr. Galin is currently
receiving a base salary of $1,125,000 per year, which increases by $25,000
annually. Mr. Galin is also entitled to receive a bonus under our bonus plan for
senior management employees. See "--Our Bonus Plan." At any time during the term
of his employment agreement, Mr. Galin may, upon three months' prior written
notice to us, terminate his employment agreement and enter into a three-year
consulting agreement with us. The consulting agreement would require Mr. Galin
to provide consulting services to us for up to half normal working time, in
exchange for annual consulting fees equal to one-half of his annual salary at
the time of termination of his employment agreement.

         We employ Scott Galin as our President and Chief Operating Officer
under an employment agreement, as amended, that expires on August 28, 2003.
Under his employment agreement, Mr. Galin is currently receiving a base salary
of $875,000 per year, which increases by $25,000 annually. Scott Galin is also
entitled to receive a bonus under our bonus plan for senior management
employees. See "--Our Bonus Plan." In addition, in the event that Jay Galin's
employment is terminated for any reason, including the


                                       25





<PAGE>

exercise of his consulting option described above, Scott Galin will serve as our
chief executive officer for the remaining term of his employment agreement.

         If we terminate the employment of Jay Galin or Scott Galin without
cause or either executive terminates his employment for good reason, as those
terms are defined in the employment agreements, each of these executives will be
entitled to receive the salary, bonus and benefits to which they would have been
entitled for the remainder of the employment term. If the employment of Jay
Galin or Scott Galin terminates upon disability, as defined in the employment
agreements, each of these executives will be entitled to receive his full salary
and benefits for one year and 50% of his salary and full benefits for an
additional six months. Upon the death of Scott Galin, we are required to pay his
designated beneficiary his salary and bonus for one year following his death. If
Jay Galin exercises his consulting option described above, his consulting
agreement will contain termination provisions similar to those contained in his
employment agreement.

         Each employment agreement also contains covenants precluding the
executive from, among other things, competing with us or soliciting our
customers or employees until the earlier of the expiration of the initial term
of the employment agreement or the date which is 18 months after the termination
of his employment with us. If Jay Galin exercises his consulting option, his
consulting agreement will contain similar covenants not to compete or solicit.

         We have also entered into separate agreements with Michael Kaplan, our
Senior Vice President and Chief Financial Officer, and Jeffrey Galin, our Senior
Vice President/Merchandise Manager, that provide for severance payments in the
event that we terminate their employment without cause, as that term is defined
in the severance agreements. These severance payments consist of the executive's
base salary for one year and, if the executive elects to continue coverage under
our medical insurance, the payment of a portion of the premiums for such
insurance equal to the portion which would have been paid had he remained in our
employ for up to one year.

Our Bonus Plan

         Our Board of Directors adopted a bonus plan for senior management
employees that became effective on February 2, 1999. Participants in the bonus
plan include Jay Galin, Scott Galin and other selected members of our senior
management. Under the bonus plan, participants are eligible to receive annual
cash bonuses in addition to their base salaries.

         The payment of bonus awards for each fiscal year is based upon our
financial performance for the fiscal year measured by our earnings before
interest, taxes, depreciation and amortization for that fiscal year. The bonus
plan provides for several performance levels, each based on:

         o    a percentage of our projected earnings before interest, taxes,
              depreciation and amortization for the relevant fiscal year
              established by our Board of Directors; and

         o    the dollar amount of bonuses payable to participants in the bonus
              plan for the relevant fiscal year at the performance level.

         The dollar amount of bonus awards is based on a percentage of each
participant's base salary based on the performance level that we achieve. The
bonus plan is administered by our Board of Directors. The bonus plan may be
amended or terminated at any time upon the recommendation of the Chairman of our
Board and Chief Executive Officer and our President and Chief Operating Officer.




                                       26





<PAGE>

Compensation of Our Directors

         As of the date of this report, our directors do not receive any
compensation for their services as directors.

Compensation Committee Interlocks and Insider Participation

         Our Board of Directors does not have a compensation committee.
Executive officer compensation is determined by the full Board of Directors
which includes Jay Galin our Chairman and Chief Executive Officer and Scott
Galin, our President and Chief Operating Officer.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         Holdings owns all of our outstanding capital stock. Holdings has four
authorized classes of common stock: class A, class B, class C and class D. We
and Holdings are prohibited from taking certain actions without the affirmative
vote or written consent of holders of a majority of the issued and outstanding
shares of class B common stock. Restricted actions include, among others:

         o    issuance or redemption of securities;

         o    incurrence of indebtedness in excess of specified amounts;

         o    effecting a liquidation or sale of the business of G+G Retail or
              Holdings; or

         o    initiating a public offering, subject to limited exceptions.

         Except as required by the Delaware General Corporation Law, holders of
class C and class D common stock do not have any voting rights. After the
completion of a public offering, if at least 20% of the common stock of Holdings
is listed or admitted for trading on a national securities exchange or quoted on
the Nasdaq National Market, each share of class B, class C and class D common
stock then issued and outstanding will automatically convert into one share of
class A common stock.

         Holdings has two series of preferred stock outstanding. Holders of
series A preferred stock are entitled to receive dividends, when and as declared
by Holding's board of directors, at an annual rate of 15%. Any dividend payment
made on or prior to August 28, 2003 may be made, at the discretion of the
Holdings board of directors, in cash, in additional shares of series A preferred
stock or by accretion. Any dividend payment made after August 28, 2003 must be
made in cash. The dividend rate increases to 17% upon the occurrence of a series
A triggering event in the certificate of incorporation of Holdings. One such
triggering event is the failure by Holdings to pay dividends on the series A
preferred stock for any reason. Holdings is prohibited from taking specified
actions without the affirmative vote or written consent of a majority of the
holders of series A preferred stock. Otherwise, except as required by the
Delaware General Corporation Law, holders of series A preferred stock do not
have any voting rights. Series A preferred stock is exchangeable at the option
of Holdings for notes containing similar terms.

         Holders of series B preferred stock are entitled to receive dividends
when and as declared by the Board of Directors at an annual rate of 17%. Any
dividend payment may be made, at the discretion of the Holdings board of
directors, in cash, in additional shares of series B preferred stock or by
accretion but if a dividend is paid in cash to the holders of series A preferred
stock, an equal amount must be paid in cash as a dividend to the holders of the
series B preferred stock. Except as required by the Delaware General Corporation
Law, holders of series B preferred stock do not have any voting rights. The
shares of series B preferred stock are exchangeable at the option of Holdings
for notes containing similar terms.

         The following table contains information about the beneficial ownership
of Holdings capital stock as of May 1, 2002, including ownership by:





                                       27





<PAGE>

         o    each person known to us to beneficially own more than 5% of the
              outstanding voting securities of Holdings;

         o    each of our directors;

         o    each of our five most highly compensated executive officers; and

         o    all of our directors and executive officers as a group.

<TABLE>
<CAPTION>

                                                           Percent
                                              Percentage   of Vote                 Percentage
                                               Ownership    of all     Number of    Ownership   Number of    Percentage
                                  Number of     of all      Classes    Shares of       of       Shares of    Ownership
                                  Shares of   Classes of   of Voting   Series A     Series A    Series B     of Series B
                                   Common       Common      Common     Preferred    Preferred   Preferred    Preferred
Name of Beneficial Owner            Stock        Stock      Stock        Stock        Stock       Stock        Stock
------------------------            -----        -----       -----       -----        -----       -----        -----
<S>                                <C>            <C>         <C>      <C>          <C>           <C>           <C>
Pegasus Related Partners, L.P.     26,723(1)      39.4%       25.2%        --          --         24,702        49.4%
Paul Gunther, as Liquidating
  Trustee under Liquidating
  Trust Agreement dated as of
  December 18, 1998                15,000(2)      30.0%         --         --          --             --          --
Cerberus G&G Company, L.L.C.       14,000(3)      21.9%         --       29,341       100%            --          --
Pegasus G&G Retail, L.P.           11,924(4)      20.6%       11.4%        --          --         11,173        22.3%
Pegasus Partners, L.P.             10,276(5)      18.1%        9.7%        --          --          9,497        19.0%
Jay Galin                           9,340(6)      17.8%       24.9%        --          --             --          --
Scott Galin                         9,340(6)      17.8%       24.9%        --          --             --          --
Pegasus G&G Retail II, L.P.         4,977(7)       9.3%        4.8%        --          --          4,665         9.3%
Donald D. Shack                        20(8)       *           *           --          --             --          --
Craig Cogut                        53,900(9)      62.7%       51.1%        --          --         50,037(9)      100%
Lenard Tessler                         --           --          --         --          --             --          --
Michael Kaplan                        807(10)      1.6%        2.3%        --          --             --          --
Jeffrey Galin                       1,520(11)      3.0%        4.3%        --          --             --          --
Robert Tinbergen                      200(12)      *           *           --          --             --          --
James R. Dodd                         250(13)      *           *           --          --             --          --
All directors and executives
  officers as a group (9
  individuals)                     75,377(14)     70.7%       95.3%        --          --         50,037         100%

</TABLE>

--------------------
* Less than 1%.
(1)  Includes 8,837 class B shares, representing 49.4% of the outstanding class
     B shares and warrants to purchase 17,886.14 class D shares. The address of
     this stockholder is 99 River Road, Cos Cob, Connecticut 06807.
(2)  100% of the outstanding class C shares. These were issued to G&G Shops in
     connection with the acquisition and transferred to the liquidating trustee
     in the bankruptcy proceedings for Petrie Retail and its subsidiaries. The
     address of this stockholder is Franklin 145 Corp., c/o Paul Gunther.
(3)  Warrants to purchase class D shares. The address of this stockholder is c/o
     Cerberus Partners LP, 450 Park Avenue, 28th Floor, New York, New York
     10022.
(4)  Includes 3,997 class B shares, representing 22.3% of the outstanding class
     B shares, and warrants to purchase 7,927 class D shares. The address of
     this stockholder is c/o Pegasus Investors, L.P., 99 River Road, Cos Cob,
     Connecticut 06807.
(5)  Includes 3,398 class B shares, representing 19.0% of the outstanding class
     B shares, and warrants to purchase 6,878 class D shares. The address of
     this stockholder is c/o Pegasus Investors, L.P., 99 River Road, Cos Cob,
     Connecticut 06807.
(6)  47.7% beneficial interest in the class A shares. Includes vested options to
     purchase 2,500 class A shares. The address of this stockholder is c/o G+G
     Retail, Inc., 520 Eighth Avenue, New York, New York 10018.


                                       28





<PAGE>

(7)  Includes 1,668 class B shares, representing 9.3% of the outstanding class B
     shares, and warrants to purchase 3,309 shares of class D common stock. The
     address of this stockholder is c/o Pegasus Investors, L.P., 99 River Road,
     Cos Cob, Connecticut 06807.
(8)  Class A common stock.
(9)  Mr. Cogut may be deemed to own beneficially 17,900 (100%) of the class B
     shares, warrants to purchase 36,000 (72.0%) class D shares and 50,037
     (100%) shares of series B preferred stock through his indirect ownership
     interest in Pegasus Partners, L.P., Pegasus Related Partners, L.P., Pegasus
     G&G Retail, L.P. and Pegasus G&G Retail II, L.P. Mr. Cogut beneficially
     owns 100% of the issued and outstanding capital stock of Pegasus Investors
     GP, Inc., a Delaware corporation that is the general partner of Pegasus
     Investors. Pegasus Investors is the general partner of each of Pegasus
     Partners and Pegasus Related Partners. Pegasus Partners and Pegasus Related
     Partners collectively own 100% of the issued and outstanding capital stock
     of Pegasus G&G Retail GP, Inc., a Delaware corporation that is the general
     partner of each of Pegasus G&G Retail and Pegasus G&G Retail II. The
     address of this stockholder is c/o Pegasus Investors, L.P., 99 River Road,
     Cos Cob, Connecticut 06807.
(10) Represents 4.7% of the outstanding class A shares.
(11) Represents 8.8% of the outstanding class A shares.
(12) Represents 1.2% of the outstanding class A shares.
(13) Represents 1.5% of the outstanding class A shares.
(14) Includes the shares beneficially owned by Mr. Cogut, as described in note
     (9) above, an aggregate of 36,000 warrants to purchase class D shares and
     5,382 vested options to purchase class A shares.

Item 13.  Certain Relationships and Related Transactions

         Donald D. Shack, a member of our Board of Directors, is a shareholder
and a director of the law firm of Shack Siegel Katz Flaherty & Goodman, P.C., to
which our company paid approximately $635,400 in legal fees in calendar year
2001.

         From February 4, 2001 to May 1, 2002, Pegasus Related Partners, L.P.,
Pegasus G+G Retail, L.P., Pegasus Partners L.P., and Pegasus G+G Retail, II,
L.P., each affiliates of Pegasus Investors, have received in the aggregate an
additional 9,378,363 shares of series B preferred stock of Holdings as dividends
on series B preferred stock that they hold. The class B common stock of Holdings
owned by the affiliates of Pegasus Investors represents approximately 51.1% of
the voting common equity of Holdings outstanding on May 1, 2002, or 43.3%,
assuming the exercise of stock options that were exercisable as of May 1, 2002.
As a result of their ownership of Holdings, the affiliates of Pegasus Investors
have the ability to determine the outcome of most corporate actions that are
required to be submitted to Holdings stockholders, other than, currently, the
election of a majority of the Board of Directors of Holdings. In addition, as
holders of class B common stock of Holdings, the affiliates of Pegasus Investors
have special veto rights, which allow them to control the timing and occurrence
of a number of major corporate transactions by us and Holdings. Craig Cogut, a
director of our company and of Holdings, has a 100% indirect ownership interest
in each of the affiliates of Pegasus Investors.

         Lenard Tessler, a director of G+G Retail and Holdings, is a principal
of TGV Partners. TGV Partners and its affiliates hold limited partnership
interests in Pegasus G&G Retail and Pegasus G&G Retail II. Pegasus G&G Retail
and Pegasus G&G Retail II own 31.6% and 31.2% respectively, of the shares and
warrants to purchase shares of Holdings held by the affiliates of Pegasus
Investors described above. See "Item 12. Security Ownership of Certain
Beneficial Owners and Management." Under the limited partnership agreement of
Pegasus G&G Retail, in the event that Holdings has not consummated an initial
public offering of its common stock on or prior to August 28, 2003, TGV Partners
may require Pegasus G&G Retail to exercise its demand registration rights that
are described below. Mr. Tessler is a Managing Director of Cerberus Capital
Management, L.P., an investment management firm which controls funds owning in
excess of $49 million of our senior notes. Cerberus G&G Company, LLC, an
affiliate of Cerberus Capital Management, owns 29,341 shares of our series A
preferred stock and warrants to purchase 14,000 shares of our class D common
stock.



                                       29





<PAGE>

         In connection with the acquisition, some of our executive officers
purchased class A common stock including Michael Kaplan who purchased 600 shares
for a purchase price of $70,813, Jeffrey Galin who purchased 840 shares for a
purchase price of $99,138 and James Dodd who purchased 150 shares for a purchase
price of $17,703. During fiscal 2000, Mr. Kaplan purchased 75 additional shares
of class A common stock for a purchase price of $8,852. To fund their purchases
of stock, each of these officers borrowed from Holdings, on a full recourse
basis, the total purchase price of the stock purchased, less the $0.001 par
value of the stock that was paid in cash. The total principal amount of each
officer's loan is due on the earlier of the fifth anniversary of the date of the
loan or 30 days following the date on which the officer is no longer an officer
of Holdings or any of its subsidiaries. The outstanding principal amount of each
loan bears interest at the prime rate announced in New York City by Citibank,
N.A. from time to time, payable on a quarterly basis. Each of these loans is
secured by a pledge of the purchased stock.

Stockholder Agreements

         Affiliates of Pegasus Investors are parties to a stockholders agreement
with a number of management stockholders of Holdings, including Jay and Scott
Galin. Under the stockholders agreement, each management stockholder is
prohibited from transferring class A common stock of Holdings on or before
August 28, 2002 without the consent of holders of a majority of the outstanding
class A and class B common stock, except in limited circumstances. After August
28, 2002, all transfers of class A common stock by management stockholders are
subject to a right of first refusal in favor of Holdings and the affiliates of
Pegasus Investors. In addition, if the affiliates of Pegasus Investors propose
to sell at least 80% of the common equity of Holdings that they hold, the
management stockholders may be required by the affiliates of Pegasus Investors
to sell shares of class A common stock in the same sale to the same purchaser on
the same terms. Furthermore, if one or more of the affiliates of Pegasus
Investors proposes to sell at least 5% of the common equity of Holdings, the
management stockholders will be entitled to sell the same percentage of their
shares of class A common stock in the same sale and on the same terms.

         Holdings has granted to the affiliates of Pegasus Investors preemptive
rights in connection with equity issuances by Holdings, with limited exceptions.
Holdings has also granted to the affiliates of Pegasus Investors and the
management stockholders demand and piggyback registration rights. Affiliates of
Pegasus Investors or our management stockholders who hold at least 33% of
outstanding class B common stock of Holdings are entitled to demand registration
of their shares after the consummation of a qualified public offering, which
means a public offering of a class of common stock of which at least 20% of the
then outstanding shares are publicly held and which is listed or admitted for
trading on a national securities exchange or quoted on the Nasdaq National
Market. The affiliates of Pegasus Investors who hold at least 33% of the
outstanding class B common stock of Holdings are also entitled to demand
registration of their shares beginning on August 28, 2002. Any demand
registration must be reasonably expected to yield aggregate gross proceeds of at
least $20 million to the stockholders exercising their registration rights. The
affiliates of Pegasus Investors as a group are entitled to two demand
registrations, and the management stockholders as a group are entitled to one
demand registration. The affiliates of Pegasus Investors and the management
stockholders are each entitled to piggyback registration rights in connection
with any registration statement filed by Holdings, with limited exceptions.

         In addition to their rights to elect directors, under the stockholders
agreement, the affiliates of Pegasus Investors may have the right to appoint an
observer for meetings of the Board of Directors of Holdings. See "Item 10.
Directors and Executive Officers of the Registrant--Board of Directors."

         Under the stockholders agreement, if we terminate certain management
stockholder's employment for cause or if certain management stockholders
terminate their employment without good reason, each of Holdings and the
affiliates of Pegasus Investors has the right to purchase the relevant
management stockholder's shares of class A common stock of Holdings at the lower
of the management stockholder's




                                       30





<PAGE>

initial purchase price per share or the fair market value per share on the
effective date of termination. Such right to purchase Scott Galin's shares
terminates upon the earlier of the consummation of a qualified public offering
or August 28, 2003. The right to purchase shares of the other management
stockholders as to whom the right applies terminates upon the consummation of a
qualified public offering.

         The affiliates of Pegasus Investors and Holdings are also parties to a
stockholders agreement with us that requires us and our permitted assigns to
first offer to sell to Holdings and the affiliates of Pegasus Investors, on
specified terms, any class C common stock of Holdings that we and our permitted
assigns, as class C holders, desire to sell. If Holdings and the affiliates of
Pegasus Investors do not elect to purchase the shares, the class C holders may
sell them to a third party on terms no more favorable than the terms proposed to
Holdings and the affiliates of Pegasus Investors. If the proposed third party
purchaser is primarily in the retail apparel business but not primarily in the
girls' and/or women's retail apparel business, the class C holders must again
offer to sell the shares to Holdings and the affiliates of Pegasus Investors. If
Holdings and the affiliates of Pegasus Investors again elect not to purchase the
shares, the class C holders may sell them to the proposed third party on terms
no more favorable than the proposed terms.

         If the affiliates of Pegasus Investors propose to sell at least 50% of
the common equity of Holdings that they hold, they may require the class C
holders to sell Holdings class C common stock in the same sale to the same
purchaser on the same terms. In addition, if one or more of the affiliates of
Pegasus Investors proposes to sell at least 15% of the common equity of
Holdings, class C holders are entitled to sell the same percentage of their
class C common stock in the same sale and on the same terms.

         Class C holders are also entitled to certain demand and piggyback
registration rights. Subject to specified limitations, holders of at least 50%
of outstanding class C common stock are entitled to demand registration of their
shares following the earlier to occur of a qualified public offering or August
28, 2003. The class C holders as a group are entitled to one demand registration
and piggyback registration right in connection with any registration statement
that is filed by Holdings, with limited exceptions.

         In connection with any initial public offering by Holdings, class C
holders are entitled to include on a priority basis in the registration up to
one-third of the registrable shares that they hold, with some limitations. In
addition, Holdings may not, without the consent of holders of a majority of its
class C common stock, grant any demand or piggyback registration rights that
have priority over or are inconsistent with the registration rights granted to
class C holders.



                                       31





<PAGE>


                                     PART IV



Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

        (a) (1) Financial Statements. See "Index to Financial Statements" on
page F-1.

            (2) Financial Statement Schedule. No financial statement schedules
are required under applicable SEC rules, or the required information is included
in the financial statements or notes thereto and, therefore, have been omitted.

            (3) Exhibits.

<TABLE>
<CAPTION>

Exhibit No.       Description
-----------       -----------
<S>               <C>
2.01              Asset Purchase Agreement, dated as of July 6, 1998, among G&G Shops, Inc., the subsidiaries
                  of G&G Shops named therein, the subsidiaries of Petrie Retail, Inc. named therein, PSL, Inc.
                  and G+G Retail, Inc. (the "Acquisition Agreement").(1)

2.02              Amendment No. 1 to the Acquisition Agreement, dated as of July 27, 1998.(1)

2.03              Amendment to the Acquisition Agreement, dated August 24, 1998.(1)

3.01              Certificate of Incorporation of G+G Retail.(1)

3.02              Amended and Restated By-Laws of G+G Retail.(1)

4.01              Indenture, dated as of May 17, 1999, by and between G+G Retail, as issuer, and U.S. Bank
                  Trust National Association, as trustee.(1)

4.02              Form of 11% Senior Note due 2006 of G+G Retail.(1)

4.03              A/B Exchange Registration Rights Agreement, dated as of May 17, 1999, by and between G+G
                  Retail and U.S. Bancorp Libra.(1)

10.01             Agreement of Lease, dated November 28, 1988, between Hartz 83rd Street Associates and G&G
                  Shops of Woodbridge, Inc. (the "1988 Lease").(1)

10.02             Lease Addendum, dated April 10, 1990, to the 1988 Lease.(1)

10.03             Second Lease Modification Agreement, dated February 24, 1994, to the 1988 Lease(1)

10.04             Notification Letter, dated November 20, 1995, re: assignment of landlord's interest under
                  the 1988 Lease.(1)

10.05             Assignment and Assumption Agreement, dated as of August 28, 1998, by and among G&G Shops,
                  the subsidiaries of G&G Shops named therein, the subsidiaries of Petrie Retail named
                  therein, PSL and G+G Retail.(1)
</TABLE>



                                                      32





<PAGE>

<TABLE>
<S>               <C>
10.06             Employment Agreement, dated as of August 28, 1998, by and between G+G Retail and Jay Galin. (1)

10.07             Employment Agreement, dated as of August 28, 1998, by and between G+G Retail and Scott Galin.
                  (1)

10.08             Letter Agreement, dated October 12, 1998, by and between G+G Retail and Michael Kaplan. (1)

10.09             Letter Agreement, dated October 12, 1998, by and between G+G Retail and Jeffrey Galin. (1)

10.10             Amendment No. 1 to Employment Agreement, dated as of November 30, 1998, by and between G+G
                  Retail and Jay Galin. (1)

10.11             Amendment No. 1 to Employment Agreement, dated as of November 30, 1998, by and between G+G
                  Retail and Scott Galin. (1)

10.12             Bonus Plan for Senior Management Employees of G+G Retail, effective February 2, 1999.(1)

10.13             NCR Corporation Master Agreement, effective as of February 9, 1999, between NCR Corporation
                  and G+G Retail.(1)

10.14             Discount Addendum, effective as of February 26, 1999, between NCR Corporation and G+G
                  Retail. Portions of this exhibit have been omitted pursuant to an order of confidential
                  treatment granted by the Securities and Exchange Commission.(1)

10.15             G&G Retail Holdings, Inc. 1999 Stock Option Plan, effective as of March 15, 1999.(1)

10.16             Option Agreement, dated as of March 15, 1999, by and between G&G Retail Holdings and Jay
                  Galin.(1)

10.17             Option Agreement, dated as of March 15, 1999, by and between G&G Retail Holdings and Scott
                  Galin.(1)

10.18             Service Agreement, dated April 1, 1999, between G+G Retail and G&G Retail of Puerto Rico,
                  Inc.(1)

10.19             Master Lease Purchase Agreement, dated as of May 4, 1999, by and between Chase Equipment
                  Leasing, Inc. and G+G Retail.(1)

10.20             Addendum to Master Lease Purchase Agreement, effective as of May 4, 1999, by and between
                  Chase Equipment Leasing and G+G Retail.(1)

10.21             Form of Exchange Agent Agreement between U.S. Bank Trust National Association, as exchange
                  agent, and G+G Retail.(1)

10.22             Letter agreement, dated January 18, 2000, amending Employment Agreement between G+G Retail
                  and Scott Galin.(2)

10.23             Amendment No. 2 to Employment Agreement, dated as of August 8, 2000, by and between Jay
                  Galin and G+G Retail, Inc.(3)

</TABLE>



                                                      33





<PAGE>


<TABLE>
<S>               <C>
10.24             Amendment No. 3 to Employment Agreement, dated as of January 22, 2001, by and between G+G
                  Retail, Inc. and Jay Galin.(4)

10.25             Amendment No. 3 to Employment Agreement, dated as of January 22, 2001, by and between G+G
                  Retail, Inc. and Scott Galin. (4)

10.26             Loan and Security Agreement between the CIT Group/Business Credit, Inc. and G+G Retail,
                  Inc., dated as of May 2, 2001.(5)

21.01             Subsidiaries of G+G Retail, Inc. (1)

</TABLE>


--------------------------
(1)   Incorporated by reference to the registration statement on Form S-4 (File
      no. 333-81307) filed by G+G Retail, Inc. on October 4, 1999.

(2)   Incorporated by reference to the annual report of Form 10-K filed by G+G
      Retail, Inc. on April 21, 2000.

(3)   Incorporated by reference to the quarterly report on Form 10-Q filed by
      G+G Retail, Inc. on September 12, 2000.

(4)   Incorporated by reference to the annual report of Form 10-K filed by G+G
      Retail, Inc. on May 4, 2001.

(5)   Incorporated by reference to the quarterly report on Form 10-Q filed by
      G+G Retail, Inc. on June 18, 2001.

         (b) Reports on Form 8-K.

         We did not file any Reports on Form 8-K during the quarter ended
February 2, 2002.


                                       34





<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                           <C>
G+G RETAIL, INC.

Report of Independent Auditors.................................................................................F-2

Consolidated Balance Sheets as of February 2, 2002 and February 3, 2001........................................F-3

Consolidated Statements of Operations for the Years ended February 2, 2002,
February 3, 2001 and January 29, 2000..........................................................................F-4

Consolidated Statements of Stockholder's Equity for the Years ended February 2, 2002,
February 3, 2001 and January 29, 2000..........................................................................F-5

Consolidated Statements of Cash Flows for the Years ended February 2, 2002,
February 3, 2001 and January 29, 2000..........................................................................F-6

Notes to Consolidated Financial Statements.....................................................................F-7

</TABLE>



                                       F-1






<PAGE>


                         Report of Independent Auditors


The Board of Directors
G+G Retail, Inc.

We have audited the accompanying consolidated balance sheets of G+G Retail, Inc.
and its subsidiary (collectively, the "Company") as of February 2, 2002 and
February 3, 2001 and the related consolidated statements of operations,
stockholder's equity and cash flows for each of the three years in the period
ended February 2, 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at February 2, 2002 and February 3, 2001 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended February 2, 2002, in conformity with accounting principles generally
accepted in the United States.


                                          /s/ Ernst & Young LLP


March 20, 2002

                                      F-2




<PAGE>



                                G+G Retail, Inc.

                           Consolidated Balance Sheets
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                  February 2,  February 3,
                                                                     2002         2001
                                                                  ----------------------
<S>                                                              <C>           <C>
Assets
Current assets:
   Cash and short-term investments                                $ 15,328      $ 14,568
   Accounts receivable                                                 888           866
   Merchandise inventories                                          15,401        15,329
   Prepaid taxes and other expenses                                  1,730         1,771
   Deferred tax assets                                               1,729           465
                                                                  ----------------------
Total current assets                                                35,076        32,999

Property and equipment, net                                         52,075        51,796
Intangible assets, net                                             107,611       112,083
Other assets                                                           198           291
                                                                  ----------------------
Total assets                                                      $194,960      $197,169
                                                                  ======================
Liabilities and stockholder's equity
Current liabilities:
   Accounts payable                                               $ 14,886      $ 14,643
   Accrued expenses                                                 16,363        16,937
   Accrued interest                                                  2,517         2,515
   Current portion of capital lease                                  1,549         1,269
                                                                  ----------------------
Total current liabilities                                           35,315        35,364

Deferred tax liability                                               2,105         2,168
Capital lease                                                        2,656         3,894
Long-term debt                                                     101,510       100,571
                                                                  ----------------------
Total liabilities                                                  141,586       141,997

Commitments and contingencies

Stockholder's equity:
  Class B common stock, par value $.01 per share, 1,000
  shares authorized, 10 shares issued and outstanding                   --            --
   Additional paid-in capital                                       50,298        50,298
   Retained earnings                                                 3,076         4,874
                                                                  ----------------------
Total stockholder's equity                                          53,374        55,172
                                                                  ----------------------
Total liabilities and stockholder's equity                        $194,960      $197,169
                                                                  ======================
</TABLE>


See accompanying notes.



                                      F-3




<PAGE>



                                G+G Retail, Inc.

                      Consolidated Statements of Operations
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                             Year ended
                                                               ------------------------------------
                                                               February 2,  February 3,  January 29,
                                                                  2002         2001         2000
                                                               ------------------------------------
<S>                                                           <C>          <C>          <C>
Net sales                                                       $380,428     $350,040     $318,506

Cost of sales (including occupancy costs)                        234,525      217,032      196,330
Selling, general, administrative and buying                      119,893      107,928       89,352
Depreciation and amortization                                     14,824       13,178       11,800
                                                                ----------------------------------
Operating income                                                  11,186       11,902       21,024

Interest expense                                                  14,468       14,343       13,513
Interest income                                                      157          331          530
                                                                ----------------------------------
(Loss) income before (benefit) provision for
   income taxes and extraordinary loss                            (3,125)      (2,110)       8,041
(Benefit) provision for income taxes                              (1,327)        (808)       3,428
                                                                ----------------------------------
(Loss) income before extraordinary loss                           (1,798)      (1,302)       4,613

Extraordinary loss, net of $354,000 of income taxes
  for the year ended January 29, 2000                                 --           --         (450)
                                                                ----------------------------------
Net (loss) income                                               $ (1,798)    $ (1,302)    $  4,163
                                                                ==================================
</TABLE>


See accompanying notes.


                                      F-4




<PAGE>



                                G+G Retail, Inc.

                 Consolidated Statements of Stockholder's Equity
                                 (In Thousands)

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

<TABLE>
<CAPTION>
                                             Additional                    Total
                                   Common     Paid-In      Retained    Stockholder's
                                   Stock      Capital      Earnings       Equity
                                   -------------------------------------------------
<S>                               <C>        <C>           <C>          <C>
Balance - January 30, 1999         $   --     $49,828      $ 2,013        $51,841
  Value of warrants                               470                         470
  Net income                                                 4,163          4,163
                                   -------------------------------------------------
Balance - January 29, 2000             --      50,298        6,176         56,474
  Net loss                                                  (1,302)        (1,302)
                                   -------------------------------------------------
Balance - February 3, 2001             --      50,298        4,874         55,172
  Net loss                                                  (1,798)        (1,798)
                                   -------------------------------------------------
Balance - February 2, 2002         $   --     $50,298     $ 3,076         $53,374
                                   =================================================
</TABLE>


See accompanying notes.


                                      F-5






<PAGE>




                                G+G Retail, Inc.

                      Consolidated Statements of Cash Flows
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                                     Year ended
                                                                         ------------------------------------
                                                                         February 2,  February 3,  January 29,
                                                                            2002        2001          2000
                                                                         ------------------------------------
<S>                                                                     <C>          <C>            <C>
Operating activities
Net (loss) income                                                        $ (1,798)    $ (1,302)      $  4,163
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
    Depreciation and amortization                                          14,824       13,178         11,800
    Amortization of debt issue costs                                        1,912        1,844          1,790
    Write-off of closed store fixed assets                                    335          155             --
    Extraordinary loss, net of income tax                                      --           --            450
    Deferred income taxes                                                  (1,327)       3,070           (312)
    Changes in assets and liabilities:
     Accounts receivable, prepaid expenses and other assets                   112       (1,268)            57
     Merchandise inventories                                                  (72)      (2,461)          (290)
     Accounts payable, accrued expenses and accrued interest                 (329)       8,942            660
     Income taxes payable                                                      --       (3,250)         2,274
                                                                         ------------------------------------
Net cash provided by operating activities                                  13,657       18,908         20,592

Investing activities
Capital expenditures                                                      (11,540)     (26,295)       (20,625)
                                                                         ------------------------------------
Net cash used in investing activities                                     (11,540)     (26,295)       (20,625)

Financing activities
Proceeds from issuance of senior notes                                         --           --        107,000
Proceeds from short-term borrowings                                        31,166       18,400            -
Proceeds from capital lease                                                   382        3,826          2,186
Payment of senior bridge note                                                  --           --        (90,000)
Payment of short-term borrowings                                          (31,166)     (18,400)            --
Original issue discount on senior notes                                        --           --         (7,340)
Payment of debt issuance costs                                               (399)        (169)        (5,795)
Payment of capital lease                                                   (1,340)        (795)           (54)
                                                                         ------------------------------------
Net cash (used in) provided by financing activities                        (1,357)       2,862          5,997
                                                                         ------------------------------------
Net increase (decrease) in cash and short-term investments                    760       (4,525)         5,964
Cash and short-term investments, beginning of period                       14,568       19,093         13,129
                                                                         ------------------------------------
Cash and short-term investments, end of period                           $ 15,328     $ 14,568       $ 19,093
                                                                         ====================================
Supplemental cash flow disclosures
Cash paid during the period for:
   Interest                                                              $ 12,549     $ 12,436       $  9,806
                                                                         ====================================
   Income taxes, net of cash refunds of $1,171 for the
    year ended February 3, 2001                                          $    152     $    230       $  1,508
                                                                         ====================================
</TABLE>


See accompanying notes.


                                       F-6




<PAGE>


                                G+G Retail, Inc.

                   Notes to Consolidated Financial Statements

                                February 2, 2002


1. Organization and Business

G+G Retail, Inc. ("G+G" or the "Company") was incorporated on June 26, 1998. On
August 28, 1998, G&G Retail Holdings, Inc. ("Holdings" or the "Parent") acquired
100% of G+G's outstanding common stock. Simultaneous with the aforementioned
transaction, the Company acquired (the "Acquisition") substantially all of the
assets and certain liabilities of G & G Shops, Inc. ("G & G Shops" or the
"Predecessor") and certain other subsidiaries of Petrie Retail, Inc. ("Petrie")
from Petrie. The Acquisition was accounted for as a purchase. Holdings has no
operations other than owning all of the capital stock of the Company and is
dependent on the cash flows from the Company to meet its obligations, including
the mandatory redeemable preferred stock due 2008.

Prior to August 28, 1998, G+G's business was conducted by G & G Shops, a
wholly-owned subsidiary of Petrie, and certain other subsidiaries of Petrie. As
part of the Acquisition, 15,000 shares of Class C, non-voting common stock of
Holdings were issued to the Predecessor. These shares, which represent
approximately 14% of Holdings common stock on a fully-diluted basis, were
transferred to the liquidating trustee who oversees the bankruptcy proceedings
for Petrie and its subsidiaries in connection with the confirmation of Petrie's
plan of reorganization.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying financial statements include the consolidated operations of G+G
and its wholly-owned subsidiary. All significant intercompany transactions and
balances have been eliminated in consolidation.

Nature of Business

The Company owns and operates a chain of young women's and pre-teen's specialty
apparel stores in the United States, Puerto Rico and the U.S. Virgin Islands.

Short-Term Investments

Short-term investments of $12.3 million and $10.3 million at February 2, 2002
and February 3, 2001, respectively, consist of time deposits, U.S. treasury
money market funds, and commercial paper of less than ninety days maturity.


                                      F-7




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions related to certain accounts, such as inventory, accounts
receivable, income taxes and various other reserves, that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.

Concentration of Risk

The Company operates a distribution center that depends on employees under a
collective bargaining agreement with a union. Historically, the Company has not
experienced labor disruptions as a result of disputes with its union workers.

The Company has significant merchandise purchases from vendors who utilize
factors. Approximately 27% of the Company's merchandise purchases are from three
vendors. In addition, approximately 17% of the stores are leased from a single
landlord.

Fiscal Year

The Company's fiscal year ends on the Saturday nearest January 31 and consists
of fifty-two or fifty-three weeks. The fiscal years ended February 2, 2002,
February 3, 2001 and January 29, 2000 consisted of fifty-two weeks, fifty-three
weeks and fifty-two weeks, respectively.

Inventories

Merchandise inventories, which consist of finished goods, are valued at the
lower of cost as determined by the retail inventory method (average cost basis)
or market.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization of
property and equipment are computed by the straight-line method based on the
estimated useful lives of the assets as follows:


                                      F-8




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)



2. Summary of Significant Accounting Policies (continued)

<TABLE>
<S>                                           <C>
Leasehold costs, interests and improvements    Term of lease or 10 years, whichever is less,
                                               straight-line

Store fixtures and equipment                   1 to 10 years, straight-line
</TABLE>

Deferred Financing Costs

The Company capitalizes debt issuance costs. Such costs are amortized over the
lives of the related debt.

Intangible Assets

Excess of cost over net assets acquired (i.e., goodwill and trademarks) is being
amortized on the straight-line method over thirty years. The Company assesses
the recoverability of these intangible assets at each balance sheet date by
determining whether the amortization of the balance of the intangibles over
their remaining useful life can be recovered through projected undiscounted
future operating cash flows.

Impairment of Long-Lived Assets

In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the Company
reviews long-lived assets, including property and equipment and intangible
assets, for impairment whenever events or changes in business circumstances
indicate that the carrying amount of the assets may not be fully recoverable. An
impairment would be recognized when estimated undiscounted future cash flows
expected to result from the use of the asset and its eventual disposition is
less than its carrying amount. Impairment, if any, is assessed using discounted
cash flows. No impairment losses on long-lived assets were required for the
years ended February 2, 2002, February 3, 2001 or January 29, 2000.

Rental Expense

Rental escalations are averaged over the term of the related lease in order to
provide level recognition of rental expense. Rent concessions received from
landlords are recognized on a straight-line basis over the remaining term of the
respective lease agreements.


                                      F-9




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)



2. Summary of Significant Accounting Policies (continued)

Income Taxes

Income taxes are accounted for by the liability method. Under this method,
deferred tax assets and liabilities are determined based on the difference
between financial reporting and tax basis of assets and liabilities and are
measured using the current enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

Revenue Recognition

Retail merchandise sales are recognized at the point of sale. A reserve is
provided for projected returns based on prior experience. Income from layaway
sales is recognized after final payment from the customer has been received.

Preopening Costs

Store opening costs are charged to operations as incurred.

Advertising and Marketing

All costs associated with advertising and marketing are expensed as incurred.
Advertising and marketing expense was $3.1 million, $2.5 million and $2.0
million for the years ended February 2, 2002, February 3, 2001 and January 29,
2000, respectively.

Vendor Allowances

Vendor allowances are recognized when the Company receives an executed allowance
agreement from its vendors. These allowances are recorded as a reduction of cost
of sales.

Segments Reporting

The Company operates a chain of 539 young women's and pre-teen's specialty
apparel stores in the United States, Puerto Rico and the U.S. Virgin Islands.
Primarily all of the 539 stores are mall based and the customers served are
young women principally between the ages of thirteen and nineteen years old and
pre-teens between the ages of six and twelve years old. All of the Company's
merchandise is distributed to its stores from the same distribution center.


                                      F-10




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

The Company conducts business in one operating segment, consisting of the
Company's 539 individual store operations. These individual operations have been
aggregated into one segment because the Company believes it helps the users to
understand the Company's performance. The combined operations have similar
economic characteristics and each operation has similar products, services,
customers and distribution network.

Financial Instruments

Effective in the first quarter of fiscal 2002, the Company adopted FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
("FAS 133"). FAS 133 requires that all derivative financial instruments that
qualify for hedge accounting, such as interest rate swap contracts and foreign
exchange contracts, be recognized in the financial statements and measured at
fair value regardless of the purpose or intent for holding them. Changes in the
fair value of derivative financial instruments are either recognized
periodically in income or stockholder's equity (as a component of comprehensive
income), depending on whether the derivative is being used to hedge changes in
fair value or cash flows. The adoption of FAS 133 did not have a material effect
on the Company's consolidated financial statements.

Effects of Recently Issued Accounting Standards

In June 2001, the FASB issued SFAS No. 141, Business Combinations ("FAS 141"),
and SFAS No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the purchase method. With the adoption of FAS 142, goodwill and other
intangible assets that have indefinite useful lives will no longer be amortized,
but will be subject to at least an annual assessment of impairment by applying a
fair value based test, as specifically provided in the statement. Separable
intangible assets that are not deemed to have an indefinite life will continue
to be amortized over their useful lives. The Company will adopt FAS 142
beginning in the first quarter of fiscal 2003 and does not believe an impairment
of goodwill or indefinite lived intangible assets will be required. Management
estimates that the pre-tax effect of implementing the non-amortization
provisions of FAS 142 will be to reduce amortization expense and increase
operating income by approximately $3.9 million in fiscal 2003.


                                      F-11




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)



2. Summary of Significant Accounting Policies (continued)

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations ("FAS 143"), which requires entities to record the fair value of the
estimated liability for an asset retirement obligation in the period in which it
is incurred. When the liability is initially recorded, the entity capitalizes an
amount equal to the present value of the estimated liability by increasing the
carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. FAS 143 is effective for fiscal years
beginning after June 15, 2002, with earlier application encouraged. The Company
will adopt FAS 143 in the first quarter of fiscal 2003. Management does not
believe the adoption of this standard will have a material impact on the
Company's consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets ("FAS 144"). FAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary and Unusual and Infrequently Occurring Events and Transactions,
for the disposal of a segment of a business (as previously defined in that
Opinion). FAS 144 is effective for fiscal years beginning after December 15,
2001, with earlier application encouraged. The Company will adopt FAS 144 in the
first quarter of fiscal 2003. Management does not believe the adoption of this
standard will have a material impact on the Company's consolidated financial
statements.

3. Property and Equipment

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                           February 2,    February 3,
                                                              2002           2001
                                                           -------------------------
<S>                                                      <C>              <C>
Leasehold costs, improvements, interests and store
   fixtures and equipment                                  $ 83,400         $ 72,415
Less accumulated depreciation and amortization              (31,325)         (20,619)
                                                           -------------------------
                                                           $ 52,075         $ 51,796
                                                           =========================
</TABLE>


                                      F-12




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


3. Property and Equipment (continued)

Depreciation and amortization on property and equipment totaled approximately
$10,926, $9,276 and $7,911 for the years ended February 2, 2002, February 3,
2001 and January 29, 2000, respectively.

4. Intangible Assets

Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                            February 2,     February 3,
                                               2002            2001
                                            --------------------------
<S>                                     <C>                 <C>
Goodwill                                    $ 65,138          $ 65,138
Trademarks                                    51,800            51,800
Deferred financing                             6,383             5,984
Less accumulated amortization                (15,710)          (10,839)
                                            --------------------------
                                            $107,611          $112,083
                                            ==========================
</TABLE>


Included in deferred financing is $5.8 million of fees associated with the
$107.0 million Senior Notes, which is being amortized over seven years, and
$568,000 of fees associated with the New Facility (see Note 5), which is being
amortized over 3 years. Additionally, amortization of the original issue
discount and the warrants associated with the Senior Notes totaled approximately
$939,000, $840,000 and $540,000 for the years ended February 2, 2002, February
3, 2001 and January 29, 2000, respectively, and are included in interest expense
in the accompanying consolidated statements of operations.

Amortization of deferred financing costs, which is included in interest expense
in the consolidated statements of operations, totaled approximately $973,000,
$940,000 and $1.2 million for the years ended February 2, 2002, February 3, 2001
and January 29, 2000, respectively.

5. Debt

Long-Term Borrowings

On August 28, 1998, in connection with the Acquisition, the Company entered into
a Loan Agreement (the "Loan Agreement") which, subject to the terms and
conditions thereof, provided the Company with $90 million of financing (the
"Loan").


                                      F-13




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


5. Debt (continued)

Outstanding borrowings under the Loan Agreement had interest per annum at LIBOR,
plus 600 basis points, and were guaranteed by Holdings.

Interest, which was payable monthly, totaled approximately $3.0 million for the
year ended January 29, 2000. An additional fee equal to 1% of the aggregate
unpaid principal amount of the Loan was payable on a quarterly basis and totaled
approximately $300,000 for the year ended January 29, 2000.

On May 17, 1999, the Company and Holdings completed a private placement of
107,000 units consisting in the aggregate of $107.0 million face amount of 11%
Senior Notes due May 15, 2006 of the Company with interest payable semi-annually
and warrants to purchase 8,209 shares of non-voting Class D Common Stock of
Holdings at an exercise price of $.01 per share. The warrants were valued at
$470,000, using the Black-Scholes Option Valuation Model, which assumed a
risk-free interest rate of 4.6% and a volatility factor of 15%. The net proceeds
from the placement were $93.9 million after deducting the original issue
discount of $7.3 million and $5.8 million of fees. The net proceeds were used to
repay the Loan and the balance of the net proceeds were used for general
corporate purposes. The unamortized finance fees of $450,000 (net of income
taxes of $354,000) related to the Loan were written-off as an extraordinary loss
in the accompanying consolidated statement of operations for the year ended
January 29, 2000. The carrying amount of the Senior Notes approximated fair
value at February 2, 2002 and February 3, 2001.

On November 2, 1999, the private placement units were exchanged for notes that
are freely tradeable.

Before May 15, 2002, the Company may redeem up to 35% of the aggregate principal
amount of the Senior Notes with the cash proceeds of a public offering by the
Company or Holdings at a redemption price of 111% of the principal amount of the
notes, plus accrued and unpaid interest and any liquidated damages. On or after
May 15, 2003, the Company may redeem all or a part of the Senior Notes as
follows: from May 15, 2003 through May 14, 2004 at 105.50% of their principal
amount; from May 15, 2004 through May 14, 2005 at 102.75% of their principal
amount and on and after May 15, 2005 at 100.00% of their principal amount, in
each case in addition to accrued and unpaid interest and any liquidated damages.


                                      F-14




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


5. Debt (continued)

Each of the Company's domestic subsidiaries (other than subsidiaries which the
Company may designate as unrestricted) is required to guarantee, on a senior but
unsecured basis, the Company's obligations under the Senior Notes. Currently,
the Company has only one subsidiary, G & G Retail of Puerto Rico, Inc., which is
an inactive foreign subsidiary and is not a guarantor. Each subsidiary
guarantor's obligations under its guarantee will be limited to the extent
necessary to prevent that guarantee from being a fraudulent conveyance under
applicable law. All subsidiary guarantors will be limited in their ability to
sell or otherwise dispose of all or substantially all of their assets to, or
consolidate with or merge with or into, a person other than the Company or
another subsidiary guarantor. Subsidiary guarantees may be released under
limited circumstances.

Any Class D Common Stock of Holdings outstanding will be automatically converted
into one class of voting common stock upon the consummation of an initial public
offering which results in at least 20% of Holdings' common stock becoming
publicly traded ("IPO"). The warrants will expire upon the earlier of the
consummation of an IPO (as defined) or ten years from the date of issuance.

Short-Term Borrowings

On October 30, 1998, the Company entered into a Loan and Security Agreement (the
"Facility") which provided, subject to the terms and conditions thereof, for the
extension of credit subject to eligible inventory (as defined therein) not to
exceed $20.0 million, of which $10.0 million could have been used for letters of
credit. There were no borrowings outstanding under the Facility at February 3,
2001.

Interest on amounts advanced under the Facility accrued at a rate equal to
specified margins over the adjusted Eurodollar Rate or at the Prime Rate (9.0%
at February 3, 2001). Outstanding letters of credit under the Facility totaled
approximately $412,500 at February 3, 2001.

On May 2, 2001, the Company replaced the Facility with a new facility ("New
Facility"). The Loan and Security Agreement governing the New Facility expires
in May 2004, and provides for a revolving credit facility subject to eligible
inventory and credit card receivables, not to exceed $30.0 million, of which
$10.0 million can be used for letters of credit. There were no outstanding
borrowings under the New Facility at February 2, 2002. Outstanding letters of
credit under the New Facility totaled approximately


                                      F-15




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


5. Debt (continued)

$449,000 at February 2, 2002. Interest on outstanding borrowings can range
either from Prime to Prime plus .25% or from 1.50% over the Eurodollar Rate to a
maximum 2.25% over the Eurodollar Rate, based on the profitability and amount of
indebtedness of the Company. A commitment fee of 0.25% per annum is payable
monthly on any unused amount under the New Facility. An administrative fee of
$30,000 is payable annually.

The New Facility contains a minimum tangible net worth covenant and other
customary covenants including limitations on change of ownership, transactions
with affiliates, dividends, additional indebtedness, creation of liens, asset
sales, acquisitions, conduct of business and capital expenditures. The New
Facility also contains customary events of default including defaults on the
Company's other indebtedness.

The Company's obligations under the New Facility are secured by a lien on all or
substantially all of the Company's assets.

6. Stock Option Plan

Effective March 15, 1999, Holdings adopted its 1999 Stock Option Plan (the
"Option Plan") which provides for the granting of options to purchase shares of
its Class A Common Stock to its employees and employees of its subsidiaries
including the Company. The Option Plan is administered by the Board of Directors
of Holdings which is authorized to grant incentive stock options and/or
non-qualified stock options to purchase up to 7,000 shares of Class A Common
Stock. On March 15, 1999, Holdings granted under the Option Plan, ten year
options to purchase 5,000 shares of its Class A Common Stock at an exercise
price of $300 per share of which 1,250 shares became immediately exercisable and
the remaining 3,750 shares vest equally over the three years following the date
of grant.

On October 19, 1999, Holdings granted under the Option Plan, ten year options to
purchase 2,000 shares of its Class A Common Stock at an exercise price of $300
per share, which vest equally over the three years following the date of grant.
The option prices exceeded the fair market value of Holdings common stock on the
date of grant.

7. Related Party Transactions

In connection with the closing of the Acquisition, an indirect investor in
Holdings earned a closing fee in the amount of $1,250,000 ($1,000,000 of this
fee was paid at closing and


                                      F-16




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)


7. Related Party Transactions (continued)

$160,000 and $90,000 were paid during the years ended January 29, 2000 and
January 30, 1999, respectively). The closing fee constituted consideration for
financial advisory services in connection with the Acquisition and is included
in the calculation of goodwill. Additional fees totaling approximately $2.1
million were paid to U.S. Bancorp Libra ("Libra"), investment banking advisors
who have an indirect ownership interest in Holdings. Of this amount, $1.4
million was paid to Libra in connection with the $90.0 million loan obtained on
August 28, 1998 and included in deferred financing costs which are amortized
over the twelve month life of the loan. The remaining $700,000 was paid to Libra
by the Company on behalf of Holdings in connection with the issuance of
preferred stock by Holdings (Note 1).

In connection with the private placement of the units on May 17, 1999, the
Company paid Pegasus Investors L.P., affiliates of which are stockholders of
Holdings and directors of Holdings and the Company, a $1.0 million fee in
consideration for financial advisory services provided by Pegasus Investors L.P.
to the Company. In addition, an aggregate underwriting fee of $3.0 million was
paid to Libra and the joint underwriter in connection with the private placement
of the Senior Notes (see Note 5).

A director ("Director") of the Company and shareholder of Holdings is also a
member of the law firm which is principal legal counsel to the Company.
Professional fees paid and expenses reimbursed to the Director's firm totaled
approximately $499,000, $802,000 and $694,000 for the years ended February 2,
2002, February 3, 2001 and January 29, 2000, respectively.

8. Obligations Under Capital Leases

Maturities of obligations under capital leases for equipment are as follows (in
thousands):

<TABLE>
<S>                                               <C>
Fiscal year ending in:
   2003                                               $1,950
   2004                                                1,941
   2005                                                  961
   Thereafter                                             --
                                                      ------
Total minimum lease payments                           4,852
Less amount representing interest                       (647)
                                                      ------
Present value of net minimum lease payments           $4,205
                                                      ======
</TABLE>


                                      F-17




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)

8. Obligations Under Capital Leases (continued)

At February 2, 2002 and February 3, 2001, the gross amount of assets under
capital leases is $6.4 million and $6.0 million, respectively, and the related
accumulated amortization is $1.9 million and $865,000, respectively. The
amortization of assets under capital leases are included in depreciation
expense.

9. 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.

The following is a summary of the (benefit) provision for income taxes (in
thousands):

<TABLE>
<CAPTION>
                                                                     Year ended
                                                       -------------------------------------
                                                        February 2,  February 3,  January 29,
                                                          2002          2001         2000
                                                       -------------------------------------
<S>                                                  <C>           <C>           <C>
Current income taxes:
   Federal                                              $    --        $  --       $2,427
   State and Puerto Rico                                     --           --        1,313
Deferred income taxes:
   Federal                                                 (983)        (814)        (101)
   State and Puerto Rico                                   (344)           6         (211)
                                                       -----------------------------------
Total (benefit) provision for income taxes              $(1,327)       $(808)      $3,428
                                                       ===================================
</TABLE>


A reconciliation of the income tax (benefit) provision to the amount of the
(benefit) provision that would result from applying the federal statutory rate
(34%) to income before taxes is as follows:


                                      F-18




<PAGE>



                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)



9. Income Taxes (continued)


<TABLE>
<CAPTION>
                                                                       Year ended
                                                         --------------------------------------
                                                         February 2,   February 3,   January 29,
                                                           2002           2001         2000
                                                         --------------------------------------
<S>                                                     <C>          <C>            <C>
Provision for income taxes at federal
   statutory rate                                          34.0%         34.0%         34.0%
State income taxes, net of federal tax
   benefit                                                  5.5           5.7           4.8
Effect of higher Puerto Rico tax rates                       --            --           3.2
Tax credits                                                 3.5            --            --
Other                                                      (0.5)         (1.4)           .6
                                                         ------------------------------------
Effective tax rate                                         42.5%         38.3%         42.6%
                                                         ====================================
</TABLE>


Deferred income taxes reflect the net effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's net deferred tax asset are as follows (in thousands):


<TABLE>
<CAPTION>
                                                    February 2,      February 3,
                                                       2002             2001
                                                    ---------------------------
<S>                                              <C>                <C>
Current deferred tax asset:
   Accrued expenses                                  $ 1,194          $    24
  Inventory cost capitalization                          535              441
                                                     -------------------------
                                                     $ 1,729          $   465
                                                     =========================

Long-term deferred tax (liability) asset:
   Difference between book and tax basis of
     fixed assets                                    $ 1,305          $ 1,250
   Intangible asset                                   (5,961)          (4,382)
   Net operating loss carryforward                     2,711            2,037
   Other                                                (160)          (1,073)
                                                    -------------------------
                                                     $(2,105)         $(2,168)
                                                    =========================
</TABLE>



The Company has net operating loss carryforwards at February 2, 2002 of
approximately $6.8 million for federal income tax purposes, which begin to
expire in 2020.


                                      F-19




<PAGE>




                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)



10. Employee Benefit Plans

G+G maintains a defined contribution plan for all eligible employees that is
funded on a current basis through discretionary contributions. Contribution
expense was $700,000, $686,000 and $600,000 for the years ended February 2,
2002, February 3, 2001 and January 29, 2000, respectively.

G+G also maintains 401(k) plans covering certain of its employees. The Company
at its discretion can make contributions to the plans; however, no contributions
were made for the years ended February 2, 2002, February 3, 2001 or January 29,
2000.

G+G also maintains a defined contribution plan covering certain of its union
employees at its distribution center. Contribution expense was approximately
$74,000, $53,000 and $51,000 for the years ended February 2, 2002, February 3,
2001 and January 29, 2000, respectively.

11. Commitments and Contingencies

The Company has employment agreements with certain key employees, providing for
minimum aggregate annual compensation of approximately $2.0 million per annum,
which expire in August 2003. Additionally, such employment agreements provide
for various incentive compensation payments as determined by the Company's Board
of Directors.

The Company is committed under operating leases for its stores and warehouse
facility, and equipment leases having initial terms of one year or more expiring
on various dates to 2012. Certain leases provide for additional rentals based on
a percentage of sales and for additional payments covering real estate taxes,
common area charges and other occupancy costs. Rent concessions recognized in
the years ended February 2, 2002, February 3, 2001 and January 29, 2000
approximated $68,000, $157,000 and $607,000, respectively.

A summary of rental expense under all leases is as follows (in thousands):


<TABLE>
<CAPTION>
                                              Year ended
                              -------------------------------------------
                              February 2,      February 3,     January 29,
                                 2002             2001            2000
                              -------------------------------------------
<S>                           <C>               <C>              <C>
Fixed minimum                  $30,810           $26,992          $22,739
Percentage rentals               1,630             1,592            2,009
Equipment rentals                  705               660              566
                              -------------------------------------------
                               $33,145           $29,244          $25,314
                              ===========================================
</TABLE>


                                      F-20




<PAGE>


                                G+G Retail, Inc.

             Notes to Consolidated Financial Statements (continued)



11. Commitments and Contingencies (continued)

Minimum annual lease commitments (excluding percentage rents and early
termination provisions) under noncancelable operating leases for subsequent
periods are as follows (in thousands):

<TABLE>
<S>                            <C>
Fiscal year ending in:
   2003                            $ 28,594
   2004                              24,005
   2005                              21,007
   2006                              18,212
   2007                              13,841
   Thereafter                        36,060
                                   --------
                                   $141,719
                                   ========
</TABLE>



Litigation

The Company is a defendant in various lawsuits arising in the ordinary course of
its business. While the ultimate liability, if any, arising from these claims
cannot be predicted with certainty, the Company is of the opinion that the
resolution of the lawsuits will not likely have a material adverse effect on the
Company's consolidated financial statements.

12. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


<TABLE>
<CAPTION>
                                         February 2,     February 3,
                                            2002            2001
                                         -------------------------
<S>                                      <C>              <C>
Salaries and employee benefit costs       $ 4,640          $ 4,672
Rent/occupancy costs                        4,981            3,873
Corporate and store operating costs         6,742            8,392
                                         -------------------------
                                          $16,363          $16,937
                                         =========================
</TABLE>


                                      F-21







<PAGE>


                                   SIGNATURES
         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
2nd day of May, 2002.


                           G + G RETAIL, INC.


                           By: /s/ Jay Galin
                               ____________________________________
                               Jay Galin
                               Chairman of the Board and Chief Executive Officer

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

<TABLE>
<CAPTION>

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

/s/ Jay Galin                              Chairman of the Board,                                    May 2, 2002
_____________________________              Chief Executive Officer and Director
Jay Galin                                  (Principal Executive Officer)


/s/ Scott Galin                            President, Chief Operating Officer                        May 2, 2002
_____________________________              and Director
Scott Galin


/s/ Michael Kaplan                         Senior Vice President, Chief Financial Officer,           May 2, 2002
_____________________________              Treasurer and Secretary (Principal Financial and
Michael Kaplan                             Principal Accounting Officer)


/s/ Donald D. Shack                        Director                                                  May 2, 2002
_____________________________
Donald D. Shack


/s/ Craig Cogut                            Director                                                  May 2, 2002
_____________________________
Craig Cogut


/s/ Lenard Tessler                         Director                                                  May 2, 2002
_____________________________
Lenard Tessler

</TABLE>