SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED September 30, 1998
Commission File Number 0-18094
UNIVERSAL EXPRESS, INC.
-----------------------
(Exact name of Registrant as specified in its charter)
NEVADA 11-2781803
- ---------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer Ident Number)
incorporation or organization)
20 SOUTH TERMINAL DRIVE, PLAINVIEW, NEW YORK 11803
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 349-1300.
--------------
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant on September 30, 1998:
- -------------------------------------------------------------------------------
$ 1,270,420
- -------------------------------------------------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
- --------------------------------------------------------------------------------
Common Stock Outstanding at September 30, 1998:
- --------------------------------------------------------------------------------
Class "A" 3,035,080
Class "B" 1,280,000
<PAGE>
UNIVERSAL EXPRESS, INC.
-----------------------
INDEX
-----
PAGE
NUMBER
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 1998 1
Combined Statement of Operations - Three months
ended September 30, 1998 2
Combined Statement of Cash Flows -- Three months
ended September 30, 1998 3
Notes to Combined Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 4
PART II - OTHER INFORMATION 10
SIGNATURE 11
<PAGE>
UNIVERSAL EXPRESS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ASSETS
------
CURRENT ASSETS:
<S> <C>
Cash $ 1,483
Accounts receivable, net of allowance
for doubtful accounts of $142,000 & $190,000, respectively 174,865
Inventory 71,432
Loans & Notes receivable, net of allowance for
uncollectible notes of $161,000 782,278
Other, primarily prepaid expenses --
------------
TOTAL CURRENT ASSETS 1,030,058
FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 836,514
REORGANIZATION VALUE, net of amortization 392,727
GOODWILL, net 929,085
Deferred Financing Costs & Other --
------------
TOTAL ASSETS $ 3,188,384
============
LIABILITITES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,294,969
Taxes payable 84,334
Other 26,392
Loans/Notes Payable 384,655
Convertible Debentures 289,000
Current maturities of long-term liabilities 114,773
------------
TOTAL CURRENT LIABILITIES 2,194,123
LONG-TERM LIABILITIES --
------------
TOTAL LIABILITIES $ 2,194,123
------------
STOCKHOLDERS' EQUITY
Common stock, Class A, $0.005 par value;
authorized 147,000,000 shares;
3,035,080 issued and outstanding 15,475
Common stock, Class B, $0.005 par value;
authorized 3,000,000 shares, 1,280,000
issued and outstanding 6,400
Additional paid-in capital 18,782,219
Cash received for stock rights 890,000
Deferred compensation related to
stock issued for services (1,354,731)
Accumulated deficit (17,345,102)
------------
TOTAL STOCKHOLDER'S EQUITY 994,261
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,188,384
============
</TABLE>
1
<PAGE>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
INCOME: 1998 1997
- ------- ---- ----
<S> <C> <C>
Merchandise and service income $ 138,299 $ 60,511
Ticket sales 497,539 414,272
Delivery Services (discontinued) -- 216,488
Other income --
TOTAL INCOME 635,838 691,271
----------- -----------
COST AND EXPENSES:
Cost of goods and services 430,034 373,865
Selling, general and administrative 901,953 1,368,013
Depreciation and amortization 79,037 70,714
----------- -----------
1,411,024 1,812,592
-----------
LOSS BEFORE INTEREST (775,186) (1,121,321)
----------- -----------
INTEREST INCOME -- --
INTEREST EXPENSE 3,451 84,036
----------- -----------
LOSS FROM CONTINUING OPERATIONS (778,637) $(1,205,357)
LOSS FROM DISCONTIUED OPERATIONS 0 0
----------- -----------
NET LOSS $ (778,637) $(1,205,357)
=========== ===========
LOSS PER COMMON SHARE
Loss from continuing operations ($ 0.22) ($ 0.20)
Loss from discontinued operations -- 0
Net Loss ($ 0.22) ($ 0.20)
Weighted average number of
shares used in calculations 3,542,908 5,895,371
=========== ===========
</TABLE>
2
<PAGE>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
CASH FLOWS PROVIDED BY OPERATIONS 1998 1997
---- ----
<S> <C> <C>
Net Loss $ (778,637) $(1,205,357)
Adjustment to reconcile net loss to net
cash used by operating activities:
Common stock issued for services rendered 179,565 668,478
Depreciation and amortization 79,037 70,714
----------- -----------
(520,035) (466,165)
Change in assets and liabilities:
(Increase)/Decrease in restricted cash -- --
(Increase)/Decrease in accounts receivable (30,998) (15,022)
(Increase)/Decrease in inventory -- (64,096)
(Increase)/Decrease in loan to officers (36,494) (69,857)
(Increase)/Decrease in notes receivable (31,299) (750,000)
(Increase)/Decrease in deferred expenses
and other assets -- (189,562)
Increase/(Decrease) in accounts payable and
accrued expenses 13,865 (56,400)
Increase/(Decrease) in taxes paybable (3,529) 29,213
Increase/(Decrease) in other liabilities (15,419) 4,841
----------- -----------
Cash provided (used) by operations (623,909) (1,577,048)
----------- -----------
CASH USED IN INVESTING ACTIVITIES
Acquisition of furniture, equipment,
and leasehold, improvements -- (47,499)
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of common stock 250,000 --
Net proceeds from issuance of convertible debt -- 2,062,252
Proceeds from notes and loans payable 66,000 25,000
Repayment of notes and other liabilities (168,500) (459,299)
Proceeds From Stock Rights 250,000 --
----------- -----------
NET INCREASE (DECREASE) IN CASH (226,409) 3,406
CASH-Beginning of period 227,892 97,738
----------- -----------
CASH-End of period $ 1,483 $ 101,144
=========== ===========
</TABLE>
3
<PAGE>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
----------------------------------------
Notes To Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
- ---------------------------
Reference is made to the Company's Consolidated financial statements as of June
30, 1998 and for the fiscal year then ended, filed with the United States
Securities and Exchange Commission for a complete discussion of the Company's
significant accounting policies and other matters.
The accompanying unaudited consolidated interim financial statements reflect all
adjustments that, in the opinion of management are necessary for a fair
presentation of financial position as of September 30, 1998, and results of
operations for the nine months then ended.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Included in this report are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward-looking
statements will prove to be correct. The Company's actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors, including sales levels, distribution and competition trends
and other market factors.
The business of Universal Express has undergone a major transition in recent
years.
Management has developed new ancillary businesses to support its former core
packaging and shipping businesses.
Management is now concentrating on raising new capital and focusing on new
ventures, including APAC, its multi-faceted association of packaging centers
nationwide connected through the World Wide Web.
Management views this fiscal year as a period of transition and anticipates
growth based upon its decision to concentrate on core business development
through APAC in particular.
PKGP's principal subsidiaries and divisions include:
- -- The Association of Packagers and Carriers, Inc.
- -- Packaging Plus Services, Inc.
- -- Images Design and Marketing
- -- UniqueNet, Inc.
- -- Manhattan Concierge
- -- Office Quick
4
<PAGE>
The business of the corporation is fully described on our Website at
WWW.USXP.COM.
The Company changed its name during the year from Packaging Plus Services, Inc.
to Universal Express, Inc. ("USXP").
During September 1997 the Company acquired Office Quick, a postal and service
center including copying, access to computers, printing, the Internet and other
related communications. Office Quick President Nick Deleone, was formerly Mail
Box Etc.'s number one franchisee in sales for seven of ten years from 1984 to
1993, and in 1988 received the "Individual Franchisee of the Year" award. Mr.
Deleone has become APAC's new President and CEO, and will assist APAC store
owners to increase their sales volume and APAC profitability.
In January 1997, the Company purchased the Entertainment division of U.S.
Transportation Systems, Inc. The division consisted mainly of: Downtown Theatre
Ticket Agency, Inc., or Advance Entertainment (now known as "Manhattan
Concierge"), which provide theater, sports and special events tickets and
concierge services. The Company intends to incorporate this division into its
expanding list of services to the members of APAC. These services are marketed
through toll-free phone numbers (1-888-NYSHOWS, 1-800-NYSHOWS AND
1-800-THE-SHOW).
These concierge agencies are nationally promoted sources for high visibility
venues such as the Olympics, U.S. Open, Super Bowl and the World Series. They
have been serving corporate and individual clients throughout the United States
for over fifty-three years. USXP will incorporate this value-added service into
APAC's expanding menu of offerings to its members stores while attempting to
increase Manhattan Concierge's own business presence in the entertainment
industry. Its most recent two (2) year contract with MBNA credit card holders
supports that direction.
In 1994, the Company acquired an advertising agency, Images Design & Marketing
(Images). This agency is the in-house marketing and promotional department of
the Company while simultaneously serving third party clients. The service of
Images is primarily utilized to maximize the Universal Express and APAC names
and trademarks. Images is also expected to reduce advertising costs for APAC
members by eliminating the "agency commissions" paid to an advertising agency by
printers and other sources of media.
In August, 1998 the Company announced the execution of an agreement to purchase
all of the assets of Skyworld International Courier (SkyNet Miami). The closing
of the SkyNet acquisition is pending and is subject to the terms of the
agreement.
5
<PAGE>
THE ASSOCIATION OF PACKAGERS AND CARRIERS (APAC): Private postal and business
- ------------------------------------------------
service centers form a highly fragmented cottage industry. This industry
generates over $5 billion in sales and consists of more than 15,000 independent
operators. The Company believes there is a market opportunity for the
development of an association with the goal of unifying and organizing
independent and franchised postal stores nationwide. APAC members are connected
to other members and APAC Headquarters via the APAC Web Site (www.useapac.com)
or by telephone at "1-888-USE-APAC". The APAC Web Site is utilized not only by
members but also by the general public. Only one APAC store per Zip Code will be
accepted, thus creating competition and internal quality control standards.
APAC is an association formed to create a long overdue and needed profitable
partnership between packaging store owners and carriers, similar in theory to
FTD. APAC provides store owners with a variety of cost-effective services and
products to increase their profitability, WHILE THEY STILL MAINTAIN THEIR LOCAL
IDENTITIES OR FRANCHISE LOYALTIES. APAC will provide consumers nationwide with a
feeling of quality assurance when they frequent an APAC location.
SERVICES OFFERED TO APAC MEMBERS & STRATEGIC GOALS
--------------------------------------------------
APAC has been formed to create a value-added association among packaging and
shipping centers as well as the actual carriers of freight worldwide.
In return for a low monthly membership fee APAC offers a unique combination of
value-added services. A list of immediate and future benefits for association
members includes:
IMMEDIATE BENEFITS:
Savings on shipping prices through quantity discounts
Centralized billing to lower certain costs
Pre-paid discounts on shipping
Professional theme coordinated advertising programs
APAC Web Site linking all members with outside customers
E-mail customer leads
Scholarship Programs for members' children
Packaging education programs
Organized conventions
APAC health/ dental insurance
APAC shipping insurance
Computer software/ hardware, Sales and consulting
Shipping hot line and tracking for customers
Continual development of new profit centers
Quality control for member and customer benefits
Affordable legal representation
National customer service satisfaction department
Political lobbying
Stock option plan
Vacation of the month program
Discounted air cargo/ next day worldwide rates
6
<PAGE>
Discounted copier and/or fax, postal meter leasing programs
Discounted long distance rates
Discounted printing programs
Discounted van and equipment leasing program
Prepaid phone card
Centralized purchasing
Monthly Newsletter
Brand recognition of APAC Logo
APAC advisory council
Store (design/modernization) program
This value-added Association is expected to revitalize the private postal
industry and position itself for additional acquisitions within the
transportation industry that benefit its members' collective strength.
On January 28, 1998, the Company announced that APAC had formed the APAC
Advisory Council (AC). This council consists of APAC members from 7 regions of
the United States as well as APAC president, Nick DeLeone. The goal of the AC is
to obtain a more specific regional view of the CMRA industry through the
cooperative efforts of the AC members. In March, 1998, APAC held its First
Advisory Council meeting in Las Vegas, Nevada. Membership was well attended from
all seven APAC regions throughout the United States.
On February 5, 1998, the Company announced that it has secured a strategic
partnership with ATCALL, Inc. and will become APAC's exclusive provider and
distributor of Prepaid Phone Cards. ATCALL's alliance with APAC establishes the
first exclusive service available to APAC members.
To promote increased awareness of the APAC brand among its members stores, the
APAC Prepaid Phone Card will prominently feature the APAC logo. Also, when APAC
member store consumers use the card they will hear a customized voice message
thanking them for shopping at an APAC member store and for using the card. APAC
member stores will make the phone cards available to consumers in three of the
most popular prepaid phone card denominations: $5, $10 and $20. The APAC Prepaid
Phone Card will be promoted to APAC members through APAC's bi-monthly newsletter
as well as at APAC industry conferences and events.
On March 17, 1998 the Company announced that APAC had formed a strategic
alliance with Kodak to make available the Kodak Image Magic Picture Maker to
APAC member stores nationwide.
During the year, APAC also announced relationships with other leading vendors,
for use of its members, including the following:
- -- 3M - Heat free, non-electric laminating system and various office supplies.
- -- Century Marking/Stamper 2000 - Discounted rates on custom rubber stamps for
resale.
- -- Day Runner - Discounts on planning and scheduling products available through
Wescosa-Florida.
7
<PAGE>
-- Francotyp-Postalia - Discounts on postage meters and mailing equipment.
-- GBC - Discounts on laminating/binding/finishing equipment and supplies.
-- Keena - Discounts on tape and sealing products.
-- Kittrich - Discounts on licensed mailing supplies.
-- MBNA Bank - Co-Marketing/Corporate Credit Card program.
-- Nova Information Services - Discounts on credit card processing with
most monthly fees waived.
-- Panasonic - National Account Program for copiers, fax, phone and more.
-- Paychex - Discounts on payroll services.
-- Pentel of America - Discounts on writing instruments through
Wescosa-Florida.
-- Rediform - Discounts on business forms and other office products and
services.
-- Risk Management - Business Insurance Services.
-- Thrifty Car Rental - Co-Marketing/Car Rental Referral program.
-- Ti-Mail - Discounts on decorated Tyvek mailing products.
-- Wescosa-Florida - End-column discounts on office supplies.
-- X-Stamper - Discounts on stock rubber stamps.
In September, 1998, APAC held a joint four days meeting with The Business
Products Industry Association (BPIA) in Orlando, Florida, which meeting was very
well attended.
Future APAC benefits should include but not be limited to: mail order contract
for individual stores, national moving preparation program, direct access to
packing supplies, audio visual training, electronic car/truck rental, national
television advertising, auto club, video conferencing, bar-coded luggage
national pick-up program, advertising revenues directly from carriers.
This value-added Association is expected to revitalize the private postal
industry and position itself for additional acquisitions within the
transportation industry that benefit its members' collective strength.
IMAGES DESIGN AND MARKETING: In 1994, management acquired an advertising agency,
- ---------------------------
Images Design & Marketing. This agency is the in-house marketing and promotional
department of the Company while simultaneously serving third party clients.
Images occupies space in the same building that the Company leases. By utilizing
this arrangement, management expects to achieve substantial cost savings on its
promotional programs and marketing support of its other subsidiaries. Management
expects to reduce the cost of development of marketing and promotional programs
for the Service Centers, thereby inexpensively maximizing promotion of the
Universal Express and APAC names and trademarks.
Management expects to reduce advertising expenditures for APAC Members through
group buying discounts and eliminating the "agency commissions" paid to an ad
agency by printers and sources of media. Typically, printers of promotional
material and media outlets such as newspapers, magazines and radio escalate
costs more for infrequent users.
8
<PAGE>
UNIQUENET: In 1996, the Company launched its venture called UniqueNet. UniqueNet
- ---------
is an interactive, specialty gifts Web Site on the Internet's WorldWide Web
(UniqueNet.Com). The Web Site will showcase the Company's line of distinctive
and "trendy" gifts. On-line visitors to the Web Site will be able to view,
select and purchase products through their personal computer using an on-line
order form or regular mail. A retail partner is presently being examined.
RESULTS OF OPERATIONS - THREE MONTHS
- ------------------------------------
Three months ended September 30, 1998, as compared to the three months ended
September 30, 1997:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
--------- --------
REVENUES
<S> <C> <C>
Merchandise and Service Income $138,299 $ 60,511
Ticket Sales 497,539 414,272
-------- --------
Total Revenues from Current Operations
$635,838 $474,783
Other Revenues - Discontinued
Operations -- 216,488
-------- --------
Total - Revenues $635,838 $691,271
Cost of Goods and Services $430,034 $373,865
======== ========
</TABLE>
Universal Express, Inc. (USXP), is an integrated business service conglomerate.
Its principal subsidiaries and divisions include the Association of Packagers
and Carriers, Inc., Manhattan Concierge, Office Quick, Packaging Plus Services,
Inc. (corrugated business), Images Design and Marketing, and UniqueNet.
During the three months ended September 30, 1998, the Company's current business
operations generated revenues of $635,838, as compared with operating revenues
from such businesses of $474,783 for the same three month period in 1997, an
increase of 34%.
Selling, general and administrative expenses were $901,953 for the three months
ended September 30, 1998, as compared with $1,368,013 for the same three month
period in 1997, a decrease of 34%.
In October, 1997 the delivery business of Rapid Delivery Services was
discontinued.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - FOR THE FIRST QUARTER 1998
- ------------------------------------------------------------
The net proceeds from new loans and investments in the Company was approximately
$566,000. Approximately $623,909 was used in its operating activities, and
approximately $168,500 to reduce notes and other liabilities. Common stock in
the amount of approximately $179,565 was issued for services rendered.
Until APAC is fully operational, the Company faces a situation whereby it needs
to raise additional cash in the near future. Management is continuing efforts to
raise cash by arranging lines of credit and obtaining additional equity.
The Company's future business operation will require additional capital.
Management continues to explore methods to increase working capital through
convertible subordinated debt and additional equity infusions, as well as
possible acquisitions.
PART II -- OTHER INFORMATION
- ----------------------------
Item 1. LEGAL PROCEEDINGS
-----------------
The Company has commenced litigation against seventeen former franchisees for
non-payment of royalties over a number of years and for failure to file monthly
reports upon which royalties were based. It is anticipated that a portion of the
total amount claimed will be eventually recovered. The total amount sought in
the suits exceeds $400,000.
The Company is also involved in a number of old lawsuits with vendors and
suppliers and claims for fees of certain professionals. These claims are all
disputed by the Company. The Company believes that the disposition of these
matters will not have a material adverse effect on the Company's financial
position.
The Company filed a suit in Florida in April against Select Capital, Ronald G.
Williams and others connected with Select Capital for compensatory and punitive
damages and a return of fees and a commissions for failing to honor previous
funding commitments and promises, for an amount in excess of $68 million
dollars.
Item 2. CHANGES IN SECURITIES -- NONE
---------------------
Item 3. DEFAULTS ON SENIOR SECURITIES -- NONE
-----------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- NONE
---------------------------------------------------
Item 5. OTHER INFORMATION -- NONE
-----------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K -- None.
---------------------------------
10
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIVERSAL EXPRESS, INC.
/S/RICHARD A. ALTOMARE
----------------------
Richard A. Altomare, President
As Registrant's duly authorized
Chairman of the Board.
Dated: December 1, 1998
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,483
<SECURITIES> 0
<RECEIVABLES> 174,865
<ALLOWANCES> 190,000
<INVENTORY> 71,432
<CURRENT-ASSETS> 1,030,058
<PP&E> 0
<DEPRECIATION> 89,037
<TOTAL-ASSETS> 3,188,384
<CURRENT-LIABILITIES> 2,194,123
<BONDS> 0
<COMMON> 21,875
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,188,384
<SALES> 635,838
<TOTAL-REVENUES> 635,838
<CGS> 430,034
<TOTAL-COSTS> 430,034
<OTHER-EXPENSES> 980,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,451
<INCOME-PRETAX> (778,637)
<INCOME-TAX> 0
<INCOME-CONTINUING> (778,637)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (778,637)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> 0
</TABLE>
