SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED December 31, 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 December 31, 1998:
- --------------------------------------------------------------------------------
$ 656,459
- --------------------------------------------------------------------------------
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 December 31, 1998:
- --------------------------------------------------------------------------------
Class "A" 3,293,296
Class "B" 1,280,000
<PAGE>
UNIVERSAL EXPRESS, INC.
-----------------------
INDEX
PAGE
NUMBER
------
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - December 31, 1998 1
Combined Statement of Operations - Three and six
months ended December 31, 1998 2
Combined Statement of Cash Flows -- Three and six
months ended December 31, 1998 3
Notes to Combined Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 4-10
PART II - OTHER INFORMATION 10
SIGNATURE 11
<PAGE>
UNIVERSAL EXPRESS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
------
CURRENT ASSETS:
<S> <C>
Cash $ (240,746)
Accounts receivable, net of allowance
for doubtful accounts of $142,000 & $190,000, respectively
204,367
Inventory 109,280
Loans & Notes receivable, net of allowance for
uncollectible notes of $161,000 793,695
Other, primarily prepaid expenses --
------------
TOTAL CURRENT ASSETS 866,596
FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 504,368
REORGANIZATION VALUE, net of amortization 358,798
GOODWILL, net 906,110
Deferred Financing Costs & Other 278,013
------------
TOTAL ASSETS $ 2,913,885
============
LIABILITITES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,342,198
Taxes payable 74,974
Other 26,393
Loans/Notes Payable 340,905
Convertible Debentures 289,000
Current maturities of long-term liabilities 114,773
------------
TOTAL LIABILITIES $ 2,188,243
============
STOCKHOLDERS' EQUITY
Common stock, Class A, $0.005 par value;
authorized 147,000,000 shares; --
3,293,296 issued and outstanding 16,475
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 18,895,219
Cash received for stock rights 890,000
Deferred compensation related to stock
issued for services (1,338,945)
Accumulated deficit (17,743,507)
------------
TOTAL STOCKHOLDER'S EQUITY 725,642
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,913,885
============
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
INCOME:
<S> <C> <C> <C> <C>
Merchandise and service income $ 126,251 $ 195,328 264,550 $ 255,839
Ticket Sales 538,394 457,918 1,035,933 872,190
Delivery Services 0 77,251 0 293,739
Other Income 0 0 0 0
----------- ----------- ----------- ----------
TOTAL INCOME 664,665 730,497 1,300,483 1,421,768
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of goods and services 326,536 408,139 756,570 782,004
Selling, General and administrative 652,473 1,262,777 1,554,426 2,630,790
Depreciation and amortization 80,590 79,655 159,627 150,369
----------- ----------- ----------- -----------
TOTAL EXPENSES 1,059,599 1,750,571 2,470,623 3,563,163
----------- ----------- ----------- -----------
LOSS BEFORE INTEREST EXPENSE (394,954) (1,020,074) (1,170,140) (2,141,395)
----------- ----------- ----------- -----------
INTEREST INCOME 0 0 0 0
INTEREST EXPENSE 3,451 10,423 6,902 94,459
PROFIT (LOSS) FROM CONTINUING OPERATIONS (398,405) (1,030,497) (1,177,042) (2,235,854)
PROFIT (LOSS) FROM DISCONTINUED OPERATIONS
0 0 0 0
NET PROFIT (LOSS) (398,405) (1,030,497) (1,177,042) (2,235,854)
=========== =========== =========== ===========
PROFIT (LOSS) PER COMMON SHARE
Profit (Loss) from continuing operations ($ 0.12) ($ 0.12) ($ 0.32) ($ 0.29)
Net Profit (Loss) per Common Share ($ 0.12) ($ 0.12) ( 0.32) ($ 0.29)
----------- ----------- ----------- -----------
Weighted average number of
shares used in calculation 3,224,210 8,425,803 3,732,038 7,712,906
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
CASH FLOWS PROVIDED BY OPERATIONS
<S> <C> <C>
Net Loss (1,177,042) (2,235,854)
Adjustment to reconcile net loss to net
cash used by operating activities:
Common stock issued as compensation 460,000 694,695
Common stock issued in lieu of cash 0 248,350
Depreciation and amortization 159,627 150,369
---------- ----------
(557,415) (1,142,440)
Change in assets and liabilities:
(Increase)/Decrease in restricted cash 0 (102,000)
(Increase)/Decrease in accounts receivable (60,500) (27,254)
(Increase)/Decrease in inventory (37,848) (64,096)
(Increase)/Decrease in loan to officers (47,911) 18,077
(Increase)/Decrease in notes receivable 0 0
(Increase)/Decrease in deferred expenses
and other assets 30,008 (1,374,055)
Increase/(Decrease) in accounts payable and
accrued expenses 85,877 (496,106)
Increase/(Decrease) in taxes payable (12,889) 35,399
Increase/(Decrease) in other liabilities (8,051) 3,227
---------- ----------
Cash provided (used) by operations (608,729) (3,149,248)
---------- ----------
CASH USED IN INVESTING ACTIVITIES
Investment in holding company 0 0
Acquisition of furniture, equipment, and 0 (64,580)
----------
leasehold improvements
CASH PROVIDED BY FINANCING ACTIVITIES
Sale of common stock from treasury 250,000 0
Proceeds from notes and loans payable 66,000 0
Proceeds from issuance of convertible debt 0 3,714,097
Repayment of notes and other liabilities (199,500) (501,905)
Proceeds From Stock Rights 250,000 0
---------- ----------
NET INCREASE (DECREASE) IN CASH (242,229) (1,636)
CASH-Beginning of period 1,483 97,738
---------- ----------
CASH-End of period (240,746) 96,102
========== ==========
</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 December 31, 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.
USXP'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").
In 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 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.
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.
5
<PAGE>
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
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
6
<PAGE>
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.
The Company announced in 1998 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.
The Company also 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.
In 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.
--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.
7
<PAGE>
--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.
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.
8
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS
Three months ended December 31, 1998, as compared to the three months ended
December 31, 1997:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
---- ----
REVENUES
<S> <C> <C>
Merchandise and Service Income $126,251 195,328
Ticket Sales 538,394 457,918
-------- --------
Total Revenues from Current Operations
$664,665 $653,246
Other Revenues - Discontinued
Operations 0 77,251
-------- --------
Total - Revenues $664,665 $730,497
Cost of Goods and Services $326,536 $408,139
======== ========
</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 December 31, 1998, the Company's current business
operations generated revenues of $664,665, as compared with operating revenues
from such businesses of $653,246 for the same three month period in 1997.
Selling, general and administrative expenses were $652,473 for the three months
ended December 31, 1998, as compared with $1,262,777 for the same three month
period in 1997, a decrease of 50%.
Similarly, for the six month period ended December 1998, the Company's current
business operations generated revenues of $1,300,483 as compared with operating
revenues from such businesses of $1,128,029 for the same six month period in
1997. Cost of revenues was $756,590 and $782,004, respectively, resulting in
gross operating income for the periods of $543,913 and $346,025, respectively.
Revenues from discontinued operations for December 1997 was $293,739.
Selling general and administrative expenses were approximately $1,554,426 for
the six months ended December 31, 1998, compared to $2,630,790 for the
corresponding 1997 period.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - FOR THE FIRST AND SECOND
- ----------------------------------------------------------
QUARTER 1998
- ------------
The net proceeds from new loans and investments in the Company was approximately
$566,000. Approximately $608,000 was used in its operating activities, and
approximately $199,500 to reduce notes and other liabilities. Common stock in
the amount of approximately $460,000 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
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: March 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> (240,746)
<SECURITIES> 0
<RECEIVABLES> 394,367
<ALLOWANCES> 190,000
<INVENTORY> 109,280
<CURRENT-ASSETS> 866,596
<PP&E> 504,368
<DEPRECIATION> 80,590
<TOTAL-ASSETS> 2,913,885
<CURRENT-LIABILITIES> 2,188,243
<BONDS> 0
0
0
<COMMON> 22,875
<OTHER-SE> (187,233)
<TOTAL-LIABILITY-AND-EQUITY> 2,913,885
<SALES> 664,665
<TOTAL-REVENUES> 664,665
<CGS> 326,536
<TOTAL-COSTS> 326,536
<OTHER-EXPENSES> 733,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,451
<INCOME-PRETAX> 398,405
<INCOME-TAX> 0
<INCOME-CONTINUING> (398,405)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (398,405)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
