UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED December 31, 2000
Commission File Number 0-18094
UNIVERSAL EXPRESS, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 11-2781803
- ---------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1350 BROADWAY, NEW YORK, NY 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 239-2575.
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
------------
(Title of Class)
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
----- -----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant on December 31, 2000:
- -------------------------------------------------------------------------------
$ 1,510,517
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
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Common Stock Outstanding at December 31, 2000
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Class "A" 54,245,206
Class "B" 1,280,000
UNIVERSAL EXPRESS, INC.
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INDEX
PAGE
NUMBER
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - December 31, 2000 3
Consolidated Statement of Operations - Three 4
and six months ended December 31, 2000
Consolidated Statement of Cash Flows - Three 5
and six months ended December 31, 2000
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Plan of
Operations
PART II - OTHER INFORMATION 14
SIGNATURE 14
2
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 2000
ASSETS
------
CURRENT ASSETS:
Cash $ 2,609
Accounts receivable, net of allowance for doubtful
accounts of $107,600 62,531
Related party receivables 521,141
Loan to officer 929,572
------------
Total current assets 1,515,853
------------
PROPERTY AND EQUIPMENT, net 13,116
OTHER ASSETS:
Goodwill, net 513,329
Other 1,237,541
------------
Total other assets 1,750,870
------------
TOTAL ASSETS $ 3,279,839
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 605,801
Accrued expenses 1,358,160
Payroll taxes payable 126,063
Other 96,237
Notes payable 875,540
Convertible debentures 189,000
------------
Total current liabilities 3,250,801
------------
STOCKHOLDERS' DEFICIENCY:
Common stock, $0.005 par value; authorized 147,000,000
shares, 54,245,206 shares issued, and outstanding 271,226
Class B common stock, $.005 part value; authorized
3,000,000 shares 1,280,000 shares issued and outstanding 6,400
Additional paid-in capital 25,941,207
Accumulated deficit (25,447,631)
Capital stock Skyworld
Stock rights 345,002
Common stock in treasury, at cost, 40,000 shares (12,000)
Deferred compensation related to stock issued for services (1,075,166)
------------
Total stockholders' deficiency 29,038
------------
$ 3,279,839
============
See notes to consolidated financial statements
3
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
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CONSOLITED STATEMENTS OF OPERATIONS (UNAUDITED)
- -----------------------------------------------
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
- -------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
DECEMBER 31, DECEMBER, 31
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
INCOME:
Ticket sales $ 551,105 $ 573,930 $ 927,925 $ 855,106
Merchandise and service sales 780 -- 1,305 102,591
------------ ----------- ------------ ------------
TOTAL 551,885 573,930 929,230 957,697
------------ ----------- ------------ ------------
COST AND EXPENSES:
Cost of goods sold (393,934) (318,518) (653,101) (646,764)
Selling, general and administration 132,673 (701,077) (304,183) (1,540,771)
Depreciation and amortization (13,252) (100,935) (26,504) (158,453)
------------ ----------- ------------ ------------
TOTAL (274,513) (1,120,530) (983,788) (2,345,988)
------------ ----------- ------------ ------------
INCOME (LOSS) FROM OPERATIONS 277,372 (546,600) (54,558) (1,388,291)
Interest Expense (5,000) (1,110) (8,350) (4,290)
------------ ----------- ------------ ------------
Net income (loss) from continuing operations 272,372 (547,710) (62,908) (1,392,581)
Loss from discontinued operations (299,414) (329,433) (398,994) (557,192)
Gain from disposal of discontinued operations 1,931,491 -- 1,931,491 --
------------ ----------- ------------ ------------
NET INCOME (LOSS) 1,904,449 $ (877,143) 1,469,589 (1,949,773)
============ =========== ============ ============
BASIC INCOME (LOSS) EARNING PER SHARE:
Continuing operations 0.01 (0.06) (0.002) (0.13)
Discontinued operations (0.01) (0.04) (0.010) (0.05)
------------ ----------- ------------ ------------
BASIC INCOME (LOSS) PER COMMON SHARE (0.00) (0.10) (0.012) (0.18)
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 33,045,515 8,444,987 38,238,803 10,665,800
============ =========== ============ ============
4
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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FOR THE SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
- ---------------------------------------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) 1,469,589 (1,949,773)
Adjustment to reconcile net loss to net cash used by operating
activities:
Common Stock issued as compensation 17,000 407,954
Depreciation and Amortization 129,615 205,752
Gain from disposal of discontinued operations (1,931,491)
Change in assets and liabilities:
(Increase)/Decrease in accounts receivable 7,291 (94,962)
(Increase)/Decrease in inventory 0 1,313
(Increase)Deacrease in loan to officers (59,672) (25,122)
(Increase)/Decrease in other assets (290,882) 0
(Increase)/Decrease in notes receivable 0 (244,096)
Increase/(Decrease) in accounts payable and
accrued expenses (234,105) 33,495
Change in net assets of discontinued operations 295,883
Increase/Decrease in taxes payable 585 158,066
Increase/(Decrease) in other liabilities (28,126) 149,145
---------- ----------
(2,093,902) 591,545
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NET CASH (USED IN) OPERATING ACTIVITIES (624,313) (1,358,228)
CASH FLOW FROM FINANCING ACTIVITIES
Sale of common stock 450,000 380,000
Repayments of notes and loans and payables (182,901) 60,000
Proceeds from Stock Rights 0 1,058,750
Proceeds from loans 339,000 0
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 606,099 1,498,750
---------- ----------
NET INCREASE(DECREASE) IN CASH (18,214) 140,522
CASH-Beginning of period 20,823 37,164
---------- ----------
CASH-End of period 2,609 177,686
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest 0 0
5
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
----------------------------------------
Notes To Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB. Accordingly, they
do not include all of the information and disclosures required for annual
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements and related footnotes included in the
Company's annual report on Form 10-KSB for the year ended June 30, 2000.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of December 31, 2000 and the results of operations and cash flow for
the six-months ended December 31, 2000 have been included.
The results of operations for the six-months ended December 31, 2000, are not
necessarily indicative of the results to be expected for the full year ended
June 30, 2001.
2. DISCONTINUED OPERATIONS
In December 2000, the Company entered into agreements for the sale of its 51%
interest in Skyworld International Couriers, Inc. ("Skynet") for the following
consideration: $200,000 cash payable by Skynet on February 27, 2001; $200,000
cash payable by Skynet in six monthly installments of $30,000 each and one
installment of $20,000, commencing on March 29, 2001; a service credit from
Skynet in the sum of $700,000, use of which is limited to $50,000 per month;
Skynet's grant to the Company of a non-exclusive license to grant sublicenses in
the use of the trademark and tradename "Skynet" in connection with international
courier service for North America; agreement between Skynet and the Company to
prepare a subsequent agreement under which Skynet will provide the Company with
international courier service; and, the assumption of all of Skynet's
liabilities by the purchasers.
3. CONVERTIBLE DEBENTURES
On October 18, 2000, the Company converted for 7,500,000 shares its outstanding
$810,000 convertible debentures, thus eliminating this substantial debt.
4. OTHER EVENTS
On November 1, 2000 the Company's board of directors authorized the issuance of
15,000,000 shares of the Company's common stock to its Chief Executive Officer,
the value of which is to be applied against accrued salary payable to such
officer.
6
In addition, the board agreed to forgive 10% per year of the outstanding balance
of the Company loans to such officer, commencing January 2, 2001 as long as the
officer continues in the service of the company. Such loan had a balance of
$929,572 as of December 31, 2000.
ITEM 2
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MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATIONS
-----------------------------------------
Included in this report are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward-looking
statements will prove to be correct. The Company's actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors, including sales levels, distribution and competition trends
and other market factors.
The business of Universal Express, Inc.(The "Company") has, the Company
believes, stabilized after having undergone major transitions in recent years.
The Company's web site is www.usxp.com.
Although the Company sold Skynet, the Company believes it retained most of the
benefits sought by the Company upon its acquisition of Skynet in 1999, in terms
of the granting of licenses to the Company of the Skynet trademark for North
America, franchise territory rights, shipping credits and low international
shipping rates for its PBC member stores.
The Company believes that the value to the Company of the sale of its interest
in Skynet is approximately $3,000,000 in cash, services and franchise rights. In
addition, the Company expects to market its Skynet/Worldpost territory business
opportunity throughout North America. USXP has received $700,000 in shipping
service credits to pass on to its postal store members of its trade association
(pbc network.com).
The agreement between Skynet and the Company provides for cash, services,
franchise revenues and an international discounted shipping service to PBC
Network's postal store and consumer customers.
The Company believes this affords the Company the Skynet services with the
franchise revenue that will be made available to entrepreneurs. The Company
plans to further develop its programs along with now its renamed international
business opportunity - Worldpost.
7
Through its new partnership with Skynet, the Company's franchise and postal
store experience, the Company believes, should allow it to further penetrate
into the International shipping business of North America. Skynet is a 20-year
trade association of independently owned and operated local courier companies in
over 230 cities in 120 countries. Skynet's competitive rates coupled with being
the fifth largest international courier network sets the stage for the North
American expansion of the Skynet/WorldPost network through the efforts of the
Company.
The Company plans to price the first 2,000 territories at an average of $80,000
for each location. Training will be done in Miami, Florida and the Company
believes that potential market opportunities co-exist very nicely with the
territories presently occupied by PBC Network's private postal store members
throughout the United States. WorldPost territory partners can work closely with
the postal stores in their area.
The sale of these territories in North America by the Company and the royalty
income to the Company from this International shipping network as it penetrates
into North America will, the Company believes, enhance its net income and value
for the coming years. In addition, the cross over values between the Company's
two subsidiaries, PBC and WorldPost, should offer many more perceived
opportunities than those that existed before. The shipping services provided by
the WorldPost members will, the Company believes, provide increased earnings for
those members.
The Company believes its strategy of developing PBCNetwork is unique to the
private postal industry. The Company believes that PBCNetwork has established
itself as a provider of quality products and services that benefit the owners of
private postal businesses (see page 11).
The Company purchased its Entertainment division in 1997. The division consisted
mainly of: Downtown Theatre Ticket Agency, Inc., or Advance Entertainment (now
known as "Manhattan Concierge"), which provides theater, sports and special
events tickets and concierge services. The Company intends to incorporate this
division into its expanding list of services to the members of its PBC Network.
These services are marketed through toll-free phone numbers (1-888-NYSHOWS,
1-800-NYSHOWS AND 1-800-THE-SHOW) and Manhattan Concierge's web site
(www.manhattanconcierge.com).
USXP intends to incorporate this value-added service into the PBC Network
expanding menu of offerings to its member stores while attempting to increase
Manhattan Concierge's own business presence in the entertainment industry.
Management continues to concentrate on the raising of new capital and focusing
on new ventures, including the PBC Network and SkyNet.
Management views this fiscal year as a period of anticipated growth based upon
the Company's decision to concentrate on core business development through the
PBC Network and SkyNet/WorldPost.
8
The Company's principal subsidiaries and divisions include:
o The Postal Business Center Network.com
o Manhattan Concierge
o WorldPost Network.com
PRIVATE POSTAL NETWORK.COM AND WORLDPOST.COM
--------------------------------------------
On May 15, 1999, the name of the Association of Packagers and Carriers, APAC was
changed to the Private Postal Network.com (PPN), with two divisions, Postal
Business Center Network.com (PBC network.com) and an international shipping
division, WorldPost Network.com. In future reports, the names of these new
entities will be used to cover and describe the present functions and programs
of these networks as well as future programs and functions of this electronic
network of retail, mail, parcel, and business centers, which the Company
believes are positioned to provide goods and services needed to support
E-commerce, as well as the international shipping division, including support
from SkyNet.
MARKETPLACE
A true global economy has surfaced and grown over the past decade. With
Internet, Catalog and Infomercial sales transcending all boundaries, an
inexpensive and responsive final mile Domestic and International delivery
network coupled with warehouse and shipping capabilities has been, the Company
believes, inexpensively and shrewdly created by the Company.
The business of the Company has undergone visionary changes in the last decade
that should, the Company believes, support its growing private postal network
utilizing the 20,000 postal retail stores doing $7 billion in sales. Strong
relationships are currently being established with E-commerce auction houses and
other manufacturers for quality assurance and localized shipping which the
Company believes will empower present and future PBC Network members.
Members of its Private Postal System (PBC Network) provide the public with a
complement to the U.S. Post Offices for many retail postal services. In
addition, these Postal Service Centers offer individuals and business customers
a variety of personal, business and communications services and even
merchandise.
BUSINESS
Private postal and business service centers form a highly fragmented cottage
industry. The Company believes that this industry generates over $7 billion in
sales and presently consists of more than 20,000 independent operators. The
Company believes there is a market opportunity for the development of an
association with the goal of unifying and organizing independent and franchised
postal stores nationwide. PBC Network members are connected to other members and
to the PBC Network Headquarters via the PBC Web Site (PBCNetwork.com). The PBC
Web Site is utilized not only by members but also will be used in the future by
the general public. Only one PBC Network store per Zip Code has been
recommended, thus creating internal quality control standards.
9
As E-commerce and a global economy grows, someone must deliver the purchased
goods to the consumer. The Company believes that many companies will eventually
need an affordable distribution system to deliver nearly anything that the
customers purchase on-line.
The PBC Network is an association formed to create a long overdue and needed
profitable partnership between previously unconnected packaging store owners.
Similar in theory to the floral industry's FTD, the PBC Network provides
storeowners with a variety of cost-effective services and products to increase
their profitability; while they still maintain their local identities or
franchise loyalties. The PBC Network's goal is to provide consumers worldwide
with a feeling of branded quality assurance when they frequent a PBC Network
location.
SkyWorld International Couriers, Inc. is the U.S. member of the SkyNet Worldwide
Express Network, an alliance of independently owned and operated express courier
services operating in 268 cities in 120 countries. SkyWorld developed and owns
the SkyNet Trademark in the U.S. and most countries in Latin America. The SkyNet
Network provides global delivery and logistics service to multinational firms.
The Network currently delivers over 400,000 packages per month. It is the
world's largest independently owned courier network and the 5th largest express
courier network behind the integrated U.S. express carriers such as FedEx, UPS
and DHL.
Unlike the major integrators who operate their own aircraft and thus offer rigid
standardized pick up and delivery schedules, SkyNet Network members offer
flexible, customized International services to meet the clients' specific
distribution needs. Instead of operating its own fleet, SkyNet offers express
International air courier service and expedited air cargo through regularly
scheduled commercial airlines to transport time sensitive documents, parcels,
freight and mail. SkyNet provides on demand and scheduled pick up and delivery
courier and freight services in the U.S. and in foreign countries. SkyNet uses
available cargo and baggage space on scheduled passenger and cargo airlines
throughout the world. SkyNet operates its own facilities in Miami, New York, Los
Angeles, San Francisco, Venezuela and Costa Rica. Using licensees in most
countries in Latin America and the Caribbean, it provides 24 to 48 hour delivery
throughout the region. Hubs operated by SkyNet Network Members in London, Dubai,
Johannesburg, Brussels, Singapore and Sydney allow the swift delivery of
documents and parcels to almost any destination in the world within 72 hours.
The Company purchased and then one year later sold SkyWorld still retaining
discounted international rates for its members and customers along with the
coveted rights to sell territory business opportunities throughout North
America.
The strategic partnership with SkyNet Worldwide Express as part of the Company's
contracted International shipping network, also supports, the Company believes,
the PBC Network's postal store members needs. The strength of SkyNet
International's network is today primarily geared towards Central and South
America, although it has reciprocity delivery partners in 120 other countries
worldwide.
10
Universal Express' strategy of developing the PBC Network, a subsidiary of its
Private Postal Network (PPN) and SkyNet together is unique to the private postal
industry. The PBC Network has established itself, the Company believes, as a
provider of quality products and services that benefit all of the owners of
private postal businesses. Private postal and business centers previously formed
a highly fragmented cottage industry within the transportation industry.
These locations are individually owned and yet can create an inexpensive
localized International and domestic delivery network for themselves rather than
the traditional carriers that utilize these locations.
REVENUE SOURCES
Our initial revenues, the Company believes, will combine SkyNet Worldwide
delivery and territory sales along with our other subsidiaries. Based upon
marketing and branding monies, PBC's strategic alliances today include numerous
additional income sources:
INTERNATIONAL SHIPPING INTERNET POSTAGE
WORLDPOST.COM (SkyNet) E-STAMPS
CORRUGATED & PACKAGING CUSTOMIZED CORRUGATED
PACKAGING TECHNOLOGIES CACTUS CORRUGATED
LAMINATION AND PHOTO ID'S BUSINESS AND OFFICE
SUPPLIES
D&K LAMINEX PBCNBIZSUPPLIES.COM
CUSTOMIZED RUBBER STAMPS PARCEL INSURANCE
THESTAMPMAKER.COM UNIVERSAL PARCEL
INSURANCE CO.
EQUIPMENT LEASING CREDIT CARD ROCESSING
ADVANTAGE LEASING NOVA INFORMATION
SYSTEMS
PROMOTIONAL ITEMS CHECK PROCESSING
INTERNATIONAL PROMOTION GROUP ECHECK2000.COM
KEY MACHINES AND SUPPLIES PAYROLL AND TAX
PROCESSING
LV SALES PAYCHEX
DISCOUNTED PHONE CARDS VIDEO CONFERENCING
SARATOGA TELECOM TALK VISUAL
SECURE DOCUMENT DELIVERY AIR MILES INCENTIVE
PROGRAM
11
NETEX AMERICAN AIRLINES
MOVING SUPPLIES TRAVEL AND
ENTERTAINMENT
ALL BOXES DIRECT RESLINX
CAR RENTAL SHREDDER CUSHIONING
SYSTEMS
HERTZ RENT-A-CAR PAC-MATE
INSURANCE
AFLAC Insurance
COMPETITION
The company further believes that the maturation of the PBC Network will
strengthen the profitable atmosphere of this cottage private postal industry.
Lack of financial strength and market penetration have prevented some excellent
franchisors and independent stores from properly promoting their services. The
ability of the PBC Network to create a nationally accepted private postal
industry that the American public will embrace and trust should re-create a
viable industry. The Company feels it can convince the independent and
nationwide franchisors that they must self-regulate for consumer acceptance and
seize this opportunity to become part of this new cooperative partnership within
the global economy.
QUALIFICATIONS AND RELATIONSHIPS
The company's key people have years of experience in all aspects of delivery,
marketing and postal service related programs as well as their visionary
chairman and founder.
INTERNATIONAL OPPORTUNITY
The Company believes that opportunities to expand the scope of the PBC Network
and WorldPost are limitless due to shipping, distribution and growth of services
virtually throughout its market.
12
RESULTS OF OPERATIONS
- ---------------------
Universal Express, Inc. (USXP), is an integrated business services conglomerate.
Its principal subsidiaries and divisions include the Private Postal Network.com
(with two divisions, Postal Business Center Network.com (PBC Network)and
WorldPost. Network.com) and Manhattan Concierge.
Net loss was $461,902 and gain on the disposal of discontinued operations was
$1,931,491 for the six months ended December 31, 2000.
Ticket sales for Manhattan Concierge for the second quarter were $551,105 as
compared with $573,930 for the same period of 1999.
LIQUIDITY AND CAPITAL RESOURCES - FOR THE THREE MONTHS ENDED DECEMBER 31, 2000
- ------------------------------------------------------------------------------
The net proceeds from new loans to the Company were $339,000, all of which was
used in its operating activities.
Until the PBC Network and WorldPost are fully operational, the Company faces a
situation whereby it needs to raise additional cash in the near future.
Management is continuing efforts to raise cash by arranging lines of credit and
obtaining additional equity. The Company's future business operation will
require additional capital.
Management continues to explore methods to increase working capital through debt
and additional equity infusions, as well as possible acquisitions.
13
PART II -- OTHER INFORMATION
- ----------------------------
Item 1. LEGAL PROCEEDINGS
-----------------
The Company is involved in a small number of lawsuits with vendors or suppliers
and claims for fees of certain professionals. The Company disputes all these
claims. The Company believes that the disposition of these matters will not have
a material adverse effect on the Company's financial position.
Item 2. CHANGES IN SECURITIES -- NONE
---------------------
Item 3. DEFAULTS ON SENIOR SECURITIES -- NONE
-----------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
--------------------------------------------
HOLDERS -
-------
NONE
Item 5. OTHER INFORMATION -- NONE
-------------------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) EXHIBITS
10.0 Skynet Contracts
(B) REPORTS ON FORM 8-K:
--------------------
None
SIGNATURES
- ----------
Pursuant to the requirement 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.
UNIVERSAL EXPRESS, INC.
/S/RICHARD A. ALTOMARE
-------------------------------
Richard A. Altomare,
President and Chairman
of the Board.
Dated: February 20, 2001
14