UNITED MAGAZINE CO, 10-K/A, 2000-02-07

UNITED MAGAZINE CO
10-K/A, 2000-02-07
MISCELLANEOUS NONDURABLE GOODS

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A

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

For the fiscal year ended October 2, 1999

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

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

Commission File Number: 0-2675

UNITED MAGAZINE COMPANY
an Ohio Corporation
I.R.S. Number: 31-0681050

5131 Post Road
Dublin, Ohio 43017
Registrant's Telephone Number: (614) 792-0777

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None
----

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, Without Par Value
-------------------------------

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 twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety 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. ______

The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of October 2, 1999 is unknown due to the fact that there
is no active trading market in the Registrant's shares. The Company has closed
substantially all of its facilities, and the Company's secured bank creditors
are in the process of selling assets and collecting accounts receivable to pay
off bank debts.

The Registrant's revenues for the fiscal year ended October 2, 1999
were $276.6 million.

The Registrant's number of common shares, without par value,
outstanding as of October 2, 1999 was 7,482,614.

DOCUMENTS INCORPORATED BY REFERENCE
None
----

<PAGE> 2

UNITED MAGAZINE COMPANY

FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1999
INDEX

<TABLE>
<CAPTION>
PART I PAGE NUMBER
- ------ -----------

<S> <C> <C>
ITEM 1. BUSINESS 1-6

ITEM 2. PROPERTIES 6-7

ITEM 3. LEGAL PROCEEDINGS 7

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 7

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 8

ITEM 6. SELECTED FINANCIAL DATA 9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 20-40

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 41

PART III
- --------

ITEM 10. DIRECTORS 42-44

ITEM 11. EXECUTIVE COMPENSATION 45-46

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 47-50

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 51-56

PART IV
- -------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K 57-62

SIGNATURES 63
</TABLE>

<PAGE> 3

PART I
------

ITEM 1. BUSINESS
- -----------------

United Magazine Company ("UNIMAG" or the "Company") is an Ohio
corporation, which was incorporated on April 8, 1964 under the name Citizens
Holding Company. UNIMAG, both directly and through its subsidiary corporations,
was engaged in the wholesale distribution of magazines, books and other
periodicals, and operates some retail bookstores.

On December 15, 1998, UNIMAG and Chas. Levy Circulating Co. ("Levy"),
an Illinois general partnership, entered into a Letter of Intent whereby the
parties agreed that Levy would purchase certain assets and assume certain
liabilities of UNIMAG.

On March 18, 1999, a definitive agreement was signed by the parties
whereby UNIMAG agreed to sell substantially all of its wholesale operating
assets to Levy in return for cash and the assumption by Levy of substantially
all of UNIMAG's wholesale operating liabilities (the "Asset Purchase
Agreement"). The closing was anticipated to occur by the end of June and was
subject to due diligence by both parties and approval by UNIMAG's shareholders.

On June 1, 1999 Levy terminated the Asset Purchase Agreement and on
June 7, 1999, UNIMAG provided written notice asserting that Levy had breached
the Asset Purchase Agreement. UNIMAG contends that, among other things, Levy's
breaches arose out of its conduct with UNIMAG's suppliers when Murdoch Magazine
Distribution Inc., a major national distributor, reinstated the historic
"franchise" territories for distribution, and Levy negotiated to acquire
UNIMAG's territory.

In the wholesale magazine distribution industry, five national
distributors control the pricing, the allotment of titles and the quantity of
issues received by wholesalers such as UNIMAG, requiring the wholesalers to
accept and distribute such allotments in their entirety. In order to handle the
allotments mandated by the national distributors, wholesalers have been required
to make substantial investments of capital in retail display fixtures, warehouse
facilities, trucks, personnel and long-term collective bargaining agreements. In
exchange for accepting the extra costs resulting from full line forcing and
tie-in sales, the wholesalers received a "franchise" granting the exclusive
distribution territories. This long-standing industry custom of "franchise"
territories began to change in 1996 into a bidding process dominated by national
retail chain stores. The national distributors ceased to honor the historic
"franchise" territories in favor of the bidding process which, in turn,
disrupted the economic viability of magazine distribution. UNIMAG contends that
this conduct by the national distributors caused irreparable harm to UNIMAG.

UNIMAG contends that, upon acquiring from Murdoch Magazine
Distribution, Inc. a "franchise" for UNIMAG's territories, Levy terminated its
agreement with UNIMAG. Subsequently, other national distributors began to
tighten credit, causing interruptions of product. This irreparably harmed UNIMAG
and was the final causative factor leading to UNIMAG's inability to continue its
business. In September of 1999, the Company had no alternative but to cease
wholesale operations and convey to two other companies certain customer
agreements, records, and customer display fixtures located on the business
premises of the Company's customers. The Company has now closed all of its
wholesale facilities and all but four of its retail facilities; these retail
facilities are scheduled to be closed in the first calendar quarter of 2000.

The Company's secured bank lenders Key Corporate Capital, Inc. and The
Chase Manhattan Bank ("Secured Bank Lenders") are in the process of selling the
Company's assets and collecting its accounts receivable. Proceeds are being used
to pay off secured bank debt and to fund current liquidation expenses.

1
<PAGE> 4

The operations for the year ended October 2, 1999 were conducted
through the Company, through its consolidated subsidiaries and through companies
merged into the Company during fiscal 1998.

The operations for the year ended October 3, 1998 were conducted
through its consolidated subsidiaries and through companies merged into the
Company during fiscal 1998. The results for the year include the operations of
Service News Company (of Waterbury, Connecticut), a Connecticut corporation,
doing business as Yankee News Company, ("Yankee") for three months, the
operations of business acquired from SKS Enterprises, Limited, an Ohio limited
liability company, ("SKS") for eight months, the operations of business acquired
through the purchase of stock of Central Wholesale, Inc., a Pennsylvania
corporation, ("Central") and Penn News Company, Inc., a Pennsylvania
corporation, ("Penn") for seven months, and the operations of all other
subsidiaries for an entire year.

The operations for the year ended September 27, 1997 were conducted
through its consolidated subsidiaries and also include the full-year impact of
the five business combinations, which the Company operated beginning in the
fourth quarter of 1996, and which are more fully discussed below. The operations
for the year ended September 27, 1997 were conducted through the following
consolidated subsidiaries: Yankee, Service News Company (of Wilmington, North
Carolina), a North Carolina corporation ("Wilmington"); and Triangle News
Company, Inc., a Pennsylvania corporation ("Triangle").

Yankee was engaged in wholesale magazine, newspaper and book
distribution and owned and operated four newsstands and one bookstore. Certain
operating assets of Yankee were sold in January of 1998. The non-operating
portion of Yankee was merged into the Company on March 6, 1998.

In February of 1998, the Company acquired certain assets and
liabilities of SKS Enterprises, Limited, an Ohio limited liability company
("SKS"), organized by three directors, Ronald E. Scherer, George R. Klein and
Richard H. Stoll, Sr. SKS had wholesale and retail operations similar to the
Company in the States of Michigan, Ohio, Indiana and Kentucky.

On March 2, 1998, the Company acquired the stock of Central and Penn.
Both of these companies were merged into the Company on March 6, 1998.

During the fourth fiscal quarter of 1996, the Company also completed
business combinations with Michiana News Service, Inc., a Michigan corporation
("Michiana"), The Stoll Companies, an Ohio corporation ("Stoll"), and The George
R. Klein News Co., Central News Co., and Newspaper Sales, Inc., all Ohio
corporations (collectively, "The Klein Companies" or "Klein"), all independent
magazine, book, and newspaper ("periodical") distributors. These transactions
were accounted for as a purchase as of July 1996 (September 14, 1996 for Klein).

During the fourth fiscal quarter of 1996, the Company also completed
business combinations with a number of companies affiliated with Ronald E.
Scherer, the Company's chairman ("Ronald E. Scherer"), also engaged in wholesale
periodical distribution (the "Scherer Affiliates"): Ohio Periodical
Distributors, Inc., an Ohio corporation ("OPD"); Northern News Company, a
Michigan corporation ("Northern"); Wholesalers Leasing, Corp., a Delaware
corporation ("Wholesalers"); Scherer Companies, a Delaware corporation ("Scherer
Companies"); and, pursuant to the agreement with Northern, MacGregor News
Services, Inc., a Michigan corporation ("MacGregor"). The Company also acquired
the stock of Read-Mor Bookstores, Inc., an Ohio corporation ("Read-Mor"), a
company managed by Scherer Companies. Read-Mor owned six retail bookstore
locations and was an insignificant acquisition. These transactions were
accounted for as a purchase as of July 1996.

Each of these transactions was closed into escrow pending a favorable
vote of the shareholders of the Company on each of these transactions at the
Annual Meeting of Shareholders held on

2
<PAGE> 5

September 3, 1997. At the Annual Meeting of Shareholders, the shareholders voted
in favor of the acquisitions. Closing documents were released from escrow in
February of 1998, and the transactions were consummated.

UNIMAG also owns two inactive subsidiaries.

BUSINESS OF THE COMPANY
- -----------------------

Until September of 1999, the Company was a dominant regional periodical
wholesaler in Ohio, Michigan, Indiana and western Pennsylvania, with an
estimated market share of greater than fifty percent (50%). The Company also
provided similar services from its Wilmington, North Carolina location, selling
to customers primarily in eastern North Carolina.

Following the termination of the Asset Purchase Agreement with Levy in
June of 1999, the Company experienced periodic difficulties in obtaining product
from certain major national distributors/publishers. In September of 1999, the
major national distributors/publishers tightened credit, causing interruptions
of product. This irreparably harmed UNIMAG and was the final causative factor
leading to UNIMAG's inability to continue its business. As a consequence, the
Company was unable to continue supplying product to its customers. The Company
then agreed to convey to two other wholesale distribution companies certain of
the Company's customer agreements, records, and customer display fixtures
located on the business premises of the Company's customers. On September 18 and
September 20, 1999, UNIMAG entered into agreements with Anderson News LLC ("The
Anderson Group") and Great Atlantic News LLC ("The News Group"), respectively.
The Anderson Group received records relating to customers in southern Ohio,
southern and central Indiana, Kentucky, West Virginia and Tennessee. The News
Group received records relating to customers in northern Ohio, Pennsylvania,
northern Indiana and Michigan.

UNIMAG can receive a percentage of revenue from former UNIMAG customers
obtained by The Anderson Group and The News Group at six months and twelve
months respectively from the dates of the agreements. In addition, UNIMAG
entered into a 30 day renewable, not to exceed 90 days, subcontracting agreement
with The News Group to service certain of The News Group customers in northern
Ohio, northern Indiana, and Michigan from the Company's facilities in Solon,
Ohio and Jackson, Michigan. The News Group will reimburse UNIMAG for all
expenses incurred up to a maximum amount calculated on a cost plus basis. This
subcontracting agreement expired December 20, 1999.

REVENUES
- --------

The acquisition activities of the Company had transformed it into an
entity which generated combined net sales for fiscal 1997 of 298.3 million and
for fiscal 1998 of $324.1 million. For fiscal 1999, the adjusted net sales of
$276.6 million included $46.2 million of sales added back to revenue because of
reductions in Section 458 reserves for future returns.

3
<PAGE> 6

EMPLOYEES
- ---------

At October 3, 1998, the Company employed approximately 2,800 employees,
including 1,200 full-time employees, of which 215 were represented by various
locals of the Teamsters Union with contracts expiring through 2001. In September
of 1999, the Company terminated a significant number of employees in connection
with initial facility closings.

On October 20, 1999, the Company sent Worker Adjustment and Retraining
Notices ("WARN") to its remaining employees. At December 31, 1999, the Company
had 76 employees remaining on the payroll, including 41 in retail operations and
the balance assisting the Company in the wind-down of its activities.

PRODUCTS
- --------

The Company generated revenue primarily from the sale and distribution
of mass market reading materials including magazines, paperback and hardback
books, newspapers and other complementary items.

- Magazines. The Company distributed over 3,500 different
magazine titles, which focused on a diverse range of consumer
interest topics. Sales of magazines represented approximately
87% of total Company revenue.

- Books. The Company's book business represented approximately
11% of total Company revenue. Approximately 60% of book
revenue was derived from the sale of paperbacks and
approximately 16% was derived from the sale of hardcover
books. The balance came from the sale of children's books and
bargain books.

- Newspapers. In selected Ohio markets, the Company distributed
over 50 local and national newspapers including daily, weekly
and Sunday only titles. Sales of newspapers represented
approximately 1% of total Company revenues.

- Other. The Company also distributed items such as trading
cards, maps and calendars; however, this category did not
represent a significant component of the Company's business.
Sales of these items represented approximately 1% of total
Company revenues.

- Included in the Company's 1999 revenues were retail sales of
$9.0 million. The Company's wholesale sales of $3.0 million to
its retail stores were eliminated in consolidation.

SUPPLIERS AND PRICING
- ---------------------

The Company purchased over 90% of its product from five suppliers who
are national distributors: The Hearst Distribution Group, Warner Publisher
Services, Murdoch Magazine Distribution, Inc., Curtis Circulation Co. and Kable
Distribution Services. The retail prices of the periodicals that the Company
distributed were established by publishers such as Time Warner, Hearst and
Hachette.

The Company purchased periodicals from these and other national
distributors at a discount to the suggested retail price and then sold the
product to retailers at a lesser discount. To the Company's best knowledge,
certain other competing wholesalers had the advantage of more favorable
discounts

4
<PAGE> 7

from the national distributors. Most of the larger retailers, such as The Kroger
Company, Giant Eagle, Meijers, CVS, Rite Aid, Food Lion and Big Bear Stores had
entered into multi-year contracts with wholesale distributors. This resulted in
an increase in the discount to retailers and a reduction in the gross margin to
the wholesalers except to the extent a competing wholesaler might receive better
pricing from the national distributors.

In September of 1999, following Levy's acquisition of a "franchise" from Murdoch
Magazine Distribution, Inc. for UNIMAG's territories and the termination of the
UNIMAG/Levy Asset Purchase Agreement, several major national
distributors/publishers tightened credit, causing interruptions of product. This
irreparably harmed UNIMAG and was the final causative factor leading to UNIMAG's
inability to continue its business.

CUSTOMERS
- ---------

The Company had developed long standing, trusted vendor relationships
with customers in its customer base. The customer base ranged from large
national retailers, such as The Kroger Company, to smaller local retailers. It
is estimated that, prior to September of 1999, the Company had a large and
diverse customer base comprised of approximately 16,000 different retail
locations representing approximately 12,000 different customers, with no one
customer representing more than 10% of sales.

During 1996, most of the larger retail chains entered into multi-year
contracts with wholesale distributors. The Company had entered into long-term
contracts ranging from one to ten years, but primarily three years with the
major retailers, to be the exclusive provider of magazines and, in most cases,
related periodical products. Some of the retail chains with which the Company
had contracts include The Kroger Company, Giant Eagle, CVS, Rite Aid, Food Lion
and Big Bear stores.

In September of 1999, after several major national
distributors/publishers tightened credit, causing interruption of product, the
Company was unable to continue supplying product to its customers. The Company
ceased operations and agreed to convey to two other companies certain customer
agreements, records, and customer display fixtures located on the business
premises of the Company's customers. On September 18 and September 20, 1999,
UNIMAG entered into agreements with The Anderson Group and The News Group,
respectively. The Anderson Group received records relating to customers in
southern Ohio, southern and central Indiana, Kentucky, West Virginia and
Tennessee. The News Group received customer records relating to customers in
northern Ohio, Pennsylvania, northern Indiana and Michigan.

COMPETITION
- -----------

The Company faced competition from four different areas. These areas
included competition from other wholesalers, competition from alternative
delivery channels, competition from suppliers selling directly to retail
customers, and competition from substitute products.

- Competition From Other Wholesalers. Principal competitors of
the Company included The Anderson Group, The News Group,
LaBelle News, Harrisburg News Co., and the Chas. Levy
Circulating Co., all of which are regional wholesalers in
neighboring territories.

- Competition From Alternative Channels of Distribution.
Periodical wholesalers compete with other delivery sources for
the sale of periodicals to the consumer. These alternative
delivery sources include subscriptions offered by the
publishers and electronic transmissions over the Internet.

5
<PAGE> 8

- Competition From Suppliers Selling Directly to Retailers. The
Company and other wholesalers in the industry are subject to
reduced revenue when the Company's suppliers bypass the
Company and sell directly to the Company's retail customers,
often while limiting related product sales to wholesalers.

- Competition From Substitute Products. The periodical industry
competes for the non-active leisure time of consumers (in
contrast to active leisure time, which includes activities
such as participant sports).

ITEM 2. PROPERTIES
- -------------------

FACILITIES
- ----------

Generally, the Company used its wholesale facilities as warehouse and
distribution centers, although certain of the facilities also contained the
business offices for the Company's operations. A number of these facilities,
identified below with an asterisk, are leased from principals of the Acquisition
Parties. At October 2, 1999, the Company owned or leased the following
properties with the following remaining terms:

COMPANY'S WHOLESALE FACILITIES:
- -------------------------------

<TABLE>
<S> <C> <C>
- 62,400 sq. ft. Pittsburgh, PA 3 Month Lease (expires 12-31-99)
- 17,500 sq. ft. Wilmington, NC 2 Year Lease
- 65,000 sq. ft. Columbus, OH* 9 Month Lease
- 35,000 sq. ft. Cincinnati, OH Owned (Subject to Mortgage)
- 17,000 sq. ft. Petoskey, MI* 9 Month Lease
- 17,000 sq. ft. Mt. Pleasant, MI* 7 Year Lease
- 84,000 sq. ft. Jackson, MI* 4 Year Lease (Renewal)
- 25,500 sq. ft. Madison Heights, MI* 3 Year Lease
- 46,800 sq. ft. Niles, MI* 9 Month Lease
- 85,000 sq. ft. Solon, OH 3 Year Lease
- 10,000 sq. ft. Cleveland, OH* 1 Year Lease
</TABLE>

As of October 2, 1999, the Company began terminating most of its lease
obligations or assigning leases to unrelated companies. Leases being terminated
or assigned included Columbus, Petoskey, Mt. Pleasant, Jackson, Niles, Solon and
Cleveland

COMPANY'S RETAIL FACILITIES:
- ----------------------------

The Company maintains lease agreements with respect to four retail
outlets and bookstore locations. The Company anticipates terminating or
assigning these leases in the first calendar quarter of 2000.

6
<PAGE> 9

COMPANY'S CORPORATE FACILITIES:
- -------------------------------

Additionally, the Company leases for its corporate offices
approximately 17,400 square feet of space at 5131 Post Road, Dublin, Ohio. The
lease is with an affiliate of Ronald E. Scherer, was acquired as part of the
business combinations in 1996, and has a remaining term through October 31,
2005. Management is in the process of negotiating a sublease or termination of
the lease for the corporate facilities.

ITEM 3. LEGAL PROCEEDINGS
- --------------------------

See Note 12 of the United Magazine Company consolidated financial
statements as of October 2, 1999 included in Item 8 of this report.

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

None.

7
<PAGE> 10

PART II
-------

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

PRICE RANGE OF COMMON SHARES OF UNIMAG
- --------------------------------------

The common shares of UNIMAG were previously traded in a very limited
local over-the-counter market, however, there is currently no established public
trading market for this class of common equity, which is the only class of
equity securities of the Company. The common shares of UNIMAG were not quoted in
each of the four quarters of 1999, 1998 and 1997.

In January of 1998, the Company received shares of its Common Stock,
valued at $15.00 per share, from MDI as part of the sale of Yankee's operating
assets. The Company also issued new shares, valued at $15.00 per share, in
connection with the conversion to equity of shareholder debenture accrued
interest and in connection with the acquisition of the assets of SKS
Enterprises, Limited. The Company also used this value of $15.00 per share in
connection with other transactions.

During the fiscal years 1998 and 1997, shares were redeemed from the
Marshall family, in connection with the Wilmington Put Agreement, at a value of
$15.00 per share.

In September 1998, the Company's Board of Directors authorized a
one-time Employee Stock Reward Program. In December 1998, approximately 108,000
shares, valued at that time at $1.00 per share, were issued. The shares were
awarded to employees in the first quarter of fiscal 1999. At October 2, 1999,
these shares were considered to have no value.

The foregoing should not be taken as an indication of the value of the
shares or the price at which the Company's shares may be purchased or sold
should a trading market develop in the future or should a holder desire to sell
shares through other means.

SHAREHOLDERS
- ------------

As of December 31, 1999, UNIMAG had 2,832 shareholders of record.

DIVIDENDS
- ---------

There were no dividends declared or paid by UNIMAG during fiscal years
1999, 1998 or 1997. The Company does not anticipate declaring or paying a
dividend in the foreseeable future. Also, in connection with a loan agreement
closed in February of 1998, the Company is restricted in paying dividends
without the consent of the lenders during the term of the loan.

8
<PAGE> 11

ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------

The following selected historical financial data of UNIMAG should be
read in conjunction with UNIMAG's consolidated financial statements and notes
thereto (see Item 8).

<TABLE>
<CAPTION>
UNIMAG Fiscal Year Ended
[in millions except earnings (loss) per
share] 1999 (1) 1998 (2) 1997 (3) 1996 (4) 1995 (5)
- ------------------------------------------- ---------------- --------------- ---------------- --------------- ----------------

Consolidated income statement
data:

<S> <C> <C> <C> <C> <C>
Net sales $276.6 $324.1 $298.3 $80.2 $24.6

Income (loss) from N/A (1) $(91.7) $(24.5) $(6.4) $1.9
Continuing operations
Before taxes and extra-
Ordinary items

Weighted average shares 7.5 7.3 7.1 3.2 2.4
Outstanding

Earnings (loss) per share N/A (1) $(12.56) $(3.47) $(1.98) $.78
From continuing operations
Before extra-ordinary items

Consolidated balance sheet data:
Total assets $429 $244.8 $271.6 $251.4 $12.3

Long-term debt obligations $56.6 $59.5 $80.9 $64.4 $.1
</TABLE>

(1) Includes all then-existing subsidiaries for a full year. Because the
Company discontinued operations in September of 1999, loss from
continuing operations data is not applicable ("N/A"). See Notes 2 and
13 in Item 8 for additional information.

(2) Includes Yankee for three (3) months, SKS for eight (8) months, Central
and Penn for seven (7) months, and Wilmington, Triangle, Michiana,
Stoll, Read-Mor, Scherer Affiliates and Klein for a full year. The loss
from continuing operations includes a $70.0 million charge for
impairment loss on goodwill.

(3) Includes Yankee, Wilmington, Triangle, Michiana, Stoll, Read-Mor,
Scherer Affiliates and Klein for a full year.

(4) Includes Yankee for a full year, Readers Choice from September 29, 1995
through June 30, 1996, UNIMAG's investment in Wilmington from September
29, 1995 through December 30, 1995, Wilmington's operations from
December 31, 1995 through September 28, 1996, Triangle's operations
from December 31, 1995 through September 28, 1996, the operations of
Michiana, Stoll, Read-Mor and Scherer Affiliates from July 28, 1996
through September 28, 1996 and Klein operations from September 14, 1996
through September 28, 1996.

(5) Includes Reader's Choice, an Ohio corporation, which was a subsidiary
of the Company sold in July of 1996, from April 11, 1995 through
September 30, 1995, UNIMAG's investment in Wilmington from April 5,
1995 through September 30, 1995, and other subsidiaries for a full
year.

9
<PAGE> 12

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

RESULTS OF OPERATIONS OF UNIMAG FOR THE YEARS ENDED OCTOBER 2, 1999, OCTOBER 3,
- -------------------------------------------------------------------------------
1998, AND SEPTEMBER 27, 1997
- ----------------------------

INTRODUCTION
- ------------

The Company was a regional wholesaler of periodicals. It distributed its
products to retail outlets such as supermarkets, discount variety stores,
convenience stores, drug stores, and newsstands that offer mass market reading
materials to consumers. The Company also maintained retail bookstores that sold
its products and related products to consumers. The Company was a dominant
regional periodical wholesaler in Ohio, Michigan, Indiana and western
Pennsylvania, with an estimated market share of greater than fifty percent (50%)
prior to September of 1999. The Company also provided similar services from its
Wilmington, North Carolina location, selling to customers primarily in eastern
North Carolina.

INDUSTRY BACKGROUND
- -------------------

The periodical wholesale distribution industry underwent significant
consolidation during the past four years. Prior to this period of consolidation,
wholesale periodical distributors historically operated in defined geographic
territories where, through long-standing custom and usage, product availability
was controlled by suppliers. Four years ago large retailers began to consolidate
their vendor relationships with large wholesalers. These large retailers began
to acquire periodicals for all of their retail locations from one or a few
larger wholesalers rather than from separate wholesalers in each geographic area
where a retail location was based. The large retailers also required wholesalers
to undergo a bidding process offering substantial cash payments and/or increased
discounts off cover price. Gross margins decreased significantly for the
industry as more price competition occurred. A number of small and medium sized
wholesalers addressed this evolution by affiliating or by consolidating their
operations to reduce duplicative operating expenses in order to compete
effectively for large retail accounts while providing the additional value-added
services required by the retailers. Consequences of this evolution included a
smaller number of wholesalers distributing within many more geographic
locations, a loss of profits for the industry, larger wholesalers engaging in
direct competition for retail business, and many wholesalers becoming unable to
remain in business.

Today, the approximate $4.3 billion wholesale periodical distribution
industry in North America currently is comprised of less than 60 regional and
local wholesalers. Management believes that these wholesalers account for
approximately 95% of all magazines purchased by consumers in retail outlets such
as newsstands, drug stores, convenience stores, discount variety stores and
grocery stores. It is estimated that the four largest wholesaler groups in the
country account for approximately 80% of magazine sales, and the ten largest
account for approximately 90% of magazine sales.

INDUSTRY TRENDS
- ---------------

Historically, the wholesale periodical distribution industry had not
been characterized by significant competition. Because publishers and retailers
had recognized the economic necessity of local distribution, they had supported
the exclusive "franchise" territories that had evolved over time, minimizing
competition from neighboring local or regional wholesalers. In 1995, however,
these exclusive territories began to break down, leading to a more competitive
environment as a result of the following trends:

10
<PAGE> 13

- Vendor Consolidation Efforts of Large Retailers. Many national
retailers such as Wal-Mart consolidated the number of
suppliers from which they purchased in an effort to streamline
their purchasing process and obtain the economic benefits of
the bidding process by wholesalers. This change in purchasing
behavior was driven, among other reasons, by the retailers'
demands for chain-wide or divisional billing to minimize their
administrative costs, by standardization and increased service
demands, and by the opportunity to enjoy a windfall of retail
profitability.

- Industry Consolidation. The industry underwent considerable
consolidation for several reasons. Because wholesalers
operated under the constraints of a price ceiling dictated by
a periodical's cover price as established by the publishers,
successful wholesalers were required to concentrate on cost
cutting measures in order to remain competitive. Through
mergers and through consolidations with competitors in
neighboring regions, local wholesalers were able to achieve
some cost savings and economies of scale in their distribution
operations by consolidating distribution plants and
eliminating redundant overhead.

- Marketing Initiatives with Retailers. As "direct store
delivery" vendors, periodical wholesalers were responsible for
determining the most effective way to market their products in
a particular retail location. Wholesalers' merchandising
decisions typically relied upon information derived from
knowledge of buying habits of consumers, distribution and
return records by title and issue of each magazine, and other
related information for each retail location. This historical
information was kept in a database, known as "Order &
Regulation Records", which was owned and maintained by the
wholesaler. It enabled the wholesaler to electronically
monitor and evaluate the historic distribution information for
greater efficiency and profit.

- Technology Initiatives with Retailers. In addition to
maintaining Order & Regulation Records, wholesalers, including
the Company, used other tools, including Electronic Data
Interchange and Efficient Consumer Response, to work with
retailers to increase the sales and the profitability of
periodicals.

- Process Automation. The periodical distribution process
involved a significant amount of labor for activities such as
sorting, scanning, loading and unloading trucks and shredding
returned periodicals. Consistent with such a business model,
labor costs represented one of the largest operating expenses
of most wholesalers. In an effort to reduce overhead expenses,
wholesalers increasingly sought to automate the handling of
the magazines they distributed through the acquisition and
development of more sophisticated and integrated machinery and
equipment.

MARGIN RECOVERY EFFORTS
- -----------------------

The loss of margin sustained by wholesalers, starting in 1996, caused
wholesalers to have poor operating results and, as a consequence, a weakened
balance sheet. During 1998 some national distributors and publishers developed
plans to provide additional margin recovery for wholesalers. Several of these
plans were implemented in the third fiscal quarter of 1998; however, not all
wholesalers received the same plans. UNIMAG did not receive the same benefits as
other wholesalers, and, therefore, was unable to restore gross margin to
historical franchise profitability levels.

11
<PAGE> 14

FINANCING ARRANGEMENTS
- ----------------------

Each of the Acquisition Agreements with Stoll, Michiana, Klein and the
Scherer Affiliates contemplated that stock or assets of the various Acquisition
Parties would be contributed to the Company in exchange for Common Stock of the
Company, valued at $15.00 per share, and for Senior and Subordinated Debentures.
In addition, the Company issued a $4,500,000 Subordinated Debenture, the KDR
Debenture, and made a cash payment of $500,000 in exchange for a $5,000,000 note
owed to KDR Limited, an Ohio limited liability company ("KDR") whose owners
include R. David Thomas, then a principal shareholder of the Company, and R. L.
Richards, a former director of the Company. KDR also received warrants to
purchase 187,657 shares of Common Stock of the Company at $12.00 per share in
connection with the exchange. These warrants were subsequently distributed to
KDR's members. R. David Thomas also purchased an additional 33,333 shares of
Common Stock of the Company at a price of $15.00 per share. The Company also
issued $242,211 of Senior Debentures and $94,594 of Subordinated Debentures in
connection with the acquisition of Read-Mor.

The Senior Debentures are designated as "8% Senior Debentures Due
2002", mature on January 1, 2002, and bear interest at the rate of 8% per annum
from July 1, 1996, provided, however, that Senior Debentures issued pursuant to
the Klein Exchange Agreement began to accrue interest on August 24, 1996.
Interest is scheduled to be paid quarterly on January 1, April 1, July 1 and
October 1. Principal on the Senior Debentures was to be paid quarterly on each
interest payment date in accordance with the schedule and priority set forth in
the Debenture Agreement, commencing on April 1, 1997; however, the parties to
the Debenture Agreements agreed to accrue the required payments until the date
of final closing and subordinate a portion of the payments in connection with
debt refinancing described below by the Company. The debenture holders
subsequently agreed in February of 1998 to accept Company stock for 2/3 of the
accrued interest due at December 31, 1997, and to receive the balance of the
accrued interest in a note due over a fifteen-month period. Since December 31,
1997, all new Senior Debenture interest has been accrued, and a portion of the
related note for interest remains unpaid.

The Subordinated Debentures are designated as "10% Subordinated
Debentures Due 2004," mature on January 1, 2004 and bear interest at the rate of
10% per annum from July 1, 1996, provided, however, that Subordinated Debentures
issued pursuant to the Klein Exchange Agreement began to accrue interest from
August 24, 1996. Interest is scheduled to be paid quarterly on January 1, April
1, July 1 and October 1. Principal on the Subordinated Debentures is to be paid
quarterly on each interest payment date in accordance with the schedule and
priority set forth in the Debenture Agreement, commencing on April 1, 1999;
however, the parties to the Debenture Agreements agreed to modify the timing of
the required payments and subordinate a portion of the payments in connection
with the debt refinancing described below. The debenture holders subsequently
agreed in February of 1998 to accept Company stock for 2/3 of the accrued
interest due at December 31, 1997, and to receive the balance of the accrued
interest in a note due over a fifteen-month period. Since December 31, 1997, all
new Subordinated Debenture interest has been accrued, and a portion of the
related note for interest remains unpaid.

The KDR Debenture contains terms similar to the Subordinated
Debentures. The holder of the KDR Debenture is not a party to any of the
modifications described above.

In February of 1998, the Company restructured existing bank and third
party debt, including the payment of $5,000,000 of Senior Debentures, and
consolidated banking relationships with both Key Corporate Capital, Inc. and The
Chase Manhattan Bank. In connection with this restructuring, the Company
expanded its bank lines of credit to support working capital and other
requirements. The credit agreement entered into provided a revolving credit
commitment of $30 million, a term loan of $5 million and a capital expenditure
loan of $3 million. The amount available to the Company under the revolving
credit commitment is based on certain amounts of eligible accounts receivable
and eligible book inventories. During 1998 the commitment was increased to $33
million.

12
<PAGE> 15

Subsequently, the debenture holders entered into subordination
agreements that prohibit the Company from making principal payments on the
senior and subordinated debentures through the maturity of the term loan.

The Company is in default of its loan covenants to its Secured Bank
Lenders. Accordingly, its Secured Bank Lenders have exercised various remedies
under the Uniform Commercial Code to cause the Company's assets to be collected
or sold. The proceeds thereof are being applied against the indebtedness owned
to the Secured Bank Lenders, although the Secured Bank Lenders continue to
advance funds to the Company necessary to pay the Company's current liquidation
expenses.

The Company has $1.2 million in loans outstanding to related parties
related to accrued interest on debentures that were converted to notes and $1.1
million loaned to UNIMAG from an entity owned by two shareholders. These
interest notes ($1.2 million) were due in 1999 while the $1.1 million is due in
2000. Interest accrues at 6.0% on the $1.1 million note.

The Company's debt obligations under the credit agreement are
collateralized by substantially all of the Company's assets. Additionally,
certain assets held in escrow, of which $2.7 million was funded by a related
entity, serve as collateral for such obligations (see Note 12 of the United
Magazine Company Consolidated Financial Statements as of October 2, 1999
included in Item 8 of this report).

REVIEW OF OPERATIONS
- --------------------

In September of 1999, several major national distributors/publishers
tightened credit causing interruptions of product. This irreparably harmed
UNIMAG and was the final causative factor leading to UNIMAG's inability to
continue its business. As a consequence, the Company was unable to continue
supplying product to its customers and had to cease wholesale business
operations. The Company then agreed to convey to two other companies certain
customer agreements, records, and customer display fixtures located on the
business premises of the Company's customers. On September 18 and September 20,
1999, UNIMAG entered into agreements with The Anderson Group and The News Group,
respectively. The Anderson Group received records relating to customers in
southern Ohio, southern and central Indiana, Kentucky, West Virginia and
Tennessee. The News Group received customer records relating to customers in
northern Ohio, Pennsylvania, northern Indiana and Michigan.

Prior to September of 1999, operations were conducted by the Company
similar to operations in fiscal 1998 except for periodic product shortages due
to tightened credit in 1999. When the Company was no longer able to continue
supplying customers with product, the Company closed several locations and
terminated employees at those locations. In connection with the discontinuance
of operations, the Company wrote off all remaining goodwill and other
intangibles. The Company also wrote off approximately $4.3 million of
unamortized customer signing bonuses against revenue and approximately $5.0
million in display fixtures located in customers' stores against selling,
general and administrative expense. In addition, the Company`s reserve for
future returns was eliminated due to industry practices. The elimination of this
reserve increased revenue by $25.4 million and gross profit by $5.7 million
during the fourth fiscal quarter.

During 1999 the Company sold or closed all but four of its retail
locations. In September of 1999, following the discontinuance of its wholesale
operations, the Secured Bank Lenders of the Company sold operating assets in
Michigan and Indiana to The News Group and sold certain vehicles to the
Anderson Group. The Company also surrendered its newspaper operations in Ohio
to Secured Bank Lenders. The Secured Bank Lenders subsequently exercised their
rights against UNIMAG's newspaper operations collateral and sold such
collateral to George R. Klein, a director of UNIMAG, in an arms-length
transaction. A loss of $1.4 million was recorded in connection with these asset
dispositions.

13
<PAGE> 16

Subsequent to year-end the Company determined that its October 2, 1999
net realizable values for inventory and for the remaining fixed assets were
lower than net book value. Reductions of $2.2 million for inventory values and
$1.7 million for fixed assets were charged to the 1999 results as an other
expense.

For 1999, after revenue addbacks of $46.2 million for changes in return
reserves and after decreases of $4.3 million for customer signing bonuses,
revenues were $276.6 million, a decline of $47.5 million, or 14.7%, from 1998.
This decline was caused by shortages of product allocated to the Company for
resale to its customers and by termination of operations near the end of
September of 1999.

Gross profit margins of 21.1% were an improvement over 1998's 19.9%;
however gross profit declined by $6.1 million due to the reduced revenue base.
The improvement in the gross margin per cent was caused in part by some margin
recovery starting in the third fiscal quarter of 1998. The gross margin per cent
was 22.7% before the fourth quarter adjustment of $4.3 million for additional
writeoff of signing bonuses.

Selling, general and administrative expenses, as a percentage of
revenue, increased to 28.2% in 1999 versus 23.1% in 1998. The per cent increase
was attributable primarily to the lower revenue base. The write off of
approximately $5.0 million of display fixtures also affected the increase of
$3.1 million in 1999 over 1998.

Depreciation and amortization, as a per cent of revenue, remained
relatively constant in 1999 versus 1998. The actual reduction of $1.6 million
was due primarily to reduced depreciation on older assets and the lack of new
asset additions in 1999 by the Company.

During 1999 the Company wrote off all remaining goodwill and remaining
intangibles in connection with the results of operations and with the
discontinuance of operations in September of 1999. The charge of $103.0 million
for impairment of goodwill was $33.0 million more than the 1998 charge of $70.0
million.

During 1999, interest expense, net of interest income,
increased by $.4 million. While debt levels declined, rates for bank loans
increased because the Company could not use LIBOR and because default interest
rates were in effect. Cash paid for interest was $4.7 million in 1999 versus
$3.4 million in 1998, reflecting a full year of bank interest in 1999 versus
eight months in 1998 and higher rates of interest. Included in the non-cash
interest was $.6 million in 1999 and 1998 for the accretion of shares subject to
put agreements. In addition, during fiscal 1999 and 1998, the majority of the
interest on the debentures was deferred by the debenture holders.

The loss from operations in 1999, excluding the charge to goodwill of
$103.0 million, was $(42.9) million (15.5%) versus $(21.7) million (6.7%) in
1998 after exclusion of the 1998 charge to goodwill of $70.0 million. The $3.9
million writedown of fixed assets and inventory to net realizable value in 1999
was charged to other expense.

The results of operations for 1998 are somewhat comparable to results
from 1997. During 1998 the Company sold the operations of Yankee in January of
1998, acquired the operations of SKS in February of 1998, and acquired the
operations of Penn and Central in March of 1998. From March of 1998 through
September of 1999, the Company operated with a comparable mix of operations.
During 1997, UNIMAG reported results of operations for the entire twelve months
for all locations except those acquired in 1998.

During 1998 the revenue from operations for the Company was $324.1
million, a $25.8 million (8.6%) increase over 1997. The increase was
attributable to a combination of factors including new

14
<PAGE> 17

business acquired, net of the disposition of the Yankee business, industry
growth, and changes in the mix and volume of customers.

The cost of goods sold, as a percentage of net sales, increased from
78.3% in 1997 to 80.1% in 1998. The increase in 1998 over 1997 was caused by the
change in the mix and the volume of business between Yankee, SKS, Penn and
Central and by higher sales increases in the lower margin customers. The Company
had historically estimated its gross margin during interim financial reporting
periods. With the changes within the periodical wholesale distribution industry,
the calculation of gross margin had become more complex. During 1998, the
Company underwent a comprehensive review of its estimating process and
implemented changes for fiscal 1999. As a result of these gross margin changes,
the Company restated its quarterly financial information for the first three
fiscal quarters of 1998.

During 1998 selling general and administrative expenses increased by
$2.8 million over 1997; however, as a percent of revenue, the expenses declined
from 24.2% to 23.1%. The increase in 1998 was primarily attributable to the
change in the mix of expenses of SKS and Penn and Central versus Yankee. The
1998 and 1997 selling, general and administrative expenses included
approximately $.6 million (.2%) and $2.9 million (1.0%) in non-recurring legal
and accounting fees and litigation settlement expenses. The reduction in
selling, general and administrative expenses, as a percent of revenue, from
27.8% in 1996 to 24.2% in 1997 was due to the Company's cost cutting efforts and
the consolidation of operations during a time of pro forma revenue increases of
approximately 6.3%.

During 1998 depreciation and amortization increased by approximately
$1.0 million. This was primarily attributable to the additional amortization of
goodwill and the additional depreciation of fixed assets from the acquisition of
the SKS net assets and the Penn and Central net assets. As a percent of revenue,
the 1998 and 1997 depreciation and amortization remained relatively unchanged.

During 1998 the Company determined that the 1998 operating losses and
future cash flow projections caused an impairment in the goodwill. The Company
wrote down goodwill by $70 million in 1998.

The loss from operations in 1998, excluding the charge to goodwill of
$70 million, was $4.0 million more than in 1997 (-6.4% versus -5.6%), with the
improvement in selling, general and administrative being offset by the decline
in gross margin.

During February of 1998 the Company restructured existing bank and
third party debt, including the payment of $5.0 million of Senior Debentures,
and consolidated banking relationships with both Key Corporate Capital, Inc. and
The Chase Manhattan Bank. In connection with this restructuring, the Company
expanded its bank lines of credit to support working capital and other
requirements. The credit agreement entered into provided a revolving credit
commitment, as amended, of $33 million a term loan of $5 million and a capital
expenditure loan of $3 million. Other debt transactions during 1998 resulted in
an increase in interest bearing debt from $82.7 million in 1997 to $101.7
million in 1998. The increase in debt was offset to some extent by lower
interest rates; however, the interest expense for the Company in 1998 versus
1997 increased by $1.4 million (3.0% versus 2.7%).

Cash paid for interest was $3.4 million in 1998 versus $2.2 million in
1997. Included in the non-cash interest was $.6 million in 1998 and 1997 for the
accretion of shares subject to put agreements. In addition, during 1998, the
majority of the interest on the debentures was deferred by the debenture
holders.

Because of the historical losses for the years, any tax benefit has
been fully reserved for 1999, 1998 and 1997. The Company has a net operating
loss ("NOL") carryforward of approximately $84.3 million at October 2, 1999. Of
this NOL, approximately $26.3 million has annual limits due to the

15
<PAGE> 18

change of control related to the shares issued at closing in February of 1998.
The Company has not recognized any benefits from the NOL through 1999.

LIQUIDITY
- ---------

Historically, the Company measured its liquidity primarily in Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA). However, EBITDA
should not be considered as an alternative to net income or as an indicator of
cash flows generated by operating, investing or financing activities.

EBITDA for 1999 was $(19.6) million, or (7.1%) of sales, versus $(10.4)
million, or (3.2%) of sales in 1998. During 1999 the Company did not achieve
anticipated gross margins due to revenue shortfalls from lack of product and did
not reduce selling, general and administrative expenses in conjunction with
revenue declines.

EBITDA for 1998 was $(10.4) million, or (3.2%) of sales, versus $(7.4)
million, or (2.5%) of sales in 1997. During 1998 the Company did not achieve all
of its anticipated savings from facility consolidations and was unable to reduce
selling, general and administrative expenses to planned levels.

At October 2, 1999, the Company had current liabilities of $170.0
million and current assets of $40.0 million for a working capital deficit of
$130.0 million. Of this $130.0 million, $30.5 million is due to classifying bank
debt as current due to debt covenant violations.

At October 3, 1998, the Company had current liabilities of $222.0
million and current assets of $115.8 million for a working capital deficit of
$106.2 million. Of this $106.2 million, $35.3 million is due to classifying bank
debt as current due to debt covenant violations.

CASH FLOWS - OPERATING ACTIVITIES
- ---------------------------------

During 1999 the Company gained $3.3 million in cash from operations, an
increase in operating cash flow of $12.6 million from 1998. This increase was
caused primarily by a $72.4 million reduction in accounts receivable and
inventory, a $34.3 million decrease in accounts payable and accrued liabilities,
a $19.6 million loss from operations and a $10.3 million reduction in the
reserve for gross profit. All of these were affected by the discontinuance of
operations in September of 1999.

During 1998, the Company used $9.3 million in cash for operations, a
decrease in operating cash flow of $13.8 million from 1997. This decrease was
caused by additional cash flow operating losses that were financed through
increases in negative working capital, primarily publisher payables.

During 1997, the Company generated $4.5 million in cash from
operations. The increase was due primarily to increases of $49.4 million in
accounts payable offset by $19.0 million in increases in trade accounts
receivable and inventories and by a net loss of $24.5 million.

CASH FLOWS - INVESTING ACTIVITIES
- ---------------------------------

In 1999, investing activities gained $2.0 million of cash. Additions to
property and equipment were $1.0 million, and $3.0 million was generated by the
sale of assets.

In 1998, investing activities used $3.7 million of cash. Additions to
property and equipment were $1.5 million, and $2.3 million was used for
additional acquisition costs.

16
<PAGE> 19

In 1997, investing activities used $1.6 million of cash, with the sale
of an asset generating $1.2 million. Additions to property and equipment were
$.7 million, and $2.1 million was used for additional acquisition costs.

CASH FLOWS - FINANCING ACTIVITIES
- ---------------------------------

During 1999, the Company reduced debt by $10.3 million with reductions
coming from payments against bank lines, from the sale of retail and wholesale
assets, and from the transfer of term debt to an affiliate in connection with
reductions in accounts receivable..

During 1998, the Company consolidated its borrowing and increased its
borrowing capacity through a debt instrument with Key Corporate Capital, Inc.
and The Chase Manhattan Bank. The Company borrowed $42.0 million under debt
obligations and made payments of $26.4 million for a net debt increase of $15.6
million. Stock transactions increased the net cash provided by financing
activities to $15.9 million.

During 1997, the Company borrowed $3.4 million under debt obligations.
The Company made payments of $6.7 million under debt obligations for a net debt
decrease of $3.3 million. Stock transactions increased the net cash used in
financing activities to $3.4 million.

CAPITAL RESOURCES
- -----------------

Through its acquisitions, the Company inherited banking relationships
with several banks. In February of 1998, the Company consolidated its borrowing
and increased its borrowing capacity through a debt instrument with Key
Corporate Capital, Inc. and The Chase Manhattan Bank.

At October 2, 1999, the Company's secured bank debt was being reduced
as Secured Bank Lenders sold Company assets and collected accounts receivable.

OPERATIONAL MEASURES
- --------------------

In September of 1999, the Company closed several locations and
terminated employees at those locations. On October 20, 1999 WARN notices were
sent to all remaining employees. By December 31, 1999, the Company had 41 retail
and 35 other employees remaining in the wind down of the Company's activities.

In September of 1999, the Secured Bank Lenders sold Company operating
assets in Michigan and Indiana to The News Group and sold certain vehicles to
The Anderson Group. The Company also surrendered its newspaper operations in
Ohio to Secured Bank Lenders for their sale to George R. Klein, a director.

The Company also is in the process of terminating most of its lease
obligations or assigning leases to unrelated companies.

COMMITMENTS AND CONTINGENCIES
- -----------------------------

The Company, as plaintiff, has commenced various lawsuits and also has
been named as a defendant in various litigation matters. (See Note 12 to the
Consolidated Financial Statements.)

17
<PAGE> 20

YEAR 2000 ISSUES
- ----------------

The risks to the Company if Y2K issues develop are minimal because the
Company has discontinued operations. The Company currently does not have a
specific contingency plan to address any remaining Y2K issues.

The Company does have internal MIS personnel available to address any
issues that may develop, and they would begin their reprogramming efforts
immediately if a significant Y2K issue were to occur.

INFLATION
- ---------

The Company believes that the effect of inflation, if any, on the
results of operations and financial condition has been minor. Since the Company
is discontinuing operations, inflation will not affect the future results of
operations and financial condition.

SEASONALITY
- -----------

The sale of magazines, books, and newspapers is subject to minimal
seasonality.

18
<PAGE> 21

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - SAFE HARBOR CAUTIONARY
- -------------------------------------------------------------------------
STATEMENT
- ---------

This report contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995 (the Reform Act). These
forward-looking statements express the beliefs and expectations of management
regarding UNIMAG's future results and performance and include, without
limitation, the following: statements concerning the Company's discontinuance of
operations: statements concerning the Company's outlook for 2000; the Company's
plans for future changes in properties; the Company's future operational plans;
and other similar expressions concerning matters that are not historical facts.

Such statements are based on current expectations and involve a number
of known and unknown uncertainties that could cause the actual results,
performances, and/or achievements of the Company to differ materially from any
future results, performances, or achievements, expressed or implied by the
forward-looking statements, and any such statement is qualified by reference to
the following cautionary statements. In connection with the safe harbor
provisions of the Reform Act, the Company's management is hereby identifying
important factors that could cause actual results to differ materially from
management's expectations including, without limitation, the following: the
continued collection of trade accounts receivable and the liquidation of
operating assets; changes in the status of current and future litigation as both
plaintiff and defendant; and other risks described from time to time in the
Company's Securities and Exchange Commission filings. The Company undertakes no
obligation to publicly release any revisions to these forward looking statements
for events occurring after the date hereof or reflect any other unanticipated
events.

Remainder of page intentionally left blank

19
<PAGE> 22

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------

UNITED MAGAZINE COMPANY
==========================

CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------

AS OF OCTOBER 2, 1999 AND OCTOBER 03, 1998
------------------------------------------

20
<PAGE> 23

UNITED MAGAZINE COMPANY
INSERT TO FORM 10-K

The following financial statements meet the requirements of
Regulation S-X, except that the accountants' reports on the audit of the
financial statements required under Rule 2-02 and Article 3 of Regulation S-X
are not reasonably available to UNIMAG. Arthur Andersen, LLP cannot provide its
reports based on the fact that UNIMAG owes Arthur Andersen, LLP, a remaining
balance totaling $1.5 million in audit, tax and consulting fees incurred by
UNIMAG since August of 1998. UNIMAG is presently unable to pay in full the
indebtedness owed to Arthur Andersen, LLP.

Under Exchange Act Rule 12b-21, the information required in the
accountants' reports may be omitted because the obtaining thereof would involve
unreasonable effort and expense.

UNIMAG believes that any accountants' reports on the financial
statements for the fiscal year ended October 2, 1999 would contain a going
concern qualification, inasmuch as the Company presently is not a going concern.
The accountant's reports issued by Arthur Andersen, LLP on the financial
statements for the fiscal year ended September 27, 1997 did contain a going
concern qualification.

21
<PAGE> 24

UNITED MAGAZINE COMPANY
-----------------------

CONSOLIDATED BALANCE SHEETS
---------------------------

AS OF OCTOBER 2, 1999 AND OCTOBER 3, 1998
-----------------------------------------
(in millions)

<TABLE>
<CAPTION>
ASSETS 1999 1998
------
--------- ----------

<S> <C> <C>
CURRENT ASSETS:
Cash $ 0.0 $ 5.0
Trade accounts receivable, net of allowance for doubtful accounts of
$5.9 million in 1999 and $6.6 million in 1998 32.1 66.6
Inventories 2.3 40.2
Prepaids, fixed assets held for sale in 1999, and other 5.6 4.0
--------- ----------
Total current assets 40.0 115.8
--------- ----------

PROPERTY AND EQUIPMENT, at cost:
Land 0.0 .2
Building and improvements 0.0 1.3
Furniture and equipment 0.0 8.5
Vehicles 0.0 3.7
Leasehold improvements 0.0 1.6
--------- ----------
0.0 15.3
Less - accumulated depreciation and amortization (0.0) (5.9)
--------- ----------

Total property and equipment, net 0.0 9.4
--------- ----------

OTHER ASSETS:
Costs in excess of net assets acquired, net of accumulated
amortization of $0.0 million in 1999 and $9.6 million in 1998 0.0 103.4
Prepaid signing bonuses 0.0 3.4
Other assets, net 2.9 12.8
--------- ----------
Total other assets 2.9 119.6
--------- ----------

Total assets $42.9 $244.8
========= ==========
</TABLE>

(Continued on next page)

22
<PAGE> 25

UNITED MAGAZINE COMPANY
-----------------------

CONSOLIDATED BALANCE SHEETS
---------------------------

AS OF OCTOBER 2, 1999 AND OCTOBER 3, 1998
-----------------------------------------
(in millions)

<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT) 1999 1998
---------------------------------------------- --------- ----------

<S> <C> <C>
CURRENT LIABILITIES:
Current portion of debt obligations $ 34.8 $ 42.2
Accounts payable 122.8 157.5
Accrued expenses 12.4 12.0
Reserve for gross profit on sales returns 0.0 10.3
--------- ----------
Total current liabilities 170.0 222.0

LONG-TERM DEBT OBLIGATIONS 2.0 4.9

DEBENTURES HELD BY SHAREHOLDERS:
- Senior 33.2 33.2
- Subordinated 21.4 21.4

BENEFIT PLAN OBLIGATIONS 4.3 4.2

OTHER LONG-TERM LIABILITIES 1.8 3.7
--------- ----------
Total liabilities 232.7 289.4
--------- ----------

COMMITMENTS AND CONTINGENCIES

COMMON STOCK SUBJECT TO PUT AGREEMENTS, .45 million
shares in 1999 and 1998 5.8 5.2
--------- ----------

SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, no par value, 53.3 million shares authorized, 9.3 and
9.2 million issued, 7.5 and 7.4 outstanding (including shares subject
to Put Agreements), in 1999 and 1998, respectively - -
Paid-in capital 117.7 117.6
Treasury stock, at cost (4.0) (4.0)
Minimum pension liability adjustment (.2) (.2)

Retained deficit (309.1) (163.2)
--------- ----------
Total shareholders' equity (deficit) (195.6) (49.8)
--------- ----------

Total liabilities and shareholders' equity $42.9 $244.8
========= ==========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.

23
<PAGE> 26

UNITED MAGAZINE COMPANY
-----------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------

FOR THE YEARS ENDED OCTOBER 2, 1999, OCTOBER 3, 1998 AND SEPTEMBER 27, 19976
----------------------------------------------------------------------------
(in millions except for loss per share)

<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ----------

<S> <C> <C> <C>
NET SALES $276.6 $324.1 $298.3

COST OF SALES (218.1) (259.5) (233.5)
--------- --------- ----------

Gross profit 58.5 64.6 64.8

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (78.1) (75.0) (72.2)

DEPRECIATION AND AMORTIZATION (8.6) (10.2) (9.2)

IMPAIRMENT LOSS ON GOODWILL (103.0) (70.0) -
--------- --------- ----------

Loss from operations (131.2) (90.6) (16.6)
--------- --------- ----------

OTHER INCOME (EXPENSES), net:
Interest expense (9.5) (9.6) (8.2)
Interest income 0.1 0.6 0.2
Gain (loss) on sale of assets in 1999 and Yankee in 1998 (1.4) 7.8 -
Other, net, including asset writedown in 1999 (3.9) .1 .1
--------- --------- ----------

Total other income (expenses), net (14.7) (1.1) (7.9)
--------- --------- ----------

Loss before taxes (145.9) (91.7) (24.5)

TAX PROVISION - - -
--------- --------- ----------

Net loss $(145.9) $ (91.7) $ (24.5)
========= ========= ==========

WEIGHTED AVERAGE SHARES OUTSTANDING 7.5 7.3 7.1
========= ========= ==========

LOSS PER SHARE (Basic and Diluted) $(19.45) $(12.56) $(3.47)
========= ========= ==========
</TABLE>

The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.

24
<PAGE> 27

UNITED MAGAZINE COMPANY
-----------------------

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------

FOR THE YEARS ENDED OCTOBER 2, 1999, OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
---------------------------------------------------------------------------
(in millions)

<TABLE>
<CAPTION>
Obligation Minimum
Number of to Issue Pension
Shares Treasury Paid-in Common Treasury Liability Retained
Outstanding Shares Capital Stock Stock Adjustment Deficit Total
----------- -------- ------- ---------- -------- ---------- -------- -------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, September 28, 1996 2.2 1.6 $ 43.1 $ 65.2 - ($ .1) $(47.0) $ 61.2

Issuance of warrants - - .1 - - - - .1
Issuance of shares - - .4 - - - - .4
Redemption of putable shares - - .1 - $ (.1) - - -
Minimum pension liability adjustment
- - - - - .1 - .1
Net loss - - - - - - (24.5) (24.5)
------ ------ ------ ------ ------ ------ ------ ------

BALANCE, September 27, 1997 2.2 1.6 43.7 65.2 (.1) - (71.5) 37.3

Issuance of shares 4.9 - 73.6 (65.2) - - - 8.4
Redemption of shares:
Puts - - .3 - (.3) - - -
Other (.2) .2 - - (3.6) - - (3.6)
Minimum pension liability adjustment
- - - - - (.2) - (.2)
Net loss - - - - - - (91.7) (91.7)
------ ------ ------ ------ ------ ------ ------ ------

BALANCE, October 3, 1998 6.9 1.8 $117.6 - $ (4.0) $ (.2) $(163.2) $(49.8)
</TABLE>

25
<PAGE> 28

<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, October 3, 1998 6.9 1.8 $117.6 - $ (4.0) $ (.2) $(163.2) $(49.8)

Issuance of shares .1 - .1 - - - - .1
Redemption of shares:
Puts - - - - - - - -

Other - - - - - - - -

Minimum pension liability adjustment - - - - - - - -
Net loss - - - - - - (145.9) (145.9)
------ ------ ------ ------ ------ ------ ------ ------

BALANCE, October 2, 1999 7.0 1.8 $117.7 $ - $ (4.0) $ (.2) $(309.1) $(195.6)
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.

26
<PAGE> 29

UNITED MAGAZINE COMPANY
-----------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------

FOR THE YEARS ENDED OCTOBER 2, 1999, OCTOBER 3, 1998, AND SEPTEMBER 27, 1997
----------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH
---------------------------
(in millions)

<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- --------

<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(145.9) $(91.7) $(24.5)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities -
Loss on investment in Wilmington - - -
Gain on sale of Yankee 1.4 (7.8) -
Consulting fee paid with common stock - - .5
Accretion of interest on common stock subject to put
agreements .6 .6 .6
Depreciation and amortization 8.6 10.2 9.2
Impairment loss on goodwill 103.0 70.0 -
Changes in certain assets and liabilities, net of the effect of
acquisitions and dispositions in 1996 and 1998-
(Increase) decrease in certain assets:
Trade accounts receivable 34.5 (17.1) (14.2)
Inventories 37.9 5.8 (4.8)
Prepaids and other .8 (2.7) (.4)
Other assets 5.4 (4.1) (10.0)
Prepaid signing bonuses 3.4 1.2 2.0
Increase (decrease) in certain liabilities:
Accounts payable (34.7) 33.8 43.0
Accrued expenses .4 (2.5) 6.4
Reserve for gross profit on sales returns (10.3) (2.3) (2.1)
Other liabilities (1.9) (2.4) (.7)
Benefit plan obligation .1 (.3) (.5)
------ ------ ------
Net cash provided by (used in) operating activities 3.3 (9.3) 4.5
------ ------ ------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1.0) (1.5) (.7)
Proceeds from sale of assets 3.0 .1 1.2
Cash used for acquisitions, net of cash acquired - (2.3) (2.1)
------ ------ ------
Net cash provided by (used in) investing activities 2.0 (3.7) (1.6)
------ ------ ------
</TABLE>

(Continued on next page)

27
<PAGE> 30

CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------

FOR THE YEARS ENDED OCTOBER 2, 1999, OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
---------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH
---------------------------
(in millions)

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------

<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under debt obligations $ - $42.0 $ 3.4
Payments on debt obligations (10.3) (26.4) (6.7)
Redemption of putable shares of common stock - (.3) (.1)
Issuance of common stock - .6 -
----- ----- -----
Net cash provided by (used in) financing activities (10.3) 15.9 (3.4)
----- ----- -----

NET INCREASE (DECREASE) IN CASH (5.0) 2.9 (.5)

CASH, beginning of year 5.0 2.1 2.6
----- ----- -----

CASH, end of year $ 0.0 $ 5.0 $ 2.1
===== ===== =====

Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------

Cash paid during the year for interest $ 4.7 $ 3.4 $ 2.2
Cash paid during the year for taxes $ .3 $ .3 $ -
</TABLE>

Supplemental Schedule of Noncash Investing and Financing Activities
- -------------------------------------------------------------------

1999
- ----

During the first fiscal quarter of 1999, the Company contributed 108,551 shares
of common stock to employees, with 108,230 shares being contributed directly to
the 401-K plan and 321 shares being contributed directly to employees. In June
of 1999, the Company sold eight retail stores of the Company; proceeds included
a $.8 million reduction of term debt. During 1999 the Company exchanged $1.1
million of receivables for assumption of $1.0 million of term debt plus
interest.

1998
- ----

The Company acquired two companies and disposed of its Connecticut subsidiary.
The Company converted accrued debenture interest of $7.4 million to debt and
equity. The Company took-back shares and debentures as consideration for related
party notes and advances of $3.7 million. During 1999 the Company reduced
accounts receivable from an affiliate by $1.1 million in return for the
assumption of Company term debt.

1997
- ----

The Company transferred marketable securities during the year to a third party
as part of the settlement of a lawsuit.

The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.

28
<PAGE> 31

UNITED MAGAZINE COMPANY
-----------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

AS OF OCTOBER 2, 1999 AND OCTOBER 2, 1998
-----------------------------------------

(1) ORGANIZATION
------------

United Magazine Company ("UNIMAG" or the "Company") is an Ohio
corporation, which was incorporated on April 8, 1964 under the name
Citizens Holding Company. UNIMAG, both directly and through its
subsidiary corporations, prior to September of 1999, was engaged in the
wholesale distribution of magazines, books and other periodicals, and
operated some retail bookstores. UNIMAG also has two inactive
subsidiaries.

Business of UNIMAG
------------------

UNIMAG operated wholesale operations primarily in the northern midwest
(Ohio, Michigan, Indiana and Western Pennsylvania), Connecticut and North
Carolina. From various distribution facilities UNIMAG distributed
approximately 3,500 different titles of magazines to its customers on a
weekly basis. UNIMAG also distributed books and various other sundry
items. In addition to the wholesaling business, UNIMAG had twenty-three
retail bookstores in the beginning of 1999. During 1999, nineteen were
sold or closed, and four were kept open to assist in the sale of
inventory after year-end.

(2) DISCONTINUED OPERATIONS PLANS
-----------------------------

In September of 1999, the Company ceased wholesale business operations
and agreed to convey to two other companies certain customer agreements,
records, and customer display fixtures located on the business premises
of the Company's customers. The Company has closed substantially all of
its wholesale and retail facilities. The Company's Secured Bank Lenders
are in the process of selling the Company's assets and collecting its
accounts receivable. Proceeds are being used to pay off secured bank debt
and to fund current liquidation expenses.

In conjunction with the wind down of its business affairs, the Company is
evaluating the legal remedies available to it for the damages it has
sustained and intends to vigorously pursue all such remedies.

In connection with the discontinuance of operations in September of 1999,
the Company increased revenue by $25.4 million and gross margin by $5.7
million for elimination of return reserves. The Company decreased both
revenue and gross margin by $4.3 million for a write off of remaining
unamortized signing bonuses. Selling, general and administrative expenses
were increased by $5.0 million for the additional write off of display
fixtures located on customers premises. A $103.0 million charge for
impairment of remaining goodwill also was made in connection with the
discontinuance of operations. Other expense was increased by $3.9 million
to reflect a $2.2 million writedown of inventory and a $1.7 million
writedown of fixed assets to net realizable values in sales by Secured
Bank Lenders after October 2, 1999. All of these charges were made in the
fourth fiscal quarter and are reflected in Note 13.

29
<PAGE> 32

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------

(a) FISCAL YEAR - UNIMAG follows the practice of a 52/53 week fiscal
year, which ends on the Saturday nearest to September 30.

(b) PRINCIPLES OF CONSOLIDATION - All intercompany balances and
transactions have been eliminated in the consolidated financial
statements.

(c) ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions, such as allowance for doubtful
accounts and the reserve for gross profit on sales returns, that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from their estimates. At October 2, 1999, the Company has estimated
the net realizable value for inventory and for fixed assets to be
sold in the process of reducing bank debt.

(d) INVENTORIES - Inventories were valued at the lower of cost or
market as determined by the first-in, first-out (FIFO) cost method
for 1998. At October 2, 1999, an estimate was made of net
realizable value for all inventory held by the Company.

(e) PROPERTY AND EQUIPMENT - Prior to October 2, 1999, property and
equipment was stated at cost or acquired cost (fair value) after
acquisition. At October 2,1999, the remaining fixed assets held for
sale to repay bank loans were written down to a net realizable
value and reclassified to other current assets. Depreciation was
provided on the straight-line method over the estimated useful
lives of the related assets as follows:

<TABLE>
<CAPTION>
Years
--------

<S> <C>
Building 31
Building improvements 10
Furniture and equipment 5-7
Vehicles 3-5
</TABLE>

Leasehold improvements were being amortized on a straight-line
basis over the life of the lease. The value of improvements for
leases terminated or assigned was written off at October 2, 1999.

The cost and accumulated depreciation and amortization applicable
to assets retired or sold are removed from the accounts, and any
resulting gain or loss on disposition is recognized in income.
Betterments, renewals and extraordinary repairs that extend the
life of the asset are capitalized; other maintenance and repair
costs are expensed as incurred.

(f) PREPAID SIGNING BONUSES - The Company had entered into exclusive
supply contracts with many of their large chain customers. As part
of such contracts, UNIMAG paid the customer an up-front payment
(signing bonus) for obtaining a multi-year contract. These payments
were being amortized straight-line against revenue over the life of
the contract. At October 2, 1999, the remaining net balance of $4.3
million was charged against revenue.

(g) EXCESS OF COST OVER NET ASSETS ACQUIRED - Excess of cost over net
assets acquired (goodwill) consists of the excess of the cost to
acquire an entity over the estimated fair market value of the net
assets acquired. Goodwill was amortized on a straight-line basis
over 40 years. In

30
<PAGE> 33

both 1999 and 1998, the Company evaluated whether events and
circumstances had occurred that indicated the remaining estimated
useful life of goodwill warranted revision or that the remaining
balance of goodwill was not recoverable based upon cash flow
projections. The Company determined based on such cash flow
projections that there was an impairment of goodwill in both 1999
and 1998. The result of such projections on a discounted basis
supported an impairment loss on goodwill in the amount of $70
million at October 3, 1998 and a further impairment loss of the
remaining goodwill in the amount of $103.0 million at October 2,
1999.

(h) REVENUE RECOGNITION - Revenues and cost of sales from the sale of
periodical inventories are recognized upon shipment to the
customers. However, due to the significant volume of merchandise
returns that are typical in the periodical industry, the Company had
recorded a reserve for gross profit on sales returned in the
accompanying consolidated financial statements. This reserve is
based on the gross profit margin on merchandise sold in the current
period that is estimated to be returned by the customers in the
subsequent period. The Company receives credit for the cost of such
returns from the publisher. At October 2, 1999, all returns were
being processed by successor suppliers to customers in accordance
with normal industry treatment of returns. The remaining reserves
for gross profit were reclassified to $25.4 million of revenue,
$19.7 million of cost of goods sold and $5.7 million of gross
profit.

(i) DISCOUNTS AND REBATES - The Company records all discounts and
rebates given to the customer on the accrual basis of accounting as
a reduction in net sales.

(j) INCOME TAXES - The Company follows SFAS No. 109 "Accounting for
Income Taxes" (SFAS 109). (See Note 8).

(k) FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of
current assets and liabilities approximate their fair market value
because of the short-term maturity of these financial instruments.

(l) WEIGHTED AVERAGE SHARES OUTSTANDING - The weighted average number of
shares outstanding for earnings per share purposes is calculated
using common shares outstanding, shares earned but not issued under
a consulting agreement, shares obligated to be issued as well as
common shares subject to put agreements. The shares obligated to be
issued in 1998 for acquisitions were included in the 1997 weighted
average shares. Warrants that are anti-dilutive have been excluded.

(m) CONCENTRATION OF CREDIT RISK - Financial instruments that
potentially subject the Company to concentrations of credit risk
consist principally of trade accounts receivable. The majority of
the Company's revenues were derived from chain and independent
grocery stores through the territories discussed in Note 1. No one
chain represented a significant portion of the Company's revenue.

(n) RECLASSIFICATIONS - Certain reclassifications have been made to the
consolidated financial statements for 1997 to conform to the 1998
presentation.

31
<PAGE> 34

(4) ACQUISITIONS AND DISPOSITIONS
-----------------------------

During 1998, the Company made two acquisitions of certain assets and
liabilities. The consideration for these acquisitions was cash of $2.4
million. These acquisitions were not considered significant for financial
reporting purposes. In January of 1998, the Company entered into an
agreement to sell certain operating assets and liabilities of Yankee (a
subsidiary) to a third party for approximately $8.3 million.
Consideration was in the form of cash ($2.7 million), notes ($2.5
million) and UNIMAG stock held by the buyer ($3.1 million). The purchase
price provided for adjustments based upon the closing balance sheet of
Yankee as of the transaction date. A gain of approximately $7.8 million
was recognized on the sale. This disposition was not considered
significant for financial reporting purposes.

In 1999, the Company made dispositions of assets both in the normal
course of business and in connection with the year-end closing of
facilities. During June of 1999 the Company sold eight retail locations
for $.3 million in cash and reduction of term debt of $.8 million. In
July the Company sold a corporate aircraft for $1.0 million. In September
the Company's Secured Bank Lenders sold wholesale operating assets of the
Company to independent third party wholesalers for $1.8 million pursuant
to Asset Surrender Agreements. The Company also surrendered its newspaper
operations in Ohio to Secured Bank Lenders for their subsequent sale to
George R. Klein, a director. A loss of $1.4 million was recorded in
connection with these asset dispositions. The Company anticipates the
Secured Bank Lenders will continue the sale of the Company's remaining
assets after year-end.

(5) DEBT OBLIGATIONS
----------------

The components of the Company's debt obligations at October 2 1999 and
October 3, 1998 are as follows (in millions):

Long term Debt Obligations
--------------------------

<TABLE>
<CAPTION>
1999 1998
--------- ---------

<S> <C> <C>
a) New Line of Credit $ 28.2 $ 32.9
a) New Term and Capital Expenditure Loans 3.1 6.5
b) Seller Financing 3.1 4.5
c) Loans from Related Parties 2.4 2.5
d) Acquired Lines of Credit 0.0 0.6
e) Term Loans with financial institutions 0.0 .1

Total 36.8 47.1
Less: normally scheduled current portion (34.8) (6.9)
--------- ---------
Long-term portion of debt obligations $ 2.0 $ 40.2
========= =========
</TABLE>

(a) On February 6, 1998, the Company entered into a Credit
Agreement (the Agreement) with two banks that provided a
Revolving Credit Commitment of $30.0 million, a Term Loan of
$5.0 million and a Capital Expenditure Loan of $2.4 million.
The amount available to the Company under the Revolving Credit
Commitment was based on certain amounts of eligible accounts
receivable and eligible inventories. The purpose of the loans
was for the Company to refinance certain debt obligations,
finance ongoing working capital requirements, finance the
acquisition of certain machinery, equipment and

32
<PAGE> 35

vehicles and for general corporate purposes. All the loans had
variable interest rates to be designated by the Company based
on the prime rate + .5% or LIBOR + 2.5%. Due to noncompliance,
in December 1998, the default interest rate became effective.
This rate is prime plus 2.0% for debt under the Credit
Agreement. The average interest rate was 8.3% for 1998 and 9.6%
for 1999. The Capital Expenditure Loan and Revolving Credit
Commitment were to mature in February 2003, and the Term Loan
was to mature in February 2001. On April 15, 1998, the Company
received a temporary expansion on the Revolving Credit
Commitment of $3.0 million. The expansion subsequently expired.
At October 2, 1999, the Revolving Credit loan balance was $28.2
million.

Quarterly principal payments of $416,667 on the Term Loan began
in April 1998. The Agreement is collateralized by substantially
all of the Company's assets. Additionally, the Company's debt
obligations under the Credit Agreement are collateralized by
assets held in escrow, of which $2.7 million was funded by a
related party (see Note 12). The Agreement contains financial
and non-financial covenants, including, among other
restrictions, minimum income before interest, taxes,
depreciation and amortization (EBITDA), a minimum cash flow
ratio, minimum net worth and a maximum debt to EBITDA ratio.
The Company was not in compliance with these covenants and
others and has not obtained waivers through 2000 for expected
continual noncompliance. At October 2, 1999, after a $1.75
million reduction from the Secured Bank Lenders sale of assets,
the Term Loan Balance was $.75 million

(b) Seller financing represents the portion of the consideration
associated with an acquisition that was funded by the seller.
These obligations relate primarily to prior acquisitions made
by the companies that were acquired by UNIMAG during the fourth
quarter of 1996. These loans bear interest at rates ranging
from 5.8% to 11.0%. Principal payments are made primarily on a
monthly basis. These loans mature at various times during 2000
through February 2011. Approximately $2.4 million of the
balance was paid-down as part of the refinancing in February
1998 discussed in (a) above, a $1.0 reduction occurred by
transfer of the loan balances to an affiliate in return for a
reduction in accounts receivable balances, and approximately
$.8 million was paid down in 1999 in connection with the sale
of eight retail stores.

(c) The loans from related parties relate to accrued interest or
debentures that were converted to notes and $1.1 million loaned
to UNIMAG from an entity owned by two shareholders. The
interest notes ($1.2 million) were due in 1999 while the $1.1
million is due in 2000. Interest accrues at 6.0% on the $1.2
million note.

(d) At October 2, 1998, the Company had a line of credit with a
bank remaining from 1997. The line was paid off in 1999.

(e) The Company had term loans with financial institutions that
were paid off in 1999.

The remaining loans after the refinancing discussed in (a) above do
not have any significant covenants.

33
<PAGE> 36

Shareholder Debentures
----------------------

The components of shareholder debentures are as follows (in
millions):

<TABLE>
<CAPTION>
1999 1998
Shareholder Group Senior Subordinated Total Total
------------------------------------------ -------- ----------------- -------- --------

<S> <C> <C> <C> <C>
KDR Limited $ - $ 4.5 $ 4.5 $ 4.5
Stoll Company 11.8 9.1 20.9 20.9
Michiana 2.1 1.4 3.5 3.5
Scherer Affiliates 9.1 1.0 10.1 10.1
Klein 10.0 5.3 15.3 15.3
Read-Mor 0.2 0.1 0.3 0.3
-------- -------- -------- --------
Total 33.2 21.4 54.6 54.6
Less: current portion - - - -
-------- -------- -------- --------
Long-term portion of debentures $33.2 $21.4 $54.6 $54.6
======== ======== ======== ========
</TABLE>

The senior debentures began to accrue interest at 8% payable
quarterly commencing on the closing date of the acquisitions.
Quarterly principal and interest payments were scheduled from April
1, 1997 through January 1, 2002 in accordance with the schedule and
priority set forth in the Debenture Agreement. Quarterly payments of
principal and interest were not paid during 1997. In February 1998
the Company paid the accrued interest with 1/3 of the payment in a
short-term note and 2/3 in common stock. In connection with the
refinancing in February 1998, the Company paid $5 million of the
senior debentures to the Stoll family. Additionally, the debenture
holders entered into subordination agreements that prohibit the
Company from making principal payments on the senior and
subordinated debentures through the maturity of the Term Loan
discussed in (a), which was originally scheduled for expiration in
February 2001. The senior debentures are secured by all of the
assets of the Company; however, these debentures are subordinated to
substantially all of the long-term debt obligations discussed above.
The entire $11.8 million of Stoll senior debentures must be paid
before any other debentures may be paid.

The subordinated debentures began to accrue interest at 10% payable
quarterly commencing on the closing date of the acquisitions.
Quarterly payments of interest were not paid during 1997. Quarterly
principal payments were scheduled from April 1, 1999 through January
1, 2004; however, no payments on subordinated debentures are allowed
until all senior debentures have been paid. These payments cannot be
made until the bank is paid, which was originally scheduled for
February 2001. Furthermore, no payments on debentures are permitted
until the maturity of the Term Loan discussed in (a), which was
originally scheduled for expiration in February 2001. Interest on
the subordinated debentures and all senior debentures since December
31, 1997 has not been paid. The subordinated debentures are secured
by all the assets of the Company; however, these subordinated
debentures are subordinated to the senior debentures.

In 1998, a $5.0 million note from KDR was exchanged for $.5 million
in cash and $4.5 million in subordinated debentures with terms
similar to the subordinated debentures discussed above. Interest on
these debentures has been paid. In 1998 $1.7 million of senior and
$1.6 million of subordinated debentures were reduced by advances due
from related parties.

Scheduled maturities of all non-debenture long-term debt obligations
at October 2, 1999 are as follows (in millions): Fiscal Year 2000 -
$34.8, 2001 through 2004 - $.3., 2005 - $.1 and thereafter

34
<PAGE> 37

- $1.0. The Company is not in compliance with its financial
covenants; therefore $31.3 million of the long-term debt obligation
has been classified as current on the consolidated balance sheet.

The debenture schedule is based on terms in effect at October 2,
1999. Because the debentures are in default of financial covenants,
the debenture terms become accelerated, and they become payable
after the completion of the payments for the secured bank loans.

(6) LEASE COMMITMENTS
-----------------

UNIMAG or its subsidiaries have entered into operating lease agreements
for facilities and certain vehicles and equipment. Expenses related to
these leases were as follows (in millions):

<TABLE>
<CAPTION>
Fiscal Year Related Party Other Total
-------------------- ---------------- ---------- ---------

As of October 2, 1999, the future minimum annual rental commitments of
lease agreements are minimal. As of October 2, 1999, the Company has
begun terminating most of its lease obligations or assigning leases to
unrelated companies.

(7) COMMON STOCK
------------

In September 1998, the Company's Board of Directors authorized a one-time
Employee Stock Reward Program. In December 1998, approximately 108,000
shares, valued at that time at $1.00 per share, were issued. The shares
were awarded to employees in the first quarter of fiscal 1999.

The Company was obligated to issue 4.3 million shares previously valued
at $15.00 per share pursuant to the acquisition agreements entered into
during the fourth quarter of 1996. These shares were issued in February
1998.

The Company has 192,657 warrants outstanding to purchase Company stock at
$12.00 per share.

(8) INCOME TAXES
------------

The provision (benefit) for income taxes for the years ended 1999, 1998
and 1997 is as follows (in millions):

<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- ---------

<S> <C> <C> <C>
Current tax provision (benefit):
Federal $ - $ - $ -
State - - -

Net increase in deferred tax assets (15.2) (6.1) (7.2)
Increase in valuation allowance 15.2 6.1 7.2
---------- --------- ---------

Income tax provision (benefit) $ - $ - $ -
========== ========= =========
</TABLE>

35
<PAGE> 38

The Company has provided deferred income taxes at a 40% tax rate which
represents a blended statutory federal and state income tax rate. The
difference between the statutory tax rate and the effective rate of zero
is due primarily to the benefit of the net operating losses generated
that may not be realized in the future. The Company's net deferred tax
assets have been fully reserved due to the uncertainty of future
realization.

On February 8, 1998 the Company, had a change of control event for tax
purposes. This event reduced the amount of net operating losses (NOL's)
that can be used in the future to an estimated $29.4 million as of
February 1998. Of the $29.4 million, approximately $2.0 million can be
used per year through October 2013. Additional NOL's of approximately
$18.0 million were generated from February 8, 1998 to October 3, 1998
that have no restriction on their use. The $18.0 million NOL also expires
in 2013. In 1999 the Company added an additional $2.0 million of NOL from
the February of 1998 calculation and an approximate additional $37.0
million for a current usable NOL of $58.0 million at October 2, 1999 out
of a total NOL of $84.4 million. The $39.0 million from 1999 expires in
2014.

(9) BENEFIT PLANS
-------------

Benefit plan obligations for the Company as of October 2, 1999 and
October 3, 1998 are as follows:

<TABLE>
<CAPTION>
1999 1998
--------- ----------

<S> <C> <C>
Deferred compensation plan $ .9 $ 1.0
Accrued pension obligation 3.3 1.8
Post-retirement obligation .1 1.4
========= ==========
Total $ 4.3 $ 4.2
========= ==========
</TABLE>

Multi-Employer Plans
--------------------

The Company's Michigan subsidiary participates in a multi-employer
defined benefit pension plan, which provides benefits to certain union
employees of the Company. Proportionate share information on any unfunded
benefit obligation is not readily available. The Company, by virtue of
its termination of all operations employees associated with the union and
because of possible future litigation, may have additional liability
associated with the plan. The Company made contributions of under $.1
million in each of the three years.

Union Pension Plan
------------------

As a result of the acquisition of Triangle in 1996 and a smaller
acquisition in 1998, the Company has two defined benefit pension plans
covering various employees whose retirement benefits are subject to
collective bargaining. The benefits are based on years of service
multiplied by the yearly amount of basic retirement income. The Company
has not made the required minimum annual contributions required by
applicable regulations in 1999. Because of the termination of all
employees covered by the plans, the Company is in the process of
obtaining new actuarial calculations of the pension liabilities at
October 2, 1999. The Company intends to terminate these plans in the
future. The Company may have additional future liability associated with
the plans due to possible future litigation.

<PAGE> 39
Other Postretirement Benefit Plans
----------------------------------

In addition to the Company's defined benefit pension plan, one of the
Company's subsidiaries sponsors defined benefit postretirement health
care and life insurance plans that provide postretirement health care and
life insurance benefits to full-time collective bargaining employees who
have met required service periods with the Company and have attained age
requirements as defined in the plan. The plans contain certain
cost-sharing features such as deductibles and coinsurance. The plan is
part of a union contract expiring December 31, 2001. The Company's
liability through December 31, 1001, under the contract portion for
existing retired employees, is less than $.1 million at October 2, 1999.

Retirement Savings Plan
-----------------------

Effective April 1994, the Company adopted a defined contribution
retirement savings plan for substantially all nonbargaining employees.
The provisions of the plan allow employees to contribute 15% of their
salary up to the statutory maximum for pre-tax contributions. The plan
provides for a matching contribution at the discretion of the Company.
Employees are fully vested in the Company's contributions after 3 years.
Through fiscal 1999, the Company has not made any significant cash
contributions to the plan. In fiscal 1999, the Company contributed
approximately 108,000 shares, valued then at $1.00 per share, to the
retirement savings plan. This plan is in the process of being terminated.
At October 2, 1999, these shares are considered to have no value.

Deferred Compensation Plan
--------------------------

An officer and former owner of the Stoll Company is entitled to receive
deferred compensation pursuant to an agreement in effect prior to the
acquisition. The agreement provided for the payment of $250,000 a year
for a five-year period beginning in 1997 and $100,000 a year for a period
of seven years thereafter. The present value of this obligation is
approximately $.9 million and $1.0 million at October 2, 1999 and October
3, 1998 respectively.

Future Liability
----------------

Because of delays in receiving actuarial data that accurately reflects
the impact of the terminations of all active participants on the existing
pension plans, the Company has accrued $3.3 million in connection with
the pension liability. As of December of 1999, the Company intends to
terminate the plans as soon as possible and has initiated actions to
begin the termination process.

(10) SIGNIFICANT VENDORS
-------------------

The Company purchased greater than 90% of its product from five national
distributors in 1999, 1998 and 1987, respectively. In September of 1999,
these national distributors ceased shipments of product to the Company.

(11) RELATED PARTY TRANSACTIONS
--------------------------

The Company had advances and notes to related parties of $.5 and $.5
million at October 2, 1999 and October 3, 1998, respectively. During 1998
the Company eliminated in consolidation $7.4 million that was a 1997
advance to an affiliated company that was purchased by the Company in
1998. During 1998 the Company also took back shares and subordinated
debentures as consideration for notes and advances of $3.7 million.

37
<PAGE> 40

The Company had sales to a retail chain owned by a significant
shareholder of $0.6, $0.9, and $2.3 million for 1999, 1998 and 1997,
respectively, and accounts receivable of $.2 and $2.9 million at October
2, 1999 and October 3, 1998. During 1999, the Company reduced accounts
receivable from the shareholder by $1.1 million in exchange for the
assumption of Company term debt and accrued interest by the shareholder.

The Company purchased display racks from a company fifty per cent owned
by a significant shareholder in the amount of $1.3 million, $2.2 million
and $2.2 million for the years ended October 2, 1999, October 3, 1998,
and September 27, 1997.

See Note 6 for a discussion on related party leases and see Notes 5 and
12 for a discussion on related party debt and related transactions.

(12) CONTINGENCIES AND COMMITMENTS
-----------------------------

(a) Common Stock Subject to Put Agreements
--------------------------------------

In conjunction with the Company's acquisition of Wilmington in
1996, 448,543 shares of common stock are subject to Put
Agreements. In the event the put options are exercised as they
become exercisable, the related payments would be $335,832 in
years 2000 through 2004 and $2,153,884 in total over the next
succeeding nine years. The put of $3,767,450 for 1999 currently is
unpaid and is the subject of a pending lawsuit. The Company may be
precluded from redeeming the common stock subject to Put
Agreements because of its deficit equity position.

On February 8, 1998, the Company and a related party entered into
an Escrow Agreement with the Company's principal bank by which the
Company and the related party contributed approximately $.5
million and $2.7 million, respectively, to an escrow account. This
escrow account was established primarily for funding future put
obligations, as permitted by the Escrow Agreement. The Company's
principal banks have a lien, pledge and security interest in the
escrow funds.

(b) Other Legal Matters
-------------------

The Company has been named as a defendant in various litigation
matters as described below. Management intends to vigorously
defend these matters.

As a result of its cessation of operations, the Company is
conducting bargaining with those labor unions with which it has
Collective Bargaining Agreements. Management is pursuing
negotiations of closing agreements for each such Collective
Bargaining Agreement.

The Company has filed an action against Chas. Levy Circulating Co.
for breach of contract, breach of fiduciary duty and tortuous
interference with prospective economic advantage arising out of
the asset purchase agreement between UNIMAG and Levy. Levy has
filed a counterclaim against the Company. This litigation is
pending in the United States District Court in Chicago, Illinois.
In September 1999, Levy sought a restraining order from the court
restraining UNIMAG from, among other things, selling any of its
assets without first giving Levy a right of first refusal. In
October 1999, the parties in the litigation agreed to the entry of
a preliminary injunction ostensibly providing for the continuance
of the temporary restraining order. Neither of the restraining
orders prevented UNIMAG's Secured Bank Lenders from exercising
their legal rights to sell UNIMAG's assets in order to realize on
their collateral. Accordingly, since September 1999, the Secured
Bank Lenders have conducted and continue

38
<PAGE> 41

to conduct sales of various of UNIMAG's physical assets. The
Company also has a claim pending against LaBelle News for
intentional interference with certain business contracts and
misappropriation of trade secrets; LaBelle News has filed a
counterclaim against the Company. The Company also has filed other
claims against other companies and defendants relating to a
business option agreement and to other refunds, judgments received
and certain receivables.

The Company is evaluating the legal remedies available to it for
the damages it has sustained as a result of the cessations of its
business operations, and the Company intends to vigorously pursue
all such legal remedies.

A subsidiary of the Company has been named as a defendant in a
suit for breach of a lease. A judgment of $400,000 is being
appealed. The Company also is appealing a judgment of $500,000 in
a breach of contract lawsuit. The Company is defendant in another
suit seeking payment of approximately $400,000 pursuant to a
promissory note and two non-competition agreements. The Company is
the subject of other non-material lawsuits relating to payment of
leases and payment of trade payables. The Company is attempting to
negotiate settlements in some of these lawsuits.

The Company is uncertain as to whether it has adequate accrued
loss contingencies for all legal matters. Any current or
threatened litigation matters will not have a significantly
greater material adverse impact on the Company's current adverse
financial position or on its results of operations.

(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of
operations for the three years ended October 2, 1999, October 3, 1998 and
September 27, 1997. The fourth quarter of 1999 includes the effects of
the transactions described in Note 2:
<TABLE>
<CAPTION>

(in millions, except earnings ( loss)
per common share) 1999
----------------------------------------------------------------------
First Second Third Fourth Total
-------- -------- --------- --------- ---------

<S> <C> <C> <C> <C> <C>
NET SALES $ 78.0 $ 64.3 $ 65.4 $ 68.9 $ 276.6
Cost of sales (59.6) (49.8) (50.5) (58.2) (218.1)
-------- -------- --------- --------- ---------
Gross profit 18.4 14.5 14.9 10.7 58.5
Selling, general and administrative
expenses (20.4) (20.6) (16.4) (20.7) (78.1)
Depreciation and amortization (2.0) (2.4) (2.3) (1.9) (8.6)
Impairment loss on goodwill -- -- -- (103.0) (103.0)
-------- -------- --------- --------- ---------
LOSS FROM OPERATIONS (4.0) (8.5) (3.8) (114.9) (131.2)
Interest expense (2.4) (2.5) (2.1) (2.4) (9.4)
Other, net -- -- (1.3) (4.0) (5.3)
-------- -------- --------- --------- ---------
Net income (loss) before tax (6.4) (11.0) (7.2) (121.3) (145.9)
Income tax -- -- -- -- --
NET INCOME (LOSS) $ (6.4) $ (11.0) $ (7.2) $ (121.3) $ (145.9)
======== ======== ======== ========= =========

EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per share - basic and
diluted $ (0.86) $ (1.47) $ (0.96) $ (16.16) $ (19.45)
Weighted average shares outstanding 7.4 7.5 7.5 7.5 7.5

</TABLE>

39
<PAGE> 42
<TABLE>
<CAPTION>

(in millions, except earnings (loss)
per common share) 1998
---------------------------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- ---------

<S> <C> <C> <C> <C> <C>
NET SALES $ 77.3 $ 76.7 $ 82.7 $ 87.4 $ 324.1
Cost of sales (62.0) (61.9) (66.0) (69.6) (259.5)
-------- -------- -------- -------- ---------
Gross profit 15.3 14.8 16.7 17.8 64.6
Selling, general and administrative
expenses (17.6) (18.0) (19.7) (19.7) (75.0)
Depreciation and amortization (2.1) (2.1) (2.7) (3.3) (10.2)
Impairment loss on goodwill -- -- -- (70.0) (70.0)
-------- -------- -------- -------- ---------
LOSS FROM OPERATIONS (4.4) (5.3) (5.7) (75.2) (90.6)
Interest expense (1.8) (1.8) (2.3) (3.7) (9.6)
Other, net -- 8.5 (0.3) 0.3 8.5
-------- -------- -------- -------- ---------
Net income (loss) before tax (6.2) 1.4 (8.3) (78.6) (91.7)
Income tax -- -- -- -- --
NET INCOME (LOSS) $ (6.2) $ (1.4) $ (8.3) $ (78.6) $ (91.7)
======== ======== ======== ======== =========

EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per share - basic and
diluted $ (0.88) $ 0.20 $ (1.12) $ (10.62) $ (12.56)
Weighted average shares outstanding 7.1 7.2 7.4 7.4 7.3

(in millions, except earnings per common
share) 1997
---------------------------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- ---------

<S> <C> <C> <C> <C> <C>
NET SALES $ 74.4 $ 75.7 $ 79.6 $ 68.6 $ 298.3
Cost of sales (58.0) (59.1) (62.1) (54.3) (233.5)
-------- -------- -------- -------- ---------
Gross profit 16.4 16.6 17.5 14.3 64.8
Selling, general and administrative
expenses (17.3) (16.5) (16.1) (22.3) (72.2)
Depreciation and amortization (2.1) (2.2) (2.1) (2.8) (9.2)
-------- -------- -------- -------- ---------
LOSS FROM OPERATIONS (3.0) (2.1) (0.7) (10.8) (16.6)
Interest expense (1.8) (1.8) (1.6) (3.0) (8.2)
Other, net (0.1) 0.1 -- 0.3 0.3
-------- -------- -------- -------- ---------
Net income (loss) before tax (4.9) (3.8) (2.3) (13.5) (24.5)
Income tax -- -- -- -- --
-------- -------- -------- -------- ---------
NET INCOME (LOSS) $ (4.9) $ (3.8) $ (2.3) $ (13.5) $ (24.5)
======== ======== ======== ======== =========

EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per share $ (0.69) $ (0.53) $ (0.32) $ (1.93) $ (3.47)
Weighted average shares outstanding 7.1 7.1 7.1 7.1 7.1
</TABLE>

40
<PAGE> 43

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------

None.

41
<PAGE> 44

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
- ----------------------------------------------------------------------------
REGISTRANT; COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
- --------------------------------------------------------------

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
- ------------------------------------------------------------

The following information is set forth with respect to each person
serving as a director and with respect to the executive officers of the Company:
<TABLE>
<CAPTION>

- - Directors:

Name Age Positions Held with the Company
---- --- -------------------------------

<S> <C> <C>
Ronald E. Scherer 49 Chairman of the Board of Directors
David B. Thompson 59 Vice Chairman/Treasurer
Eugene J. Alfonsi 62 Senior Vice-President
George R. Klein 57 Vice-Chairman
Thaddeus A. Majerek 49 Assistant to the Chairman
Richard Stoll, Sr. 66 None
Nancy Stoll Lyman 39 None
</TABLE>

- - Executive Officer Not Named Above.

John B. Calfee, Jr. 54 Chief Financial Officer

RONALD E. SCHERER, age 49, has been a member of the Board of Directors
of the Company since 1989. He was appointed Chief Executive Officer and
President of the Company in August 1989, and became Chairman of the Board of
Directors in February 1992. In September 1997, Mr. Scherer resigned as President
of the Company, and in December 1998, he resigned as Chief Executive Officer. He
continues to serve as the Chairman of the Company's Board of Directors.
Additionally, Mr. Scherer served as Chairman of the Board of Directors of
Scherer Companies from 1982 to 1993, at which time he was appointed Senior
Chairman of its Board. Other companies under Mr. Scherer's ownership, control or
management have engaged in such businesses as real estate, manufacturing,
pharmaceutical distribution, and data processing.

DAVID B. THOMPSON, age 59, has been a member of the Board of Directors
of the Company since 1988. He was appointed Vice Chairman in November 1996 and
Treasurer and Chief Financial Officer of the Company in August 1989, but ceased
serving as Chief Financial Officer in December 1993. Additionally, Mr. Thompson,
a Certified Public Accountant, was affiliated with Scherer Companies since 1973,
when he was elected as a Director and appointed Treasurer and Chief Financial
Officer. In 1993, Mr. Thompson became Chairman of the Board of Directors and
Chief Executive Officer of Scherer Companies. Currently, Mr. Thompson is an
officer and/or a director of a number of companies owned, controlled or managed
by Mr. Scherer. Mr. Thompson graduated in 1963 with a BS degree in Accounting
from the University of Detroit.

42
<PAGE> 45

EUGENE J. ALFONSI, age 62, has been a member of the Board of Directors
of the Company since 1992 and is currently serving as a Senior Vice-President.
Mr. Alfonsi was the President of the Periodical Division of Scherer Companies
from 1986 to September 1993. In September 1993, Mr. Alfonsi was appointed as the
President and Chief Operating Officer of Scherer. Prior to joining Scherer
Companies in 1986, he owned and managed several wholesale periodical
distribution companies, a business in which he has been employed for most of his
adult life. Mr. Alfonsi graduated in 1963 with a B. A. degree in Economics and
Finance from Milliken University in Illinois.

GEORGE R. KLEIN, age 57, has been a member of the Board of Directors of
the Company since September 1997 and Vice-Chairman since October 1997.
Additionally, he has served as President of the Cleveland, Ohio Division of the
Company since September 1996. Mr. Klein was formerly Vice-Chairman of The George
R. Klein News Co., Central News Co. and Newspaper Sales, Inc. In addition, for
over ten years, he has served as President and Chairman of the Executive
Committee for East Texas Distributing Co., a magazine wholesaler located in
Houston, Texas. Mr. Klein has ownership interests in other magazine wholesale
companies and in other entities, including companies that provide real estate
and management services to Klein. Mr. Klein is a 1964 graduate of Colorado
College with a Bachelor of Science degree and earned an MBA from the University
of Denver in 1965.

THADDEUS A. MAJEREK, age 49, has been a member of the Board of
Directors since 1992. Since 1997, he has served as Assistant to the Chairman of
the Company. From 1988 to February of 1998, Mr. Majerek served as the President
and Chief Executive Officer of Michiana News Service, Inc. in Niles, Michigan.
Mr. Majerek graduated in 1974 with a BS degree in Business and Physical
Education from Eastern Michigan University and in 1989 with an MBA from the
University of Notre Dame. Mr. Majerek has been active in the magazine
distribution business since 1971. He has managed magazine distribution companies
in Utah, Indiana, and Michigan.

RICHARD H. STOLL, SR., age 66, has been a member of the Board of
Directors since September of 1997. Mr. Stoll Sr. was the Chairman of the Board
of Directors and Chief Executive Officer of The Stoll Companies and was employed
by The Stoll Companies from July of 1954 to July of 1997. Mr. Stoll Sr. is a
graduate of Colgate University in 1954 with a degree in history. Mr. Stoll is
the father of Nancy Stoll Lyman.

NANCY STOLL LYMAN, age 39, has been a member of the Board of Directors
since September of 1997. Ms. Lyman was a Director of The Stoll Companies. Ms.
Lyman is the Founder and Managing Consultant for the Executive Development
Group, a management and consulting firm formed in 1991. Previously Ms. Lyman was
the Manager of Management Training and Development at Merrill Lynch and an
Associate with Morgan Stanley in the Fixed Income Division. Ms. Lyman is a
Certified Public Accountant who graduated from Saint Mary's College in Notre
Dame, Indiana, with a Bachelor of Business Administration degree, and from
Boston College with an MBA. Mrs. Lyman is the daughter of Richard H. Stoll, Sr.

During 1999 President, Chief Executive Officer and Director Robert H.
Monnaville and Directors R. L. Richards and William D. Parker resigned from the
Company's Board of Directors. The resignations were for personal reasons and
were not the result of any disagreements with Company policies.

- - Other Executive Officer:

JOHN B. CALFEE, JR., age 54, has served as Chief Financial Officer of
the Company since July 1998. Mr. Calfee is a graduate of Yale University with a
Masters degree from Harvard University Graduate School. Additionally, Mr. Calfee
was a certified public accountant from 1975 to 1988. He started his career at
Ernst & Whinney (now Ernst & Young). Mr. Calfee was Vice President and Chief
Financial Officer of the Essef Corporation from 1989 to 1994. Prior to joining
United Magazine Company, Mr. Calfee was Senior Vice-President and Chief
Financial Officer of TBN Holdings, Inc. Mr. Calfee also served as a lieutenant
in the U.S. Navy.

43
<PAGE> 46

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------

Based solely upon a review of Forms 3, 4 and 5, and amendments thereto,
furnished to the Company, except as set forth below, the Company is not aware of
any director, officer or beneficial owner of more than 10% of the Company's
Common Stock who failed to file, on a timely basis, reports required by Section
16(a) of the Exchange Act during the fiscal year ended October 2, 1999.

44
<PAGE> 47

ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------

EXECUTIVE COMPENSATION
- ----------------------

The following table sets forth the compensation of the Company's Chief
Executive Officer and the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who were serving as executive
officers at the end of the most recently completed fiscal year.
<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE
- --------------------------
Long Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------------- ------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Under- All Other
Compen- Stock lying LTIP Compen-
Name and Fiscal Salary Bonus Sation Award(s) Options/ Payouts sation
Position(s) Year ($) ($) ($) ($) SAR's(#) ($) ($)
- ------------------------- ------ -------- ------ -------- ---------- ----------- ------------- ----------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald E. Scherer, 1999 $133,000 None None None None None None
Chairman of the Board of 1998 $492,000 None None None None None None
Directors 1997 $491,000 None $235,000 None None None None

David B. Thompson, 1999 $204,000 None None None None None None
Treasurer 1998 $225,000 None None None None None None
1997 $224,000 None $75,000 None None None None

Robert H. Monnaville, 1999 $185,000 None None None None None None
Chief Executive Officer, 1998 $200,000 None None None None None None
President 1997 $164,000 None None None None None None

Eugene J. Alfonsi, 1999 $181,000 None None None None None None
Senior Vice President 1998 $196,000 None None None None None None
1997 $180,000 None None None None None None

John B. Calfee, Jr., 1999 $200,304 None None None None None None
Chief Financial Officer 1998 $40,000 None None None None None None
1997 None None None None None None None
</TABLE>

Mr. Scherer, Mr. Thompson and Mr. Alfonsi, although executive officers
of the Company, were not employees of the Company prior to July of 1996. Mr.
Scherer, Mr. Thompson and Mr. Alfonsi were employed by Scherer Companies, and
their services were provided to the Company pursuant to a management agreement
between Scherer Companies and the Company. The employment contracts for Mr.
Scherer, Mr. Thompson and Mr. Alfonsi became effective in August of 1997
following the Annual Meeting of Shareholders. Mr. Scherer did not receive any
compensation during the last three quarters of fiscal 1999, and David B.
Thompson and Eugene J. Alfonsi received lesser amounts of compensation than
called for in the employment agreements due to a 30% reduction in 1999 from the
contract terms.

45
<PAGE> 48

EMPLOYMENT AGREEMENTS
- ---------------------

Effective August of 1997, the Company has entered into three year
employment agreements with Ronald E. Scherer, David B. Thompson, and Eugene J.
Alfonsi, pursuant to which they are to receive annual salaries in the following
respective amounts: $491,000, $224,000 and $195,000. During 1999 Ronald E.
Scherer did not receive compensation during the last three quarters, and David
B. Thompson and Eugene J. Alfonsi received lesser amounts of compensation than
called for in the employment agreements due to a 30% reduction in 1999 from the
contract terms.

DEFERRED COMPENSATION AGREEMENT
- -------------------------------

As part of the acquisition terms with Stoll, the Company has assumed a
deferred compensation agreement with Richard Stoll, Sr., who has been elected to
the Company's board of directors. Under the agreement, the Company will pay Mr.
Stoll the sum of $250,000 per year for a period of five years beginning in 1997
and $100,000 per year for a period of seven years thereafter.

COMPENSATION OF DIRECTORS
- -------------------------

The Company has a policy which provides that each outside director of
the Company will receive the sum of $3,000 for each meeting of the Board of
Directors attended by such director and $2,000 for each Committee Meeting
attended by such director; the Company also plans to provide outside directors
stock options in connection with such meetings, but has not issued any stock
options to date. The Company does pay reasonable out-of-pocket expenses incurred
in the attendance of meetings of the Board of Directors for all directors.

46
<PAGE> 49

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
- ----------------------------------------------------------------------

The following tables set forth, to the knowledge of management, the
number of shares of Common Stock of the Company and the percentage of
outstanding shares of Common Stock of the Company represented thereby, owned by
each person or entity who is the beneficial owner of more than 5% of the shares
of Common Stock of the Company outstanding as of October 2, 1999 and by each
executive officer and director of the Company.
<TABLE>
<CAPTION>

TABLE FOR FIVE PERCENT (5%) SHAREHOLDERS
- ----------------------------------------

Number of Shares of Percentage of
Name and Address Common Stock Common Stock
of Beneficial Owner Beneficially Owned (1) Outstanding (2)
- ------------------------------- ------------------------------------ ---------------
<S> <C> <C>
Ronald E. Scherer 1,731,641(3)(4)(5) 22.58%
Chairman of the Board
of Directors
5131 Post Road
Dublin, OH 43017

Linda (Hayner) Scherer Talbott 1,266,591(5) 16.51%
5131 Post Road
Dublin, OH 43017

Roger L. Scherer Trust 1,059,077(5) 13.81%
F/B/O Ronald E. Scherer,
Dated June 14, 1979
5131 Post Road
Dublin, OH 43017

Roger L. Scherer Trust 1,059,077(5) 13.81%
F/B/O Linda Hayner (Scherer) Talbott,
Dated June 14, 1979
5131 Post Road
Dublin, OH 43017

Richard H. Stoll, Sr. 421,750 (4)(7)(8) 5.50%
Director
6477 Mill Ridge Road
Maumee, OH 43537

George R. Klein 1,169,502(4) 15.25%
Director
1771 East 30th Street
Cleveland, OH 44114

Total 3,322,893 43.32%

</TABLE>

47
<PAGE> 50
<TABLE>
<CAPTION>

TABLE FOR OFFICERS AND DIRECTORS
- --------------------------------

Number of Shares of Percentage of
Name and Address Common Stock Common Stock
of Beneficial Owner Beneficially Owned (1) Outstanding (2)
- ------------------------------------ -------------------------- ---------------------
<S> <C> <C>
Ronald E. Scherer 1,731,641(3)(4)(5) 22.58%
Chairman of the Board
of Directors
5131 Post Road
Dublin, OH 43017

David B. Thompson 2,264(3) .03%
Vice-Chairman, Treasurer,
Director
5131 Post Road
Dublin, OH 43017

Eugene J. Alfonsi 5,000 .07%
Senior Vice President, Director
5131 Post Road
Dublin, OH 43017

Thaddeus A. Majerek 279,212(4)(6) 3.64%
Assistant to the Chairman, Director
2232 S. 11th Street
Niles, MI 49120

John B. Calfee, Jr. 0 0
Chief Financial Officer
5131 Post Road
Dublin, OH 43017

Nancy Stoll Lyman 153,350(4)(7)(8) 2.00%
Director
203 N. Wabash, Suite 1504
Chicago, IL 60601

</TABLE>

48
<PAGE> 51
<TABLE>
<CAPTION>

Number of Shares of Percentage of
Name and Address Common Stock Common Stock
of Beneficial Owner Beneficially Owned (1) Outstanding (2)
- ---------------------------------- ------------------------------ -------------------------------------
<S> <C> <C>
Richard H. Stoll, Sr. 421,750(4)(7)(8) 5.50%
Director
6477 Mill Ridge Road
Maumee, OH 43537

George R. Klein 1,169,502(4) 15.25%
Vice-Chairman, Director
1771 E. 30th Street
Cleveland, OH 44114

All Directors and Executive Officers as 3,762,719 49.06%
a Group (5 persons before the September, 1997
Annual Meeting, 8 persons after the
Annual Meeting)
<FN>

(1) Unless otherwise specified, the beneficial owners of the shares of Common
Stock have sole voting and Investment power over such shares.

(2) The total number of shares of Common Stock of the Company outstanding on
October 2, 1999 is 7,482,614 shares. The total number of beneficial shares of
common stock of the Company outstanding on October 2, 1999 is 7,670,271
shares. Except as noted below, none of the executive officers, directors or
holders of 5% or more of the Company's issued and outstanding Common Stock
hold any options or warrants to acquire Common Stock.

(3) The table does not include 58,900 shares of Common Stock of the Company
held of record by RAP Diversified, Inc. ("RAP"), the sole shareholder of which
is David B. Thompson, Trustee for a trust of which the children of Ronald E.
Scherer are the beneficiaries. Mr. Scherer and Mr. Thompson disclaim any
beneficial ownership of such shares.

(4) The table includes 144,476 (1.88%) shares of Common Stock of the Company
received by Northern in the Exchange Transactions and 52,488 (0.68%) shares of
Common Stock of the Company received by Wholesalers in the Exchange
Transactions. Mr. Scherer has voting power over the shares of Common Stock of
the Company held by these companies by virtue of his position as Chief
Executive Officer of these Companies.

(5) All of such shares of Common Stock of the Company are subject to a
shareholders' voting agreement dated as of October 9, 1996, among Ronald E.
Scherer, certain of the Scherer Affiliates, the Stoll Shareholders, the
Michiana Shareholders and the Klein Shareholder, pursuant to which they have
agreed to act together in the election of directors of the Company until such
time as all principal and interest on the Debentures have been paid in full.
The parties to the agreement have agreed to vote for the election to the Board
of Directors of two Scherer representatives, two Stoll representatives, one
Michiana representative and two Klein representatives.

</TABLE>

49
<PAGE> 52

(6) 49.5% of the stock of OPD is owned by a trust established for the benefit
of Ronald E. Scherer and his family, and 49.5% of the stock of OPD is owned by
a trust established for the benefit of Linda Scherer Talbott, the sister of
Ronald E. Scherer, and her family. The table reflects that both Ronald E.
Scherer and Linda (Hayner) Scherer Talbott beneficially own these shares
because each of them shares voting power over the shares held in such trust.

(7) Includes 279,212 (3.64%) shares of Common Stock of the Company owned by a
trust over which Thaddeus A. Majerek shares voting power as one of the
co-trustees. Does not include 290,609 (3.79%) shares of Common Stock of the
Company owned by another family trust, over which Mr. Majerek disclaims any
beneficial ownership.

(8) Does not include 1,955,418 (25.49%) shares of Common Stock of the Company
held by other members of the Stoll family, over which Nancy Stoll Lyman
disclaims any beneficial ownership.

(9) Does not include 1,687,018 (21.99%) shares of Common Stock of the Company
held by other members of the Stoll family, over which Richard H. Stoll, Sr.
disclaims any beneficial ownership.

50
<PAGE> 53

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

See Note 11 of the United Magazine Company consolidated financial
statements as of October 2, 1999, included in Item 8 of this report.

CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS
- ----------------------------------------------------

There are various conflicts of interest and related party transactions
in connection with the acquisitions and from other contractual arrangements.

CONSULTING AGREEMENT WITH FORMER DIRECTOR
- -----------------------------------------

On June 27, 1994, the Company and Yankee entered into a consulting
agreement with Charles Pastorino, a former officer of Yankee and former director
of the Company. The consulting agreement was for a term of eight years expiring
in 2002. During the first two years, the consultant was paid $4,000 per month.
During years three through five, the consultant was to be paid $5,000 per month.
During years six through eight, the consultant was to be paid $8,500 per year.
The aggregate amount paid during 1998 was $60,000. During 1999, the aggregate
amount paid was $195,000, including a lump-sum payout of $150,000 in July of
1999 for the balance of the contract.

YANKEE AGREEMENTS WITH MDI, LP
- ------------------------------

On May 24, 1993, the Company's wholly owned subsidiary, Yankee,
re-acquired the net operating assets of Yankee from MDI, L.P., a limited
partnership in which Yankee and Magazine Distributors, Inc. ("MDI") were
partners. MDI held more than 5% of the outstanding shares of Common Stock of the
Company. As part of this acquisition, the Company, Yankee, OPD and Northern
entered into non-competition agreements with MDI and with Robert B. Cohen, James
S. Cohen, and Michael Cohen, the majority shareholders of MDI, pursuant to which
MDI and the Cohens agreed not to compete for a period of ten years within a
specified Yankee distribution area. During the first five years of the
agreements, MDI and the Cohens were to receive compensation equal to an
aggregate of 2% of Yankee's agency net sales, payable 1% in cash and 1% in
Common Stock of the Company valued at $1.00 per share for this purpose. During
the last five years of the agreements, MDI and the Cohens were to receive
compensation equal to 1% of Yankee's agency net sales, payable in cash. The
compensation was $767,000 in 1997 and $538,000 in 1996 (one-half paid in cash
and one-half paid in shares).

As part of the sale to MDI and Hudson News of the operating assets of
Yankee, all of the prior non-competition and consulting agreements were
terminated, effective January 12, 1998. See Note 4 of the United Magazine
Company Consolidated Financial Statements as of October 2, 1999 included in Item
8 of this report.

EMPLOYMENT AGREEMENTS
- ---------------------

In connection with the acquisition transactions, effective August of
1997, the Company entered into employment agreements with three officers and
directors, Ronald E. Scherer, David B. Thompson and Eugene J. Alfonsi, for a
term of three years each. Each of these individuals previously had served the
Company as an officer and director without compensation for the four years
preceding the employment contracts. During 1999, Ronald E. Scherer did not
receive any compensation in the last three fiscal quarter, and David B. Thomson
and Eugene A. Alfonsi received lesser amounts of compensation than called for in
the employment agreements due to a 30% reduction in 1999 from the contract
terms. See Item 10, "Executive Compensation."

The Stock Exchange Agreement with Scherer Companies required, as a
condition to closing, that the Company enter into employment agreements with
four individuals, one of who is Ronald E. Scherer, Jr., the son of Ronald E.
Scherer. The employment agreement for Ronald E. Scherer, Jr. was for a term of
three years, was

51
<PAGE> 54

effective August of 1997 and provided for an annual salary of $60,000. At
December 1999, none of the four individuals were employed by the Company.

The Stock Exchange Agreement with Stoll required, as a condition to
closing, that the Company enter into employment agreements with three
individuals, one of whom was Richard Stoll, Jr., who is a significant
shareholder of the Company and who is the son of Richard Stoll, Sr. and the
brother of Nancy Stoll Lyman, both of whom have been elected to the board of
directors. Each such employment agreement was for a term of three years
commencing October 24, 1996 and Mr. Stoll's agreement provided for an annual
salary of $160,000, along with potential bonuses upon the achievement of certain
objectives. At December 1999, none of the three individuals were employed by the
Company, and all contracts have expired. Mr. Stoll's compensation was reduced by
50% effective January 1, 1999; Mr. Stoll has taken legal action against the
Company for contract performance.

The Stock Exchange Agreement with Michiana required, as a condition to
closing, that the Company enter into employment agreements with three
individuals. In accordance with the terms of the Michiana Exchange Agreement,
the Company agreed that, following the acquisition of Michiana, it would enter
into employment agreements, effective October 21, 1996, with certain employees
of Michiana, one of whom is Thaddeus A. Majerek, a director of the Company,
another of whom is David W. Majerek, the brother of Thaddeus A. Majerek, and
another of whom is Michael Gilbert, the brother-in-law of Thaddeus A. Majerek.
The employment agreements were for three-year terms; Thaddeus A. Majerek was to
receive an annual salary of $160,000, David W. Majerek was to receive an annual
salary of $60,000, and Michael Gilbert was to receive an annual salary of
$100,000. At December 1999, none of the three individuals were employed by the
Company, and all contracts have expired.

Klein was managed by Klein Management Company, which was an independent
company owned by director George R. Klein, and which was not acquired by the
Company. For the 1997 period through September of 1997, Klein paid approximately
$527,000 for management services. Effective August of 1997, the Company entered
into a new management agreement with the Klein Management Company pursuant to
which Klein Management Company would provide the services of George R. Klein to
the Company for a term of three years in exchange for an annual management fee
of $159,000, plus the reimbursement of employee benefits. For the fiscal year
ended October 2, 1999, the Company paid $76,833 for management services. In
December of 1999, two other individuals who received employment contracts in
September of 1997 in connection with the Klein management agreement were no
longer employed by the Company.

COMMON OWNERSHIP AND MANAGEMENT
- -------------------------------

The acquisitions of the Scherer Affiliates involved transactions
between related parties, because substantially the same management operated the
Scherer Affiliates and the Company, and because Ronald E. Scherer, the principal
shareholder of the Company, was also, either directly or through family trusts,
the principal shareholder of each of the Scherer Affiliates. The Company took a
number of steps to help assure itself that the acquisitions involving the
Scherer Affiliates were on an arm's length basis and no more favorable to the
Scherer Affiliates than were the transactions with independent unrelated
parties: (1) the acquisition agreements were on substantially the same terms as
the acquisition agreements with Stoll, Michiana, and Klein, independent parties;
(2) the Company used a standard in establishing the purchase price which was
used in connection with other acquisitions in the periodical industry of which
the Company is aware and which was also used in connection with the Stoll,
Michiana and Klein acquisitions (except that Wholesaler's and Scherer Companies'
price was based upon fair market value); (3) the acquisition agreements provided
for an independent audit of the financial statements of the acquired companies
by the Company's independent auditors and adjustments of the purchase prices
based upon the results of the audits; (4) the acquisitions involving the Scherer
Affiliates were reviewed and approved by an independent committee appointed by
the Board of Directors, consisting of

52
<PAGE> 55

Thaddeus A. Majerek, a board member not then employed by the Company; and (5)
the Company received a fairness opinion from the Corporate Finance Department
of the First National Bank of Boston that stated, from a financial point of
view, the consideration to be paid by the Company for Michiana, Stoll, Klein,
OPD, Northern, MacGregor and Scherer Companies, was fair to the shareholders
of the Company. Additionally, Mr. Scherer abstained from all voting of the
Board of Directors with respect to the acquisitions of the Scherer Affiliates.

BENEFICIAL OWNERSHIP OF MICHIANA STOCK
- --------------------------------------

Thaddeus A. Majerek, a director of the Company, is an officer, director
and a beneficiary of a trust, which owned stock of Michiana. Accordingly, he was
not disinterested with respect to the Michiana acquisition. Although Mr. Majerek
engaged in negotiations with the Company with respect to its acquisition of
Michiana, he did not participate in the deliberations of the Board of Directors
of the Company with respect to the acquisition and abstained in all voting by
the Board of Directors of the Company related thereto. Mr. Majerek was appointed
to act as the member of an independent committee of the Board of Directors of
the Company to consider the exchange agreements with the Scherer Affiliates. He
was selected to serve in this capacity because, at the time, he was an outside
director not employed by the Company or any of its subsidiaries.

ESCROW CLOSING
- --------------

On February 9, 1998, when the closing escrow terminated, the Company
completed the acquisition of the stock of Michiana. See Item 1. In such
acquisition, Thaddeus A. Majerek, a director of the Company, received 54,133
shares of Common Stock, $332,500 principal amount of 8% Senior Debentures of the
Company due 2002, and $221,754 principal amount of 10% Subordinated Debentures
of the Company due 2004 in exchange for his shares of common stock of Michiana
exchanged in such transaction.

On February 9, 1998, when the closing escrow terminated, the Company
completed the acquisition of the stock of Stoll. See Item 1. In such
acquisition, Nancy Stoll Lyman, a director of the Company, received 153,350
shares of Common Stock, $1,226,696 principal amount of 8% Senior Debentures of
the Company due 2002, and $662,135 principal amount of 10% Subordinated
Debentures of the Company due 2004 in exchange for her shares of stock of Stoll
exchanged in such transaction. Additionally in such acquisition, Richard H.
Stoll, Sr., a director and more than 5% shareholder of the Company, received
421,750 shares of Common Stock, $3,360,000 principal amount of 8% Senior
Debentures of the Company due 2002, and $1,821,053 principal amount of 10%
Subordinated Debentures of the Company due 2004 in exchange for his shares of
common stock of Stoll exchanged in such transaction.

On February 9, 1998, when the closing escrow terminated, the Company
completed the merger of OPD into the Company, the acquisition of certain assets
of Northern, the acquisition of the stock of Scherer Companies and the
acquisition of certain assets of Wholesalers. See Item 1. In such transactions,
Ronald E. Scherer, Chairman of the Board and Chief Executive Officer of the
Company and more than 5% shareholder of the Company, received 23,451 shares of
Common Stock, $30,994 principal amount of 8% Senior Debentures of the Company
due 2002, and $277,886 principal amount of 10% Subordinated Debentures of the
Company due 2004 in exchange for his shares of common stock of Scherer
Companies. Mr. Scherer also indirectly controls, through his ownership interest
in Northern and Wholesalers, 196,964 shares of Common Stock, $1,730,183
principal amount of 8% Senior Debentures of the Company due 2002, and $779,085
principal amount of 10% Subordinated Debentures of the Company due 2004, which
Northern and Wholesalers received, in the aggregate, in exchange for assets.
Additionally, two Scherer family trusts beneficially owned by Ronald E. Scherer
and Linda (Hayner) Scherer Talbott, who are also beneficiaries, received
1,048,486 shares of Common Stock, $7,330,758 principal amount of 8% Senior
Debentures of the Company due 2002, and $75,272 principal amount of 10%
Subordinated Debentures of the Company due 2004 in the merger of OPD into the
Company.

53
<PAGE> 56

On February 9, 1998, when the closing escrow terminated, the Company
completed the acquisition of the stock of the Klein Companies. See Item 1. In
such acquisitions, George R. Klein, a director and more than 5% shareholder of
the Company received 1,169,502 shares of Common Stock, $10,180,001 principal
amount of 8% Senior Debentures of the Company due 2002, and $5,498,282 principal
amount of the 10% Subordinated Debentures of the Company due 2004 in exchange
for his shares of common stock of the Klein Companies exchanged in such
transaction.

LEASE OF NORTHERN OFFICE AND WAREHOUSE FACILITIES
- -------------------------------------------------

Upon completion of the acquisition from Northern of the assets related
to its wholesale periodical distribution business, the Company entered into a
real estate lease with Northern, pursuant to which the Company leased, for a
three-year term, the approximately 17,000 square foot warehouse and distribution
facility located in Petoskey, Michigan. The lease was a triple net lease, with
the Company paying the cost of all taxes, insurance, utilities and other
expenses, and the annual rental amount is $3.00 per square foot. Because the
stock of Northern was owned by a trust of which Ronald E. Scherer is a primary
beneficiary, he could benefit from the lease arrangement. Management believes
that the terms of this lease were no less favorable to it than it could obtain
from an independent party in an arms-length transaction. In October of 1999 the
facility was vacated, and the lease was assigned to an unrelated party.

LEASE OF CORPORATE OFFICE FACILITIES
- ------------------------------------

Scherer Companies leased approximately 17,400 square feet of office
space for its principal executive offices at 5131 Post Road, Dublin, Ohio, from
NRS Equities, Inc., an entity controlled by Ronald E. Scherer. The lease is for
a term of 10 years, commencing November 1, 1995. The current rental rate is
$14.50 per square foot. Pursuant to its management agreement with the Company,
Scherer Companies subleased office and conference facilities in this building to
the Company. The Company assumed this lease and is now in the process of
either subleasing or terminating it.

AMOUNT OWED BY OPD TO PRINCIPAL SHAREHOLDER
- -------------------------------------------

OPD owed $5,000,000, plus accrued interest, to KDR Limited, an Ohio
limited liability company ("KDR"), whose owners include R. David Thomas, then a
principal shareholder of the Company, and R.L. Richards, subsequently a director
of the Company. This debt was evidenced by a promissory note dated July 31,
1992, from OPD to RDT Corp., and subsequently assigned to KDR, in the principal
amount of $5,000,000 with interest at the rate of 11.75% per annum (the "Note").
The Note was due on demand. The Note was secured by a pledge from OPD of
5,000,000 shares of Common Stock of the Company owned by OPD.

KDR exchanged the Note for a new note from UNIMAG. The new note became
a $4,500,000 Subordinated Debenture. This subordinated debenture is not subject
to the same terms and restrictions on subordinated debentures issued to the
acquisition parties. In consideration for KDR's agreement to the new note, the
Company paid KDR accrued interest, made a $500,000 partial payment of the
principal of the note, and issued to KDR warrants to purchase an additional
187,657 shares of Common Stock of the Company at $12.00 per share.

Additionally, the Company nominated R.L. Richards for election to the
Company's board of directors. Mr. Thomas purchased from the Company an
additional $500,000 of Common Stock of the Company at a purchase price of
$15.00 per share. Mr. Richards resigned as a Director in 1999.

54
<PAGE> 57

DEFERRED COMPENSATION AGREEMENT
- -------------------------------

Stoll had entered into a deferred compensation agreement with Richard
Stoll, Sr., who was elected to the Company's board of directors. Under the
agreement, Stoll will pay Mr. Stoll the sum of $250,000 per year for a period of
five years and $100,000 per year for a period of seven years thereafter. The
Company has assumed this agreement.

STOLL LEASE AGREEMENTS
- ----------------------

Stoll leased a 78,000 square foot facility located in Indianapolis,
Indiana from Richard Stoll, Sr., a director of the Company, for a monthly rental
of $25,000. This lease was on a month-to-month tenancy. As part of the Stoll
Exchange Agreement, the Company agreed to lease this facility from Richard
Stoll, Sr. for a period of 36 months, commencing January 1, 1997, for a monthly
rental of $12,000. The facility was vacated in September of 1999, and the lease
was terminated.

A trust, which has been established for the benefit of the Stoll
family, owns several parcels of real property that are leased to Stoll. The
terms of the only significant lease are as follows: The Jackson, Michigan
facility contains 84,000 square feet and is leased for $300,000 per year. The
lease has approximately four years remaining. The facility was vacated in
October of 1999, and the lease was terminated.

TRANSACTIONS WITH HALL OF CARDS AND BOOKS, INC.
- -----------------------------------------------

Some of the principal shareholders of Michiana, including Thaddeus A.
Majerek, a director of the Company, were also shareholders of Hall of Cards and
Books, Inc. ("HOCAB"), which operates approximately 27 retail stores, including
Hallmark stores, paperback stores and newsstands. HOCAB is a principal customer
of Michiana for books and magazines. In connection with the closing of the
Michiana transaction, the Company and HOCAB entered into a five year exclusive
supply agreement pursuant to which the Company is to be the exclusive supplier
of magazines, books and other related periodical items to HOCAB, at special
prices negotiated in the agreement. These discounts are below the prices charged
other retailers, and HOCAB is expected to benefit by an aggregate of
approximately $165,000 per year from the extra discount received by it. At
September 27, 1997 HOCAB was indebted to the Company in the amount of
$2,012,618. The Company also had other small balances owed to and owed by
affiliates of HOCAB as a result of the Michiana acquisition. During June of
1998, the HOCAB notes receivable, affiliated balances, and related interest were
all cancelled in exchange for the cancellation of $1,400,000 of senior
debentures and $934,256 of subordinated debentures. The Company had net sales to
HOCAB of $0.6, $0.9 and $2.3 million for 1999, 1998 and 1997, respectively, and
had trade accounts receivable of $0.2, $2.9 and $1.8 million at October 2, 199,
October 3, 1998 and September 27, 1997. During 1999 the Company reduced accounts
receivable from HOCAB by $1.1 million in exchange for the assumption of Company
term debt by the shareholders of Michiana.

PURCHASE OF DISPLAY RACKS
- -------------------------

During the years ended October 2, 1999, October 3, 1998 and September
27, 1997, the Company purchased approximately $1.3, $2.2 and $2.2 million
respectively of display racks from a company fifty per cent owned by Ronald E.
Scherer.

55
<PAGE> 58

LOANS FROM MAJEREKS
- -------------------

Thaddeus A. Majerek, who is a director of the Company, and his parents,
Thaddeus S. Majerek and A. Marie Majerek, had loaned various amounts to
Michiana. These loans were assumed by the Company as part of the Michiana
transaction. The loans have been transferred to HOCAB as an offset to other debt
balances.

LEASE OF MICHIANA WAREHOUSE FACILITY
- ------------------------------------

Michiana entered into a lease agreement with a trust established for A.
Marie Majerek, the spouse of Thaddeus S. Majerek, to lease a warehouse building
containing approximately 46,800 square feet of space located in Niles, Michigan.
The lease is for a term of three years, and the rent is $12,000 per month. The
Company has assumed this lease as part of the Michiana transaction. The facility
was vacated on October of 1999, and the lease was terminated.

PURCHASE OF MICHIANA REAL PROPERTY
- ----------------------------------

Michiana leased a 14,200 square foot distribution facility in Fort
Wayne, Indiana from a trust established for A. Marie Majerek. The Company
entered into a real estate purchase contract with the trust to purchase this
property at a price to be established by an independent appraisal firm
acceptable to both the seller and the Company. The facility was vacated in
October of 1999, and the contract has not closed.

GUARANTY OF KLEIN DEBT
- ----------------------

The George R. Klein News Company had guaranteed certain debt incurred
by Northwest News Company ("Northwest") in connection with Northwest's
acquisition of several wholesale periodical distributors. George R. Klein, who
was elected a director of the Company, is a 50% owner of Northwest and benefits
from the transaction; however, Mr. Klein will reimburse the Company if the
guarantee results in a claim against the Company.

LEASES OF FACILITIES
- --------------------

There are a number of facilities that were leased by Klein from George
R. Klein, a director and principal shareholder of the Company, or persons or
entities affiliated with him. The George R. Klein News Co. leased a 98,000
square foot warehouse and distribution facility located on 30th Street in
Cleveland, Ohio and vacated in September of 1998. Central News Company leased a
38,000 square foot warehouse and distribution facility in Akron, Ohio and
vacated in 1997. Newspaper Sales, Inc. leased a 10,000 square foot facility
located on Paynes Avenue in Cleveland, Ohio and vacated in September of 1999.

All prior leases expired on December 31, 1996. The Company entered into
a new three-year lease with Newspaper Sales, Inc. and a month-to-month lease
with a six-month termination clause with The George R. Klein News Co. The new
lease rates were at a market value, which the Company considers reasonable. As
of October 2, 1999, none of these leases were in effect.

56
<PAGE> 59

PART IV
-------

INDEX

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

Page
----

Exhibits 58-60

Financial Statement Schedules 61

Reports on Form 8K 62

57
<PAGE> 60

EXHIBITS
- --------

3.1 Articles of Incorporation of the Registrant (incorporated by reference
from 1989 Form 10-K, Exhibit I). Amended and Restated (incorporated by
reference from the 1997 proxy for the Annual Meeting of Shareholders).

3.2 Code of Regulations of Registrant (incorporated by reference from 1989
Form 10-K, Exhibit II).

4.1 Put Agreement between UNIMAG and Donald E. Garlikov dated July 25, 1992
together with commitment letter between Donald E. Garlikov and Team Logos
Corporation dated July 7, 1992 (incorporated by reference from Exhibit 4
to the Current Report on Form 8-K of the Registrant, filed August 7,
1992).

4.2 Services and Management Agreement with Service News Company and SNPC,
Inc. and Doris R. Marshall together with related Put Agreements and
related documents dated April 5, 1995 (incorporated by reference from the
Current Report in Form 8-KA, Amendment No. 3 to Form 8-K, Current Report
filed April 17, 1995 of the registrant, filed January 13, 1996.)

10.1 Partnership Dissolution and Distribution Plan and Agreement between
UNIMAG, Service News Company and Magazine Distributors, Inc. relative to
the dissolution of MDI Distributors, Limited Partnership, dated May 24,
1993 (incorporated by reference from Exhibit 1 to the Current Report on
Form 8-K of the Registrant, filed June 8, 1993.

10.2 Services and Management Agreement with Service News Company and SNPC,
Inc. and Doris R. Marshall together with related Put Agreements and
related documents dated April 5, 1995 (incorporated by reference from the
Current Report in Form 8-KA, Amendment No. 3 to Form 8-K, Current Report
filed April 17, 1995 of the registrant, filed January 13, 1996.)

10.3 Asset Transfer and Exchange Agreement between United Magazine Company and
Northern News Company, effective July 29, 1996 (incorporated by reference
from the Current Report on Form 8-KA filed September 30, 1996, See
Exhibit 2 (a) therein).

10.4 Stock Transfer and Exchange Agreement among United Magazine Company,
Michiana News Service, Inc. and all of the shareholders of Michiana News
Service, Inc. effective July 30, 1996 (incorporated by reference from the
Current Report on Form 8-KA filed September 30, 1996, See Exhibit 2 (b)
therein).

10.5 Stock Transfer and Exchange Agreement among United Magazine Company, The
Stoll Companies and all of the shareholders of The Stoll Companies
effective July 31, 1996 (incorporated by reference from the Current
Report on Form 8-KA filed September 30, 1996, See Exhibit 2 (c) therein).

10.6 Asset Transfer and Exchange Agreement, subsequently modified to a Stock
Transfer and Exchange Agreement, and subsequently amended to a merger
agreement, between United Magazine Company and Ohio Periodical
Distributors, Inc., effective August 1, 1996 (incorporated by reference
from the Current Report on Form 8-KA filed September 30, 1996, See
Exhibit 2 (d) therein).

10.7 Asset Transfer and Exchange Agreement between United Magazine Company and
Wholesalers Leasing Corp., effective August 2, 1996 (incorporated by
reference from the Current Report on Form 8-KA filed September 30, 1996,
See Exhibit 2 (e) therein).

10.8 Stock Transfer and Exchange Agreement among United Magazine Company,
Scherer Companies and all of the shareholders of Scherer Companies
effective August 2, 1996 (incorporated by reference from the Current
Report on Form 8-KA filed September 30, 1996, See Exhibit 2 (f) therein).

58
<PAGE> 61

10.9 Stock Transfer and Exchange Agreement among United Magazine Company,
Read-Mor Bookstores, Inc. and all of the shareholders of Read-Mor
Bookstores, Inc. effective August 2, 1996 (incorporated by reference from
the Current Report on Form 8-KA filed September 30, 1996, See Exhibit 2
(g) therein).

10.10 Stock Transfer and Exchange Agreement among United Magazine Company, The
George R. Klein News Co., Central News Co., Newspaper Sales Inc. and the
shareholder of all of those companies, effective September 27, 1996
(incorporated by reference from the Current Report on Form 8-K filed
September 27, 1996, See Exhibit 2 therein).

59
<PAGE> 62
<TABLE>
<CAPTION>

21.0 Subsidiaries of the Registrant

- ------------------------------------------ --------------------------------------- ----------------------------------------
Name of Subsidiary Jurisdiction of Name in which
(Current) Incorporation or Organization Business is Conducted
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S> <C> <C>
Michiana News Service, Inc. Michigan Michiana
- ------------------------------------------ --------------------------------------- ----------------------------------------
MacGregor News Service, Inc. Michigan MacGregor
- ------------------------------------------ --------------------------------------- ----------------------------------------
The Stoll Companies Ohio Stoll
- ------------------------------------------ --------------------------------------- ----------------------------------------
Scherer Companies Delaware Scherer Companies
- ------------------------------------------ --------------------------------------- ----------------------------------------
Read-Mor Book Store, Inc. Ohio Read-Mor
- ------------------------------------------ --------------------------------------- ----------------------------------------
The Geo. R. Klein News Co. Ohio Klein
- ------------------------------------------ --------------------------------------- ----------------------------------------
Central News Co. Ohio Klein
- ------------------------------------------ --------------------------------------- ----------------------------------------
Newspaper Sales, Inc. Ohio Klein
- ------------------------------------------ --------------------------------------- ----------------------------------------
Imperial News Co., Inc. (Inactive) Delaware Imperial News
- ------------------------------------------ --------------------------------------- ----------------------------------------
Team Logos Sportstuff, Inc. (Inactive) Ohio Team Logos and Sportstuff
- ------------------------------------------ --------------------------------------- ----------------------------------------
<CAPTION>

- ------------------------------------------ --------------------------------------- ----------------------------------------
Name of Subsidiary Jurisdiction of Name in which
(merged during 1998) Incorporation or Organization Business is Conducted
- ------------------------------------------ --------------------------------------- ----------------------------------------
<S> <C> <C>
Ohio Periodical Distributors, Inc. Ohio OPD
(Merged)
- ------------------------------------------ --------------------------------------- ----------------------------------------
Service News Company* Connecticut Yankee News Company
- ------------------------------------------ --------------------------------------- ----------------------------------------
Sportstuff Marketing, Inc.* (Inactive) Ohio Sportstuff Marketing
- ------------------------------------------ --------------------------------------- ----------------------------------------
UNIMAG I, Inc.* (Inactive) Delaware N/A
- ------------------------------------------ --------------------------------------- ----------------------------------------
Service News Company*
(Acquired January 12, 1996) North Carolina Service News and Wilmington
- ------------------------------------------ --------------------------------------- ----------------------------------------
Triangle News Company*
(Acquired January 23, 1996) Pennsylvania Triangle and Pittsburgh
- ------------------------------------------ --------------------------------------- ----------------------------------------
Central Wholesale, Inc. Pennsylvania Central
- ------------------------------------------ --------------------------------------- ----------------------------------------
Penn News Company, Inc. Pennsylvania Penn
- ------------------------------------------ --------------------------------------- ----------------------------------------
<FN>

*Merged into the Company on March 6, 1998.
</TABLE>

On March 2, 1998, the Company acquired the stock of Central Wholesale,
Inc. and Penn News Company, Inc. Both of these companies were merged into the
Company on March 6, 1998.

27.0 Financial Data Schedules - EDGAR Filing.

60
<PAGE> 63

UNITED MAGAZINE COMPANY
-----------------------

VALUATION AND QUALIFYING ACCOUNTS
---------------------------------

FOR THE YEARS ENDED OCTOBER 2, 1999, OCTOBER 3, 1998, AND SEPTEMBER 27, 1997
----------------------------------------------------------------------------

Charged to
Balance at Charges to other accounts Balance at
beginning costs and - Additions Deductions end of
of period expenses thru acquisition (1) period
------------- ------------- ----------------- ------------ ------------

Allowance for doubtful
accounts
<S> <C> <C> <C> <C> <C>
1997 $ 2,895,000 $ 1,556,566 $ -- $ -- $4,541,566
1998 4,541,566 1,776,419 282,763 -- 6,600,748
1999 6,600,748 -- -- (692,050) 5,908,698

Reserve for gross profit
on sales returns
<S> <C> <C> <C> <C> <C>
1997 10,474,409 -- -- (2,123,375) 10,474,409
1998 8,351,034 -- 4,255,509 (2,331,733) 8,351,034
1999 10,274,810 -- -- (10,274,810) -

<FN>

(1) Charges to this account are for the purposes for which the reserves were
created.
</TABLE>

61
<PAGE> 64

REPORTS ON FORM 8-K
- -------------------

The following reports on Form 8-K, reporting on the items listed below,
were filed during the fourth fiscal quarter of 1999 through December 31, 1999:

On October 13, 1999 the Company filed Form 8-K disclosing that
the Company had ceased wholesale business operations and had agreed to convey to
two other companies certain customer agreements, records, and customer display
fixtures located on the business premises of the Company's customers and that
the Company had closed several facilities. Proceeds from the sale and proceeds
from the collection of the Company's accounts receivable are being used by the
Company's Secured Bank Lenders to pay off secured bank debt and to fund current
expenses.

FILING STATUS
- -------------

Effective October 2, 1994, UNIMAG began filing as an SB filer. The
first such filing was the Company's Form 10-QSB for the first quarter of fiscal
1995. This Form 10-KSB for the fiscal year end September 27, 1997 is the final
filing as an SB filing. The Company's Form 10-Q for the first fiscal quarter of
1998 was filed under regular status.

62
<PAGE> 65
SIGNATURES
----------

Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.

UNITED MAGAZINE COMPANY

Date January 11, 2000 By /s/ Ronald E. Scherer
---------------- --------------------------------------
Ronald E. Scherer, President

Pursuant to the required Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities as stated as of the dates indicated below, and
in the capacities indicated.
<TABLE>
<CAPTION>

Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Ronald E. Scherer Director, Chairman January 11, 2000
- -------------------------------
Ronald E. Scherer

/s/ David B. Thompson Director, Vice January 11, 2000
- ------------------------------- Chairman and Treasurer
David B. Thompson

/s/ Eugene J. Alfonsi Director, January 11, 2000
- ------------------------------- Senior Vice President
Eugene J. Alfonsi

/s/ Thaddeus A. Majerek Director, Assistant to January 11, 2000
- ------------------------------- the Chairman
Thaddeus A. Majerek

/s/ John B. Calfee, Jr. Chief Financial Officer January 11, 2000
- -------------------------------
John B. Calfee, Jr.
</TABLE>

<ARTICLE> 5
<CIK> 0000020469
<NAME> UNITED MAGAZINE COMPANY
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> OCT-02-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 38,000
<ALLOWANCES> 5,900
<INVENTORY> 2,300
<CURRENT-ASSETS> 40,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,900
<CURRENT-LIABILITIES> 170,000
<BONDS> 56,600
0
0
<COMMON> 0
<OTHER-SE> (195,600)
<TOTAL-LIABILITY-AND-EQUITY> 42,900
<SALES> 276,600
<TOTAL-REVENUES> 276,600
<CGS> 218,100
<TOTAL-COSTS> 86,700
<OTHER-EXPENSES> 103,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,400
<INCOME-PRETAX> (145,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (145,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145,900)
<EPS-BASIC> (19.45)
<EPS-DILUTED> (19.45)

</TABLE>