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 September 30, 2001
Commission File Number 0-18094
UNIVERSAL EXPRESS, INC.
-----------------------
(Exact name of Registrant as specified in its charter)
NEVADA 11-2781803
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1230 AVENUE OF THE AMERICAS, SUITE 771, ROCKEFELLER CENTER,
NEW YORK, 10020
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (917) 639-4157.
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
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(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
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant on September 30, 2001:
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$ 8,413,370
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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 September 30, 2001
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Class "A" 138,481,294
Class "B" 1,280,000
UNIVERSAL EXPRESS, INC.
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 2001 3
Consolidated Statement of Operations -
Three months ended September 30, 2001 4
Consolidated Statement of Cash Flows -
Three months ended September 30, 2001 5
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
UNIVERSAL EXPRESS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2001
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 454,236
Other Receivables 57,700
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Total Current Assets 511,936
PROPERTY AND EQUIPMENT, NET 75,410
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OTHER ASSETS:
Loan to Officer 879,847
Related Party Receivables 696,424
Other Assets 28,170
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Total Other Assets 1,604,441
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TOTAL ASSET $ 2,191,787
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts Payable $ 433,738
Accrued Expenses 1,311,631
Payroll Taxes Payable 133,756
Other 18,255
Notes Payable 421,236
Convertible Debentures 189,000
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Total Current Liabilities 2,507,616
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OTHER LONG-TERM LIABILITIES 26,141
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STOCKHOLDERS' DEFICIENCY:
Common Stock, $.005 par value; Authorized 247,000,000 Shares
138,481,295 Shares Issued and Outstanding 692,407
Class B Common Stock, $.005 par value; Authorized 3,000,000
shares 1,280,000 shares issued and outstanding 6,400
Additional Paid-in Capital 31,644,395
Accumulated Deficit (31,094,842)
Accumulated Other Comprehensive Income (111,000)
Stock Rights 1,395,002
Common Stock in Treasury, at cost, 40,000 shares (18,000)
Deferred Costs Related to Stock Issued for Services (2,856,332)
Total Stockholders' Deficiency (341,970)
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$ 2,191,787
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3
UNIVERSAL EXPRESS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
FOR THREE MONTHS ENDING SEPTEMBER 30, 2001 AND 2000
2001 2000
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INCOME:
Merchandise and Service Sales $ -- $ 525
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-- 525
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COSTS AND EXPENSES:
Selling, General and Administrative 1,213,708 727,146
Depreciation and Amortization 4,388 38,095
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1,218,096 765,241
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LOSS FROM OPERATIONS (1,218,096) (764,716)
Interest Expense -- 3,350
Taxes -- 1,120
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NET INCOME (LOSS) FROM CONTINUING OPERATIONS $ (1,218,096) $ (769,186)
Loss from Discontinued Operations (115,674)
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NET INCOME (LOSS) $ (1,218,096) $ (884,860)
==============================
BASIC INCOME (LOSS) PER SHARE
Continuing Operations (0.01) (0.03)
Discontinuing Operations -- (0.01)
INCOME (LOSS) PER COMMON SHARES (0.01) (0.04)
==============================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 112,165,661 23,911,037
==============================
NET INCOME (LOSS) (1,219,096) (884,860)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized loss of marketable securities (18,000) --
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COMPREHENSIVE INCOME (LOSS) (1,237,096) (884,860)
==============================
See notes to consolidated financial statements.
UNIVERSAL EXPRESS INC, AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 2001 AND 2000
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,218,096) $ (884,860)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,388 38,095
Common shares issued for services 809,503 348,949
Write down of net fixed assets
Gain from disposal of discontinued operations
Changes in assets and liabilities:
Accounts receivable (138,113)
Inventory
Loan to officer 7,217 (16,670)
Related party receivables (105,000)
Other receivables 60,700
Other assets (5,100)
Accounts payable an accrued expenses (98,980) (898,770)
Payroll taxes payable (24,230) 149
Other Liabilities (6,555) 46,561
Change in net assets of discontinued operations 1,053,250
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Total adjustments 641,943 433,451
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NET CASH USED IN OPERATING ACTIVITIES (576,153) (451,409)
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (2,056) (4,585)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 203,650 450,000
Proceeds from issuance of convertible debt
Proceeds (Repayments) of notes and loans payable (44,521) (30,610)
Proceeds from stock rights 840,000
Purchase of treasury stock (6,000)
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NET CASH PROVIDED BY FINANCING ACTIVITIES $ 993,129 $ 419,390
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NET INCREASE (DECREASE) IN CASH 414,920 (36,604)
CASH - BEGINNING OF YEAR 39,316 53,873
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CASH - END OF PERIOD $ 454,236 $ 17,269
==========================
Non cash investing and financing activities:
Issuance of Stock for Notes/Loans - $665,000
Issuance of Stock for Interest - $181,500
See notes to consolidated financial statements
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 and Article 10 of
Regulation S-X. 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, 2001.
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 September 30, 2001 and the results of operations and cash flows
for the three-months ended September 30, 2001 have been included.
The results of operations for the three-months ended September 30, 2001, are not
necessarily indicative of the results to be expected for the full year ended
June 30, 2002.
2. ISSUANCES OF COMMON STOCK
During the three months ended September 30, 2001, the Company issued 53,630,006
shares of common stock. Of such shares 25,769,756 were issued in exchange for
future advisory and consulting services, 2,491,000 shares were issued to
investors for approximately $203,650, 13,401,722 shares were issued in
satisfaction of $846,500 of outstanding debt plus accrued interest and
11,967,538 shares were issued to investors for stock rights of $425,225.
Additionally, the Company has received approximately $840,000 of stock rights
for which no shares have been issued to date. On August 22, 2001, the Company
authorized an additional 100,000,000 shares of common stock. The Company has
subsequently cancelled 5,500,000 of the consultant shares and has begun
negotiations to re-purchase a substantial amount of common shares with new
capital that the Company is presently negotiating.
3. DIVIDEND
On August 20, 2001 the Company announced a 8% stock dividend to stockholders of
record on the close of business on September 21, 2001. The dividend payment date
was October 16, 2001.
6
4. SUBSEQUENT EVENTS
On October 10, 2001 the Company signed an agreement to acquire 75% of a
privately held specialty logistics services provider for cash and stock.
On November 1, 2001 the Company announced a letter of intent to purchase a new
subsidiary, FedFinancial Corp., a commercial leasing entity.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
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 Company's web site is www.usxp.com.
Universal Express, Inc. (USXP) has evolved into a conglomerate of supportive
companies centered on its private postal system.
Its three principal divisions include the Postal Business Center Network (PBC),
WorldPost(TM) and Luggage Express(TM).
Its association of independent and franchise nationwide postal stores (PBC)
continues to evolve into a sophisticated buying service and market penetration
vehicle.
WorldPost(TM), its discounted international delivery service, will earn revenues
from selling Skynet discounted envelopes and services to the postal stores, as
well as selling territory businesses for entrepreneurs interested in selling
these shipping services to independent businesses.
Luggage Express(TM) will enable consumers to have their baggage picked up at
their home by a local PBC member store and delivered to the consumers'
destination.
USXP continues to mature as an accepted participant within the shipping and
postal store industry.
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, sale of territory rights, shipping credits and low international
shipping rates for its PBC member stores. 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 (pbcnetwork.com).
7
As a result of selling two losing operations, yet revenue producing
subsidiaries, the Company has, by design, shown no revenues for this quarter.
The Company has positioned itself, however, (i) through two recently announced
revenue producing acquisitions that more clearly fit its corporate image; (ii)
the beginning of its new territory sales and envelope distributions to postal
locations program of WorldPost(TM); and (iii) the aggressive development of its
Postal Business Center programs, to exceed past quarterly revenues while
substantially cutting excessive overhead costs. This corporate transition, as
expected, will take 4 to 6 months to obtain profits, while enjoying lower
overhead and payments from purchasers of previous subsidiaries that are not
recorded as revenue but have resulted in operational monies for the Company.
This, along with removal of debt, finds the Company in better overall financial
shape than last quarter.
The Company retained the rights to sell Manhattan Concierge territories.
The Company's principal divisions:
The Postal Business Center Network.com
WorldPost(TM)
Luggage Express(TM)
MARKETPLACE
A global economy has grown over the past decade. With Internet and Catalog sales
transcending all boundaries it now requires an inexpensive and responsive final
mile Domestic and International delivery network, The Private Postal Network,
coupled with warehouse and shipping capabilities, has been inexpensively created
by Universal's family of companies.
The business of Universal has undergone visionary changes in the last decade.
These changes will support its growing private postal network using the 20,000
potential North American postal retail stores presently grossing over $7 billion
in sales. Strong relationships are currently being established with companies
and manufacturers, which should empower our 8,000 present members of the Private
Postal Network (PBC).
Members of this Private Postal System (PBC Network) provide the public with a
complement to the U.S. Post Office for many retail and business postal services.
In addition, these Postal Service Centers offer individuals and business
customers a variety of personal and business services and merchandise.
8
These private postal and business service centers form a highly fragmented
cottage industry. Universal believes that since this industry generates over $7
billion in sales and presently consists of more than 20,000 independent
operators, there is a market opportunity for the development of an association
with the goal of unifying and organizing the independent and franchised postal
stores nationwide. These members are electronically connected to other members
and to the PBC Network Headquarters via the PBC Web site (PBCNetwork.com). The
PBC web site will be used in the future by the general public. Only one PBC
Network store per zip code will be accepted for membership, thus creating
internal quality control standards.
As E-commerce and the global economy grow, someone must deliver the purchased
goods inexpensively to the consumer. The Company believes that many companies
will eventually need an affordable distribution system to deliver what the
consumers purchase. Universal believes it has indeed positioned itself to be a
contender in the global economy of the next decade with the creation of its
additional subsidiaries, Luggage Express (Universal's luggage delivery service),
WorldPost (Universal's international delivery system) and Fundings Express
(Universal's discounted mortgage bank).
POSTAL BUSINESS CENTER NETWORK(TM)
(PBCNETWORK.COM)
The PBC Network is an association formed to create a very much-needed
partnership between previously unconnected shipping and packaging storeowners.
This concept has been accomplished many times before in American industries,
most notably by FTD's maturation of the independent florists across America and
Interflora's unification and development of florists in Europe. The PBC Network
provided independent storeowners with a variety of cost effective services and
products to help increase their profitability, while they are able to maintain
their local or franchised identities. The PBC Network mission statement is to
provide consumers with a feeling of quality assurance when they choose to visit
a PBC Network member location and to have the owners of these locations utilize
the various association services offered for them and their customers.
9
STRATEGIC PARTNERS OF POSTAL BUSINESS CENTER NETWORK
International Shipping WORLDPOST.COM(SKYNET)
Corrugated & Packaging PACKAGING TECHNOLOGIES
Lamination and Photo ID's D&K LAMINEX
Customized Rubber Stamps THESTAMPMAKER.COM
Equipment Leasing ADVANTAGE LEASING
Promotional Items INTERNATIONAL PROMOTION GROUP
Key Machines and Supplies LV SALES
Discounted Phone Cards SARATOGA TELECOM
Secure Document Delivery NETEX
Moving Supplies ALL BOXES DIRECT
Car Rental HERTZ RENT-A-CAR
Customized Corrugated CACTUS CORRUGATED
ATM Machines E-TRADE
Business and Office Supplies PBCNBIZSUPPLIES.COM
Parcel Insurance UNIVERSAL PARCEL INSURANCE CO.
CreditCard Processing NOVA INFORMATION SYSTEMS
Check Processing ECHECK2000.COM
Payroll and Tax Processing PAYCHEX
Video Conferencing TALK VISUAL
Air Miles Incentive Program AMERICAN AIRLINES
Travel and Entertainment RESLINX
Shredder Cushioning Systems PACK-MATE
10
WORLDPOST(TM)
(WORLDPOSTNETWORK.COM)
To understand WorldPost's International Delivery Territory opportunity one must
begin with an explanation of Skyworld's history and its relationship to
Universal Express.
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 services 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 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
world.
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.
Universal Express purchased and then after one year sold SkyWorld importantly
retaining discounted international rates for its members and customers along
with the rights to sell WorldPost territory business opportunities throughout
North America. A WorldPost territory can be sold for at least $80,000. The
purchaser is trained at Miami SkyNet and at Universal's PBC and WorldPost
offices also located in Florida. The purchaser of this territory has just been
put into the lucrative international shipping business with postal stores to
help him begin his new business. He has a discounted envelope and rate chart and
an override on the other services of participating postal stores in his
territory. The purchaser has aligned himself with over 268 international
shipping partners and his rates are on the average of 20-50% below the
traditional carriers.
According to industry averages, the Postal stores alone ship approximately
$600,000,000 annually in international packages. Any percentage of that volume,
coupled with over 600 locations to be sold @ 80,000 (48,000,000) also indicates
a potential growth subsidiary.
11
The strategic partnership with SkyNet Worldwide Express and USXP's Postal Store
Association and its International shipping network enhance its position in the
shipping and service industry.
Universal Express's strategy of developing the PBC Network and WorldPost
together is unique to the private postal industry. These postal locations can
create an inexpensive localized international delivery network for themselves
rather than only using the more expensive traditional carriers.
LUGGAGE EXPRESS(TM)
Universal has identified a significant niche in the travel industry - the
transportation of passenger's luggage to and from airports. According to the
Port Authority, the airports in only the New York area (JFK, LaGuardia and
Newark) processed 84 million passengers in 1997 (a number that is increasing
yearly) with 148,680,000 items of check-in luggage (an average of 1.77 pieces
per passenger). Nationwide over 1.5 billion suitcases are presently being
checked by domestic passengers themselves.
There is no branded consumer accepted commercial luggage transportation service
anywhere else in America. Universal has over 8000 no-cost warehouse locations.
The service includes luggage collection from home, hotel or business and
delivery for loading. Immediate benefits to the travelers include: convenience,
help with large and heavy luggage items, avoiding long baggage check-in lines
and minimizing pre-flight waiting time, as well as delays at retrieval carousels
at journey's end.
The inbound service includes collection by local postal stores of passenger's
luggage and then delivery by major carriers to the final destination.
Arrangements for international customs clearance will be part of the service.
Another passenger benefit is the enhanced security at an additional cost if
desired and safety of the passenger's luggage through a protective plastic
wrap-around on each item.
At the same time, there are significant benefits to the airlines, which include:
customer satisfaction, easier check-in, a secure alternative to curb-side
check-in, less congestion in the departure hall with less luggage to screen and
it should minimize departure delays. Negotiations are currently underway with
airlines to offer the luggage service to first-class and business class
passengers.
Universal plans to charge $70 per piece of luggage or a minimum of $85 per
pick-up. The average couple, traveling for 10-14 days, with 3 pieces of luggage
will presently spend $2500-3000 for such a trip. The addition of $210 is minimal
for the added convenience of not having to stand in line for 2 hours before
departure and no movement of luggage issues until it arrives at their final
destination.
12
Luggage Express, may conduct sales through travel agents, which will offer the
service to their clients when their tickets are booked. There are over 3500
travel agents in New York. The service will be advertised directing passengers
to call an 800 number for pick-up. It is estimated that 30% of the luggage
business will be derived from travel agents or travel website efforts.
While USXP cannot be definite as to the market penetration that it will achieve,
the FAA expects the number of airline passengers to double by 2005, making
domestic luggage exceed 3 billion suitcases.
The short-term goal of USXP is to go international with its 268 worldwide
partners once it has reached a 1% market penetration, utilizing its postal
business center warehouse network presently located in all 50 states.
USXP has trademarked both the name and patented the procedure to protect its
ideas and efforts. Its web site (don'tcarryit.com) is expected to be easy to
remember and will explain the services to the public.
RESULTS OF OPERATIONS - THREE MONTHS
Management is continually concentrating on raising new capital to further
develop the PBC Network. Its multi-faceted national private postal business
centers nationwide connected through the World Wide Web, and for future
acquisitions.
Management views this year as a period of growth based upon its decision to
concentrate on core business development through the PBC Network, WorldPost(TM)
and Luggage Express(TM).
The sale of Skynet and Manhattan Concierge, have permitted the Company to shed a
considerable amount of liabilities, in order to concentrate on its core
businesses and to seek synergistic acquisitions, while retaining the benefits of
territory sales for Skynet and Manhattan Concierge.
LIQUIDITY AND CAPITAL RESOURCES - FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
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The net proceeds from new loans and investments in the Company was approximately
$1,043,650. Approximately $578,209 was used in its operating activities.
Until the PBC Network and WorldPost(TM) are fully operational, the Company will
continue to rely on equity and debt raised to fund its operations. Management is
continuing efforts to raise cash by arranging lines of credit, and obtaining
additional equity capital. The Company's future business operations will require
additional capital.
Management is presently exploring methods to increase available credit lines as
well as methods to increase working capital through both traditional and
non-traditional debt services.
13
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company was awarded a $389 million dollar damage verdict on July 25, 2001 by
a jury in Dade County, Florida, upon which judgment was entered, against Select
Capital, Ronald G. Williams and Walter Kolker. We believe that the judgment,
which is non-appealable, is substantially collectible.
The Company is involved in several lawsuits with vendors and suppliers and
claims for fees of certain professionals. These claims are all disputed by the
Company. The Company believes that disposition of these matters will not have a
material adverse effect on the Company's financial position.
Item 2. CHANGES IN SECURITIES -- NONE
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Item 3. DEFAULTS ON SENIOR SECURITIES -- NONE
-----------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS -
-----------------------------------------------------
NONE
Item 5. OTHER INFORMATION -- NONE
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Item 6. EXHIBITS AND 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: November 14, 2001
14