UNI MARTS INC - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2004

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

FOR THE TRANSITION PERIOD FROM ________ TO ________

COMMISSION FILE NUMBER 1-11556

UNI-MARTS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 25-1311379
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)

477 EAST BEAVER AVENUE
State College, PA 16801-5690
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (814) 234-6000

------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

7,208,725 Common Shares were outstanding at May 7, 2004.

INDEX

2

PART 1 -- FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS

UNI-MARTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)
(UNAUDITED)

(Continued)
3

UNI-MARTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

(CONTINUED)

See notes to condensed consolidated financial statements
4

UNI-MARTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

See notes to condensed consolidated financial statements
5

UNI-MARTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)
(UNAUDITED)

6

UNI-MARTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)
(UNAUDITED)

(CONTINUED)

See notes to condensed consolidated financial statements
7

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

A. FINANCIAL STATEMENTS:

The condensed consolidated balance sheet as of April 1, 2004, the condensed
consolidated statements of operations and the condensed consolidated statements
of cash flows for the quarter and two quarters ended April 1, 2004 and April 3,
2003, respectively, have been prepared by Uni-Marts, Inc. (the "Company")
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
of the Company at April 1, 2004 and the results of operations and cash flows for
all periods presented have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission for the fiscal
year ended September 30, 2003. Certain reclassifications have been made to the
September 30, 2003 financial statements to conform to classifications used in
fiscal year 2004. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the full year.

During fiscal 2003, the Company increased its valuation allowance against
the deferred tax asset because it has been determined that it is more likely
than not that the Company will not be able to utilize the net operating loss
carryforwards ("NOL's"). The increase in the allowance has resulted in a minimum
tax provision in the first two quarters of fiscal 2004.

As part of the Company's plan to divest of stores, in fiscal 2003, the
Company reclassified the assets of 130 stores on its balance sheet as properties
held for sale and classified the income and expense of such stores as
discontinued operations. At April 1, 2004, the Company had 122 remaining stores
classified as assets held for sale on its balance sheet with a net book value of
$40.8 million. The Company continues to operate the stores pending their
successful negotiation of sale or sublease, although pursuant to the merger
agreement with Green Valley Acquisition Co., LLC ("Green Valley") described
below, the Company may not sell or lease a material portion of its assets
without the consent of Green Valley. At April 1, 2004, the Company had 163
stores classified as continuing operations.

B. FUTURE OPERATIONS:

During fiscal year 2002, the Company began a store evaluation and strategic
initiative program, with the retention of financial advisors, to evaluate
operating strategies including the divestiture of certain store locations and
non-operating assets. As a result of this evaluation, during the last twelve
months, the Company closed three convenience stores and sold two convenience
stores, four Choice Cigarette Discount Outlets ("Choice") and two non-operating
locations. In addition, the Company's negotiations with certain buyers to divest
additional store locations led the Board of Directors to consider the sale of
the entire Company when certain potential third party buyers expressed an
interest in acquiring the Company. In fiscal 2003, the Board established an Ad
Hoc Committee, consisting solely of independent directors, that conducted all
negotiations relating to the sale of the Company. The Ad Hoc Committee was
advised separately by independent counsel and financial advisors.

During fiscal 2003, negotiations with certain potential third party buyers
and, subsequently, HFL Corporation, an entity controlled by Henry and Daniel
Sahakian (the Company's Chairman and Chief Executive Officer, and a Director,
respectively), did not come to fruition for a variety of reasons. In the first
quarter of fiscal 2004, the Company's negotiations with another potential third
party buyer were not successfully concluded. In December 2003, the Company
agreed to consider a proposal for the acquisition of the Company by an entity
owned in part by Henry Sahakian, Daniel Sahakian and Ara Kervandjian (the

8

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's President). On January 26, 2004, the Company entered into a definitive
merger agreement with Green Valley, a privately held company formed for the
purpose of acquiring the Company. The business and affairs of Green Valley are
to be managed under the direction of a Board of Managers, which currently
consists of six individuals, three of whom have been appointed by an entity
controlled by Henry Sahakian, Daniel Sahakian and Ara Kervandjian, and three of
whom have been appointed by an entity controlled by individuals who are not
affiliated with the Company. Consummation of the merger is subject to various
conditions, including shareholder approval, and is expected to be completed in
June 2004.

Management believes that cash from operations, available credit facilities
and asset sales will be sufficient to meet the Company's obligations for the
foreseeable future. In the event that the proposed merger with Green Valley is
not consummated and the Company is otherwise unable to consummate the
divestiture of certain store locations on acceptable terms, there is a risk that
the Company could encounter liquidity problems.

The current level of cash flow and available credit facilities allows the
amount of asset sales that are necessary to maintain sufficient liquidity to
meet its obligations to be minimal. However, in the event that the Company's
future financial performance does not meet minimum lender targets, covenant
violations might result and cause the restriction, modification or loss of the
current revolving credit facility. The Company would then need to amend the
current credit facility, obtain a new credit facility from another lender or
rely more heavily on asset sales in order to maintain liquidity.

C. INTANGIBLE AND OTHER ASSETS:

Intangible and other assets consist of the following (in thousands):

Lease acquisition costs are the bargain element of acquired leases and are
being amortized on a straight-line basis over the related lease terms.

Amortization expense for the next five years is as follows (in thousands):

9

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

D. REVOLVING CREDIT AGREEMENT:

On April 20, 2000, the Company executed a 3-year secured $10.0 million
revolving loan agreement (the "Agreement") with $3.5 million available for
letters of credit. Provisions of the Agreement require the maintenance of
certain covenants relating to minimum tangible net worth, interest and
fixed-charge coverage ratios, as measured on a quarterly basis. In addition, the
Agreement places limitations on capital expenditures, additional debt and
payment of dividends. This Agreement bears interest at the Company's option
based on a rate of either prime plus 1.0% or LIBOR plus 3.0%. The blended
interest rate at April 1, 2004 was 4.45%. The Agreement is collateralized by
substantially all of the Company's inventories, receivables, other personal
property and selected real properties. At April 1, 2004, the net book value of
these selected real properties that are pledged as collateral was $2.4 million.
The Company was in compliance with these covenants as of April 1, 2004.
Borrowings of $5.7 million and letters of credit of $3.5 million were
outstanding under the Agreement at April 1, 2004.

During fiscal years 2001 and 2002, the Agreement was amended to increase
the total credit line, extend the maturity date, revise covenants relating to
fixed charge and interest coverage ratios, and provide for additional borrowing
on a seasonal basis. At April 1, 2004, the total credit line available for
borrowings was $15.0 million, with $3.5 million available for letters of credit
and $4.0 million available for the prepayment of debt in connection with the
sale of stores (as discussed below and in Footnote E). Effective April 1, 2003,
the Company amended the Agreement to extend the maturity date to December 31,
2004, extend the $2.0 million seasonal borrowing increase to April 30, 2004, and
revise certain financial covenants. As part of this amendment to the Agreement,
at April 30, 2004 the total credit line available for borrowings was reduced to
$12.0 million, reflecting not only the elimination of the seasonal borrowing
increase but also an additional $1.0 million reduction in anticipation of
reduced borrowing requirements that would result from store divestitures
expected to be completed by that time.

As discussed in Footnote E, in connection with the negotiation of Master
Property Disposition Agreements relating to certain of the Company's term loans,
as of September 30, 2003, the Company entered into an agreement with its
revolving credit lender to provide a $4.0 million sub-limit under the revolving
credit agreement. This sub-limit may be utilized under certain conditions to pay
off term debt associated with stores that are sold. These agreements create a
subordinated interest in the several cross-escrow accounts created pursuant to
the Master Property Disposition Agreements and continue the lien on working
capital assets and certain real property assets created by the original
revolving credit agreement. At April 1, 2004, $5.8 million (including the $2.0
million seasonal borrowing increase that expires on April 30, 2004 and the $1.0
million additional reduction required by the April 1, 2003 amendment) was
available under the Agreement for general working capital purposes and
prepayment of debt.

E. LONG-TERM DEBT:

10

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The mortgage loans are collateralized by $65,049,200 of property, at net
book value, of which $26,099,600 relates to assets classified as held for sale
on the balance sheet. The equipment loans are collateralized by $4,324,700 of
equipment, at net book value, of which $2,384,100 relates to assets classified
as held for sale on the balance sheet.

The Company has classified $32.7 million of its debt as current maturities
relating to assets held for sale. However, $32.1 million becomes due only when
sales of the assets of store locations classified as held for sale on the
balance sheet are consummated and the remaining $600,000 are regularly scheduled
debt payments.

Aggregate maturities of long-term debt (net of loan fee amortization)
during the next five years are as follows (in thousands):

As of September 30, 2003, the Company entered into several Master Property
Disposition Agreements that amended, through October 31, 2004, certain terms of
the various loan agreements originated with and

11

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

now serviced by GE Capital Franchise Finance Corporation, (formerly Franchise
Finance Corporation of America or "FFCA"). Under these agreements, the lenders
will permit the disposition and release of their security interest on certain
real property and equipment assets that are part of the Company's strategic
disposition program. In addition, the lenders will accept reduced prepayment
penalties or yield maintenance payments, and forbear from enforcing any property
fixed charge ratio covenants, corporate fixed charge ratio covenants, or net
worth covenants for the duration of the agreements. The agreements also
establish several cross-escrow accounts, create liens against these accounts,
and continue the liens on certain real property and equipment assets that were
part of the original loan. Simultaneously, the Company entered into an agreement
with its revolving credit lender to provide a $4.0 million sub-limit under its
existing revolving credit agreement. (See Footnote D)

F. RELATED PARTY TRANSACTIONS:

Certain directors and officers of the Company are also directors, officers
or controlling shareholders of other entities from which the Company leases its
corporate headquarters and various store and other locations under agreements
classified as operating leases. In addition, the Company leases store locations
from entities controlled by, or from persons related to, certain directors and
officers of the Company. Aggregate rentals in connection with all such leases
for the two quarters ended April 1, 2004 and April 3, 2003 were $752,400 and
$743,500, respectively.

The Company charges an affiliate for general and administrative services
provided. Such charges amounted to $5,600 in the two quarters ended April 1,
2004 and April 3, 2003, respectively.

On January 26, 2004, the Company entered into a definitive merger agreement
with Green Valley Acquisition Co., LLC, a privately-held company formed for the
purpose of acquiring the Company. The business and affairs of Green Valley
Acquisition Co., LLC are to be managed under the direction of a Board of
Managers, which currently consists of six individuals, three of whom have been
appointed by an entity controlled by Henry Sahakian, Daniel Sahakian and Ara
Kervandjian, and three of whom have been appointed by an entity controlled by
individuals who are not affiliated with the Company. (See Footnote B)

G. RECENT ACCOUNTING PRONOUNCEMENTS:

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 142, "Goodwill and Other Intangible Assets," which requires that such assets
with indefinite lives not be amortized but be tested annually for impairment and
provides specific guidance for such testing. This statement also requires
disclosure of information regarding goodwill and other assets that was
previously not required. In accordance with SFAS No. 142, the Company
discontinued the amortization of goodwill as of October 1, 2002 and completed
its impairment test, using a discounted cash flow approach, during the 2003
second fiscal quarter. As a result, the Company wrote-off its total goodwill
balance of $5,857,000.

The Company adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," effective October 1, 2002. SFAS No. 144
addressed the financial accounting and reporting for the impairment or disposal
of long-lived assets. There was no impact on the Company's consolidated
financial position or results of operations as a result of the adoption of SFAS
No. 144.

The FASB issued Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46"). FIN 46 applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. For variable interest entities
created before February 1, 2003, it becomes applicable for the first annual
period beginning after June 15, 2003.

In January 2004, the FASB revised the Interpretation and issued FIN 46R
which delays the effective date of FIN 46 prior to revision, except for
special-purpose entities, and has separate effective dates for certain public
entities that are small business issuers as defined by the SEC. The Company must
apply FIN 46 or
12

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FIN 46R for special-purpose entities no later than the end of the first
reporting period that ends after December 15, 2003. FIN 46R must be applied to
all entities no later than the end of the first reporting period that ends after
March 15, 2004. Based on management's assessment as of the date of this report,
management has determined that the adoption of FIN 46 has not had an impact on
the Company's financial position or results of operations.

H. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts of cash and short-term debt approximates fair value.
The Company estimates the fair value of its long-term, fixed-rate debt generally
using discounted cash flow analysis based on the Company's current borrowing
rates for debt with similar maturities. The Company estimates the fair value of
its long-term, variable-rate debt based on carrying rates offered for similar
security, terms and maturity.

Fair value of capital lease obligations is estimated based on current rates
offered to the Company for similar debt.

The estimated fair values of the Company's financial instrument liabilities
are as follows (in thousands):

I. DEFERRED REVENUE AND OTHER LIABILITIES:

The Company generally records revenues when products are sold or services
rendered. In certain instances, the Company receives advance payments for
purchase commitments or other services and records revenue from such payments as
purchase commitments are met and services are performed in accordance with the
terms of the related contractual arrangements.

Deferred revenue and other liabilities includes the following (in
thousands):

J. DISCONTINUED OPERATIONS:

During fiscal year 2003, the Company announced plans to divest 130 stores
and reclassified the assets relating to these stores as assets held for sale in
accordance with SFAS 144. At April 1, 2004, the Company had 122 remaining stores
classified as assets held for sale on its balance sheet with a net book value of
$40.8 million. The loss from discontinued operations lessened for the comparable
periods presented below due to the discontinuance of depreciation on assets held
for sale of $778,000 for the quarter ended April 1, 2004 and $1.6 million for
the two quarters ended April 1, 2004. The income and expense relating to these
stores is reported as discontinued operations for all periods presented in the
accompanying financial

13

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

statements and are reported separately from the results of continuing
operations. The Company continues to operate these stores pending successful
negotiation of their sale or sub-lease. See Note A for limitations on the
Company's ability to sell or lease assets without the consent of Green Valley.

The following is a summary of the operating results and net loss of
discontinued operations (in thousands, except per share data):

K. COMMITMENTS AND CONTINGENCIES:

(1) Leases -- The Company leases its corporate headquarters, 120 of its
store locations, certain equipment, offices, and maintenance and storage
facilities. Future minimum lease payments under capital leases and
noncancellable operating leases with initial or remaining terms in excess of one
year at April 1, 2004 are shown below. Some of the leases provide for additional
rentals when sales exceed a specified amount and contain variable renewal
options and escalation clauses.

(2) Contingent Bonus -- If the proposed merger between the Company and
Green Valley, described above in Footnote B (the "Merger"), is completed,
certain executive officers, including Henry Sahakian and Ara Kervandjian who are
principle beneficial owners of Green Valley will be eligible to receive bonuses
pursuant to a Transaction Success Bonus Plan adopted by the Company in 2003. The
aggregate amount of such bonuses available under the plan is estimated to be
between $0 and $500,000 and will be based on several factors, including the
purchase price, the outstanding debt of the Company at closing and transaction
related expenses.

14

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) Litigation -- The Company is involved in litigation and other legal
matters which have arisen in the normal course of business. Although the
ultimate results of these matters are not currently determinable, management
does not expect that they will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.

Between January 28, 2004 and January 30, 2004, three lawsuits were filed on
behalf of stockholders of the Company in Delaware Chancery Court against the
Company, the members of the Board of Directors and, in two actions, against
Green Valley, in connection with the proposed merger between Uni-Marts and Green
Valley. The three lawsuits have now been consolidated into one action.

The relevant complaint alleges that, among other things, Messrs. Henry and
Daniel Sahakian have a conflict of interest with respect to the merger, all the
Company's Directors have breached their fiduciary duties in approving and
structuring the merger, and the price to be paid to the stockholders is grossly
unfair and inadequate. The plaintiffs seek class action certification, an
injunction prohibiting the Company from completing the merger, rescission of the
merger if it is consummated or the award of recessionary damages, compensatory
damages, and an award of attorneys' fees and costs of the lawsuit. The Company
believes that the allegations in the complaints are without merit and intends to
defend the lawsuits vigorously.

L. STOCK BASED COMPENSATION:

The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations for all periods represented. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the fair value of the
Company's common stock at the date of the grant over the amount an employee must
pay to acquire the stock. The following table illustrates the effect on net loss
and net loss per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", to
stock-based employee compensation (in thousands, except per share data):

15

UNI-MARTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

M. CHANGES IN SECURITIES:

During the first two quarters of fiscal 2004, the Uni-Marts, Inc.
Retirement Savings and Incentive Plan purchased 10,202 shares of the Company's
treasury stock for $54,175 to fund its 401(k) retirement plan, resulting in a
decrease of additional paid-in capital of $35,489. The Company issued 2,750
shares of common stock to employees upon the exercise of stock options pursuant
to the Company's 1996 Equity Compensation Plan. The issuance of these shares
resulted in an increase of $4,215 to additional paid-in capital. The net effect
of these transactions for the first two quarters of fiscal 2004 was a decrease
to additional paid-in capital of $31,274.

16

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

OPERATING DATA (RETAIL LOCATIONS ONLY)

Set forth below are selected unaudited consolidated financial data of the
Company for the periods indicated:

17

RESULTS OF OPERATIONS:

RISKS THAT COULD AFFECT FUTURE RESULTS

A number of the matters and subject areas discussed in this Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Form 10-Q that are not historical or current
facts, including statements regarding the Company's plans and strategies or
future financial performance, deal with potential future circumstances and
developments. These forward-looking statements frequently can be identified by
the use of terminology such as "believes," "expects," "may," "should" or
"anticipates" (or the negative or other variations thereof) or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
Although the Company believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge, investors and prospective
investors are cautioned that such statements are only projections and that
actual events or results may differ materially from those expressed in any such
forward-looking statements. In addition to other factors described elsewhere in
this report, the Company's actual consolidated quarterly or annual operating
results have been affected in the past, or could be affected in the future, by
factors, including, without limitation, general economic, business and market
conditions; environmental, tax and tobacco legislation or regulation; volatility
of gasoline prices, margins and supplies; competition and ability to maintain
merchandising margins; the ability to successfully consummate the Company's
divestiture program; the sufficiency of cash balances, cash from operations and
cash from asset sales to meet future cash obligations; volume of customer
traffic; weather conditions; labor costs; the level of capital expenditures; and
costs associated with litigation.

OVERVIEW

The convenience store industry is highly competitive, continues to be
fragmented and has relatively low barriers to entry. In addition, certain
external forces exert pressure on the industry as a whole, and on the Company as
well, including volatile fuel prices and margin pressures on gasoline and
tobacco sales. Further, certain aspects of the convenience store business
operate subject to government regulation, which include such areas as
environmental regulations, franchising laws and tobacco regulations. These
factors have combined during the past few years to constrain industry growth and
to create liquidity pressures.

The Company's revenues are derived primarily from the retail sales of
merchandise and gasoline at its 285 convenience and discount tobacco stores in
Pennsylvania, New York, Delaware and Maryland. The Company's primary competitors
include national chains such as A-Plus and 7-Eleven, and regional chains such
Sheetz, WaWa, Hess, Turkey Hill and Co/Go. In addition, the Company's business
is subject to seasonal influences with sales adversely impacted during the
unfavorable winter weather conditions. In order to meet the competitive and
industry issues, the Company has focused its efforts to improve merchandising
and marketing programs designed to promote convenience and customer service. In
addition, the Company is updating its business systems and technology to
streamline key business processes and continues to evaluate individual store
contributions to the Company's overall performance.

During fiscal year 2002, the Company began a store evaluation and strategic
initiative program, with the retention of financial advisors, to evaluate
operating strategies including the divestiture of certain store locations and
non-operating assets. As a result of this evaluation, during the last twelve
months, the Company closed three convenience stores and sold two convenience
stores, four Choice Cigarette Discount Outlets ("Choice") and two non-operating
locations. In addition, the Company's negotiations with certain buyers to divest
additional store locations led the Board of Directors to consider the sale of
the entire Company when certain potential third party buyers expressed an
interest in acquiring the Company. In fiscal 2003, the Board established an Ad
Hoc Committee, consisting solely of independent directors, that conducted all
negotiations relating to the sale of the Company. The Ad Hoc Committee was
advised separately by independent counsel and financial advisors.

During fiscal 2003, negotiations with certain potential third party buyers
and, subsequently, HFL Corporation, an entity controlled by Henry and Daniel
Sahakian (the Company's Chairman and Chief Executive Officer, and a Director,
respectively), did not come to fruition for a variety of reasons. In the first

18

quarter of fiscal 2004, the Company's negotiations with another potential third
party buyer were not successfully concluded. In December 2003, the Company
agreed to consider a proposal for the acquisition of the Company by an entity
owned in part by Henry Sahakian, Daniel Sahakian and Ara Kervandjian (the
Company's President). On January 26, 2004, the Company entered into a definitive
merger agreement with Green Valley, a privately held company formed for the
purpose of acquiring the Company. The business and affairs of Green Valley are
to be managed under the direction of a Board of Managers, which currently
consists of six individuals, three of whom have been appointed by an entity
controlled by Henry Sahakian, Daniel Sahakian and Ara Kervandjian, and three of
whom have been appointed by an entity controlled by individuals who are not
affiliated with the Company. Consummation of the merger is subject to various
conditions, including shareholder approval, and is expected to be completed in
June 2004.

If, for any reason, the merger is not completed, the Company could
encounter liquidity problems if it is unable to divest of store locations in a
timely manner and on acceptable terms, or encounter adverse changes to its
current bank or vendor relations.

Quarters Ended April 1, 2004 and April 3, 2003

At April 1, 2004, the Company operated 285 stores, which were comprised of
222 Uni-Mart convenience stores and 63 Choice stores. Of these locations, two
were franchised and 235 offered self-service gasoline. In the fiscal quarter,
the Company sold one Uni-Mart convenience store. The Company had five fewer
convenience stores and four fewer Choice stores in operation in the second
fiscal quarter ended April 1, 2004, compared to the second fiscal quarter ended
April 3, 2003.

As part of the Company's plan to divest of stores, in fiscal 2003 the
Company reclassified the assets of 130 stores on its balance sheet as properties
held for sale and classified the income and expense of such stores as
discontinued operations. At April 1, 2004, the Company had 122 remaining stores
classified as assets held for sale on its balance sheet with a net book value of
$40.8 million. Although these stores are now classified as discontinued
operations, the Company intends to continue to operate these stores pending
successful negotiation of their sale or sub-lease. See Note A for limitations on
the Company's ability to sell or lease assets without the consent of Green
Valley.

CONTINUING OPERATIONS

For the second quarter of fiscal 2004, ended April 1, 2004, revenues from
continuing operations of 163 stores were $79.7 million, an increase of $11.6
million, or 16.9%, compared to revenues of $68.2 million for the second quarter
of fiscal 2003. The increase in revenues is primarily the result of a 29.4%
increase in gasoline sales as a result of a 34.5 cent per gallon increase in the
average reported retail price per gallon of petroleum sold at the Company's
locations in the second quarter of fiscal year 2004 compared to the second
quarter of fiscal year 2003. The 34.5 cent per gallon price increase includes
the effect of the Company's change in payment method for Pennsylvania gasoline
taxes of 25.9 cents per gallon. As previously reported, in June 2003 the Company
changed its payment method for gasoline taxes for its Pennsylvania stores and
now includes the gasoline taxes in its average reported retail price per gallon
and its cost of sales. This change in payment method has no effect on gross
profits.

Merchandise sales were $34.2 million, an increase of $1.1 million, or 3.4%,
compared to merchandise sales of $33.1 million recorded in the second quarter of
fiscal 2003. Other income increased by $204,000 to $540,000 in the current
fiscal quarter primarily due to gains on the sale of assets of $154,000.
Merchandise sales at comparable stores increased by 5.9% and gasoline gallons
sold at comparable stores increased by 4.2% in the second quarter of fiscal 2004
compared to the second quarter of fiscal 2003.

Gasoline sales in the second quarter of fiscal year 2004 were $45.0
million, an increase of $10.2 million, compared to gasoline sales of $34.8
million in the second quarter of fiscal 2003. The gasoline sales increase
includes approximately $6.1 million for gasoline taxes for the Company's
Pennsylvania stores which was not included in gasoline sales in the second
quarter of fiscal year 2003.

19

In the current fiscal quarter when compared to the second fiscal quarter of
2003, increases and volatility in wholesale petroleum costs resulted in
increases in retail petroleum prices and contributed to lower gross margins per
gallon sold. The Company continues to evaluate alternatives to mitigate the
volatility in wholesale petroleum costs. Generally, increased wholesale
petroleum costs impacts consumer demand, overall customer traffic and indirectly
affects our merchandise sales. In addition, increases in wholesale cigarette
costs and tax increases on tobacco products have an adverse effect on consumer
demand for such products. These factors generally impact our retail price of
cigarettes, sales volumes, merchandise gross profits and overall customer
traffic.

Gross profits on merchandise sales increased by $297,000 to $10.0 million
in the second quarter of fiscal 2004. Higher merchandise sales contributed to
the 3.1% increase in merchandise gross margins, while the merchandise gross
profit rate was relatively unchanged in the second quarter of fiscal 2004
compared to the same period in fiscal 2003. Merchandise sales increased due
primarily to the effects of increases in costs and tax increases on tobacco
products, offset by fewer stores in operation in the current quarter in
comparison to the second quarter of fiscal 2003.

Gross profits on gasoline sales declined by $286,000, or 9.1%, to $2.9
million in the second quarter of fiscal 2004, compared to gasoline gross margins
of $3.2 million in the second quarter of fiscal 2003. A 2.6% increase in
gasoline gallons sold in the current fiscal quarter was offset by an 11.4%
decline in the gasoline gross profit per gallon sold. Gasoline gallons increased
due in part to milder weather conditions during the current fiscal quarter in
comparison to harsh weather conditions reported in the second quarter of the
prior fiscal year.

The Company reported a 1.5% increase in selling expenses in the first
fiscal quarter to $10.1 million due primarily to higher credit card fees
resulting from higher retail petroleum prices, offset by fewer stores in
operation in the current period in comparison to the same period in fiscal 2003.
General and administrative expense increased by 12.4%, or $246,000, to $2.2
million, compared to $2.0 million, due primarily to a $358,000 increase in legal
fees as a result of expenses related to the Company's merger negotiations,
divestiture plan, and litigation expenses, as well as higher audit fees in the
current fiscal quarter. These increases in general and administrative expenses
were offset by a reduction in expenses related to the Company's improvements to
its information systems. Depreciation and amortization expense declined by
$34,000, or 3.1%, to $1.1 million as the result of lower levels of capital
expenditures and fewer stores in operation in the current fiscal quarter.
Interest expense declined by 2.9%, or $26,000, to $869,000 due to lower
borrowing levels and interest rates in the second fiscal quarter of 2004, in
comparison to the second fiscal quarter of 2003.

For the second quarter of fiscal 2004, losses from continuing operations,
before income taxes and change in accounting principle, were $895,000, compared
to losses from continuing operations, before income taxes and change in
accounting principle, of $775,000 in the second quarter of fiscal 2003. The
Company recorded a provision for income taxes of $1,000, compared to an income
tax benefit of $42,000 in the second quarter of fiscal 2003. The lower tax rate
is due to the Company's increased valuation allowance in fiscal 2003. Losses
from continuing operations before the change in accounting principle were
$896,000, or $0.13 per share, for the second quarter of fiscal 2004, compared to
losses from continuing operations before the change in accounting principle of
$733,000, or $0.10 per share, for the prior year's second fiscal quarter.

DISCONTINUED OPERATIONS

The Company reported a loss from discontinued operations in the second
quarter of fiscal 2004 of $456,000, compared to a loss of $1.4 million in the
second quarter of fiscal 2003. The loss from discontinued operations lessened
primarily as a result of the discontinuance of $778,000 of depreciation on
assets held for sale in the current fiscal quarter. The improvement in the loss
from discontinued operations was also attributed to a decline in selling
expenses of $84,000 due to fewer stores in operation and a $105,000 decline in
interest expense primarily due to lower borrowing levels and interest rates. In
the second quarter of fiscal 2004, there was no disposal of discontinued
operations, compared to a loss of $248,000 on disposal of discontinued
operations for the comparable quarter of fiscal 2003. The Company had no income
tax provision

20

in the current fiscal quarter, compared to an income tax benefit of $84,000 for
the second quarter of fiscal 2003. The lower tax rate is due to the Company's
increased valuation allowance in fiscal 2003. Total losses from discontinued
operations for the second fiscal quarter of 2004 were $456,000, or $0.06 per
share, compared to losses on discontinued operations of $1.5 million, or $0.22
per share, in the second quarter of fiscal 2003.

OTHER

During fiscal 2003, the Company increased its valuation allowance against
the deferred tax asset because it was determined that it is more likely than not
that the Company will not be able to fully utilize the NOL's. This increase in
the reserve has resulted in a minimum tax provision in comparison to a 5.3% tax
benefit in the second quarter of fiscal 2003.

Total net losses for continued and discontinued operations for the second
quarter ended April 1, 2004 were $1.4 million, or $0.19 per share, compared to
total net losses of $2.3 million, or $0.32 per share, for the second quarter of
fiscal 2003.

Two Quarters Ended April 1, 2004 and April 3, 2003

CONTINUING OPERATIONS

Total revenues for the first two quarters of fiscal 2004 were $161.1
million, an increase of $21.8 million, or 15.6%, compared to total revenues of
$139.3 million for the two quarters ended April 3, 2003. Revenues increased due
principally to a $20.1 million, or 28.9%, increase in gasoline sales for the
current reporting period to $89.7 million, compared to $69.6 million for the
first six months of fiscal 2003. The increase in gasoline sales was due to a
35.0 cent per gallon increase in the average reported retail price per gallon of
petroleum sold in the current reporting period, as the result of higher retail
petroleum prices in the first six months of fiscal 2004 and the effects of the
Company's change in its payment method for Pennsylvania gasoline taxes that
became effective in June 2003. For the first six months of fiscal 2004,
merchandise sales increased by $1.6 million, or 2.3%, to $70.5 million, compared
to merchandise sales of $68.9 million in the first six months of fiscal 2003.
Merchandise sales at comparable stores increased by 4.5% and gasoline gallons
sold at comparable stores increased by 2.6% from the first six months of fiscal
2003. Other income increased by $97,000, or 12.9%, to $851,000 for the current
six-month period due primarily to gains on the sale of assets of $146,000,
offset by lower rental income and commissions due to fewer stores in operation.

Increases in wholesale cigarette costs and tax increases on tobacco
products have an adverse effect on consumer demand for such products. These
factors impact our retail price of cigarettes, sales volumes, merchandise gross
profits and overall customer traffic. While the Company attempts to maintain its
gross profit margin on tobacco products by passing these types of price
increases on to its customers, competitive pressures in specific markets prevent
it from doing so. As a result, tobacco unit sales are negatively impacted as
well as the gross profit associated with these products. In the first six months
of fiscal 2004, these factors contributed to higher merchandise sales and a
decline in the merchandise gross margin rate when compared to the first six
months of fiscal 2003.

Gross profits on merchandise sales were $21.1 million, an increase of 1.6%
compared to merchandise gross profits of $20.7 million for the first six months
of fiscal 2003. The increase in merchandise gross profits was primarily the
result of higher merchandise sales levels, offset by a 0.2% decline in the
merchandise gross margin rate for the first two quarters of fiscal 2004.

Gross profits on gasoline sales for the first two quarters of fiscal 2004
declined by 2.9% to $6.1 million compared to gasoline gross profit margins of
$6.2 million reported in the first two quarters of fiscal 2003. The decline was
due to a 3.4% decline in the gross margin rate per gallon sold, offset by a 0.6%
increase in gasoline gallons sold in the first six months of fiscal 2004.

Selling expenses declined by $54,000, or 0.3%, to $20.2 million due to
lower maintenance expenses as a result of fewer stores in operation in the
current period, offset by increases in credit card fees resulting from

21

higher retail petroleum prices. General and administrative expense increased by
14.0%, or $542,000, to $4.4 million for the first six months of fiscal 2004 due
to increased legal and professional fees of $805,000 as a result of expenses
related to merger negotiations, litigation expenses, the Company's divestiture
plan and higher audit fees. These increased expenses were offset by lower
expenses related to the Company's improvements to its information systems and
the non-replacement of corporate personnel in an attempt to reduce general and
administrative overhead. Depreciation and amortization expense for the first six
months of fiscal 2004 declined by 2.9% to $2.2 million due to lower levels of
capital expenditures in recent years and fewer stores in operation. Interest
expense declined by $57,000, or 3.1%, to $1.8 million for the first six months
of fiscal 2004 compared to the first six months of fiscal 2003 due to lower
interest rates and borrowing levels.

For the first six months of fiscal 2004, losses from continuing operations,
before income taxes and change in accounting principle, were $522,000, compared
to losses from continuing operations, before income taxes and change in
accounting principle, of $415,000 for the first six months of fiscal 2003. The
Company recorded a provision for income taxes of $2,000, compared to an income
tax benefit of $23,000 for the first six months of fiscal 2003. Losses from
continuing operations before a change in accounting principle were $524,000, or
$0.07 per share, compared to losses from continuing operations before the change
in accounting principle of $392,000, or $0.05 per share, for the first six
months of fiscal 2003.

DISCONTINUED OPERATIONS

The Company reported a loss from discontinued operations of $118,000 for
the first six months of fiscal 2004, compared to a loss from discontinued
operations of $2.2 million in the first six months of fiscal 2003. The loss from
discontinued operations lessened for the first six months of fiscal 2004 due
primarily to reductions in depreciation and amortization and interest expenses
of $1.7 million, as well as lower selling expenses due to fewer stores in
operation. These positive impacts were offset by lower merchandise and gasoline
gross profits in the first six months of fiscal 2004. In the two quarters ended
April 1, 2004, there was no disposal of discontinued operations, compared to a
loss of $248,000 on disposal of discontinued operations for the comparable
period of fiscal year 2003. The Company recorded an income tax benefit of
$128,000 for the loss on discontinued operations for the first six months of
fiscal year 2003. Total losses on discontinued operations for the six months
ended April 1, 2004 was $118,000, or $0.02 per share, compared to losses of $2.3
million, or $0.32 per share, for the first six months of fiscal 2003.

OTHER

In the first quarter of fiscal 2003, the Company reported a one-time
non-cash charge of $5.5 million, or a loss of $0.78 per share, due to the
adoption of Statement of Financial Accounting Standard No. 142, "Goodwill and
Other Intangible Assets." SFAS 142 requires that assets with indefinite lives
not be amortized but tested annually for impairment and provides specific
guidelines for such testing. In accordance with SFAS 142, the Company
discontinued the amortization of goodwill as of October 1, 2002 and completed
its impairment testing during fiscal year 2003, which resulted in the write-off
of the total goodwill balance.

During fiscal 2004, the Company increased its valuation allowance against
the deferred tax asset because it was determined that it is more likely than not
that the Company will not be able to fully utilize the NOL's. This increase in
the reserve has resulted in a minimum tax provision in the first two quarters of
fiscal 2004 compared to a 5.3% tax benefit in the first two quarters of fiscal
2003.

Total net losses for the two quarters ended April 1, 2004 were $642,000, or
$0.09 per share, compared to total net losses of $8.2 million, or $1.15 per
share, for the two quarters ended April 3, 2003.

LIQUIDITY AND CAPITAL RESOURCES

Most of the Company's sales are for cash and its inventory turns over
rapidly. From time to time, the Company utilizes portions of its cash to acquire
and construct new stores and renovate existing locations.

22

As of April 1, 2003, the Company amended its revolving credit agreement
(the "Agreement") to extend the maturity date to December 31, 2004 and revise
covenants relating to interest and fixed-charge coverage ratios. As part of the
amendment to the Agreement, at April 30, 2004 the total credit line available
for borrowings was reduced to $12.0 million, reflecting not only the elimination
of the seasonal borrowing increase of $2.0 million, but also an additional $1.0
million reduction in anticipation of reduced borrowing requirements that would
result from store divestitures expected to be completed by that time. As of
September 30, 2003, the Company entered into an agreement with its revolving
credit lender to provide a $4.0 million sub-limit under its existing revolving
credit agreement as discussed in Footnotes D and E to the Consolidated Financial
Statements. At April 1, 2004, $5.8 million was available for borrowing under
this Agreement for general working capital and prepayment of debt. In addition,
the Company's liquid fuels tax bond expired in the third fiscal quarter of 2003.
Due to the expiration of the bond, the Company pays the liquid fuels tax on
purchases directly to the vendors within its normal payment terms. The Company
utilizes its working capital credit facility to mitigate the cash flow impact of
the liquid fuels tax bond expiration.

Capital requirements for debt service and capital leases for the remainder
of fiscal year 2004 are approximately $39.2 million, which includes $32.7
million related to the Company's divestiture plan and $5.7 million in revolving
credit that have been classified as current. The Company anticipates capital
expenditures for the remainder of fiscal year 2004 of $1.1 million, funded from
cash flows from operations. These capital expenditures include normal
replacement of store equipment and gasoline-dispensing equipment and upgrading
of the Company's in-store and corporate data processing systems.

Management believes that cash from operations, available credit facilities
and asset sales will be sufficient to meet the Company's obligations for the
foreseeable future. In the event that the proposed merger with Green Valley is
not consummated and the Company is otherwise unable to consummate the
divestiture of certain store locations on acceptable terms, there is a risk that
the Company could encounter liquidity problems.

The current level of cash flow and available credit facilities allows the
amount of asset sales that are necessary to maintain sufficient liquidity to
meet its obligations to be minimal. However, in the event that the Company's
future financial performance does not meet minimum lender targets, covenant
violations might result and cause the restriction, modification or loss of the
current revolving credit facility. The Company would then need to amend the
current credit facility, obtain a new credit facility from another lender or
rely more heavily on asset sales in order to maintain liquidity.

CONTRACTUAL OBLIGATIONS

Below is a summarized list of the Company's contractual obligations
relating to long-term debt, capitalized leases, noncancelable operating leases
and gasoline supply agreements at April 1, 2004 (in thousands):

23

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

(1) The Company has agreements with four gasoline suppliers with terms ranging
from 6 to 15 years. These agreements obligate the Company to purchase
specified quantities of gasoline at market prices from the various suppliers
over the life of the contracts. On an annualized basis, the minimum required
purchases under these agreements total approximately 96.5 million gallons.
The estimated minimum purchase obligations reflected in the table above are
calculated based on the gallon purchase requirements remaining under the
contracts at a current market price of $1.67 per gallon. Although the
Company did not meet the minimum purchase requirements in fiscal year 2003,
the Company does not expect any material change to its obligations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The discussion and analysis of the Company's financial condition and
results of operations are based upon its condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues, and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to self-insured
liabilities, impairment of long-lived assets and income taxes. The Company bases
its estimates on historical experience, current and anticipated business
conditions, the condition of the financial markets, and various other
assumptions that are believed to be reasonable under existing conditions. Actual
results may differ from these estimates.

The Company believes that the following critical accounting policies affect
its more significant judgments and estimates used in the preparation of its
consolidated financial statements:

Self-insurance liabilities -- The Company records estimates for
self-insured worker's compensation and general liability insurance coverage.
Should a greater amount of claims occur compared to what was estimated, or costs
increase beyond what was anticipated, reserves recorded may not be sufficient,
and additional expense may be recorded.

Impairment -- The Company evaluates long-lived assets, including stores,
for impairment quarterly, or whenever events or changes in circumstances
indicate that the assets may not be recoverable. The impairment is measured by
calculating the estimated future cash flows expected to be generated by the
store, and comparing this amount to the carrying value of the store's assets.
Cash flows are calculated utilizing individual store forecasts and total company
projections for the remaining estimated lease lives of the stores being
analyzed. Should actual results differ from those forecasted and projected, the
Company may be subject to future impairment charges related to these facilities.

During the first quarter of fiscal year 2003, the Company adopted Statement
of Financial Accounting Standards ("SFAS") Nos. 142 and 144. SFAS No. 142
requires that assets with indefinite lives not be amortized but tested annually
for impairment and provides specific guidance for such testing. SFAS No. 144
provides additional guidance for impairment testing and determination of when an
asset is considered to be for sale. The Company completed its impairment test
during the second quarter of fiscal 2003 and the adoption of SFAS No. 142
resulted in the write-off of goodwill in the amount of $5,857,000. Furthermore,
in accordance with SFAS No. 144, the Company reclassified assets totaling $40.9
million as part of its divestiture plan to sell or sublet 130 stores as assets
held for sale in the third quarter of fiscal year 2003. At April 1, 2004 the
Company had reclassified as assets held for sale $40.8 million relating to 122
remaining stores that the Company plans to sell or sublet, reclassified the
related debt totaling $32.7 million as current maturities, and classified the
income and expense of such stores as discontinued operations. During fiscal year
2003, the Company recognized a $654,000 loss relating to the future disposal of
certain locations.

Income taxes -- The Company currently has NOL's that can be utilized to
offset future income for federal and state tax purposes. These NOL's generate a
significant deferred tax asset. However, the Company has recorded a valuation
allowance against this deferred tax asset as it has determined that it is more
likely than not that it will not be able to fully utilize the NOL's. Should the
Company's assumptions regarding the utilization of these NOL's change, it may
reduce some or all of this valuation allowance, which would result in the
recording of an income tax benefit.

24

ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company uses its revolving credit facility and its mortgage and
equipment loans to finance a significant portion of its operations. These
on-balance sheet financial instruments, to the extent they provide for variable
rates of interest, expose the Company to interest rate risk resulting from
changes in the LIBOR or prime rate.

To the extent that the Company's financial instruments expose the Company
to interest rate risk, they are presented in the table below. The table presents
principal cash flows and related interest rates by year of maturity for the
Company's revolving credit facility, mortgage loans and equipment loans at April
1, 2004.

The carrying amounts of cash and short-term debt approximate fair value.
The Company estimates the fair value of its long-term, fixed-rate debt generally
using discounted cash flow analysis based on the Company's current borrowing
rates for debt with similar maturities. The Company estimates the fair value of
its long-term, variable-rate debt based on carrying amounts plus unamortized
loan fees associated with the debt.

FISCAL YEAR OF MATURITY
(DOLLAR AMOUNTS IN THOUSANDS)

25

ITEM 4 -- CONTROLS AND PROCEDURES

CEO and CFO Certifications. Appearing as Exhibits 31.1 and Exhibit 31.2 of
this Quarterly Report are two certifications, one by each of our Chief Executive
Officer and our Chief Financial Officer (the "Section 302 Certifications"). This
Item 4 of our Quarterly Report contains information concerning the evaluation of
the Company's disclosure controls and procedures and matters regarding our
internal controls that are referred to in the Section 302 Certifications. This
information should be read in conjunction with the Section 302 Certifications
for a more complete understanding of the topics referred to in the Section 302
Certifications.

Evaluation of Our Disclosure Controls and Procedures. The Securities and
Exchange Commission (the "SEC") requires that as of the end of the quarter
covered by this Report, the CEO and the CFO must evaluate the effectiveness of
the design and operation of our disclosure controls and procedures and report on
the effectiveness of the design and operation of our disclosure controls and
procedures.

"Disclosure controls and procedures" mean the controls and other procedures
that are designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934 (the
"Exchange Act"), such as this Quarterly Report, is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
promulgated by the Securities and Exchange Commission (the "SEC"). Disclosure
controls and procedures are also designed with the objective of ensuring that
such information is accumulated and communicated to our management, including
the CEO and CFO, as appropriate to allow timely decisions regarding required
disclosure.

Evaluation of Our Internal Control Over Financial Reporting. The SEC also
requires that the CEO and CFO certify certain matters regarding our internal
control over financial reporting.

"Internal control over financial reporting" means the process designed by,
or under the supervision of, our CEO and CFO, and implemented by management and
other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that: (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the issuer are being made only in accordance with
authorizations of management and directors of the issuer; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the issuer's assets that could have a
material effect on the financial statements.

Among the matters our CEO and CFO must certify in the Section 302
Certifications are whether all "significant deficiencies" or "material weakness"
in the design or operation of our internal control over financial reporting that
are likely to adversely affect our ability to record, process, summarize and
report financial information have been disclosed to our auditors and the Audit
Committee of our Board of Directors. "Significant deficiencies," according to
auditing literature, are deficiencies in the design or operation of internal
control over financial reporting that could adversely affect a company's ability
to record, process, summarize and report financial data consistent with the
assertions of management in a company's financial statements. A "material
weakness" is defined in the auditing literature as a particularly serious
reportable condition where the design or operation of one or more internal
control over financial reporting components does not reduce to a relatively low
level the risk that misstatements caused by error or fraud may occur in amounts
that would be material in relation to the financial statements and not be
detected within a timely period by employees in the normal course of performing
their assigned functions. A "material weakness" constitutes a greater deficiency
than a "significant deficiency, but an aggregation of significant deficiencies
may constitute a material weakness in a company's internal control over
financial reporting.

Limitations on the Effectiveness of Controls. The Company's management,
including the CEO and CFO, does not expect that our disclosure controls and
procedures or our internal controls will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only

26

reasonable, as opposed to absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within an entity have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and
Procedures. As required by Rule 13a-15(b), the Company's management, including
our CEO and CFO, conducted an evaluation as of the end of the period covered by
this report, of the effectiveness of the Company's disclosure controls and
procedures. Based on that evaluation, the CEO and CFO concluded that our
disclosure controls and procedures are effective to provide reasonable assurance
that the disclosure controls and procedures will meet their objectives.

Changes in Internal control over financial reporting. As required by Rule
13a-15(d), the Company's management, including the CEO and CFO conducted an
evaluation of the Company's internal control over financial reporting to
determine whether any changes occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting. Based on that
evaluation, there has been no such change during the period covered by this
report.

27

PART II -- OTHER INFORMATION

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

(A) EXHIBITS

3.1 Amended and Restated Certificate of Incorporation of the
Company (Filed as exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the period ended July 4, 2002 and
incorporated herein by reference thereto).
3.2 Amended and Restated By-Laws of the Company (Filed as
exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the period ended July 4, 2002 and incorporated herein by
reference thereto).
11 Statement regarding computation of per share loss.
31.1 Certification of the Chairman and Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chairman and Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

(B) REPORTS ON FORM 8-K

The Company filed a report on Form 8-K on January 23, 2004, furnishing its
financial results for the fiscal 2004 first quarter ended January 1, 2004.

The Company filed a report on Form 8-K on January 27, 2004 as amended on
February 4, 2004, reporting that (i) it had signed a merger agreement whereby
the Company agreed to merge with and into Green Valley Acquisition Co., LLC, a
privately-held company formed for the purpose of acquiring the Company (the
"Merger") and (ii) the signing of the merger agreement may be deemed to be, and
the consummation of the Merger will result in, a change of control of the
Company.

The Company filed a report on Form 8-K on March 5, 2004, clarifying
information reported by the newswires.

28

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.

UNI-MARTS, INC.
(Registrant)
--------------------------------------------------------

Date May 14, 2004 /s/ HENRY D. SAHAKIAN
--------------------------------------------------------
Henry D. Sahakian
Chairman of the Board
(Principal Executive Officer)

Date May 14, 2004 /s/ N. GREGORY PETRICK
--------------------------------------------------------
N. Gregory Petrick
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
(Principal Financial Officer)

29

UNI-MARTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX