U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File No. 0-27780
U-SHIP, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0355929
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
5583 West 78th Street, Edina, MN 55439
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (612) 941-4080
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
As of February 8, 1999, there were 5,079,709 shares of common stock of the
registrant issued and outstanding.
Transitional Small Business Disclosure.
YES [ ] NO [X]
<PAGE>
U-SHIP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 1998
INDEX
Page
----
PART I. FINANCIAL INFORMATION................................................3
ITEM 1. a) Condensed Consolidated Financial Statement (UNAUDITED)
b) Condensed Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998.........................3
c) Condensed Consolidated Statements of
Operations - Three and Six months ended
December 31, 1998 and 1997..................................4
d) Condensed Consolidated Statements of
Cash Flows - Six months ended
December 31, 1998 and 1997..................................5
e) Notes to Condensed Consolidated Financial
Statements..................................................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............7
PART II. OTHER INFORMATION...................................................15
ITEM 2. Changes in Securities and Use of Proceeds..................15
ITEM 6. Exhibits and Reports on Form 8-K...........................15
SIGNATURES...................................................................16
EXHIBIT INDEX................................................................17
2
<PAGE>
U-SHIP, INC. AND SUBSIDIARIES
Condensed and Consolidated Balance Sheets
As of
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 281,521 $ 153,693
Short-term investments -- 1,700,000
Accounts receivable 140,235 83,529
Inventories 1,046,194 501,641
Prepaid expenses and other 204,192 --
------------ ------------
Total current assets 1,672,142 2,438,863
------------ ------------
PROPERTY AND EQUIPMENT
Shipping centers 687,133 1,335,234
Furniture, fixtures and equipment 851,104 537,979
Less accumulated depreciation (844,796) (934,054)
------------ ------------
Total property and equipment,net 693,441 939,159
------------ ------------
OTHER ASSETS, net 185,517 174,904
------------ ------------
$ 2,551,100 $ 3,552,926
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 45,445 $ 52,881
Accounts payable 385,099 74,143
Accrued liabilities 86,905 144,928
Deferred revenue 2,167 19,225
------------ ------------
Total current liabilities 519,617 291,177
------------ ------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 31,126 61,004
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, $.004 par value; 25,000,000 shares authorized;
4,500,000 shares designated series A cumulative convertible;
4,455,498 issued and outstanding 17,822 17,822
Common stock, $.004 par value; 75,000,000 shares authorized;
5,079,709 and 4,979,709 issued and outstanding 20,319 19,919
Additional paid-in capital 12,994,947 12,935,347
Accumulated deficit (11,032,730) (9,772,343)
------------ ------------
Shareholders' equity 2,000,358 3,200,745
------------ ------------
$ 2,551,100 $ 3,552,926
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed and consolidated
financial statements.
3
<PAGE>
U-SHIP, INC. AND SUBSIDIARIES
Condensed and Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 147,610 $ 289,201 $ 272,086 $ 552,614
EXPENSES
Direct shipping and equipment sales 119,321 255,413 246,739 435,822
General and administrative 498,929 400,918 949,449 888,502
Marketing and sales 130,630 30,106 165,691 67,467
Research and development 68,363 37,733 205,830 98,721
----------- ----------- ----------- -----------
817,243 724,170 1,567,709 1,490,512
Loss from operations (669,633) (434,969) (1,295,623) (937,898)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 16,984 8,262 41,570 14,904
Interest expense (2,937) (5,854) (6,334) (13,179)
----------- ----------- ----------- -----------
Net Loss (655,586) (432,561) (1,260,387) (936,173)
=========== =========== =========== ===========
Basic & diluted net loss per share: $ (0.13) $ (0.09) $ (0.25) $ (0.19)
=========== =========== =========== ===========
Basic & diluted weighted
average number of common
shares outstanding 5,001,448 4,979,709 4,990,579 4,975,271
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed and consolidated
financial statements.
4
<PAGE>
U-SHIP, INC. AND SUBSIDIARIES
Condensed and Consolidated Statement of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended December 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $(1,260,387) $ (936,173)
Adjustments to reconcile net loss to net cash flows
used for operating activities-
Depreciation and amortization 201,215 271,727
Change in operating assets and liabilities:
Accounts receivable (56,706) 27,175
Inventories (164,544) 117,332
Prepaid expenses and other (204,192) 16,423
Accounts payable 310,956 111,574
Accrued liabilities (58,023) (201,939)
Deferred revenue (17,058) (17,775)
----------- -----------
Cash used by operating activities (1,248,739) (611,656)
----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment (196,119) (237,978)
Cash paid for acquisition (90,000) --
Redemption of short-term investments 1,700,000 250,000
----------- -----------
Cash provided by investing activities 1,413,881 12,022
----------- -----------
FINANCING ACTIVITIES
Payments on notes payable and long-term debt (37,314) (23,756)
Proceeds from sale of common stock -- 20,783
----------- -----------
Cash provided (used) by financing activities (37,314) (2,973)
----------- -----------
Net increase (decrease) in cash and cash equivalents 127,828 (602,607)
Cash and cash equivalents, beginning of period 153,693 724,260
----------- -----------
Cash and cash equivalents, end of period $ 281,521 $ 121,653
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 6,334 $ 13,179
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment returned to inventory $ 379,509 --
Assets acquired in connection with the acquisition of Gel Trucking, Inc. were as follows:
Allocation of cost based on fair value of assets acquired:
Current assets $ 500 --
Property and equipment 61,710 --
Intangible assets 87,790 --
----------- -----------
150,000 --
Less fair market value of common stock issued 60,000 --
Net cash paid for acquisition $ 90,000 --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed and consolidated
financial statements.
5
<PAGE>
U-SHIP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by U-Ship, Inc. which, together with its wholly-owned subsidiaries,
shall be referred to herein as the "Company", without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. The Company's
business is seasonal and, accordingly, interim results are not indicative of
results for a full year. In the opinion of the Company, all adjustments
consisting only of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of December 31, 1998, and the results of
its operations for the three and six months ended December 31, 1998 and 1997,
and its cashflows for the six months ended December 31, 1998 and 1997 have been
included. Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These consolidated financial
statements should be read in conjunction with the financial statements for the
year ended June 30, 1998, and the footnotes thereto, included in the Company's
Report on Form 10-KSB, filed with the Securities and Exchange Commission.
1. Basis of Presentation:
Principles of consolidation - The consolidated financial statements include the
accounts of U-Ship, Inc. and its wholly owned subsidiaries. All inter-Company
balances and transactions have been eliminated in the consolidation.
2. Revenue Recognition:
The Company has historically generated revenue from: The per-package shipping
revenue generated from ongoing shipping volume at its Intelligent Shipping
Kiosks (ISKs), the sale of ISKs and custom built intelligent kiosks, and to a
lesser extent, from the sale of shipping supplies and maintenance contracts.
Package shipping revenue is recognized when the package is shipped. Revenue from
maintenance contracts is deferred and recognized over the period of the related
agreement.
3. Basic and Diluted Net Loss Per Share:
In the second quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings per Share" which is effective for interim periods ending after
December 15, 1997. As a result, all prior period earnings per share data has
been restated. The adoption of SFAS No. 128 did not have a significant impact on
previously reported earnings per share. Basic earnings per common share was
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the period. Dilutive earnings per common share
was computed similar to the computation of basic earnings per share, except that
the denominator is increased for the assumed exercise of dilutive options and
other dilutive securities using the treasury stock method. No options or other
dilutive securities were included in diluted earnings per share as they would be
antidilutive. Total options and warrants outstanding for the periods ended
December 31, 1998 and 1997 were 4,662,870 and 1,509,446, respectively.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
U-SHIP, INC. AND SUBSIDIARIES
IN ACCORDANCE WITH THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY NOTES THAT CERTAIN
STATEMENTS IN THIS FORM 10-QSB AND ELSEWHERE WHICH ARE FORWARD-LOOKING AND WHICH
PROVIDE OTHER THAN HISTORICAL INFORMATION, INVOLVE RISKS AND UNCERTAINTIES THAT
MAY IMPACT THE COMPANY'S RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, STATEMENTS CONCERNING THE COMPANY'S GENERAL BUSINESS
STRATEGIES, FINANCING DECISIONS, AND EXPECTATIONS FOR FUNDING CAPITAL
EXPENDITURES AND OPERATIONS IN THE FUTURE. WHEN USED HEREIN, THE WORDS
"BELIEVE," "PLAN," "CONTINUE," "HOPE," "ESTIMATE," "PROJECT," "INTEND,"
"EXPECT," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, NO STATEMENTS
CONTAINED IN THIS FORM 10-QSB SHOULD BE RELIED UPON AS PREDICTIONS OF FUTURE
EVENTS. SUCH STATEMENTS ARE NECESSARILY DEPENDENT ON ASSUMPTIONS, DATA OR
METHODS THAT MAY BE INCORRECT OR IMPRECISE AND MAY BE INCAPABLE OF BEING
REALIZED. THE RISKS AND UNCERTAINTIES INHERENT IN THESE FORWARD-LOOKING
STATEMENTS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN OR IMPLIED BY THESE STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE INFORMATION CONTAINED IN THIS FORM 10-QSB IS BELIEVED BY THE COMPANY
TO BE ACCURATE AS OF THE DATE HEREOF. CHANGES MAY OCCUR AFTER THAT DATE, AND THE
COMPANY WILL NOT UPDATE THAT INFORMATION EXCEPT AS REQUIRED BY LAW IN THE NORMAL
COURSE OF ITS PUBLIC DISCLOSURE PRACTICES. REFERENCE IS MADE TO THE CAUTIONARY
LANGUAGE UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS" IN
THE COMPANY'S 10-KSB FOR FISCAL YEAR END JUNE 30, 1998, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1998.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE EXPECTATIONS REFLECTED IN ANY FORWARD-LOOKING STATEMENT HEREIN
INCLUDED, AMONG OTHER THINGS, (1) THE ABILITY OF THE COMPANY TO LEVERAGE AND
MARKET ITS ISK TECHNOLOGY (AS DEFINED BELOW) TO MAJOR SHIPPERS AND CARRIERS AND
OPERATE A BRAND IDENTITY RELATING THERETO; (2) THE ABILITY OF THE COMPANY TO
SUCCESSFULLY REDEPLOY EXISTING COMPANY-OWNED ISKS TO HIGHER VOLUME LOCATIONS;
(3) THE ABILITY OF THE COMPANY TO INCREASE ITS ORIGINAL EQUIPMENT MANUFACTURING
BUSINESS FOR KIOSKS AND THE GROWTH IN KIOSKS AS TOOLS FOR PROVIDING INFORMATION,
MARKETING AND VENDING SERVICES AND PRODUCTS; (4) THE UNCERTAINTIES SURROUNDING
TECHNOLOGICAL CHANGES AND THE COMPANY'S DEPENDENCE UPON COMPUTER SYSTEMS AND
THIRD PARTIES WHO MANUFACTURE AND MARKET THE SAME; (5) THE ABILITY OF THE
COMPANY TO SUCCESSFULLY DEVELOP AND IMPLEMENT AN ACQUISITION STRATEGY, INCLUDING
THE ABILITY TO SUCCESSFULLY INTEGRATE AND MANAGE ACQUIRED COMPANIES; (6) THE
ABILITY OF THE COMPANY TO ACCESS PUBLIC AND PRIVATE EQUITY MARKETS; AND (7) THE
ABILITY OF THE COMPANY TO STEM OPERATING LOSSES AND POSITION THE COMPANY TO
ACHIEVE POSITIVE CASH FLOW.
GENERAL
In 1991, U-Ship, Inc. (the "Company" or "U-Ship") began the initial
development of self-service automated shipping systems designed to be installed
at the shipping hubs of major package carriers such as United Parcel Service
("UPS") and Federal Express Corporation ("FedEx"), thereby allowing small
business and individuals expanded access to shipping services. The original
shipping kiosks developed by the Company were large and relatively slow,
reflecting the state of the computer industry of that day. Since that time,
rapid advances in computer software and hardware have allowed the Company to
reduce the size of the systems, to build in higher levels of intelligence with
greater speed, and to make the kiosks more consumer friendly.
In 1996 the Company introduced a third generation of intelligent
shipping kiosks ("ISKs") (formerly known as the self-service automated shipping
center or "ASC"). Since that time, the primary business of the Company has been
the manufacturing, marketing and operation of self-service, automated shipping
systems for use by consumers and small businesses who ship packages and priority
letters through major carriers in the air express and package delivery market.
Historically, ISKs placed in service by the Company were leased by retailers
from third
7
<PAGE>
party leasing companies or were Company-owned. Beginning in 1996, the Company's
consumer testing and deployment strategy began to emphasize the placement of
Company-owned and operated ISKs in retail locations. In the past, ISKs have been
placed in office services and copy centers, including Kinko's Copy Centers and
CopyMax, and in other retail locations such as grocery and general merchandise
stores. As of December 31, 1998, the Company had installed a total of 190 ISKs
currently placed in test sites in 31 states and Canada. Of these, 72 ISKs were
located in Kinko's Copy Centers. In September, 1998 the Company terminated its
relationship with CopyMax and removed 113 ISKs located in CopyMax stores. The
Company is currently undertaking efforts to retrofit these units into its new
ET300 series. The Company's revised business strategy is to deploy them into the
Minneapolis/St. Paul metro area.
Beginning in fiscal 1997, the Company began the production of custom
built computerized kiosks for a third party in the employment information
business. The Company currently derives revenue primarily from package shipping
transactions and, to a lesser extent, from the sale of ISKs and custom built
computerized kiosks.
The Company holds nine patents and has one allowed patent application
related to hardware and software utilized in its ISKs. The Company is not aware
of any other comparable self-service, automated shipping system currently
marketed or available to consumers and small business package shippers. Each ISK
location is centrally controlled and serviced through an electronic connection
to the Company's computer network system. The Company believes that its ISK
technology is among the most advanced self-service automated air express and
package shipping systems available for consumers and small businesses.
REVISED BUSINESS STRATEGY
In late 1997, as a result of lower than anticipated revenues from ISKs
placed in the field, the Company began an extensive evaluation of its strategies
and results from its test sites. Based upon information gathered from the
operation of over 300 ISKs in various retail locations such as Kinko's Copy
Centers and CopyMax, the Company has substantially revised its historical
business strategy of installing Company-owned ISK systems in major office supply
and instant printing outlets, business centers and office parks. The Company has
concluded that these placements were not sufficiently concentrated to allow for
economies of scale in marketing and advertising, which the Company believes is
crucial to customer awareness and acceptance of the ISK. Accordingly, the
Company is in the process of consolidating these units to the Minneapolis and
St. Paul markets to take advantage of economies of scale in both maintenance and
advertising. On September 15, 1998, the Company entered into an agreement with
CopyMax to remove all of the ISKs located at CopyMax stores. The Company is
currently undertaking efforts to retrofit those units into its new ET300 series
and to redeploy them into the Minneapolis/St. Paul metro area.
The Company also determined that existing ISKs were unable to offer
customers the range of shipping choices needed to provide true convenience of
package delivery (such as the ability to select one of several package delivery
and/or carrier options, and the enhancement of speed of delivery and ease of
use). To address these needs the Company concluded that it needs to have the
in-house capability to provide its own pick up and redelivery of packages from
its ISKs to the major carriers. (Market research by the Company's consultants
also indicated that such services may offer a lucrative opportunity if the
Company combines this pick up service with a courier business.)
As a result, the Company sees an opportunity to integrate the package
collection and courier markets and provide increased service options to its
customers by utilizing the Company's technology both for traditional package and
letter delivery as well as acting as a computerized depository for courier
services, thus making it feasible for the Company to pursue a courier "roll up"
strategy with a unique technological advantage. The courier business is highly
fragmented, with no dominant brands and extremely low technological innovation.
The Company believes that the "intraday" courier business segments are currently
not being served by the major carriers but may be a future target for
acquisitions. The Company believes its technology combined with a courier
service can provide consumers and end users with significant value and will
allow the Company to attract these consumers and end users as customers. The
Company's existing ISK units, once repositioned to the Minneapolis/St. Paul
area, may be utilized pursuant to the Company's courier roll up strategy.
8
<PAGE>
To achieve this goal the Company has formed a new subsidiary, Advanced
Courier Services, Inc. This subsidiary is actively seeking acquisitions with the
intent of establishing first a regional and then a national position in the
intraday courier business. The subsidiary is also negotiating a license of an
established brand name for its courier services, or it may create its own brand,
to achieve market differentiation. If the Company is successful in establishing
several key markets, it then plans to expand the concept by a franchise or
similar program to further leverage the brand name, generate additional revenues
and further explore advances in the Company's technologies to create greater
customer intimacy.
The Company has also determined it must make continued investments in
its technology to remain competitive and to create a barrier to entry from the
competition. Company research indicates shipping technology is subject to the
same changes as other computer technologies and will require the Company to
continually enhance its products. The Company has a core competency in the
development of intelligent kiosks and shipping management systems. The Company
will leverage these assets to spread the development overhead needed for the
pursuit of its revised business strategy by offering its kiosk designs, software
or other properties to the marketplace as an original equipment manufacturer
("OEM") or in other capacities.
In order to best manage this process the Company formed a subsidiary
called Intelligent Kiosk Company ("IQK"). IQK is the technology arm of the
Company. This subsidiary's primary activities include the management and
development of shipping and delivery systems, the design and production of
shipping and information kiosks, and the development of information management
software for the kiosk and shipping industries. The kiosk business is growing
rapidly as a result of consumer familiarity with the Internet, and the Company
believes it is in a position to utilize its experience to penetrate these
emerging markets. The Company also intends that IQK will explore synergistic
acquisitions and strategic alliances to support the development of new
technologies for the Company.
The Company also developed a new generation of intelligent kiosk
systems, designated as the Company's Performance Series, which are based on the
Company's models 3100 and 4100. The Model 3100 has become the ET300, and the
Model 4100 has become the ET400. In addition, the Company has designed a new
model, designated the ET200, which will be a Model 4100 with a wall-mounted
drop box feature to be used in locations calling for a large-capacity, secure
package intake capability. These new systems are believed by the Company to be
among the most advanced in the marketplace. The Company is currently
retrofitting the ISKs recalled from the CopyMax locations and is redeploying
them in the Minneapolis/St. Paul metropolitan area.
ADVANCED COURIER SERVICES, INC.
As part of its revised business strategy, the Company is seeking to
identify and evaluate acquisition opportunities with businesses that complement
its current field of business. The Company initially targeted the courier and
transportation industries as areas for potential acquisitions, having identified
that couriers were not being supported by supplemental collection systems or
advanced shipping and operating technologies.
While the courier industry is very large (estimated at over $23 billion
in 1995), the Company's informal market surveys indicate that it has become
highly fragmented as a result of deregulation and low entry barriers. Based upon
this and information from the Company's consultants, the Company believes that
consolidation of this industry will provide a basis for brand building,
increased customer service, new customer service programs, and achievement of
operating synergies (e.g., office infrastructure, network effectiveness,
dispatch, and management).
On December 11, 1998, the Company, through ACS, purchased substantially
all of the assets of JEL Trucking, a Minneapolis based trucking company engaged
in dock truck and courier shipments, for a combination of cash and the Company's
stock. Additionally, on January 13, 1999, the Company acquired, through ACS,
Twin City Transportation, Inc., a Minneapolis based courier with revenue of
approximately $1.8 million and 50 drivers, for a combination of cash and the
Company's common stock. In addition, the Company continues to evaluate potential
acquisitions of other courier and transportation services. There can be no
assurance that the Company will be able to successfully complete any additional
acquisitions.
9
<PAGE>
As part of its marketing efforts for ACS, the Company is seeking to
license and test a nationally recognizable brand name, to be utilized in
connection with personal and small business shipping and courier services. The
Company believes this will build brand value and increase leverage with
carriers, licensees, joint ventures and potential franchisees, which the Company
expects can result in more efficient use of advertising dollars and improved
future profitability for the Company. There can be no assurance that the Company
will be successful in its efforts to acquire and utilize a nationally recognized
brand.
INTELLIGENT KIOSK COMPANY
The Intelligent Kiosk Company ("IQK") was incorporated as a subsidiary
of the Company in Minnesota in August 1998. The purpose of IQK is to consolidate
the Company's core competency in the development and manufacture of interactive
kiosks for both the shipping and non-shipping industry, as well as related
software systems. The Company plans that all technological development for the
Company's ISKs and interactive kiosks, as well as supportive technologies for
the courier business, will be performed by IQK.
During fiscal 1997, the Company began manufacturing and marketing
intelligent kiosks on an original equipment manufacturer ("OEM") basis for a
business that provides information on employment opportunities to prospective
job applicants. This kiosk allows electronic job searches and applications to be
processed and transmitted electronically. The Company identified the kiosk
market as potentially providing the opportunity for growth based on the
Company's existing technology and manufacturing expertise. Market data, as well
as ongoing requests from other businesses for quotations on the manufacture of
intelligent kiosk systems, have led the Company to conclude that a substantial
market for such products may exist. The Company intends to position itself as an
OEM producer of advanced computerized kiosk systems for a multitude of
applications. The Company believes that its current ISK design is readily
adaptable to use as computerized kiosks, with little modification, thereby
reducing developmental costs.
The Company is also engaged in the marketing of its automated shipping
(ISK) technology to major carriers for the purpose of automating their package
intake hubs. The Company believes that the use of its ISKs by major carriers for
use in their hubs will allow for more efficient package intake and use of
existing personnel in servicing customers. In November of 1998, the Company
entered into a pilot test program with one of the world's largest carriers. The
test calls for the Company to install its ISKs in one of the carrier's hubs for
use at its commercial package shipping counter. It is intended that customers
will use the ISKs to ship packages, rather than using traditional counter
personnel to do the job, thereby allowing the carrier a more efficient package
intake operation and allowing the customer easier payment for shipping services
via the Company's built-in credit card swipe.
The Company expects to continue leveraging its existing technology,
know-how and patent position to create strategic relationships with major
carriers through licensing the technology or selling ISK units/systems as an OEM
manufacturer. The Company believes that the use of the Company's ISKs can enable
these carriers to expand their market coverage to more efficiently and
profitably service the small business or consumer shipping transaction without
increasing prices or overhead.
In addition to the foregoing, the Company believes that its unique
kiosk and information management technology will allow for the integration of
the ISK with courier and in-house delivery services and, ultimately, will
provide a base for a "roll up" of courier and other related services on a
regional or national scale. To this end, the Company plans to utilize its ISKs
as an "electronic drop box" for courier services provided through its
subsidiary, ACS. Because the ISKs are linked electronically to the Company's
central computers, they will allow for immediate notification to a courier that
a pickup is needed at a particular site; the Company's information technology
will allow for the management and coordination of dispatching and other "back
room" functions to provide support services more efficiently and, the Company
believes, more cost-effectively.
There can be no assurance that any of the aforementioned strategies
will be implemented, or, if implemented, that any of such strategies will be
successful. If implemented, the Company expects overall revenues from the use of
its ISKs to drop significantly in the short term. Because the Company is
growth-focused, it intends that any earnings it realizes will be utilized for
the continued development of its technologies and the expansion of its business.
Accordingly, the Company believes that it will require substantial financing to
implement its revised business plan.
10
<PAGE>
There can be no assurance that the Company will be successful in raising the
required funds to implement the plans outlined above.
In order to highlight the adoption by the Company of the revised
business strategies outlined above, the Company recently applied for the use of
"United Shipping and Technology" as an assumed business name in the State of
Minnesota. The Company plans to seek shareholder approval for the change of its
name to "United Shipping and Technology, Inc." at its next meeting of
shareholders.
RESULTS OF OPERATIONS
Revenue for the three months ended December 31, 1998 decreased $141,591
or 49% to $147,610 from $289,201 for the same period in 1997. Revenue for the
six months ended December 31, 1998 decreased $280,528 or 51% to $272,086 from
$552,614 for the corresponding period in 1997. For both periods, the decrease in
revenue is a result of the redeployment strategy which has resulted in a
decrease in the number of ISKs in operation from 309 to 190, a 39% decrease. In
September 1998, the Company reached an agreement to remove ISKs deployed with
one multiple location retailer, in order to implement the new ISK placement
strategy. In addition, revenue for the six months period ended December 31, 1997
included a one-time revenue related to the development of a prototype ISK for a
major carrier.
Direct shipping and equipment sales expenses decreased $136,092 or 53%
to $119,321 from $255,413 for the corresponding period in 1997. For the six
month period ended December 31, 1998, direct shipping and equipment sales
expenses decreased $189,083 or 43% to $246,739 from $435,822 for the same period
in 1997. The decrease for both periods is the result of lower package shipments
as the Company begins its redeployment strategy.
General and administrative expenses for the three months ended December
31, 1998, increased $98,011 or 24% to $498,929 from $400,918 for the same period
in 1997. General and administrative expenses for the six months ended December
31, 1998 increased $60,947 or 7% to $949,449 from $888,502 for the same period
in 1997. Personnel expenses attributed to the majority of the increases for both
periods. In April 1997, the Company implemented cost-cutting measures through
the reduction of staff and the deferral of certain expenditures. Significant
staff reductions and operating expense reductions were implemented during 1997.
As a result of the Company's revised strategy, significant efforts have been
undertaken to develop acquisition activities and to rebuild an experienced
management team to implement the strategy.
Marketing and sales expenses for the three months ended December 31,
1998 increased $100,524 or 334% to $130,630 from $30,106 for the same period in
1997. For the six month period ended December 31, 1998 marketing and sales
expenses increased $98,224 or 146% to $165,691 from $67,467 for the same period
in 1997. The increase for both periods is the result of staff additions required
to implement the redeployment strategy and to establish marketing programs for
both IQK and ACS.
Research and development expenses for the three months ended December
31, 1998, increased $30,630 or 81% to $68,363 from $37,733 for the corresponding
period in fiscal 1997. Research and development costs for the six month period
ended December 31, 1998 increased $107,109 or 108% for the corresponding period
in 1997. The increase in research and development expense is attributed to the
development of new software tools for the ISKs.
Interest income increased to $16,984 for the three months ended
December 31, 1998 compared to $8,262 for the same period in 1997. For the six
month period ended December 31, 1998 interest income increased to $41,570 from
$14,904 for the same period in 1997. For both periods, the increase is a result
from the investment of cash surpluses generated from the Company's private
offerings in May and June 1998. Interest expense decreased from $5,854 for the
three month period ended December 31, 1997 to $2,937 for the same period in
1998. Interest expense for the six month period ended December 31, 1998
decreased to $6,334 from $13,179 for the corresponding period in 1997. For both
periods, the decrease is attributed to the retirement of a portion of long-term
debt.
11
<PAGE>
Net loss for the three months ended December 31, 1998, increased
$223,025 to $655,586 from $432,561 for the same period in the prior year. The
net loss of the six month period ended December 31, 1998 increased $324,214 to
$1,260,387 from $936,173 for the same period in 1997. The Company expects to
incur additional losses while it begins implementation of the revised business
strategy.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has operated at a loss and has funded its
operations from the proceeds of public and private equity offerings. In order to
finance the implementation of the revised business strategy outlined above, the
Company completed two private placements raising over $2.6 million equity
capital from private investors during the fiscal year ended June 30, 1998. By
separate closings on June 2, 1998, and June 8, 1998, the Company completed a
private placement in which it sold to accredited investors 2,883,824 shares of
its newly-created Series A Cumulative Convertible Preferred Stock, together with
Warrants to purchase 1,441,912 shares of Common Stock. The Preferred Shares and
Warrants were sold in Units, at a purchase price of $1.20 per Unit. The total
consideration received by the Company for the sale of these Units was
$1,477,856, net of interest ($7,080) and the Agent's commissions and
non-accountable expenses and other expenses of the offering. The Agent purchased
for $50.00 a Warrant to purchase up to 288,381 shares of the Company's common
stock at an exercise price of $.60 per share.
In April 1998, certain accredited investors (the "Additional
Investors") purchased directly from the Company, in a private placement
transaction an aggregate of 1,571,674 shares of its Series A Cumulative
Convertible Preferred Stock, together with Warrants to purchase 785,837 shares
of common stock, at a purchase price of $1.20 per Unit, for a total
consideration received by the Company of $943,003. The total net consideration
from the sale of the Units in the two offerings described above was $2,420,859.
In April 1997, to meet working capital requirements, the Company completed a
private placement of its Common Stock raising approximately $1.6 million.
The Company is currently attempting to raise additional cash for
acquisitions and working capital needs through the sale of $16 million of 12%
Unsecured Notes with attached warrants to purchase common stock. These notes are
being marketed on a private placement basis. On December 31, 1998, notes in the
principal amount of $1.10 million, together with warrants to purchase an
aggregate of 29,333 shares of the Company's common stock, were sold pursuant to
subscription agreements. The cash proceeds, however, were received subsequent to
December 31, 1998.
Inventory increased $544,553 as of December 31, 1998, compared to June
30, 1998. The Company has increased its purchase of materials during the quarter
in order to implement the new ISK redeployment strategy. In addition, the
Company removed the ISKs which were recalled from CopyMax from fixed assets and
returned them to inventory as they were being retrofitted to ET300 series and in
anticipation of reselling them into the market. Accounts receivable increased
$56,706 as of December 31, 1998, compared to June 30, 1998. The increase is
primarily due to one time billings for ISK removal. Accounts payable increased
$310,956 over the same period due to the increased level of purchases associated
with the redeployment efforts. Accrued liabilities and deferred revenue
decreased due to reductions in the liabilities associated with the possible
exercise of return rights on the ISKs, as well as payments of severance due to
officers and the payments of sales and use taxes.
During the six month period ended December 31, 1998, the Company
incurred $132,465 of costs associated with the development of a new operating
system for the ET series kiosks. These costs are capitalized and included in
Property and Equipment.
In fiscal 1999, the Company plans to focus on the various aspects of
its courier roll up strategy making acquisitions in the intraday courier market
and supporting technology, the acquisition or building of a nationally
recognized brand name to be used in conjunction with such services, and related
advertising - as well as on the continued development of its intelligent kiosk
technology for both the shipping and information retrieval market. The Company
believes that these efforts will require the Company to expend significant
capital. While the Company will seek to acquire courier companies that have
profits or positive cash flow, or that have the potential to generate positive
cash flow in the future, it is likely that any positive cashflow that would
otherwise result will be
12
<PAGE>
utilized in connection with the Company's ongoing consolidation strategy. The
Company believes that these revised strategies, while initially requiring
additional cash outlays, will result in greater revenues from courier
operations, sales and licensure of ISK technology and package shipping revenues,
although no assurance can be given that such revenues will increase appreciably
as a result of these initiatives in the near future, if at all. The Company
expects that its current ISK network and other operations will continue to
result in negative cash flow and working capital deficiencies that will require
the Company to continue to obtain additional capital and/or obtain debt
financing.
There can be no assurance that the Company will be able to generate
sufficient revenues to meet its operating cash and growth needs or that any
additional equity or debt funding will be available or at terms acceptable to
the Company in the future to continue operating in its current form. The
Company's loss for the fiscal year ended June 30, 1998 was $1,901,130. The
Company's loss for the three months ended December 31, 1998 was $655,586. The
Company expects to incur losses for the foreseeable future due to the ongoing
activities of the Company to expand its ISK network and the costs incurred in
supporting this network, and in pursuing other aspects of its revised business
strategy. Based on current commitments and ongoing working capital needs, the
Company will continue to require substantial additional debt or equity funding
to continue to implement its revised business strategy, including acquisitions.
The Company's cash needs and usage may vary based on the outcome of these
initiatives. At the present time, the Company has no commitments from any person
to provide additional financing to the Company. There can be no assurance that
the necessary financing will be available to the Company or, if available, that
the same will be on terms satisfactory or favorable to it. While the Company is
not now in a position to determine the price at which its securities may be
issued in any subsequent equity or debt financing, it is likely that additional
equity or debt financing will be highly dilutive to existing shareholders.
THE COMPANY'S YEAR 2000 READINESS
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, in less than a year, computer systems and
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements.
The Company is presently assessing its Year 2000 readiness for
operations, focusing on critical operating and applications systems,
particularly the Year 2000 compliance of: (i) the product lines, (ii) the key
software/hardware vendors, and (iii) the financial accounting systems of the
Company, in light of its recent acquisitions.
Because the Company's internal computer systems were either developed
or upgraded in the early 1990's, substantial infrastructure concerns inherent in
hardware and software systems developed and placed into service at an earlier
date are not a primary concern. As a result, management does not consider that
the incremental costs directly related to Year 2000 issues will be material.
Costs incurred prior to 1999 were also immaterial. The Company does not expect
to incur significant Year 2000 related costs on its internal computer systems.
The Company believes that its greatest Year 2000 risk for disruption to
its business may be the potential noncompliance of its systems which are in its
ISKs which are currently in the market. The Company is currently in the process
of assessing and testing such systems in order to determine whether any of
theses machines are not Year 2000 compliant. If such machines are not Year 2000
compliant, the Company intends to replace or upgrade the systems to make them
Year 2000 compliant. The cost of doing this testing and the possible
replacements or upgrading is estimated to be less than $50,000. The testing and,
if necessary, the replacement or upgrading the systems which are in the ISKs is
estimated to be completed by mid-1999.
The Company has established a team to survey the Year 2000 readiness of
its critical vendors, although management presently has little information
concerning their Year 2000 compliance status. In the event that any such key
vendors do not achieve Year 2000 compliance in a timely manner, or at all, the
Company's business or operations could be adversely affected. The team is also
charged with investigating the Year 2000 readiness of customers, agents and
other third parties which the Company deals with. The Company has identified
critical
13
<PAGE>
suppliers, customers and other third parties and is in the process of surveying
their Year 2000 remediation programs. The Company estimates that risk
assessments and contingency plans, where necessary, will be finalized in the
second quarter of 1999.
As a part of its Year 2000 assessment, the Company intends to
demonstrate its Year 2000 readiness by simulating the Year 2000 in an
orchestrated manner for its key infrastructure components, critical business
processes and key applications systems. The Company expects that minor Year 2000
compliance issues will be identified as an outcome of the Year 2000 simulation
test and intends to address these compliance issues no later than the second
quarter of calendar 1999.
The Company recognizes the need for Year 2000 contingency plans in the
event that remediation is not fully successful or that the remediation efforts
of its vendors, suppliers and governmental/regulatory agencies are not timely
completed. The Company intends to address contingency planning during calendar
1999.
The Company intends to complete its Year 2000 remediation efforts
primarily with in-house resources, but will utilize consultants should the need
arise. The Company believes that the costs of Year 2000 remediation described
above will not be material and can be funded from operations.
The Company recognizes that issues related to Year 2000, insofar as
they relate to the Company's ISKs which were placed in service prior to 1998
constitute a material known uncertainty. The Company also recognizes the
importance of ensuring its operations will not be adversely affected by Year
2000 issues. The Company's Year 2000 efforts are ongoing and its overall plan,
as well as the consideration of contingency plans, will continue to evolve as
new information becomes available. The Company believes that the processes
described above will be effective to manage the risks associated with the
problem. However, there can be no assurance that the processes can be completed
on the timetable described above or that remediation will be fully effective.
The failure to identify and remediate Year 2000 issues, or the failure of users
of the Company's ISKs, key vendors or other critical third parties who do
business with the Company to timely remediate their Year 2000 issues could cause
system failures or errors, business interruptions and, in a worst case scenario,
the inability to engage in normal business practices for an unknown length of
time. The effect on the Company's operation, income and financial condition
could be materially adverse.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
The Company is not a party to any material pending or threatened legal
proceedings. The Company is subject to legal proceedings in the
ordinary course of its business, none of which the Company believes is
material.
ITEM 2 - Changes in Securities and Use of Proceeds
On December 31, 1998, the Company sold, in a private placement
transaction, medium term, unsecured 12% notes (the "Notes") in an
aggregate principal amount of $1,100,000, together with warrants to
purchase an aggregate of 29,333 shares of Common Stock, exercisable at
$1.875 per share. The Warrants expire on January 1, 2004. The Notes,
due December 31, 2002, can be prepaid by the Company without penalty or
premium. No underwriter was used in connection with the sale of the
Notes and no underwriting commissions were paid. The Company intends to
use the net proceeds from the sale of the Notes for working capital and
to fund acquisitions. The Notes and Warrants were sold to a limited
group of accredited investors in a private placement transaction,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended.
ITEM 3 - Defaults upon Senior Securities
Not Applicable
ITEM 4 - Submission of Matters to a Vote of Securities Holders
Not Applicable
ITEM 5 - Other Information
Not Applicable
ITEM 6 - Exhibits and Reports on Form 8-K
a. Exhibits required by Item 601 of Regulation S-B
Exhibit 4.1 Form of 12% Medium Term Note
Exhibit 4.2 Form of Warrant issued to purchasers of 12% Medium
Term Notes
Exhibit 27 Financial Data Schedule
b. Current Reports on Form 8-K for the second quarter ended
December 31, 1998.
Not Applicable
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned; thereunto duly
authorized, in the City of Edina, State of Minnesota on February 16, 1999.
U-SHIP, INC.
By: /s/ Peter C. Lytle
-------------------------------------
Peter C. Lytle
President and Chief Executive Officer
16
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
Exhibit 4.1 Form of 12% Medium Term Note
Exhibit 4.2 Form of Warrant issued to purchasers of 12% Medium Term Notes
Exhibit 27 Financial Data Schedule
17
EXHIBIT 4.1
NOTE AGREEMENT
THIS NOTE AGREEMENT (the "Agreement") dated as of ______, 199_, by and
between U-Ship, Inc., a Utah corporation (the "Company"), and
____________________________________ (the "Investor"), a ______________________.
In consideration of the foregoing, the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Loan/Promissory Note. The Investor agrees to purchase _____ units
("Units") of the Company's 12% Unsecured Notes with Warrants at a purchase price
of $100,000 per Unit, for an aggregate purchase price of $500,000. The Company
agrees to deliver and issue to the Investor for the Units purchased, a
promissory note in the form attached hereto as Exhibit A (the "Note"), in such
amount. The delivery of the Note shall be made concurrently with delivery of
funds to the Company in the amount set forth above. The principal amount of the
Note shall bear interest from the date thereof at the rate of twelve percent
(12%) per annum.
2. Warrants. In consideration of the loan, the Company shall issue to
the Investor, concurrently with delivery of the Note, a warrant with respect to
each Unit purchase, in the form attached hereto as Exhibit B (the "Warrant"), to
purchase a number of shares of Common Stock of the Company $.004 par value per
share (the "Common Stock") equal, for each Unit purchased hereunder, to $5,000
divided by the last sale price of the Common Stock as reported by the Nasdaq
SmallCap Market at the close of business on the date the Company receives and
accepts this Note Agreement from the Investor. The Warrant shall be exercisable
to purchase Common Stock commencing ninety (90) days after the date hereof and
terminating five (5) years from the date of issuance. The shares of Common Stock
issuable upon exercise of the Warrants are referred to hereinafter as the
"Warrant Shares."
3. Repayment of Note. All outstanding principal and accrued interest on
the Note shall be due and payable on the third anniversary of the issuance of
the Note. The Note may be prepaid in whole or in part at any time and from time
to time without premium or penalty as provided in the Note.
4. Representations and Warranties of the Company. The Company
represents and warrants to the Investor that this Agreement has been duly
authorized by all necessary corporate action on behalf of the Company, has been
duly executed and delivered by an authorized officer of the Company, and is a
valid and binding agreement on the part of the Company. All corporate action
necessary for the authorization, issuance, and delivery of the Note, the
Warrant, and the Warrant Shares has been taken on or prior to the date hereof.
5. Representations and Warranties of the Investor. The Investor
represents and warrants to the Company as follows:
<PAGE>
(a) The Investor has had the opportunity to ask questions
of, and receive answers from the Company, or an agent
of the Company, concerning the terms and conditions
of the investment and the business and affairs of the
Company, and to obtain any additional information
necessary to verify such information, as the Investor
considers necessary or advisable in order to form a
decision concerning an investment in the Company.
(b) The Note, the Warrant, the shares purchasable upon
conversion of the Note and the Warrant Stock are
being acquired for investment for the Investor's own
account and not with the view to, or for resale in
connection with, any distribution or public offering
thereof. The Investor understands that neither Note,
nor the Warrant or the Warrant Shares has been
registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state
securities laws by reason of the contemplated
issuance in transactions exempt from the registration
requirements of the Securities Act and applicable
state securities laws and that the reliance of the
Company and others upon these exemptions is
predicated in part upon this representation by the
Investor. The Investor further understands that the
Note, the Warrant, and the Warrant Shares may not be
transferred or resold without registration under the
Securities Act and any applicable state securities
laws, or an exemption from the requirements of the
Securities Act and applicable state securities laws.
(c) The Investor's principal office or residence is set
forth on Page 1 hereof.
(d) The Investor has carefully reviewed the Company's
Confidential Private Placement Memorandum dated
December 21, 1998, as amended December 31, 1998 (the
"Memorandum").
(e) The Investor is able to bear the loss of the entire
investment in the Note, the Warrant, the shares
purchasable upon conversion of the Note and the
Warrant Stock without any material adverse effect on
the Investor's financial position or prospects, and
the Investor has such knowledge and experience of
financial and business matters to be capable of
evaluating the merits and risks of the investment to
be made pursuant to this Agreement. Without limiting
the foregoing, the Investor understands that the
securities offered hereby are highly speculative,
involve a high degree of risk and immediate
substantial dilution, and should be purchased by
persons who can afford the loss of their entire
investment. The Investor has carefully considered the
risks and speculative factors described under "Risk
Factors" in the Memorandum, and the Company's 10-KSB
Report for the year ended June 30, 1998 and
particularly section captioned "Management's
Discussion and Analysis - Factors that May Affect
Operating Results."
(f) The Investor is (check all that apply):
<PAGE>
______(i) A natural person whose individual net worth (assets
less liabilities), or joint net worth with his or her spouse, exceeds
$1,000,000.
______(ii) A natural person whose individual income was in
excess of $200,000, or whose joint income with his or her spouse was in excess
of $300,000, each of the two most recent years, and who has a reasonable
expectation of reaching the same income level for the current year.
______(iii) A bank, insurance company, registered investment
company, business development company, small business investment company, or
employee benefit plan.
______(iv) A savings and loan association, credit union, or
similar financial institution, or a registered broker or dealer.
______(v) A private business development company.
______(vi) An organization described in Section 501(c)(3) of
the Internal Revenue Code with assets in excess of $5,000,000.
______(vii) A corporation, Massachusetts or similar business
trust, or partnership with assets in excess of $5,000,000.
______(viii) A trust with assets in excess of $5,000,000.
______(ix) A director or an executive officer of the Company.
______(x) An entity in which all of the equity owners are
accredited investors (Not available for an Irrevocable Trust).
______(xi) A self-directed IRA, Keogh, or similar plan of
which the individual directing the investments qualifies as an "accredited
investor" under one or more items (i)-(x), above.
Also check the item(s) (i)-(x) which applies.
(g) This Agreement has been duly authorized by all
necessary action on the part of the Investor, has
been duly executed and delivered by the Investor, and
is a valid and binding agreement of the Investor.
(h) If the Investor is an entity, the Investor was not
organized for the specific purpose of acquiring the
Note, the Warrant, the shares purchasable upon
conversion of the Note or the Warrant Stock.
(i) Investor is NOT subject to backup withholding
provisions of Section 3406(a)(i)(C) of the Internal
Revenue Code of 1986, as amended (note: you are
subject to backup withholding if (i) you fail to
furnish your Social Security number or taxpayer
identification number herein; (ii) the Internal
Revenue Service notifies the Company that you
furnished an incorrect Social Security number or
taxpayer identification number; (iii) you are
notified that
<PAGE>
you are subject to backup withholding; or (iv) you
fail to certify that you are not subject to backup
withholding or fail to certify your Social Security
number or taxpayer identification number).
6. Other.
(a) This Agreement, including the appendices attached hereto,
constitutes the entire agreement of the parties relative to
the subject matter hereof and supersedes any and all other
agreements and understandings, whether written or oral,
relative to the matters discussed herein.
(b) This Agreement shall be construed and enforced in accordance
with the laws of the State of Minnesota, without regard to
conflicts of laws principles.
(c) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SIGNATURE PAGE TO FOLLOW
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
INVESTOR: U-SHIP, INC.
By
Print Full Name Peter C. Lytle
Chief Executive Officer
Signature
Address
Telephone Number
Taxpayer ID Number
or
Social Security Number
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Investor is an entity)
I, _______________________________________, am the __________________
of _____________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Note Agreement and to purchase and hold
the Note and the Warrant and certify further that the Note Agreement has been
duly and validly executed on behalf of the Entity and constitutes a legal and
binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ________ day of __________,
199_.
Signature
Print Name and Title
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$__________ Minneapolis, Minnesota
__________, 199__
FOR VALUE RECEIVED, effective this ___ day of ___________, 199__, the
undersigned, U-Ship, Inc., a Utah corporation, ("BORROWER"), hereby agrees and
promises to pay to the order of ____________________ ("HOLDER") at such place as
Holder may from time to time designate, the principal sum of
_____________________ Dollars upon such terms and conditions as are set forth
below.
Simple interest on the unpaid principal balance shall accrue from date
hereof until this Note is fully paid at a fixed per annum interest rate of
12.0%. Interest shall be calculated on the basis of actual days elapsed in a
365-day year.
The principal of and interest on this Note are payable as follows:
Commencing on the 1st day of April 1999, and continuing on the 1st day
of each July, October and January thereafter, Borrower shall make
quarterly payments of interest at the rate specified above. Unless
sooner paid, the entire balance of unpaid principal and accrued
interest shall be due and payable in full on ___________ (the "Maturity
Date").
The outstanding principal balance evidenced by this Note may be prepaid
in full or in part at any time. All monthly payments made under this Note shall
be applied first to interest, and then to principal.
This Note is given pursuant to the terms and provisions of that certain
Note Agreement between the parties dated the date hereof.
It is agreed that time is of the essence in the performance of this
Note.
The occurrence of any of the following shall be deemed an "Event of
Default" under this Note:
(1) the Company defaults in the payment of interest on this Note
when the same becomes due and payable and the Default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of this
Note when the same becomes due and payable at the Maturity
Date, upon redemption or otherwise;
(3) a court of competent jurisdiction enters a final judgment for
the payment of money in excess of $500,000 against the Company
or any subsidiary and such judgment
<PAGE>
remains undischarged for a period (during which execution
shall not be effectively stayed) of 30 days;
(4) the Company pursuant to or within the meaning of any
Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against
it in an involuntary case,
(c) consents to the appointment of a Custodian of it or
for all or substantially all of its property, or
(d) makes a general assignment for the benefit of its
creditors,
(5) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any material
subsidiary in an involuntary case,
(b) appoints a Custodian of the Company or any material
subsidiary or for all or substantially all of its
property, or
(c) orders the liquidation of the Company or any material
subsidiary, and the order or decree remains unstayed
and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or State Law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Upon the occurrence of an Event of Default, Holder shall have the right
and option to declare, upon 10 days' prior written notice to Borrower, all
remaining unpaid principal, interest, and other amounts due under this Note to
be immediately due and payable. Holder may exercise this option to accelerate at
any time after the occurrence of any Event of Default, regardless of any
forbearance by Holder. The remedies of Holder, as provided herein and in the
Loan Documents shall be cumulative and concurrent and may be pursued singularly,
successively, or together at the discretion of Holder and may be exercised as
often as the occasion therefor shall arise.
Upon the occurrence of an Event of Default as described above, Borrower
shall pay Holder all expenses and costs of collection, or any other action taken
as a result thereof, including, but not limited to, attorney's fees and costs,
whether or not suit or other formal action has been commenced.
Borrower waives presentment for payment, protest and notice of
non-payment and dishonor or any other notice otherwise provided by law.
<PAGE>
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other remedy under this
Note. A waiver of any one occasion or occasions shall not be construed as a bar
to or waiver of any such right or remedy on a future occasion.
Other than pursuant to registration under federal and any applicable
state securities laws or an exemption from such registration, the availability
of which the Company shall determine in its sole discretion, this Note may not
be transferred, sold or otherwise disposed of unless the Company has received
from the transferee hereof such representations and agreements as the Company
shall determine in its sole discretion may be necessary to permit such transfer.
The Holder, by acceptance hereof, agrees to give written notice to the Company
before transferring this Note of the Holder's intention to do so, describing the
manner of any proposed transfer. Within thirty (30) days after receiving such
written notice, the Company shall notify the Holder as to whether such transfer
may be effected and of the conditions to any such transfer.
All demands and notices to be given hereunder shall be delivered or
sent by certified mail, return receipt requested; in the case of the Company,
addressed to its corporate headquarters, 5583 West 78th Street, Edina, Minnesota
55439, and in the case of the Holder, addressed to the address written above, in
either case, until a new address shall have been substituted by like notice.
IN WITNESS WHEREOF, the Company has caused this Note to be executed on
its behalf by its duly authorized officer; on the day and year first above
written.
U-SHIP, INC.
By:
Peter C. Lytle
Chief Executive Officer
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE AVAILABILITY
OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY WHOSE
AUTHORIZED OFFICER HAS SIGNED THIS NOTE ABOVE.
EXHIBIT 4.2
WARRANT
TO PURCHASE SHARES OF
COMMON STOCK OF
U-SHIP, INC.
_______________, 199__
This Certifies that, in consideration of having purchased one or more
Units of Unsecured Promissory Notes ("Notes") of U-Ship, Inc., a Utah
corporation (the "Company") on ________________, 199__, and for other good and
valuable consideration, _____________ _________________, [a corporation, a
partnership, a limited liability company, a trust] (the "Warrantholder"), is
entitled to subscribe for and purchase from the Company, at any time after
_______________, 1999, and prior to the expiration hereof up to ________ shares
of the Company's Common Stock at a purchase price of $___ per share (the
"Purchase Price"), subject to adjustment as hereinafter set forth.
1. Definitions. For the purposes of this Warrant the following terms
shall have the following meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the
Securities Act.
"Company" shall mean U-Ship, Inc., a Utah corporation, and any
corporation which shall succeed to, or assume, the obligations of said
corporation hereunder.
"Common Stock" shall mean the shares of Common Stock of the
Company, $0.004 par value.
"Other Securities" shall mean any stock (other than Common
Stock) or other securities of the Company which the Warrantholder at
any time shall be entitled to receive, or shall have received, upon the
exercise of the Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, as
in effect at the time.
"Subscription Form" shall mean the subscription forms attached
hereto.
"Transfer" shall mean any sale, assignment, pledge, or other
disposition of any Warrants and/or Warrant Shares, or of any interest
in either thereof, which would constitute a sale thereof within the
meaning of Section 2(3) of the Securities Act.
<PAGE>
"Warrant Shares" shall mean the shares of Common Stock
purchased or purchasable by the Warrantholder upon the exercise of the
Warrants pursuant to Section 2 hereof.
"Warrantholder" shall mean the holder or holders of the
Warrants or any related Warrant Shares.
"Warrants" shall mean the Warrants (including this Warrant),
identical as to terms and conditions and date, issued by the Company in
connection with the sale of the Notes, and all Warrants issued in
exchange, transfer or replacement thereof.
All terms used in this Warrant which are not defined in Section 1
hereof have the meanings respectively set forth elsewhere in this Warrant.
2. Exercise of Warrant, Issuance of Certificate, and Payment for
Warrant Shares. The rights represented by this Warrant may be exercised at any
time after ______________, 1999, and prior to expiration hereof, by the
Warrantholder, in whole or in part (but not as to any fractional share of Common
Stock), by: (a) delivery to the Company of a completed Subscription Form, (b)
surrender to the Company of this Warrant properly endorsed and signature
guaranteed, and (c) delivery to the Company of a certified or cashier's check
made payable to the Company in an amount equal to the aggregate Purchase Price
of the shares of Common Stock being purchased, at its principal office or agency
in Minnesota (or such other office or agency of the Company as the Company may
designate by notice in writing to the holder hereof). The Company agrees and
acknowledges that the shares of Common Stock so purchased shall be deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant, properly endorsed, and the
Subscription Form shall have been surrendered and payment made for such shares
as aforesaid. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute or
cause to be executed and deliver to the Warrantholder a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said Subscription Form. Each stock certificate so delivered shall
be in such denomination as may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or such other name as shall be
designated by the Warrantholder. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of said stock certificate or
certificates, deliver to the Warrantholder a new Warrant evidencing the rights
of such holder to purchase the remaining shares of Common Stock covered by this
Warrant. The Company shall pay all expenses, taxes, and other charges payable in
connection with the preparation, execution, and delivery of stock certificates
pursuant to this Section 2, except that, in case any such stock certificate or
certificates shall be registered in a name or names other than the name of the
Warrantholder, funds sufficient to pay all stock transfer taxes which shall be
payable upon the execution and delivery of such stock certificate or
certificates shall be paid by the Warrantholder to the Company at the time of
delivering this Warrant to the Company as mentioned above.
3. Ownership of this Warrant. The Company may deem and treat the
registered Warrantholder as the holder and owner hereof (notwithstanding any
notations of ownership or writing made hereon by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for transfer as provided herein and then only if
such transfer meets the requirements of Section 5.
<PAGE>
4. Exchange, Transfer, and Replacement. Subject to Section 5 hereof,
this Warrant is exchangeable upon the surrender hereof by the Warrantholder to
the Company at its office or agency described in Section 2 hereof for new
Warrants of like tenor and date representing in the aggregate the right to
purchase the number of shares purchasable hereunder, each of such new Warrants
to represent the right to purchase such number of shares (not to exceed the
aggregate total number purchasable hereunder) as shall be designated by the
Warrantholder at the time of such surrender. Subject to Section 5 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, upon the
books of the Company by the Warrantholder in person or by duly authorized
attorney, and a new Warrant of the same tenor and date as this Warrant, but
registered in the name of the transferee, shall be executed and delivered by the
Company upon surrender of this Warrant, duly endorsed, at such office or agency
of the Company. Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction, or mutilation of this Warrant, and, in
the case of loss, theft, or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant. This Warrant shall be promptly canceled by the Company
upon the surrender hereof in connection with any exchange, transfer, or
replacement. The Company shall pay all expenses, taxes (other than stock
transfer taxes), and other charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 4.
5. Restrictions on Transfer. Notwithstanding any provisions contained
in this Warrant to the contrary, neither this Warrant nor the Warrant Shares
shall be transferable except upon the conditions specified in this Section 5,
which conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act in respect of the transfer of this Warrant or
such Warrant Shares. The holder of this Warrant agrees that such holder will not
transfer this Warrant or the related Warrant Shares (a) prior to delivery to the
Company of an opinion of counsel selected by the Warrantholder and reasonably
satisfactory to the Company, stating that such transfer is exempt from
registration under the Securities Act, or (b) until registration of such
Warrants and/or Warrant Shares under the Securities Act has become effective and
continues to be effective at the time of such transfer. An appropriate legend
may be endorsed on the Warrants and the certificates of the Warrant Shares
evidencing these restrictions. The holder of this Warrant further agrees that
such holder will not, for a period of 180 days from the date that a registration
statement covering securities offered by the Company is declared effective by
the Commission, offer to sell, contract to sell, or otherwise sell, dispose of,
loan, pledge or grant any rights with respect to the Warrant or the Warrant
Shares owned by the holder, otherwise than with the prior written consent of the
Company.
6. Antidilution Provisions. The rights granted hereunder are subject to
the following:
a. Stock Splits. In case at any time the Company shall
subdivide its outstanding shares of Common Stock into a greater number
of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in case
at any time the Company shall combine its outstanding shares of Common
Stock into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall be proportionately
increased and the number of Warrant Shares purchasable upon the
exercise of this Warrant
<PAGE>
immediately prior to such combination shall be proportionately reduced.
Except as provided in this paragraph (a), no adjustment in the Purchase
Price and no change in the number of Warrant Shares so purchasable
shall be made pursuant to this Section 6 as a result of or by reason of
any such subdivision or combination.
b. Reorganization, Reclassification, Consolidation, Merger, or
Sale. If any capital reorganization or reclassification or merger of
the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation, shall be
effected in such a way that holders of shares of Common Stock shall be
entitled to receive Common Stock, Other Securities or assets with
respect to or in exchange for shares of Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the
Warrantholder shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified in the
Warrants and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of
the Warrants such shares of Common Stock, Other Securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore purchasable and receivable upon
the exercise of the Warrants had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the Warrantholder so that the provisions of the Warrants
(including, without limitation, provisions for adjustment of the
Purchase Price and the number of shares purchasable upon the exercise
of the Warrants) shall thereafter be applicable, as nearly as may be,
in relation to any shares of Common Stock, Other Securities or assets
thereafter deliverable upon the exercise of the Warrants.
7. Special Agreements of the Company.
a. Will Reserve Shares. The Company will reserve and set apart
and have at all times the number of shares of authorized but unissued
Common Stock deliverable upon the exercise of the Warrants, and it will
have at all times any other rights or privileges provided for herein
sufficient to enable it at any time to fulfill all of its obligations
hereunder.
b. Will Avoid Certain Actions. The Company will not, by
amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, issue or
sale of securities or otherwise, avoid or take any action which would
have the effect of avoiding the observance or performance hereunder by
the Company, but will at all times in good faith assist in carrying out
of all the provisions of the Warrants and in taking all such actions as
may be necessary or appropriate in order to protect the rights of the
Warrantholder against dilution or other impairment.
8. Provisions for Registration. Despite anything in this Warrant to the
contrary, the Warrantholder shall have the following rights regarding
registration of Warrant Shares which may be hereafter acquired upon exercise of
this Warrant.
<PAGE>
a. Required Registration. If at any time the Company receives
the written request from the Holder of this Warrant, the Company shall
prepare and file a registration statement under the Securities Act
covering the Warrant Shares which are the subject of such requests and
shall use its best efforts to cause such registration statement to
become effective; provided, however, that all Warrant Shares covered by
such registration statement shall be converted into Common Stock prior
to inclusion in such registration statement. In addition, upon the
receipt of the aforementioned request, the Company shall promptly give
written notice to all other record holders of Warrant Shares that such
registration is to be effected. The Company shall include in such
registration statement such Warrant Shares for which it has received
written requests to register by such other record holders within
fifteen (15) days after the Company's written notice to such other
record holders. The Company shall be obligated to prepare, file and
cause to become effective only two (2) registration statements pursuant
to this Section 8(a). In the event that the holders of a majority of
the Warrant Shares for which registration has been requested pursuant
to this Section determine for any reason not to proceed with a
registration at any time before the registration statement has been
declared effective by the Commission, and such holders thereafter
request the Company to withdraw such registration statement, the
holders of such Warrant Shares agree to bear their own expenses
incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to such registration statement,
then, and in such event, the holders of such Warrant Shares shall not
be deemed to have exercised their right to require the Company to
register Warrant Shares pursuant to this Section 8(a).
b. Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and
filing of a registration statement under the
Securities Act in connection with the proposed offer
and sale for money of any of its Common Stock by it
or any of its security holders, the Company will give
written notice of its determination to all record
holders of Warrant Shares. Upon the written request
of a record holder of any Warrant Shares given within
fifteen (15) days after receipt of any such notice
from the Company, the Company will, except as herein
provided, cause all such Warrant Shares, the record
holders of which have so requested registration
thereof, to be included in such registration
statement, all to the extent requisite to permit the
sale or other disposition by the prospective seller
or sellers of the Warrant Shares to be so registered;
provided, however, that (a) all such Warrant Shares
to be so registered shall be converted into Common
Stock prior to sale pursuant to such registration
statement; (b) nothing herein shall prevent the
Company from, at any time, abandoning or delaying any
such registration initiated by it; and (c) if the
Company determines not to proceed with a registration
after the registration statement has been filed with
the Commission and the Company's decision not to
proceed is primarily based upon the anticipated
public offering price of the securities to be sold by
the Company, the Company shall promptly complete the
registration for the benefit of those selling
security holders who wish to proceed with a public
offering of their securities and who bear all
expenses in excess of $25,000 incurred by the Company
as the result of such registration after the Company
has decided not to proceed. If any registration
pursuant to this Section shall
<PAGE>
be underwritten in whole or in part, the Company may
require that the Warrant Shares requested for
inclusion pursuant to this Section be included in the
underwriting on the same terms and conditions as the
securities otherwise being sold through the
underwriters. If in the good faith judgment of the
managing underwriter of such public offering the
inclusion of all of the Warrant Shares originally
covered by a request for registration would reduce
the number of shares to be offered by the Company or
interfere with the successful marketing of the shares
of stock offered by the Company, the number of
Warrant Shares otherwise to be included in the
underwritten public offering may be reduced pro rata
among the holders thereof requesting such
registration to a number that the managing
underwriter believes will not adversely affect the
sale of shares by the Company. Those securities which
are thus excluded from the underwritten public
offering, and any other Common Stock owned by such
holders, shall be withheld from the market by the
holders thereof for a period, not to exceed one
hundred eighty (180) days, which the managing
underwriter reasonably determines is necessary in
order to effect the underwritten public offering.
c. Registration Procedures. If and whenever the Company is
required by the provisions of Sections 8(a) or 8(b) to effect the
registration of any Warrant Shares under the Securities Act, the
Company will:
(1) prepare and file with the Commission a
registration statement with respect to such Warrant Shares,
and use its best efforts to cause such registration statement
to become and remain effective for such period as may be
reasonably necessary to effect the sale of such Warrant
Shares, not to exceed three (3) months;
(2) prepare and file with the Commission such
amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep
such registration statement effective for such period as may
be reasonably necessary to effect the sale of such Warrant
Shares, not to exceed three (3) months;
(3) furnish to the security holders participating in
such registration and to the underwriters of the Warrant
Shares being registered such reasonable number of copies of
the registration statement, preliminary prospectus, final
prospectus and such other documents as such security holders
and underwriters may reasonably request in order to facilitate
the public offering of such Warrant Shares;
(4) use its best efforts to register or qualify the
Warrant Shares covered by such registration statement under
such state securities or blue sky laws of such jurisdictions
as such participating holders may reasonably request within
ten (10) days following the original filing of such
registration statement, except that the Company shall not for
any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so
qualified;
<PAGE>
(5) notify the security holders participating in such
registration, promptly after it shall receive notice thereof,
of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(6) notify such holders promptly of any request by
the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(7) prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or
supplements to such registration statement or prospectus
which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under
the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Warrant Shares by such
holder;
(8) prepare and promptly file with the Commission and
promptly notify such holders of the filing of such amendment
or supplement to such registration statement or prospectus as
may be necessary to correct any statements or omissions if, at
the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus
or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not
misleading;
(9) advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness
of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be
issued; and
(10) not file any amendment or supplement to such
registration statement or prospectus to which a majority in
interest of such holders shall have reasonably objected on the
grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been
furnished with a copy thereof at least five (5) business days
prior to the filing thereof, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such
filing will not violate applicable law.
d. Expenses. With respect to any registration, requested
pursuant to Section 8(a) (except as otherwise provided in such section
with respect to registrations voluntarily terminated at the request of
the requesting security holders) and with respect to each inclusion of
securities in a registration statement pursuant to Section 8(b) (except
as
<PAGE>
otherwise provided in Section 8(b) with respect to registrations
terminated by the Company), the Company shall bear the following fees,
costs and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company and/or selling security
holders are required to bear such fees and disbursements), all internal
Company expenses, the premiums and other costs of policies of insurance
against liability arising out of the public offering, and all legal
fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for the selling security
holders, underwriting discounts and commissions and transfer taxes for
selling security holders and any other expenses incurred by the selling
security holders not expressly included above shall be borne by the
selling security holders.
e. Copies of Prospectus; Amendments of Prospectus. The Company
will furnish the Warrantholder with a reasonable number of copies of
any prospectus or offering circular and one copy of the registration
statement included in such filings and will amend or supplement the
same as required during the nine (9) month period following the
effective date of the registration statement, provided, that the
expenses of any amendment or supplement made or filed more than three
(3) months after the effective date of the registration statement, at
the request of the Warrantholder, shall be borne by the Warrantholder.
f. Conditions of the Company's Obligations. It shall be a
condition of the Company's obligation to register the Warrant Shares
hereunder that the Warrantholder agrees to cooperate with the Company
in the preparation and filing of any such registration statement, or in
its efforts to establish that the proposed sale is exempt under the
Securities Act, as to any proposed distribution. It shall also be a
condition of the Company's obligations under this Agreement that, in
the case of the filing of any registration statement, and to the extent
permissible under the Securities Act, and controlling precedent
thereunder, the Company and the Warrantholder provide
cross-indemnification agreements to each other in customary scope
covering the accuracy and completeness of the information furnished by
each.
9. Notices. Any notice or other document required or permitted to be
given or delivered to the Warrantholder shall be delivered or sent by certified
mail to the Warrantholder at the last address shown on the books of the Company
maintained for the registry and transfer of the Warrants. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered or sent by certified or registered mail to the principal office of the
Company.
10. No Rights as Shareholders; Limitation of Liability. This Warrant
shall not entitle any holder hereof to any of the rights of a shareholder of the
Company. No provisions hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Purchase Price or as a shareholder of the
Company whether such liability is asserted by the Company or by creditors of the
Company.
<PAGE>
11. Governing Law. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Minnesota, without regard
to conflicts of laws principles.
12. Miscellaneous. This Warrant and any provision hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
a duly authorized officer, and to be dated as of the ____ day of ____________,
199___.
U-SHIP, INC.
By:
Peter C. Lytle
Chief Executive Officer
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT") OR UNDER THE SECURITIES LAWS OF ANY
OTHER STATE AND MAY NOT BE TRANSFERRED WITHOUT (i) THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT
REGISTRATION UNDER THE 1933 ACT OR THE SECURITIES LAWS OF ANY APPLICABLE STATE;
OR (ii) SUCH REGISTRATION."
<PAGE>
FULL SUBSCRIPTION FORM
To Be Executed By the Registered Warrantholder if It/
She/He Desires to Exercise in Full the Within Warrant
The undersigned hereby exercises the right to purchase the
_____________ shares of Common Stock covered by the within Warrant at the date
of this subscription and herewith makes payment of the sum of
$____________________________ representing the Purchase Price of $__________ per
share in effect at that date. Certificates for such shares shall be issued in
the name of and delivered to the undersigned, unless otherwise specified by
written instructions, signed by the undersigned and accompanying this
subscription.
Dated:________________________________
Signature:
Address:
<PAGE>
PARTIAL SUBSCRIPTION FORM
To be Executed by the Registered Warrantholder if It/She/He
Desires to Exercise in Part Only the Within Warrant
The undersigned hereby exercises the right to purchase __________
shares of the total shares of Common Stock covered by the within Warrant at the
date of this subscription and herewith makes payment of the sum of $____________
representing the Purchase Price of $_________ per share in effect at this date.
Certificates for such shares and a new Warrant of like tenor and date
for the balance of the shares not subscribed for (if any) shall be issued in the
name of and delivered to the undersigned, unless otherwise specified by written
instructions, signed by the undersigned and accompanying this subscription.
The shares hereby subscribed for constitute ______________ shares of
Common Stock (to the nearest whole share) resulting from adjustment of
______________ shares of the total of __________________ shares of Common Stock
covered by the within Warrant, as said shares were constituted at the date of
the Warrant.
Dated:__________________________
Signature:
Address:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 281,521
<SECURITIES> 0
<RECEIVABLES> 140,235
<ALLOWANCES> 0
<INVENTORY> 1,046,194
<CURRENT-ASSETS> 1,672,142
<PP&E> 1,538,237
<DEPRECIATION> (844,796)
<TOTAL-ASSETS> 2,551,100
<CURRENT-LIABILITIES> 519,617
<BONDS> 0
0
17,822
<COMMON> 20,319
<OTHER-SE> 1,962,217
<TOTAL-LIABILITY-AND-EQUITY> 2,551,100
<SALES> 147,610
<TOTAL-REVENUES> 147,610
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 669,633
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,047
<INCOME-PRETAX> (655,586)
<INCOME-TAX> 0
<INCOME-CONTINUING> (655,586)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (655,586)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
