10-Q 1 d91264e10-q.txt FORM 10-Q FOR QUARTER ENDED DECEMBER 24, 2000 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: December 24, 2000 OR [ ] 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: 2-38375 United Petroleum Corporation ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3103494 --------------------------------------------- ------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 5800 N.W. 74th Avenue, Miami, Florida 33166 -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (305) 592-5101 -------------------------------------------------------------- (Registrant's telephone number, including area code) N/A -------------------------------------------------------------- (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 ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 4,951,601 shares of voting common stock, par value $.01 per share, and 148,492 shares of preferred stock, Series A, 9%, $.01 par value, as of September 3, 2000. 2 UNITED PETROLEUM CORPORATION INDEX

PART I FINANCIAL INFORMATION PAGE NO. -------- ITEM 1. Financial Statements Condensed consolidated balance sheets -December ~~June 4~~24, 2000 and ~~August~~September 293, ~~1999...............................................~~2000 4-5 Condensed consolidated statements of operations -Sixteen ~~Twelve and forty~~ weeks ended ~~June~~December 424, 2000 and ~~June~~December 619, 1999.~~....................~~ 6 ~~Consolidated statement of changes in stockholders' equity - Forty weeks ended June 4, 2000................................................. 7~~ Condensed consolidated statements of cash flows -Sixteen ~~Forty~~ weeks ended ~~June~~December 424, 2000 and ~~June~~December 619, 1999~~................................~~ 87-98 Notes to condensed consolidated financial statements~~..............................~~ 109-12 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~...................................~~ 1213-1615 PART II OTHER INFORMATION ITEM 13. Legal Proceedings~~........................................................~~ 1615 ITEM 6. Exhibits and Reports on Form 8-K~~.........................................~~ 15-16

3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements UNITED PETROLEUM CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)

~~JUNE~~DECEMBER 424, ~~AUGUST~~SEPTEMBER 293, ASSETS 2000 ~~1999~~2000 ------ ------------ ------------ (Unaudited) * ~~Current assets:~~ Cash and cash equivalents $ 681,209 $ 381,226 Accounts receivable, net of allowances of $65~~,000~~ in ~~2000~~2001 and ~~1999~~2000 1,~~593~~269 ~~762~~1,205 Receivable from affiliated company ~~204~~340 --159 Inventories 43,~~447~~942 34,~~826~~685 Prepaid expenses and other current assets ~~631~~80 ~~483~~481 ------------ ------------ Total current assets 6,~~943~~840 57,~~109~~756 Property and equipment, net 15,~~879~~139 315,~~794~~229 ~~Net assets held for sale 614 --~~ Goodwill and other intangible assets 3520,~~696~~635 --20,982 Investment in Farm Stores Grocery, Inc. 27244 11251 Deferred financing costs 1,~~170~~022 541,103 Other assets ~~165~~74 35169 ------------ ------------ $ 6043,~~494~~954 $ 945,~~003~~490 ============ ============

(continued on page 5) 4 UNITED PETROLEUM CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (IN THOUSANDS)

~~JUNE~~DECEMBER 424, ~~AUGUST~~SEPTEMBER 293, LIABILITIES AND STOCKHOLDERS' EQUITY 2000 ~~1999~~2000 ------------------------------------ ------------ ------------ (Unaudited) * Current liabilities: Accounts payable ~~$ 9~~10,~~157~~736 ~~$ 4~~10,~~972~~592 Accrued expenses 2,~~294~~491 1,~~674~~893 Accrued preferred stock dividends ~~703~~590 --169 Due to stockholders 2,720 2,177 Current portion of long-term debt 122,~~531~~884 9422,980 ------------ ------------ Total current liabilities 1339,~~685~~421 637,~~740~~811 Long-term debt, net of current portion ~~22,298~~765 ~~106~~764 Other long-term liabilities ~~131~~350 ~~224~~353 ------------ ------------ Total liabilities 3640,~~114~~536 738,~~070~~928 Stockholders' equity: Preferred stock, Series A, 9%, $.01 par value, 300,000 shares authorized, ~~140~~148,~~000~~492 shares issued and outstanding 2 --2 Common stock, $.01 par value, 10,000,000 shares authorized, 54,~~000~~951,~~000~~601 shares issued and outstanding 50 --50 Additional paid-in capital 2814,~~355~~183 --14,183 Accumulated deficit (410,~~027~~817) --(7,673) ------------ ------------ Total stockholders' equity 243,~~380~~418 --6,562 ----------- -~~-----------~~ ~~Division equity~~ -- ~~1,933~~ ----------- ~~------------~~ $ 6043,~~494~~954 $ 945,~~003~~490 ============ ============

* Condensed from audited financial statements. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 UNITED PETROLEUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

SIXTEEN WEEKS ENDED -------------------------- -----~~---------------------~~ ~~TWELVE~~DECEMBER ~~WEEKS~~24, ~~ENDED~~DECEMBER ~~FORTY~~19, ~~WEEKS~~2000 ~~ENDED~~1999 ------------~~--------------~~ ------------~~--------------~~ ~~JUNE 4, JUNE 6, JUNE 4, JUNE 6, 2000 1999 2000 1999~~ Sales $ 3438,~~067~~216 $ 2633,~~514~~708 ~~$ 99,072 $ 84,078~~ Cost of sales 2731,~~379~~230 2026,~~456~~227 ~~78,656 63,494~~ ----------- -~~----------~~ ----------- -~~----------~~ Gross profit 6,~~688~~986 67,~~058~~481 ~~20,416 20,584~~ Operating expenses: Store operating expenses 56,~~077~~320 46,~~834~~262 ~~16,620 16,423~~ Depreciation and amortization ~~664~~610 ~~142~~326 ~~1,741 384~~ General & administrative expenses 1,~~144~~937 1,~~177~~564 ~~4,012 3,738~~ ----------- -~~----------~~ ----------- -~~----------~~ Total 68,~~885~~867 68,~~153~~152 ~~22,373 20,545~~ ----------- -~~----------~~ ----------- -~~----------~~ Income (loss) from operations (~~197~~1,881) (95671) ~~(1,957) 39~~ Other income (expense): Interest expense (~~635~~949) (7290) ~~(1,557) (26)~~ Interest income 3 2326 ~~30 95~~ Other income ~~(expense)~~100 4819 ~~97 40~~ Equity in earnings (loss) of ~~Farm~~FSGI ~~Stores Grocery, Inc. 13 33 16~~ (208) 14 Gain (loss) from disposition of ~~property~~properties ~~and~~12 ~~equipment~~(13) ~~122 37 47 23~~ ----------- -~~----------~~ ----------- -~~----------~~ Net income (loss) (~~646~~2,723) $ (9915) ~~(3,324) $ 151 =========== ===========~~ Preferred stock dividends (~~291~~421) (~~703~~121) ------------ ------------ Net income (loss) applicable to common stockholders $ (~~937~~3,144) $ (41,~~027~~036) ============ ============ Earnings (loss) per share Basic ~~and diluted~~ earnings (loss) per share $ (0.1963) $ (0.8121) Weighted average number of shares 54,~~000~~952 54,~~000~~952

The accompanying notes are an integral part of these condensed consolidated financial statements. 6 UNITED PETROLEUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

~~Series~~SIXTEEN AWEEKS ~~Preferred~~ENDED ~~Stock Common Stock~~ ------------------------------- DECEMBER 24, DECEMBER 19, 2000 1999 ------------ ------------ ~~Shares~~Cash ~~Amount~~flows ~~Shares~~from ~~Amount~~operating ~~Balance~~activities: atNet ~~August~~income ~~29,~~(loss) ~~1999~~$ --(2,723) $ --(915) --Adjustments $for non--cash ~~Settlement~~items: Depreciation and amortization 609 326 Amortization of ~~partners'~~deferred ~~interest~~loan incosts ~~Division~~81 Equity --in --(earnings) --loss --in ~~FSCI~~FSG ~~common~~7 ~~stock~~(14) ~~outstanding~~Loss --(gain) --on 10disposal of fixed assets (12) 13 Change in assets and liabilities: Accounts receivable (64) (667) Receivable from affiliated company (181) Inventories 743 (410) Prepaid expenses 401 57 Other assets 95 (337) Accounts payable 144 1,~~000~~720 10Accrued expenses 598 (212) Other long-term liabilities (3) (218) ------------ ------------ Cash provided by (used in) operating activities (305) (657) ------------ ------------ ~~FSCI~~Cash ~~balance~~flows atfrom ~~November~~investing ~~12,~~activities: ~~1999~~Payments ~~prior~~for toacquisitions, ~~merger~~net --of --cash 10acquired (19,~~000~~936) 10Purchases ~~Acquisition~~ of ~~FSCI~~property, ~~common~~plant ~~stock~~and --equipment -- (~~10,000~~169) (10322) ~~UPC~~Proceeds ~~preferred~~from ~~and~~disposition ~~common~~of ~~stock~~property, ~~issued~~plant toand ~~FSCI~~equipment ~~shareholder~~9 ~~for~~14 ~~the~~------------ ~~acquisition~~------------ ofNet ~~FSCI~~cash ~~70,000~~used 1in 2investing activities (160) (20,~~400,000~~244) 24------------ ~~Issuance~~------------ ofCash ~~new~~flows ~~preferred~~from ~~and~~financing ~~common~~activities: ~~stock~~Proceeds tofrom ~~UPC's~~issuance ~~pre~~of long-~~merger~~term ~~shareholders 70~~debt,~~000~~ 1net 2of loan costs 21,~~600,000~~751 26Principal ~~Dividends~~payments ~~declared:~~on ~~Series~~long-term Adebt ~~preferred~~(95) ~~stock~~(173) atProceeds 9%from short--term borrowings from stockholders 543 -- -- -- ~~Net loss~~ -- -- -- ------------ Net cash used in financing activities 448 21,578 ------------ ------------ Net increase (decrease) in cash and cash equivalents (17) 677 Cash and cash equivalents, beginning 1,226 38 ------------ ------------ ~~Balance~~Cash atand ~~June~~cash 4equivalents, ~~2000~~ending ~~140,000~~ $ ~~2 5~~1,~~000,000~~209 $ 50715 ========== ==~~========~~ ========== ==~~========~~

(continued on page 8) 7 UNITED PETROLEUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

~~Additional~~SIXTEEN ~~Total~~WEEKS ~~Paid-in~~ENDED ~~Accumulated Division Stockholders' Capital Deficit Equity Equity~~ ------------- ------------- ----~~---------~~ ~~-------------~~DECEMBER ~~Balance at August 29~~24, ~~1999~~DECEMBER ~~$ -- $ -- $ 1~~19,~~933~~ $2000 ~~1,933~~1999 ~~Settlement of partners' interest in division equity 844~~ -- ~~(1,933) (1,089) FSCI common stock outstanding (10)~~ -- -- -- ----~~---------~~ ------------- ~~-------------~~Supplemental ~~-------------~~cash ~~FSCI~~flow ~~balance~~information: atCash ~~November~~paid ~~12,~~for ~~1999~~interest ~~prior~~$ to426 ~~merger~~$ ~~834~~130 --============ --============ ~~844~~Supplemental ~~Acquisition~~schedule of ~~FSCI common stock (2,990)~~ non--cash ~~(3,000)~~investing ~~UPC preferred~~ and ~~common~~financing ~~stock~~activities: ~~issued~~Accrued todividends ~~FSCI~~on ~~shareholder~~preferred ~~for~~stock ~~the~~$ ~~acquisition~~421 of$ ~~FSCI~~121 ~~14,925~~============ --============ --Net ~~14,950~~reorganized ~~Issuance~~value of ~~new~~UPC and preferred and common stock issued to UPC's pre-merger shareholders ~~15,586~~$ ~~-- --~~ 15,613 Dividends declared: Series A preferred stock at 9% -- (703) -- (703) Net loss -- (3,324) -- (3,324) ------------- ------------- ------------- ------------- Balance at June 4, 2000 $ 28,355 $ (4,027) $ -- $ 24,380 ============~~= ============= ============= =============~~

The accompanying notes are an integral part of these condensed consolidated financial statements. 8 UNITED PETROLEUM CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements for United Petroleum Corporation (the "Company") have been prepared in accordance with (i) generally accepted accounting principles for interim financial reporting and (ii) the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements as of September 3, 2000, as presented in the Form 10K, filed with Securities and Exchange Commission on September 28, 2001. Operating results for the sixteen weeks ended December 24, 2000 are not necessarily indicative of operating results that may be expected for the full fiscal year. Fiscal Year The Company operates on a fifty-two/fifty-three week fiscal year ending on the Sunday nearest August 31. The accompanying financial statements include operations for the first quarter ended December 24, 2000 and December 19, 1999, each encompassing a total of sixteen weeks. Earnings (loss) per Share The Company has adopted Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS") which requires the presentation of "basic" and, if appropriate, "diluted" earnings per common share. Diluted earnings per share have not been presented in the accompanying unaudited condensed consolidated statements of operations because the Company had a net loss for the sixteen weeks ended December 24, 2000 and accordingly, the assumed effects of the conversion of all of the Company's preferred stock would have been anti-dilutive. Segment information The Company primarily operates in one segment, convenience stores, and in one geographic area, Florida. Although the Company operates in another segment, consisting of oil and gas operations, and in other geographic areas (Georgia and Tennessee), the operations of these segments are insignificant to the operations of the Company as a whole, and are therefore not reported on separately. 9 2. Significant Events On February 11, 2000 the Company's Board of Directors approved a Stock Option Plan which provides for the granting of options to purchase an aggregate of up to 650,000 shares of common stock. In October, 2000, following the Company's unsuccessful attempts to expand its business through acquisitions, and in recognition that the Company's cash flow could no longer support its debt service obligations, the Company ceased making scheduled payments on its primary institutional loan, and that loan went into default. In late 2000 and early 2001, the Company made various personnel reductions in an attempt to improve its cash flow. By January 16, 2001, these reductions had left the Company unable to fulfill its responsibilities under the Management Agreement with FSG. Additionally, the Company's studies of the issue had revealed that the Management Agreement was at best cash flow neutral, and more likely, a cash flow drain on the Company. Therefore, on January 16, 2001, the Company and FSG terminated the Management Agreement and the Consignment Agreement also terminated in accordance with its terms. On January 1, 2001 the Company's leased employee agreement was terminated by the co-employer in response to the Company's inability to secure a bond the co-employer requested. As a result, the Company presently employs its work force directly. As of August 31, 2001, the Company employed approximately 700 persons, of which approximately 180 are part-time and 520 are full time employees. On January 17, 2001, Carlos E. Bared resigned as a director of United Petroleum Corporation. (filed herewith) On January 17, 2001 the Company granted two of its executives options to purchase 350,000 shares of common stock at an exercise price of $0.05 per share. Fifty percent (50%) of the aggregate shares shall vest and become exercisable on January 18, 2001 and fifty percent (50%) on January 18, 2002 with an expiration of five years from January 18, 2001 or the expiration of 180 days from the date of any termination. On January 17, 2001, the Company issued to L. Grant Peeples, a Director, stock options to purchase 150,000 shares of the Company's common stock at $0.05 per share. On January 31, 2001, Clark K. Hunt resigned as a director of United Petroleum Corporation. (filed herewith) From January 23, 2001 to March 9, 2001 the Company sold nine of its under-performing store locations (8 non-gas and one gas store) in a series of transactions, to Valencia Food Stores. The total sale proceeds, approximately $1,020,000, were paid to reduce the Company's primary institutional indebtedness. Although these stores' aggregate annual sales amounted to approximately $5,000,000, they did not make a significant contribution to the Company's operating profits or cash flow. Additionally, during the period from October 1, 2000 to March 1, 2001, due to their low profitability and high administrative expenses, the Company closed one of its stores in Florida and reached agreements to lease three of its Calibur store locations to other operators. On February 1, 2001, Murphy Oil USA, Inc. dismissed its lawsuit against the Company without prejudice. 10 On February 8, 2001, the Company entered into a fuel marketing agreement with a major fuel retailer to re-brand as many as 23 of its gasoline store locations. In March, 2001, the Company's real and personal property tax obligations came due. Certain of these payments are due under the Company's store leases and their non-payment could default those leases and terminate the Company's operations at the stores. To prevent this catastrophic result, the Company sought financing from its primary institutional lender, and then following that lender's denial, from its principal stockholders, Infinity and Mr. and Mrs. Bared. Ultimately, only Mr. and Mrs. Bared elected to provide this financing, in the form of a loan of up to $600,000 of which $583,000 was funded, secured by a first lien on the Company's 100,000 shares of common stock of FSG. The Company's primary institutional lender released its pledge on these shares in order to permit this loan to be so secured. The loan is presently in default, and no payments of principal or interest have been made thereunder. On May 3, 2001 TransMontaigne Inc, a supplier of gasoline and diesel fuel to the Company, stopped delivering fuel to the Company because it was unable to provide financial statements that met their requirements. On June 28, 2001 the case styled Robert Rankin vs Michael F. Thomas and United Petroleum was settled and the Company agreed to pay Mr. Rankin $8,000. On July 25, 2001 Coastal Refining & Marketing, a supplier of gasoline and diesel fuel to the Company, stopped delivering fuel to the Company claiming that the Company was unable to provide financial statements that met their requirements. On August 31, 2001 First Data Company revoked its money order system agreement because UPG was unable to provide financial statements that met their requirements. First Data Company provided the Company with the Western Union brand system of dispensing money orders. The Company is seeking to renew or replace its agreement with First Data or another supplier of money orders, but no such arrangements have been concluded. On September 11, 2001 Pepsi Cola stopped servicing Company locations. Since June 1, 2001 the Company had been purchasing Pepsi branded products under a payment arrangement to reduce outstanding balances owed to Pepsi Cola. The Company has a $23 million credit facility with a bank. This facility provides credit in the form of a $10,467,000 term loan, an $8,300,000 mortgage loan and a $4,233,000 revolving line of credit, and matures on October 30, 2004. Effective October, 2000, the Company went into payment default under these loans, and in September, 2001, the bank accelerated the maturity of these loans, and they are therefore classified as short term liabilities on the balance sheet. The Company is party to a license agreement with FSG, providing for its use of the "Farm Stores" trademark on its stores and certain products sold in the stores. On September 28, 2001, FSG notified the Company of its termination of the License Agreement, and on October 3, 2001, FSG commenced a lawsuit in Federal Court to enforce such termination. The Company disputes the termination, and intends to defend the lawsuit; however, the Company is actively pursuing a settlement of this matter. On October 5, 2001, Stuart Chasanoff resigned as a director of United Petroleum Corporation. (filed herewith) 11 On October 8, 2001, L. Grant ("Jack") Peeples resigned as a director of United Petroleum Corporation. (filed herewith) 3. Receivable from Affiliated Company Receivable from affiliated company at December 24, 2000 represents the balance due from Farm Stores Grocery, Inc. ("FSG") in which the Company has 100,000 of common stock. The amount receivable relates to the management fee charged to FSG by the Company for providing general and administrative services for FSG. The fee is based on the number of stores FSG operates in accordance with the management agreement between the Company and FSG. 4. Current Portion of Long-term Debt Current portion of long-term debt includes a loan to the Company in the amount of $144,915 which has matured. The loan is secured by a mortgage encumbering a property located in Georgia which is leased by the Company's subsidiary to an unrelated third party. The lease requires the tenant to make all payments coming due under the loan, and upon exercising an option to purchase the property, to assume the loan. The tenant has advised the Company that it has exercised its option to purchase the property, and continues to make monthly payments under the loan. 5. Contingencies The Company is a defendant in various legal proceedings arising in the normal course of business. In the opinion of management, based on the nature of these proceedings and the amounts of damages claimed, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company's financial position or results of operations. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, including without limitation expectations as to future revenues and profitability, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1955 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In the following comparison of the results of operations, the sixteen weeks ended December 24, 2000 and December 19, 1999 are referred to as 2001 and 2000, respectively. COMPARISON OF THE SIXTEEN WEEKS ENDED DECEMBER 24, 2000 AND DECEMBER 19, 1999 Revenues and gross profit for 2001 were $38.2 million and $7.0 million, respectively, as compared to $33.7 million and $7.5 million, respectively for 2000. The Company generated a net loss of $3.1 million in 2001, compared to net loss of $1 million in 2000. The effects of the Nov. 12, 1999 transactions (refer to Company's Form 10-K for Fiscal Year ended September 3, 2000) and their financing contributed $1.7 million of the net loss in 2001 as follows: (i) amortization of goodwill and other intangible assets of $347,000 , (ii) interest expense including amortization of deferred loan costs of $949,000, and (iii) accrued preferred dividends totaling $421,000. Revenues increased $4.5 million or 13.4% from the prior year. A summary of revenues by source for the comparative sixteen week period is as follows (in thousands):

~~FORTY~~Sixteen ~~WEEKS~~Weeks ~~ENDED~~Ended ~~------------------------~~Dec. ~~JUNE 4~~24, ~~JUNE~~Dec. 619, 2000 1999 ----------- ----------- ~~Cash~~Grocery ~~flows from operating activities: Net income (loss)~~ $ (316,~~324)~~472 $ ~~151 Adjustments for non-cash items: Depreciation and amortization 1~~17,~~741~~014 ~~384~~Gasoline ~~Amortization of deferred loan costs 148 -- Equity in (earnings) loss of Farm Stores Grocery~~21,140 ~~Inc. (~~16) 20 Loss (gain) on disposition of property and equipment (47) (23) Change in assets and liabilities: Accounts receivable (863) (16) Receivable from affiliated company (204) Inventories (472) 223 Prepaid expenses and other current assets (172) 43 Other assets (437) 18 Accounts payable 3,~~238~~354 ~~320 Accrued expenses (212) (541)~~ Other ~~long-term~~604 ~~liabilities~~340 ~~(93) 223~~ ---------- -~~---------~~ ~~Cash provided by (used in) operating activities (713) 802~~ ---------- -~~---------~~ ~~Cash~~Total ~~flows~~$ ~~from investing activities: Payments for acquisitions, net of cash acquired (19,936) -- Purchases of property and equipment (972) (768) Proceeds from disposition of property and equipment 197~~ 38 ~~---------- ---------- Net cash used in investing activities (20~~,~~711)~~216 ~~(730)~~$ ~~---------- ---------- Cash flows from financing activities: Proceeds from issuance of long-term debt~~33,708 net of loan costs 21,751 -- Principal payments on long-term debt (297) (82) ---------- ---------- Net cash provided by (used in) financing activities 21,454 (82) ---------- ---------- Net increase (decrease) in cash and cash equivalents 30 (10) Cash and cash equivalents, at beginning of period 38 41 ---------- ---------- Cash and cash equivalents, at end of period $ 68 $ 31 =========== ===========

Grocery revenues decreased by $542,000 or 3.2%, in 2001 as compared to 2000 due to a reduction in stores from 88 for the 16 weeks ending Dec. 19th, 1999 to 83 stores for the corresponding period ending on Dec. 24th, 2000. Gasoline revenues increased $4.8 million in 2001 as compared to 2000. The increase is due to a $0.22 increase in the average retail price per gallon from $1.31 per gallon in 2000 to $1.53 per gallon in 2001, and an increase of 1.4 million gallons sold from 12.5 million gallons in 2000 to 13.8 million gallons in 2001. 13 Gross profit decreased by $495,000 in 2001 primarily due to the decrease in the gross profit earned on gasoline sales. The gross profit percentage on gasoline sales was 7.0% in 2001 compared to 9.7% in 2000 as a result of a 19.5% increase in average fuel costs from $1.19 per gallon in 2000 to $1.42 per gallon in 2001. Store operating expenses increased by $58,000 in 2001 primarily due to an increase of $178,000 from leases associated with new gasoline dispensing equipment and offset by decreases in repairs and maintenance, workers compensation claim payments and spoilage. Depreciation and amortization expense in 2001 includes the amortization of goodwill and other intangible assets of $347,000. General and administrative expenses increased by $373,000 due to an increase of approximately $209,000 in legal, auditing and consulting fees. Additionally, prior to January 16, 2001 UPG provided management services to FSG under a Management Agreement between UPG and FSG dated November 12, 1999. UPG and FSG terminated the Management Agreement effective January 16, 2001 after company studies showed the Management Agreement was at best cash flow neutral, and more likely, a cash flow drain on the Company. The management agreement was in effect for approximately 16 weeks during the first quarter of 2001, compared to 5-1/2 weeks in the first quarter of 2000. The increase in interest expense of $659,000 resulted from the borrowing of $23 million used to finance the acquisition[s]. CREDIT FACILITIES The Company has a $23 million credit facility with a bank. This facility provides credit in the form of a $10,467,000 term loan, an $8.3 million mortgage loan and a $4,233,000 revolving line of credit, and matures on October 30, 2004. The term loan bears interest at prime plus 3%, payable monthly with monthly principal payments of $121,146 beginning after the first twelve months. The $8.3 million mortgage loan bears interest at the 180-day libor rate plus 4%, payable monthly at $43,000 plus interest. The $4,233,000 revolving loan bears interest at the 30-day libor rate plus 3.875%, payable monthly and is advanced against the Company's inventory and receivables. The Company is required to comply with various covenants in connection with this facility and borrowings on the revolving line of credit are subject to a borrowing base calculated from the Company's inventory and receivables. In addition, the agreement prohibits the payment of any cash dividends unless approval is obtained from the lender. At December 24, 2000, the Company had used all $4,233,000 under its credit facility. LIQUIDITY AND CAPITAL RESOURCES The Company generates substantial cash from its operations since most of its revenues are received in cash. For the 16 weeks ended Dec. 24, 2000 the Company used $305,000 in its operating activities, including $426,000 in interest payments toward its credit facilities. In October, 2000, following the Company's unsuccessful attempts to expand its business through acquisitions, and in recognition that the Company's cash flow could no longer support its debt service obligations, the Company ceased making scheduled payments on its primary institutional loan, and that loan went into default. 14 CAPITAL EXPENDITURES In fiscal year 2001, the Company anticipates spending approximately $320,000 for capital expenditures mostly associated with leasehold improvements and store equipment. These capital expenditures will be funded primarily by cash generated from operations. PART II - OTHER INFORMATION ITEM 3. LEGAL PROCEEDINGS. In 1999, an affiliate of F.S. Convenience Stores, Inc. (the company with which United Petroleum Group, Inc., the Company's wholly owned subsidiary, merged in November 1999) filed a lawsuit against Zenith in the Circuit Court for the Eleventh Judicial Circuit for improperly administering and managing the Plaintiff's workers compensation insurance plan. Zenith has filed a counterclaim and the Plaintiff is actively defending the claim. In June of 2000, Zenith filed a separate action in federal court against the Company's surety, the surety has tendered the defense to the Company and the Company is actively defending the lawsuit. The Company is party to a license agreement with FSG, providing for its use of the "Farm Stores" trademark on its stores and certain products sold in the stores. On September 28, 2001, FSG notified the Company of its termination of the License Agreement, and on October 3, 2001, FSG commenced a lawsuit in Federal Court to enforce such termination. The Company disputes the termination, and intends to defend the lawsuit; however, the Company is actively pursuing a settlement of this matter. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit Number Description Exhibit 17.1 On January 17, 2001, Carlos E. Bared resigned as a director of United Petroleum Corporation. (filed herewith) Exhibit 17.2 On January 31, 2001, Clark K. Hunt resigned as a director of United Petroleum Corporation. (filed herewith) Exhibit 17.3 On October 5, 2001, Stuart Chasanoff resigned as a director of United Petroleum Corporation. (filed herewith) Exhibit 17.4 On October 8, 2001, L. Grant ("Jack") Peeples resigned as a director of United Petroleum Corporation. (filed herewith) Exhibit 10.13 Pledge Agreement and Promissory Note dated March 30, 2001, among F.S. Non-Gas Subsidiary, Inc., United Petroleum Corporation, United Petroleum Group, Inc. and Jose 15 P. Bared and Miriam Bared (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K filed September 28, 2001, and incorporated herein by reference) Exhibit 10.7 Loan Agreement dated November 9, 1999 among United Petroleum Corporation, United Petroleum Group, Inc., F.S. Convenience Stores, Inc., et al., as Borrowers, and Hamilton Bank, N.A. As Lender (filed as Exhibit 99.10 to the Company's Current Report on Form 8-K (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) Exhibit 10.1 License Agreement dated as of November 12, 1999 among Farm Stores Grocery, Inc., United Petroleum Corporation, United Petroleum Group, Inc. (filed as Exhibit 99.5 to the Company's Current Report on Form 8-K (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED PETROLEUM CORPORATION ----------------------------------------- (Registrant) Date: October 11, 2001 /s/ JOSE P. BARED ----------------------------------------- Jose P. Bared Chief Executive Officer and Chairman of the Board of Directors 16 EXHIBIT INDEX

~~FORTY~~EXHIBIT ~~WEEKS~~NUMBER ~~ENDED~~DESCRIPTION ------- -----------~~---~~ ~~JUNE~~Exhibit 417.1 On January 17, ~~JUNE~~2001, 6Carlos E. Bared resigned as a director of United Petroleum Corporation. (filed herewith) Exhibit 17.2 On January 31, ~~2000~~2001, ~~1999~~Clark ~~---------~~K. ~~---------~~Hunt ~~Supplemental~~resigned ~~cash~~as ~~flow~~a ~~information:~~director ~~Cash~~of ~~paid~~United ~~for~~Petroleum ~~interest~~Corporation. $(filed 1herewith) Exhibit 17.3 On October 5,~~361~~ $2001, 27Stuart ~~=========~~Chasanoff ~~=========~~resigned ~~Supplemental~~as ~~schedule~~a director of ~~non~~United Petroleum Corporation. (filed herewith) Exhibit 17.4 On October 8, 2001, L. Grant ("Jack") Peeples resigned as a director of United Petroleum Corporation. (filed herewith) Exhibit 10.13 Pledge Agreement and Promissory Note dated March 30, 2001, among F.S. Non-~~cash~~Gas ~~investing~~Subsidiary, Inc., United Petroleum Corporation, United Petroleum Group, Inc. and ~~financing~~Jose ~~activities:~~P. ~~Accrued~~Bared ~~dividends~~and Miriam Bared (filed as Exhibit 10.13 to the Company's Annual Report on ~~preferred~~Form ~~stock~~10-K $filed ~~703~~September ~~=========~~28, ~~Preferred~~2001 , and ~~common~~incorporated ~~stock~~herein ~~issued~~by toreference) ~~acquire~~Exhibit ~~the~~10.7 ~~net~~Loan ~~assets~~Agreement ofdated ~~FSCI~~November $9, 141999 among United Petroleum Corporation,~~950~~ ~~=========~~United ~~Net~~Petroleum ~~reorganized~~Group, ~~value~~Inc., ofF.S. ~~UPC~~Convenience Stores, Inc., et al., as Borrowers, and ~~preferred~~Hamilton Bank, N.A. As Lender (filed as Exhibit 99.10 to the Company's Current Report on Form 8-K (Amendment 1) dated November 12, 1999 and ~~common~~filed ~~stock~~on ~~issued~~December 1, 1999, and incorporated herein by reference) Exhibit 10.1 Licence Agreement dated as of November 12, 1999 among Farm Stores Grocery, Inc., United Petroleum Corporation, United Petroleum Group, Inc. (filed as Exhibit 99.5 to ~~UPC~~the Company's ~~pre~~Current Report on Form 8-~~merger~~K ~~shareholders~~(Amendment $1) 15dated November 12,~~613~~ ~~=========~~1999 and filed on December 1, 1999, and incorporated herein by reference)

Twelve Weeks Ended June 4, June 6, 2000 1999 --------- --------- Grocery $ 13,855 $ 14,657 Gasoline 19,467 11,795 Other 745 62 --------- --------- Total $ 34,067 $ 26,514 ========= =========

FORTY WEEKS ENDED JUNE 4, JUNE 6, 2000 1999 ----------- ----------- Grocery $ 44,245 $ 47,478 Gasoline 52,775 36,338 Other 2,052 262 ----------- ----------- Total $ 99,072 $ 84,078 =========== ===========

Exhibit Number Description ------- ----------- 3(i) Amended and Restated Certificate of Incorporation of United Petroleum Corporation (filed as Exhibit 3(i) to the Company's Current Report on 8K/A (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) 3(ii) Amended and Restated Bylaws of United Petroleum Corporation (filed as Exhibit 3(ii) to the Company's Current Report on 8K/A (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) 4 Certificate of Designation - Class A 9% Preferred Stock (filed as Exhibit 4 to the Company's Current Report on 8K/A (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) 10 Client Service Agreement dated May 5, 2000 between the Company and Oasis Outsourcing, Inc. (filed herewith) 19 Current Report on Form 8/K/A(Amendment 2) dated November 12, 1999 and filed on January 28, 2000 (incorporated herein by reference) 27 Financial Data Schedule (filed herewith)

Exhibit Number Description ------- ----------- 3(i) Amended and Restated Certificate of Incorporation of United Petroleum Corporation (filed as Exhibit 3(i) to the Company's Current Report on 8K/A (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) 3(ii) Amended and Restated Bylaws of United Petroleum Corporation (filed as Exhibit 3(ii) to the Company's Current Report on 8K/A (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) 10 Client Service Agreement dated May 5, 2000 between the Company and Oasis Outsourcing, Inc. 4 Certificate of Designation - Class A 9% Preferred Stock (filed as Exhibit 4 to the Company's Current Report on 8K/A (Amendment 1) dated November 12, 1999 and filed on December 1, 1999, and incorporated herein by reference) 19 Current Report on Form 8-K/A (Amendment 2) dated November 12, 1999 and filed on January 28, 2000 (incorporated herein by reference) 27 Financial Data Schedule

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