<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


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

                                   FORM 10-QA

                                  Amendment #1


                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)

                                     OF THE

                         SECURITIES EXCHANGE ACT OF 1934

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


                    For the Third Quarter Ended July 04, 1998
                         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



        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:                         No:  X
                           ------                      -------

        Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.


        The Registrant's number of common shares, without par value, outstanding
as of July 04, 1998 was 7,411,314.


        Traditional Small Business Disclosure Format (check one):

                       Yes:                         No:   X
                           ------                      -------


<PAGE>   2


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

                                   FORM 10-QA
                                   ----------

                    FOR THE THIRD QUARTER ENDED JULY 04, 1998
                    -----------------------------------------


                                      INDEX
                                      -----
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                        <C>
PART I - FINANCIAL INFORMATION
------------------------------

Item 1.   Financial Statements:

          Condensed Consolidated Balance Sheets
                 July 04, 1998 and September 27, 1997                        1-2

          Condensed Consolidated Statements of Operations (Unaudited)
                 For the Three Months and Nine Months Ended
                 July 04, 1998 and June 28, 1997                              3

          Condensed Consolidated Statements of Cash Flow (Unaudited)
                 For the Nine Months Ended
                 July 04, 1998 and June 28, 1997                             4-5

          Notes to Condensed Consolidated Financial Statements               6-9

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                              10-18

PART II - OTHER INFORMATION AND SIGNATURES
------------------------------------------

Item 1.   Legal Proceedings                                                   19

Item 2.   Change in Securities                                                19

Item 3.   Default Upon Senior Securities                                      19

Item 4.   Submission of Matters to a Vote of Security Holders                 19

Item 5.   Other Information                                                   19

Item 6.   Exhibits and Reports on Form 8-K                                    19

Signatures                                                                    19
</TABLE>


                                                                               i
<PAGE>   3




                                     UNITED MAGAZINE COMPANY
                                     -----------------------
                                            FORM 10-QA
                                            ----------
                             CONDENSED CONSOLIDATED BALANCE SHEETS
                             -------------------------------------
                            AS OF JULY 04, 1998 AND SEPTEMBER 27, 1997
                           -------------------------------------------
                         (Dollar Amounts in Thousands, Except Share Data)



<TABLE>
<CAPTION>

                                ASSETS                          July 04,     September 27,
                                ------                            1998            1997
                                                               ------------  ------------
                                                                (Unaudited)    (Audited)
                                                              (As Restated)


<S>                                                             <C>          <C>
CURRENT ASSETS:
   Cash                                                         $   1,774    $   2,085
   Trade accounts receivable, net
   -related party                                                   1,579        1,579
   -other                                                          61,911       43,269
   Inventories                                                     25,315       40,534
   Notes receivable from related parties                              431          431
   Advances to related parties                                      2,846        9,243
   Prepaids and other                                               1,404          746
                                                                ---------    ---------
              Total current assets                                 95,260       97,887
                                                                ---------    ---------

PROPERTY AND EQUIPMENT, at cost:
   Land                                                               291          291
   Building and improvements                                        2,115        2,143
   Furniture and equipment                                          7,887        6,167
   Vehicles                                                         4,300        3,932
   Leasehold improvements                                           1,438          977
                                                                ---------    ---------
                                                                   16,031       13,510
   Less - accumulated depreciation and amortization                (5,256)      (3,621)
                                                                ---------    ---------

              Total property and equipment, net                    10,775        9,889
                                                                ---------    ---------

OTHER ASSETS:
   Costs in excess of net assets acquired, net of accumulated
   amortization                                                   158,297      152,601
   Notes receivable from related parties                            2,013        2,228
   Prepaid signing bonuses                                          6,082        3,626
   Other assets, net                                                9,441        5,372
                                                                ---------    ---------
             Total other assets                                   175,833      163,827
                                                                ---------    ---------

             Total assets                                       $ 281,868    $ 271,603
                                                                =========    =========
</TABLE>


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

                                                                               1

<PAGE>   4


                                UNITED MAGAZINE COMPANY
                                -----------------------
                                      FORM 10-QA
                                      ----------
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                        -------------------------------------
                      AS OF JULY 04, 1998 AND SEPTEMBER 27, 1997
                      ------------------------------------------
                   (Dollar Amounts in Thousands, Except Share Data)



<TABLE>
<CAPTION>

             LIABILITIES AND SHAREHOLDERS' EQUITY              July 04,   September 27,
             ------------------------------------               1998         1997
                                                              ---------    ---------
                                                             (Unaudited)   (Audited)
                                                            (As Restated)
CURRENT LIABILITIES:
<S>                                                           <C>          <C>
   Current portion of debt obligations                        $   7,701    $   1,842
   Accounts payable                                             111,526      113,370
   Accrued expenses                                              16,974       13,650
   Accrued interest on debentures                                 2,283        6,091
   Income taxes payable                                               0          827
   Reserve for gross profit on sales returns                      8,398        8,351
                                                              ---------    ---------
              Total current liabilities                         146,882      144,131

LONG-TERM DEBT OBLIGATIONS                                       38,681       22,390

DEBENTURES HELD BY SHAREHOLDERS:
   - Senior                                                      34,920       39,920
   - Subordinated                                                23,060       18,560

DEFERRED COMPENSATION PLAN                                          955        1,077

ACCRUED PENSION OBLIGATION                                        1,720        1,623

POST-RETIREMENT OBLIGATION                                        1,404        1,604

DEALER ADVANCE PAYMENTS AND OTHER                                     0          144
                                                              ---------    ---------
              Total liabilities                                 247,622      229,449
                                                              ---------    ---------

COMMITMENTS AND CONTINGENCIES

COMMON STOCK SUBJECT TO PUT AGREEMENTS,
476,543 shares                                                    4,974        4,833
                                                              ---------    ---------
SHAREHOLDERS' EQUITY:
   Common stock, no par value, 53,250,000 shares
    authorized, 9,204,832 and 4,277,909 issued, and
    7,411,134 and 2,670,437 outstanding (including
    shares subject to Put Agreements), and paid in
    capital                                                     117,686       43,698
   Obligation to issue shares (0 and 4,349,476)                       0       65,242
   Treasury stock, at cost (1,799,295 and 1,613,069 shares)      (3,730)        (101)
   Minimum pension liability adjustment                             (58)         (58)
   Retained deficit                                             (84,626)     (71,460)
                                                              ---------    ---------
              Total shareholders' equity                         29,272       37,321
                                                              ---------    ---------

              Total liabilities and shareholders' equity      $ 281,868    $ 271,603
                                                              =========    =========

</TABLE>


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

                                                                               2
<PAGE>   5

<TABLE>
<CAPTION>


                                UNITED MAGAZINE COMPANY
                                -----------------------
                                      FORM 10-QA
                                      ----------
                       FOR THE THIRD QUARTER ENDED JULY 04, 1998
                       -----------------------------------------
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    -----------------------------------------------
                            JULY 04, 1998 AND JUNE 28, 1997
                            -------------------------------

                    (Dollar Amounts in Thousand, Except Share Data)


                                 3 Months        3 Months     9 Months          9 Months
                                   Ended          Ended         Ended            Ended
                                   1998            1997          1998            1997
                                -----------    -----------    -----------    -----------
                                (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)
                               (As Restated)                 (As Restated)
<S>                             <C>            <C>            <C>            <C>
NET SALES                       $    82,692    $    79,601    $   236,714    $   229,704

COST OF SALES                        66,033         62,039        189,893        179,099
                                -----------    -----------    -----------    -----------

        Gross Profit                 16,659         17,562         46,821         50,605

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES             (19,715)       (16,109)       (55,321)       (49,918)

DEPRECIATION AND                     (2,682)        (1,819)        (6,933)        (6,394)
AMORTIZATION                    -----------    -----------    -----------    -----------

LOSS FROM OPERATIONS                 (5,738)          (366)       (15,433)        (5,707)
                                -----------    -----------    -----------    -----------

OTHER INCOME (EXPENSES), net:
    Interest Expense, net            (2,347)        (1,898)        (5,979)        (5,318)
    Other, net                         (287)           (23)         8,246            131
                                -----------    -----------    -----------    -----------

 Total other income                  (2,634)        (1,921)         2,267         (5,187)
      (expenses), net           -----------    -----------    -----------    -----------

INCOME (LOSS) BEFORE TAXE            (8,372)        (2,287)       (13,166)       (10,894)

INCOME TAXES                           --             --             --             --
                                -----------    -----------    -----------    -----------

NET INCOME (LOSS)               $    (8,372)   $    (2,287)   $   (13,166)   $   (10,894)
                                ===========    ===========    ===========    ===========

WEIGHTED AVERAGE SHARES
OUTSTANDING                       7,443,007      7,069,413      7,229,592      7,061,978
                                ===========    ===========    ===========    ===========

EARNINGS (LOSS) PER SHARE       $     (1.12)   $      (.32)   $     (1.82)   $     (1.54)
                                ===========    ===========    ===========    ===========

</TABLE>


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

                                                                               3

<PAGE>   6


                             UNITED MAGAZINE COMPANY
                             -----------------------
                                   FORM 10-QA
                                   ----------
                    FOR THE THIRD QUARTER ENDED JULY 04, 1998
                    -----------------------------------------
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                 ----------------------------------------------
                            FOR THE NINE MONTHS ENDED
                            -------------------------
                         JULY 04, 1998 AND JUNE 28, 1997
                         -------------------------------

                   (Dollar Amounts in Thousands, Except Share Data)

<TABLE>
<CAPTION>

                                                          9 Months     9 Months
                                                            Ended        Ended
                                                        July 04, 1998 June 28, 1997
                                                          -----------  -----------
                                                          (Unaudited)  (Unaudited)
                                                         (As Restated)

<S>                                                        <C>         <C>
NET CASH (USED IN) OPERATING ACTIVITIES                    $(15,857)   $  3,695

CASH FLOWS FROM INVESTING ACTIVITIES:
   Sale of operating assets                                   2,700           0
   Sale of stock                                                500           0
   Purchase of stock of companies                            (2,552)          0
   Cash used for asset purchase                              (4,050)          0
   Purchases of property and equipment                         (665)       (831)
   Additions of long-term assets                             (1,398)     (1,366)
   Sale of airplane held for resale                               0       1,240
                                                           --------    --------
             Net cash provided by (used in) investing        (5,465)       (957)
               activities                                  --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings under debt obligations                         42,241           0
   Payment of debt obligations                              (19,234)     (3,824)
   Cash used for financing costs                             (1,657)          0
   Redemption of putable shares of common stock                (339)          0
                                                           --------    --------
             Net cash provided by (used in) financing        21,011      (3,824)
               activities                                  --------    --------

NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS                                                    (311)     (1,086)

CASH, beginning of year                                       2,085       2,547
                                                           --------    --------

CASH, end of year                                          $  1,774     $ 1,461
                                                           ========    ========

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

   Cash paid during the period for interest                $  1,785    $  1,653
   Cash paid during the period for taxes                      1,371          23
</TABLE>


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


1998:    The Company received treasury shares back as part of the sale of
         certain operating assets and as part of a litigation settlement. The
         Company issued shares to convert $4,910,000 of debt to equity and
         issued shares valued at $3,000,000 to a related party for $15.00 per
         share in connection with a liability assumed with the acquisition of
         the operating assets of SKS Enterprises, Limited, an Ohio limited
         liability company ("SKS"). The Company received a $2,500,000 note in
         connection with the sale of certain operating assets of Yankee and
         converted $4,500,000 of short-term debt to a subordinated debenture.

1997:    None


                                                                               4
<PAGE>   7

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


                                     Remainder of Page Intentionally Left Blank.

                                                                               5

<PAGE>   8


                             UNITED MAGAZINE COMPANY
                             -----------------------
                                   FORM 10-QA
                                   ----------
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------
                    FOR THE THIRD QUARTER ENDED JULY 04, 1998
                    -----------------------------------------
                                   (UNAUDITED)
                                   -----------


1.      GENERAL
        -------
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements, as restated, contain all adjustments necessary to present
fairly the financial position of United Magazine Company and subsidiaries
(UNIMAG or the Company) as of July 04, 1998 and September 27, 1997, and the
results of its operations and cash flows for the nine months ended July 04, 1998
and June 28, 1997. All such adjustments were of a normal recurring nature. The
results of operations in any interim period are not necessarily indicative of
results for the full year.


2.      THE 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, is engaged in the
wholesale distribution of magazines, books and other periodicals, and operates
some retail bookstores.

The operations for the quarters ended July 04, 1998 and June 28, 1997 were
conducted through its consolidated subsidiaries and also include the impact of
five business combinations, which the Company operated beginning in the fourth
quarter of 1996, and which are more fully discussed below. The following were
the consolidated subsidiaries: Service News Company (of Waterbury, Connecticut),
a Connecticut corporation, doing business as Yankee News Company ("Yankee");
Service News Company (of Wilmington, North Carolina), a North Carolina
corporation ("Wilmington") ; and Triangle News Company, Inc., a Pennsylvania
corporation ("Triangle"). These were merged into the Company on March 6, 1998.

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.

Wilmington is engaged in wholesale magazine and book distribution.

Triangle is engaged in wholesale magazine, newspaper and book distribution.

United Magazine 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).

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

                                                                               6
<PAGE>   9

("Wholesalers"); Scherer Companies, a Delaware corporation ("Scherer
Companies"); and, pursuant to the agreement with Northern (further described
herein), 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.


Michiana, Stoll, Klein, Read-Mor and Scherer Affiliates are collectively known
as the "Acquisition Parties". The defined terms "UNIMAG" and the "Company" also
include the Acquisition Parties in combination with the other entities of
UNIMAG.

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 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.

Shareholders who were entitled to vote more than 50% of the stock of the Company
had agreed to vote their shares in favor of the transactions. Since approval of
the transactions was assured and UNIMAG had effective control over the
operations of the companies, the Acquisition Parties were included in the
consolidated financial statements of UNIMAG.

UNIMAG also owns three inactive subsidiaries, two of which were merged into the
Company on March 6, 1998.

In February of 1998, the Company acquired certain assets and liabilities of SKS,
which had wholesale and retail operations similar to the Company in the States
of Michigan, Ohio, Indiana and Kentucky. SKS was organized by three of the
Company's directors, Ronald E. Scherer, George R. Klein and Richard H. Stoll,
Sr.

On March 2, 1998, the Company acquired the stock of Central Wholesale, Inc.
("Central") and Penn News Company, Inc. ("Penn"), both Pennsylvania
corporations. Both of these were merged into the Company on March 6, 1998.


3.      RESTATEMENT OF FINANCIAL INFORMATION
        ------------------------------------

     The Company has historically estimated its gross margin during interim
financial reporting periods. With the changes within the periodical wholesale
distribution industry, the calculation of gross margin has become more complex.
The Company has undergone a comprehensive review of its estimation process and
has implemented changes for fiscal 1999. The impact on the previously reported
Form 10-Qs has been determined and is part of this restatement.

     In addition to the restatement  of gross margin, the Company's selling
general and administrative expenses have been restated due primarily to the
correction of an error relating to monthly provisions for health insurance cost
and for professional fees.

     For the quarter ended July 04, 1998. the restatement is as follows:
<TABLE>
<CAPTION>
                         As Reported              Charge              Restated
                         -----------              ------              --------
<S>                      <C>                      <C>                 <C>
Net Sales                $ 82,692                 $     0             $ 82,692
Gross Margin               20,538                  (3,879)              16,659
Net (Loss)                 (3,493)                 (4,879)              (8,372)
Loss Per Share           $   (.47)                $  (.65)            $  (1.12)
</TABLE>
     For the nine months ended July 04, 1998, the restatement is as follows:
<TABLE>
<CAPTION>
                         As Reported              Charge              Restated
                         -----------              ------              --------
<S>                      <C>                      <C>                 <C>
Net Sales               $236,714                 $      0            $236,714
Gross Margin              56,499                   (9,678)             46,821
Net (Loss)                  (645)                 (12,521)            (13,166)
Loss Per Share          $   (.09)                $  (1.73)           $  (1.82)
</TABLE>

4.      PROVISION FOR INCOME TAXES
        --------------------------


The provision (benefit) for income taxes for the periods ended July 04, 1998 and
June 28, 1997 is as follows:

<TABLE>
<CAPTION>
                         Three Months   Three Months    Six Months     Six Months
                          Ended 1998     Ended 1997     Ended 1998     Ended 1997
                         ------------   ------------    ----------     -----------

<S>                        <C>            <C>            <C>            <C>
Current                    $     0        $     0        $     0        $     0
Deferred                         0              0              0              0
                           -------        -------        -------        -------
         Total             $     0        $     0        $     0        $     0
                           =======        =======        =======        =======
</TABLE>

The Company has provided deferred income taxes at a 40% tax rate which
represents a blended statutory federal and state income tax rate. The types of
differences between the tax bases of assets and liabilities


                                                                               7
<PAGE>   10

and their financial reporting amounts that give rise to significant portions of
deferred income tax assets and liabilities are: reserve for gross profit on
sales returns, property and equipment asset valuations, deferred compensation,
amortization life of intangibles and certain taxes.

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 and to the utilization of net operating losses to
offset the tax liability on the gain on the sale of Yankee's operating assets.
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 at control event for tax purposes.
This event reduced the amount of net operating losses of (NOL's) that can be
used in the future to an estimated $28.7 million as of February 1998. Of the
$28.7 million, approximately $1.9 million can be used per year through October,
2013. Additional NOL's of approximately $10.0 million were generated from
February 8, 1998 though July 4, 1998. These have no restrictions and expire in
2013.

At September 27, 1997, UNIMAG had income taxes payable of approximately
$827,000. This related primarily to Michiana's tax assessment plus interest for
a total of approximately $1,371,000 due to the Internal Revenue Service as a
result of unfavorable tax settlements relating to years 1994 and prior that was
assumed by UNIMAG, net of certain refund claims. This obligation was paid in
full with the proceeds from the refinancing in February of 1998.

5.       SIGNIFICANT EVENTS
         ------------------

SALE OF CERTAIN OPERATING ASSETS AND LIABILITIES OF YANKEE. In January of 1998,
the Company entered into an agreement to sell certain operating assets and
liabilities of Yankee 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 final selling price will be
determined based partially upon the closing balance sheet of Yankee as of the
transaction date. The Company anticipates that a gain of approximately $7.8
million will be recognized on the sale. The total net sales of Yankee included
in the consolidated financial statements for the quarter ended January 03, 1998
was approximately $8.2 million.


FINANCING ARRANGEMENT. On February 6, 1998, the Company entered into a Credit
Agreement with a group of banks that 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 inventories. Subsequently, the amount available to the Company under
the Revolving Credit Commitment was increased to $33 million. The Revolving
Credit Commitment is scheduled to revert from $33 million to $30 million,
effective October 15, 1998. 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
vehicles and for general corporate purposes. All the loans have variable
interest rates to be designated by the Company based on the prime rate +.5% or
LIBOR +2.5%. The Capital Expenditure Loan and Revolving Credit Commitments
mature in February 2003, and the Term Loan matures in February 2001.

Quarterly principal payments of $416,667 on the term loan began in April 1998.
The outstanding amount of the Capital Expenditure Loan as of February 2000 is
required to be converted to a term loan that will have consecutive equal monthly
principal and interest payments beginning at the time of conversion through the
maturity of the Capital Expenditure Loan. The agreement is collateralized by
substantially all of the

                                                                               8
<PAGE>   11


Company's assets. The agreement contains financial and non-financial covenants,
including, among other restrictions, limitations on capital expenditures,
minimum income before interest, taxes, depreciation and amortization, a minimum
cash flow ratio, minimum net worth and a maximum debt to income before interest,
taxes, depreciation and amortization ratio.



     The Company was required to meet certain financial covenants beginning in
the fiscal quarter ending March 1998. Based on the restated financial results,
the Company would not be in compliance with certain of the covenants; however,
the Company has obtained forbearance agreements through January 31, 1999 for any
non-compliance.



ACQUISITION OF SKS. In February of 1998, the Company acquired certain assets and
liabilities of SKS. The consideration for the acquisition was the assumption of
the related negative net worth of SKS. The total net sales of SKS included in
the consolidated financial statements for eight weeks of ownership during the
quarter ended April 04, 1998 was approximately $8.2 million, an amount
approximately equal to the quarterly revenue lost through the sale of Yankee
operating assets.



                                     Remainder of Page Intentionally Left Blank.

                                                                               9
<PAGE>   12


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

                   ----------------------------------------------------------
                   RESULTS OF OPERATIONS OF UNIMAG FOR THE THREE MONTHS ENDED
                                JULY 04, 1998 AND JUNE 28, 1997
                   ----------------------------------------------------------


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

The results of operations for the quarter ended July 04, 1998 are not indicative
of results from prior quarters, nor are the results for the quarter indicative
of the future.


The following table provides comparative financial information for the third
fiscal quarters of 1998, as restated, and 1997.

<TABLE>
<CAPTION>
                                                        July 04, 1998                    June 28, 1997
                                                ------------------------          ----------------------
                                                       (As Restated)
<S>                                                          <C>                            <C>
 Results of Operations ($000):
    Revenue                                                  $    82,692                    $    79,601
    Gross Margin                                                  16,659                         17,562
    Selling, General and Administrative                           19,715                         16,109
    EBITDA from Operations                                        (3,056)                         1,453
    Net loss                                                      (8,372)                        (2,287)

As a Percent of Revenue:
    Gross Margin                                                    20.1                           22.0
    Selling, General and Administrative                             23.8                           20.2
    EBITDA from Operations                                          (3.7)                           1.8
    Net loss                                                       (10.1)                          (2.9)
</TABLE>


The revenue for the Company for the quarter ended July 04, 1998 was $82,692,000,
an increase of 3.9% over revenue for the quarter ended June 28, 1997. The
increase was due primarily to the impact of revenue from the acquisition of SKS
assets, net of the revenue lost in the sale of Yankee.


During fiscal 1997 and 1998, the Company and the industry experienced reductions
in gross margins from existing chain customers because of new discounts, rebates
and amortization of up-front signing bonuses. The 1998 third quarter gross
margin, as restated, decreased by 1.9% to 20.1%. The decline was due to
continued discounting and to related pricing changes within the industry as
competition and industry consolidation increased.

Selling, general and administrative expenses, as a percent of revenue, increased
by 3.6% to 23.8% in 1998, versus 20.2% in 1997. The increase in selling, general
and administrative expenses was due to the restated increase in monthly
provisions for health insurance costs and professional fees and for costs
incurred in the acquisitions of SKS, Penn and Central.

The acquisition of Michiana, Stoll, Klein, Read-Mor and Scherer Affiliates was
accounted for using purchase price accounting. Accordingly, goodwill was created
in the approximate amount of $154 million.


                                                                              10
<PAGE>   13



Goodwill is being amortized over 40 years at an approximate amount of $1,000,000
per quarter. The increase in depreciation and amortization was caused by
depreciation in assets acquired for SKS, Central and Penn, and by adjustments in
the quarter for year-to-date amortization of display fixtures.

The decline in gross margin of 1.9% plus the 3.6% increase in selling,
general and administrative expenses resulted in a 5.5% decrease in EBITDA
from operations.


The acquisition of Michiana, Stoll, Klein, Read-Mor and Scherer Affiliates was
financed by the issuance of Common Stock of the Company, 8% Senior Debentures in
the aggregate amount of $39,920,000 and 10% Subordinated Debentures in the
aggregate amount of $18,560,000. During the second quarter of 1998, the Company
repaid $5 million of Senior Debentures and added $4.5 million of Subordinated
Debentures. The increase in interest expense for the quarter from $1.6 million
to $2.3 million is primarily attributable to the approximate $40 million in
average bank borrowings under the new loan agreements entered into in February
of 1998.


The reduction in gross margin, the increase in selling, general and
administrative expense, and the increase in the quarter for depreciation,
amortization and interest resulted in an increase in the net loss from $2.3
million to $8.4 million.

Because of loss carryforwards, UNIMAG had no federal income tax expense for the
third quarters of 1998 and 1997. Because of a change of control in February of
1998, the Company anticipates the loss of approximately $40 million of NOL from
the estimated $69 million at January 3, 1998.


The calculation of earnings per common share and weighted average number of
shares outstanding includes the shares issued for Michiana, Stoll, Klein,
Read-Mor and Scherer Affiliates for the periods determined under the respective
agreements. The calculation also includes shares issued in connection with the
purchase of certain operating assets of SKS, shares issued in the conversion of
debt to equity, shares sold during 1998, and shares returned to treasury during
1998. In addition, the calculation of earnings per share reflects the one for
ten reverse split approved by the Shareholders at the 1997 Annual Meeting of
Shareholders.
-------------------------------------------------------------------------------

            RESULTS OF OPERATIONS OF UNIMAG FOR THE NINE MONTHS ENDED
                         JULY 04, 1998 AND JUNE 28, 1997
-------------------------------------------------------------------------------

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

The results of operations for the nine months ended July 04, 1998 are not
indicative of results from prior comparable periods, nor are the results for the
nine months indicative of future periods.


                                     Remainder of Page Intentionally Left Blank.


                                                                              11
<PAGE>   14


The following table provides comparative financial information for the first
nine months of 1998, as restated and 1997.

<TABLE>
<CAPTION>
                                                        July 04, 1998               June 28, 1997
                                                ------------------------         ----------------------
                                                        (As Restated)
<S>                                                         <C>                            <C>
 Results of Operations ($000):
    Revenue                                                 $    236,714                   $    229,704
    Gross Margin                                                  46,821                         50,605
    Selling, General and Administrative                           55,321                         49,918
    EBITDA from Operations                                        (8,500                            687
    Net Loss                                                     (13,166)                      (10,894)

As a Percent of Revenue:
    Gross Margin                                                    19.8                           22.0
    Selling, General and Administrative                             23.4                           21.7
    EBITDA from Operations                                          (3.6                             .3
    Net Loss                                                        (5.6)                         (4.7)
</TABLE>


The revenue for the Company for the nine months ended July 4, 1998 was
$236,714,000, an increase of 3.1% over revenue for the nine months ended June
28, 1997. The increase was due primarily to the impact of revenue from the
acquisition of SKS assets net of the revenue lost from the sale of Yankee.


During fiscal 1997 and 1998, the Company and the industry experienced reductions
in gross margins from existing chain customers because of new discounts, rebates
and amortization of up-front signing bonuses. The 1998 nine months gross margin,
as restated, decreased by 2.2% to 19.8%. The decline was due to continued
discounting and to related pricing changes within the industry as competition
and industry consolidation increased.

Selling, general and administrative expenses, as a percent of revenue, increased
by 1.7% to 23.4% in 1998, versus 21.7% in 1997. The increase in selling, general
and administrative expenses was due to the restated increase in monthly
provisions for health insurance costs and professional fees and for costs
incurred in the acquisitions of SKS, Penn and Central.

The acquisition of Michiana, Stoll, Klein, Read-Mor and Scherer Affiliates was
accounted for using purchase price accounting. Accordingly, goodwill was created
in the approximate amount of $154 million. Goodwill is being amortized over 40
years at an approximate amount of $1,000,000 per quarter. The increase in
depreciation and amortization was caused by depreciation in assets acquired for
SKS, Central and Penn, and by adjustments in the third fiscal quarter for
year-to-date amortization of display fixtures.


The 3.9% decrease in EBITDA from operations was due to the 2.2% decrease in
gross margin and the 1.7% increase in selling, general and administrative
expenses.

The acquisition of Michiana, Stoll, Klein, Read-Mor and Scherer Affiliates was
financed by the issuance of Common Stock of the Company, 8% Senior Debentures in
the aggregate amount of $39,920,000 and 10% Subordinated Debentures in the
aggregate amount of $18,560,000. During the second quarter of 1998, the Company
repaid $5 million of Senior Debentures and added $4.5 million o f Subordinated
Debentures. The increase in interest expense for the nine months from $5.3
million to $6 million is primarily

                                                                              12
<PAGE>   15
attributable to the approximate $40 million in average bank borrowing in the
third fiscal quarter of 1998 under the new loan agreement entered into in
February of 1998.


During the quarter ended April 04, 1998, the Company sold certain operating
assets of Yankee for a gain of approximately $7.8 million. The Company also
generated other income in connection with the discounting of notes payable in
connection with the refinancing.

Including the gain on the sale of the assets of Yankee, the Company had a loss
of $13.2 million for the first nine months of 1998, versus a loss of $10.9
million in the first nine months of 1997.

Because of the loss carryforwards, UNIMAG had no federal income tax expense for
the nine months of 1998 and 1997. Because of a change of control in February of
1998, the Company anticipates the loss of approximately $40 million of NOL from
the estimated $69 million at September 27, 1997.


The calculation of earnings per common share and weighted average number of
shares outstanding includes the shares issued for Michiana, Stoll, Klein,
Read-Mor and Scherer Affiliates for the periods determined under the respective
agreements. . The calculation also includes shares issued in connection with the
purchase of certain operating assets of SKS, shares issued in the conversion of
debt to equity, shares sold during 1998, and shares returned to treasury during
1998. In addition, the calculation of earnings per share reflects the one for
ten reverse split approved by the Shareholders at the 1997 Annual Meeting of
Shareholders.

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

                                    LIQUIDITY
------------------------------------------------------------------------------

EBITDA
------

The Company measures 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 from operations for the third quarter of 1998 was $(3,056,000) versus
$1,453,000 for 1997, a decline of $4,509,000. EBITDA from operations for the
first nine months of 1998 was $(8,500,000) versus $687,000 for 1997, a decline
of $9,187,000. The decline in EBITDA for the third quarter of 1998 and the first
nine months of 1998 was due primarily to the decline in gross margin percent.
The increases in selling, general and administrative expenses, including the
restated increases in monthly provisions for health insurance costs and
professional fees and for costs incurred in the acquisitions of SKS, Penn and
Central, also contributed to the decline.


The 1997 EBITDA was impacted negatively by the industry-wide gross margin
pressures and by payroll costs.


During the second quarter of 1998, the Company made acquisitions of the
operations of two contiguous businesses with combined annualized sales of
approximately $60 million. Due to their contiguous locations, the opportunity
exists for incremental profit increases as that business is assimilated into the
existing Company business during the balance of the fiscal year. During the
second fiscal quarter of 1998, the Company was successful in negotiating margin
recovery programs for a portion of its magazine volume. During the


                                                                              13
<PAGE>   16

fourth fiscal quarter, the Company anticipates additional programs will be
implemented. On a weighted average basis, these programs should improve margins.


The acquisition transactions of the Company in 1996 added $154 million of
goodwill to the Company's assets and $58.5 million of Senior and Subordinated
Debentures to the Company's liabilities. On an annual basis, the Company
anticipates future amortization of approximately $4,000,000 related to this
goodwill. During the second quarter of 1998, the Company entered into new
financing agreements which have resulted in an increase in interest expense.


WORKING CAPITAL
---------------


At September 27, 1997, the Company had a deficit working capital of $46.2
million. At January 03, 1998, the deficit working capital was $50.4 million.
During the quarter ended April 04, 1998, this working capital deficit decreased
by $11.3 million to $39.1 million. While the purchase of certain operating
assets of SKS and the stock of Central and Penn increased the deficit by
approximately $7 million, the sale of certain operating assets of Yankee reduced
the deficit by approximately $4.3 million, and the conversion of debenture
interest to stock reduced the deficit by $4.9 million. The balance of the
reduction in the working deficit was due to cash flow from operations and to
refinancing, which converted short-term debt to long-term debt. The Company also
exchanged $4.5 million of current debt for a $4.5 million subordinated
debenture.

During the quarter ended July 04, 1998, the working capital deficit increased by
approximately $12.5 million to 51.6 million, due primarily to the loss of $8.4
million and to a $3.5 million increase in short-term debt caused, in part, by
the increase in receivables. Approximately $1 million of this working capital
deficit was reflected in increases in accrued debenture interest. The balance
was primarily reflected in decreases in inventory, increases in accounts
receivable and increases in accounts payable and accrued expenses.


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


During the third quarter of 1998, the Company used $2.3 million of cash in
operations. The increase in receivables was offset by a decline in inventory
levels, and both of these changes were impacted by the July 4 date for quarter
end closing. Payables and accrued expenses increased by approximately $6.0
million.


The 1997 increase in cash from operations was caused by increases in current
liabilities used to offset losses, net of depreciation and amortization.

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

During the first nine months of 1998, the Company spent a net of $5.5 million on
investing activities, with the SKS, Central and Penn transactions requiring $6.6
million. The Company generated $3.2 million from the Yankee transaction and the
sale of stock. Purchases of fixed assets used $.7 million cash and the purchase
of long-term assets used $1.4 million cash.

In 1997, the sale of a Company plane acquired in the Stoll transaction provided
$1.2 million in cash, while purchases of fixed assets and long-term assets used
$2.2 million in cash.

                                                                              14

<PAGE>   17

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

During the third quarter of 1998, the Company increased borrowings by $3.4
million and made debt reductions of $.9 million.

During the second quarter of 1998, the Company obtained new borrowings of $38.8
million, and paid $18.1 million of debt with the proceeds. The Company also used
$1.7 million cash for fees associated with the financing and redeemed $255,000
of treasury stock for cash. During the first quarter of 1998, the Company paid
$.3 million of debt.

During 1997, the Company paid $2.7 million of debt in the first quarter and $.7
million of debt in the second quarter, and $.4 million of debt in the third
quarter.

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


During the second quarter of 1998, the Company completed a loan package with two
banks. Notes 5 describes the $38,000,000 loan arrangement obtained by the
Company. See also "Financing Arrangements" below.


CAPITAL REQUIREMENTS
--------------------

During the balance of 1998, the Company expects that its requirements for
capital expenditures will not be significant. Through route consolidations and
greater use of in-store service personnel, the Company anticipates minimal
increases in its delivery fleet. The Company does anticipate additional
expenditures for store fixtures; however, these fixture increases have
historically generated enough additional revenue and gross margin to pay for the
fixture costs within one year.


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

The Company has converted all locations to its computer system, and receivables
and payables can now be managed on a more consistent, company-wide basis. The
Company continues to be engaged in collection efforts to reduce the average days
outstanding, with excess cash proceeds earmarked for reductions in vendor
payables.

OPERATING SYNERGIES
-------------------

The acquisition transactions enable the Company to successfully leverage its
investment in its sophisticated and proprietary SMARTS System (which stands for
Sales Magazine Analysis React Transmit System) for more efficient product
allocation and higher per store revenue. The SMARTS System develops a
Distribution Rate Base ("DRB") which is used by publishers to reach targeted
customer growth. The Company charges for the use of the DRB information, which
offsets the cost of higher levels of service and the use of improved technology.
Management believes that, as the Company continues to expand and as all
locations are converted to the Company's computer system, the SMARTS System,
which provides a unique competitive advantage, will improve same store revenue
as it is introduced to new retail locations and will provide a critical
competitive advantage over other regional wholesalers in obtaining important new
accounts.

In addition to the proprietary SMARTS System, the Company's current and future
high impact marketing programs provide an important competitive advantage by
customizing magazine displays to utilize

                                                                              15
<PAGE>   18

otherwise wasted space in retail stores. The implementation of these programs
has historically enabled the Company to improve sales levels by as much as
20-25% when the programs are introduced into a given retail location. The
Company expects that the introduction of the high impact marketing program to
customers not currently using it will improve sales levels of the Company.


Through the continued consolidation of the Company's warehouse and office
functions, management expects the Company to achieve additional cost savings and
operating efficiencies through the elimination of redundant overhead and the
reduction of required facility square footage. Duplicate administrative and
distribution functions are being eliminated, and the costs and benefits of
technology are being spread over a larger customer base. Additionally, the
consolidation of the businesses of the Company should increase purchasing power
and the ability to negotiate favorable quantity discounts with publishers and
national brokers.

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


The magazine industry has recognized that the loss of margin sustained by
wholesalers in 1996 and 1997 created a problem that needed resolution. During
fiscal 1998, wholesalers, national distributors and publishers developed a
variety of plans to provide margin recovery to wholesalers. Several
of these plans were implemented in the third fiscal quarter of 1998, with the
expectation that eventually there will be an annual margin recovery in excess of
2%.


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


The Company has entered into long-term contracts (generally three years) with
its most important customers. These contracts resulted in gross margin
reductions in 1996, 1997 and 1998. Many of these contracts are up for renewal in
1999, and the impact on the Company at that time is uncertain.


Previously, the Company was named as a defendant in various litigation matters.
Subsequent to September 27, 1997, most of the claims were settled. The Company
believes it has an adequate accrual for these claims, and that any current
pending or threatened litigation matters will not have a material adverse impact
on the Company's future results of operations or financial conditions.

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 whose owners include R.
David Thomas, a principal shareholder of the Company, and R. L. Richards, a
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. 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.

                                                                              16
<PAGE>   19
Interest is payable 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 due over a sixteen-month period.

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 payable in the Company's stock 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 due over a sixteen-month period.


The KDR Debenture contains terms similar to the Subordinated Debenture. The
Holder of the KDR Debenture is not a party to any of the modification described
above.


The issuance of the Company's 1997 annual report to shareholders caused the
Company to be in non-compliance with certain non-financial covenants contained
in the bank agreement. The banks have forborne their available rights and
remedies under the bank agreement until January 31, 1999. As part of the
forbearance agreement, the Company has agreed to not make any cash interest
payments due on the Senior Debentures for the period beginning January 1, 1998
through the maturity of the bank term loan discussed below. By a modification of
the Debenture Agreement, the holders of the Senior Debentures have agreed to
this non-payment.



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 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, subsequently
increased to $33 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 inventories.

The Company, through an investment advisor, is reviewing other opportunities for
additional debt and/or equity financing for the Company. At present, the Company
has not entered into any agreements for any new debt and/or equity placements.

INFLATION
---------

The impact of inflation on wholesale and retail operations is difficult to
measure. The Company cannot easily pass magazine costs on to customers unless
the publisher increases the cover price of the periodical, so it must control
inflation at the point of purchase. The Company is engaged in activities to
control these costs. As a result, the Company believes that the effect of
inflation, if any, on the results of operations and financial condition has been
minor and is expected to remain so in the future.

                                                                              17

<PAGE>   20

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

The sale of magazines, books, and newspapers is subject to minimal seasonality;
however, the second fiscal quarter of the Company is historically the slowest
revenue quarter.

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

The Company continues to address the Year 2000 Issue. The Company has hired two
additional programmers to free up resources needed to update its in-house
software. The Company also has initiated the process of seeking new financial
reporting software to replace existing software, including general ledger,
payroll, fixed assets, employee benefits and other related areas. The costs to
date have not been material and have been expensed when incurred. The Company
seeks to complete these plans during calendar 1998.

The Company must coordinate with customers, suppliers and creditors, and the
Company is in the process of analyzing the size of this coordination. At
present, the Company is not aware of any material event or uncertainty or
related cost that would negatively impact future reported costs in a material
amount.

The Company may develop some competitive advantages from the Year 2000 Issue if
it continues to modify its industry software in areas where its competition may
fall short.

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 outlook for the balance of 1998; the
Company's plans for revenue growth and operational cost reductions; the
Company's plans for future consolidations and changes in properties; the
Company's plans for future financing and refinancing; the Company's future
operational strategies to improve operating cash flow; the Company's plans for
margin recovery; 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 loss of chain
customer business, the ability to obtain required levels of product for all
geographic markets; the acquisition or disposition of additional entities; the
ability of the Company to integrate the financial records and related
information of acquired companies; the ability of the Company to obtain
additional financing; the timing of the implementation of operating synergies;
further changes in the industry, including margin recovery results; 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.


                                                                              18


<PAGE>   21


PART II.       OTHER INFORMATION AND SIGNATURES
               ---------------------------------

ITEM 1.        LEGAL PROCEEDINGS
               -----------------


        Except as set forth below, there have been no material developments in
legal proceedings involving either the Company or its subsidiaries since the
filing of the Company's Form 10-Q for the Quarter Ended April 4, 1998: None


ITEM 2.        CHANGE IN SECURITIES:         None
               --------------------

ITEM 3.        DEFAULT UPON SENIOR SECURITIES:             None
               ------------------------------

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:        None
               ---------------------------------------------------

ITEM 5.        OTHER INFORMATION:            None
               -----------------

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K:
               --------------------------------

        (a)    None


        (b)    Change in 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. The Company's SB filing terminated with the
filing of Form 10-KSB for September 27, 1997. The regular filing status resumed
with Form 10-Q for the quarter ended January 3, 1998.


ITEM 7.        SIGNATURES
               ----------

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

                                          UNITED MAGAZINE COMPANY

                                                    Registrant


                                          /s/ Ronald E. Scherer
                                          ------------------------------------
                                          Ronald E. Scherer
                                          President and Chief Executive Officer



                                          /s/ John B. Calfee, Jr.
                                          ------------------------------------
                                          John B. Calfee, Jr.
                                          Chief Financial Officer

                                                                              19