U.S. 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, 1999
Commission File Number 0-18094
UNIVERSAL EXPRESS, INC.
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(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.
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- ------
State the aggregate market value of the voting stock held by non-affiliates of
the registrant on September 30, 1999:
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$ 2,717,816
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
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Common Stock Outstanding at September 30, 1999:
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Class "A" 10,065,988
Class "B" 1,280,000
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UNIVERSAL EXPRESS, INC.
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INDEX
Page
Number
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 1999 1
Combined Statement of Operations - Three months
ended September 30, 1999 2
Combined Statement of Cash Flows -- Three months
ended September 30, 1999 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 12
SIGNATURE 13
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UNIVERSAL EXPRESS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT SEPTEMBER 30, 1999
ASSETS
------
CURRENT ASSETS:
Cash $ (108,380)
Accounts receivable, net of allowance
for doubtful accounts of $182,400 693,922
Inventory 98,849
Loans & Notes receivable 1,333,094
Other, Assets 303,079
------------
TOTAL CURRENT ASSETS $ 2,320,564
FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 205,445
REORGANIZATION VALUE, net of amortization 106,071
GOODWILL, net 560,355
Investment A/C 1,293,194
------------
TOTAL ASSETS $ 4,485,629
============
LIABILITITES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,335,612
Taxes payable 176,548
Other 98,444
Loans/Notes Payable 1,171,616
Convertible Debentures 189,000
Long-Term Liabilities 194,611
------------
TOTAL LIABILITIES $ 4,165,831
============
STOCKHOLDERS' EQUITY
Common stock, Class A, $0.005 par value;
authorized 147,000,000 shares;
10,065,988 issued and outstanding $ 50,330
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 21,756,781
Cash received for stock rights 1,640,002
Deferred compensation related to
stock issued for services (1,419,299)
Accumulated deficit (21,714,414)
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TOTAL STOCKHOLDER'S EQUITY 319,798
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,485,629
============
1
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UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
INCOME: 1999 1998
- ------- ---- ----
Merchandise and service income $ 102,591 $ 138,299
Ticket sales 281,176 497,539
Delivery Services 950,677 --
Other income -- --
TOTAL INCOME 1,334,444 635,838
COST AND EXPENSES:
- ------------------
Cost of goods and services 1,028,256 430,034
Selling, general and administrative 1,295,957 901,953
Depreciation and amortization 79,681 79,037
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2,403,894 1,411,024
LOSS BEFORE INTEREST (1,069,450) (775,186)
-----------
INTEREST INCOME -- --
INTEREST EXPENSE (3,180) (3,451)
LOSS FROM CONTINUING OPERATIONS (1,072,630) (778,637)
LOSS FROM DISCONTIUED OPERATIONS 0 0
----------- -----------
NET LOSS $(1,072,630) $ (778,637)
=========== ===========
LOSS PER COMMON SHARE
Loss from continuing operations ($ 0.11) ($ 0.22)
Loss from discontinued operations -- --
Net Loss ($ 0.11) ($ 0.22)
Weighted average number of
shares used in calculations $ 9,428,670 $ 3,542,908
=========== ===========
2
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UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
CASH FLOWS PROVIDED BY OPERATIONS 1999 1998
---- ----
Net Loss $(1,072,630) $ (778,637)
Adjustment to reconcile net loss to net
cash used by operating activities:
Common stock issued for services rendered 198,150 179,565
Depreciation and amortization 79,681 79,037
----------- -----------
(794,799) (520,035)
Change in assets and liabilities:
(Increase)/Decrease in restricted cash -- --
(Increase)/Decrease in accounts receivable (156,788) (30,998)
(Increase)/Decrease in inventory 1,313 --
(Increase)/Decrease in loan to officers -- (36,494)
(Increase)/Decrease in notes receivable 1,151 (31,299)
(Increase)/Decrease in deferred expenses
and other assets -- --
Increase/(Decrease) in accounts payable
and accrued expenses (268,537) 13,865
Increase/Decrease in taxes payable (4,453) (3,529)
Increase/(Decrease) in other liabilities (32,307) (15,419)
----------- -----------
Cash provided (used) by operations (1,254,420) (623,909)
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CASH USED IN INVESTING ACTIVITIES
Acquisition of furniture, equipment,
and leasehold, improvements -- --
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of common stock 648,876 250,000
Net proceeds from issuance of convertible debt -- --
Proceeds from notes and loans payable 60,000 66,000
Repayment of notes and other liabilities -- (168,500)
Proceeds From Stock Rights 400,000 250,000
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NET INCREASE (DECREASE) IN CASH (145,544) (226,409)
CASH-Beginning of period 37,164 227,892
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CASH-End of period $ (108,380) $ 1,483
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3
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UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
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Notes To Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
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Reference is made to the Company's Consolidated financial statements as of June
30, 1999 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, 1999, 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, Inc. (the "Company") has undergone major
transitions in recent years.
On May 7, 1999, the Company acquired 51% of the capital stock of SkyWorld
International Courier (SkyNet Miami), in consideration for a note of $450,000
payable by the Company in eighteen monthly installments of $25,000 each
commencing June 15, 2000. In addition, the Company agreed to payoff a $500,000
loan to SkyNet Miami from a bank. The Company also provided SkyNet Miami with
$600,000 of additional working capital. No capital stock consideration from the
Company was involved in this transaction.
SkyNet Miami is part of an international shipping network specializing in
corporate discount pricing to its customers. Its revenues for its most recent
fiscal year were in excess of $5,000,000.
The Company believes that that acquisition of SkyNet Miami will benefit the PBC
Network by providing PBC store owners with reduced international shipping rates
over their present vendors.
4
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Management has developed other new ancillary businesses to support its core
packaging and shipping businesses.
In November, 1999, the Company announced the signing of an agreement with
Imaging Technology Solutions, L.L.C. ("NetEx") pursuant to which NetEx will
provide services for the PBC Network. NetEx is a full-featured software and
service combination designed to securely transmit any document, including paper,
graphical images, hand written documents and electronic media via the Internet.
The Company believes that NetEx is the first Internet-based document delivery
service to seemlessly integrate a patented imaging platform, real-time document
linking, telephone notification and tiered digital security in an easy-to-use
Internet-ware graphical user interface. Accordingly, the Company believes that
NetEx provides a secure, expedient, and economical alternative to faxes,
overnight couriers and traditional email. The Company is offering to raise for
the "NetEx Program" and the PBC Network members $1.7 million dollars, in
increments based on a roll out schedule for the program and equipment, for the
members of the PBC Network throughout the United States. The Company will
provide each member store owner with a scanner valued at $300 for the members to
begin offering their customers the program for a fee based on usage. The PBC
Network will earn revenues based on the usage of the program by the members and
their customers.
In December, 1999, the Company announced the signing of a non-binding letter of
intent with Talk Visual Corp. to enable the PBC Network to offer its members
videocalling systems for the use of their customer. There can be no assurance
that the Company will reach a definitive agreement with Talk Visual Corp.
The Company believes its strategy of developing PBCNetwork is unique to the
private postal industry. The Company believes that PBCNetwork has established
itself as a provider of quality products and services that benefit the owners of
private postal businesses. In order for PBCNetwork to continue to provide
high-quality products and services essential to today's market needs, the
Company believes that it is necessary to develop a strategy for the "third wave"
of the industrial revolution - the Internet. While PBCNetwork members do not
currently compete with traditional overnight couriers, the Company believes that
NetEx will provide them with the opportunity to increase revenues through the
use of NetEx's technology for a minimal investment.
The Company's Web Site is www.usxp.com.
The Company purchased the Entertainment division of U.S. Transportation Systems,
Inc. (USTS) in 1997. The division consisted mainly of: Downtown Theatre Ticket
Agency, Inc., or Advance Entertainment (now known as "Manhattan Concierge"),
which provides theater, sports and special events tickets and concierge
services. The Company intends to incorporate this division into its expanding
list of services to the members of its PBC Network. These services are marketed
through toll-free phone numbers (1-888-NYSHOWS, 1-800-NYSHOWS AND
1-800-THE-SHOW) and Manhattan Concierge's web site (www.manhattanconcierge.com).
5
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This concierge business is a nationally promoted source for high visibility
venues such as the Olympics, U.S. Open, Super Bowl and the World Series. It has
been serving corporate and individual clients throughout the United States for
over fifty-three years. The Company intends to incorporate this value-added
service into the PBC Network expanding menu of offerings to its member stores
while attempting to increase Manhattan Concierge's own business presence in the
entertainment industry.
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. The service of Images is primarily utilized to maximize the
Universal Express and the PBC Network's names and trademarks. Images is also
expected to reduce advertising costs for the PBC Network members by eliminating
the "agency commissions" paid to advertising agencies by printers and other
sources of media.
Management is now concentrating on raising new capital and focusing on new
ventures, including the PBC Network and SkyNet Miami.
Management views this fiscal year as a period of transition and anticipates
growth based upon its decision to concentrate on core business development
through the PBC Network and SkyNet Miami.
USXP's principal subsidiaries and divisions include:
Private Postal Network.com
The Postal Business Center Network.com
Manhattan Concierge
SkyNet Miami
WorldPost Network.com
Images Design and Marketing
UniqueNet, Inc.
Packaging Plus Services, Inc.
PRIVATE POSTAL NETWORK.com
- --------------------------
On May 15, 1999, the name of the Association of Packagers and Carriers, APAC was
changed to the Private Postal Network.com (PPN), with two divisions, Postal
Business Center Network.com (PBC network.com) and an international shipping
division, WorldPost Network.com.
Private postal and business service centers form a highly fragmented cottage
industry. The Company believes that this industry generates over $5 billion in
sales annually 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
6
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stores nationwide. PBC Network members are connected to other members and the
PBC Network Headquarters via the PBC Web Site (PBCNetwork.com) or by telephone
at "1-888-873-2722". The PBC Web Site is utilized not only by members but also
will be used by the general public. Only one PBC Network store per Zip Code will
be accepted, thus creating internal quality control standards.
The PBC Network, with the help of other media outlets, found that the emergence
of E-Commerce is being overlooked by the big retail outlets. The Company
believes these firms have not at this point moved well to address the online
focus that is gaining momentum. As the online population becomes more frequent
and E-Commerce gains speed, the Company believes that the PBC Network will have
laid the foundation that will be needed to provide the necessary adaptations for
future commerce.
The Company believes that business-to-consumer e-commerce will benefit from
consumers seeking the lowest possible price, convenience and public acceptance
over fears of insecure transactions and the difficult task of converting these
"eyeballs" into transactions.
The Company believes that E-commerce success factors such as quality domain
name, first mover advantage, capital to build a brand name, convergence with an
established brick and mortar player and the emergence of a leader in most
categories will determine the survival of the fittest.
The Company believes that industries will turn to the Internet to improve their
existing business models or introduce an innovative one.
As e-commerce grows, someone must deliver the purchased goods to the consumer.
The Company believes that companies such as FedEx, UPS and the U. S Postal
Service are well positioned. The opportunity in this market has drawn lots of
attention, as "Others" are quickly developing to snatch-away business from these
companies. Although traditional shipping companies have been handling most
online purchases, the Company believes that residential delivery is not their
forte. The Company believes that UPS delivers about 2.4 million packages to
homes each day, while Fedex delivers around 320,000. The Company believes that
startups will eventually need a distribution system to deliver nearly anything
that customers purchase on-line.
A particular trend that the Company feels will further revolutionize the
e-commerce space surrounds strategic alliances between virtual companies and
traditional brick and mortar companies. The Company believes leverage can be
created being both online and off-line. The Company believes that distribution
issue present a problem for many e-commerce companies. And that traditional
companies, with their existing infrastructure, can be invaluable in fulfilling,
packaging and shipping orders. There are also benefits of offering customers
multiple sales and service channels.
7
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The PBC Network is an association formed to create a long overdue and needed
profitable partnership between packaging store owners and carriers, similar in
theory to FTD. The PBC Network 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. The PBC Network's
goal it to provide consumers nationwide with a feeling of quality assurance when
they frequent a PBC Network location.
SERVICES OFFERED TO PBC NETWORK MEMBERS & STRATEGIC GOALS
The PBC Network 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, the PBC Network offers a unique
combination of value-added services on the e-commerce horizon.
A list of immediate and future benefits for association members includes:
IMMEDIATE BENEFITS:
E-Commerce representation and a highly structured
plan for these outlets
Discounts for Web Utilization
Savings on shipping prices through quantity discounts
Centralized billing to lower certain costs
Pre-paid discounts on shipping
Professional theme coordinated advertising programs
PBC Network Web Site linking all members with outside customers
E-mail customer leads Scholarship Programs for members' children
Packaging education programs
Organized conventions
PBC Network health/ dental insurance
PBC Network 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
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 PBC Network Logo
PBC Network advisory council
Store (design/modernization) program
9
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This value-added Network is expected to revitalize and re-define the private
postal industry and position itself for additional acquisitions within the
transportation industry that may benefit its members' collective strength.
The Company announced in 1998 that the PBC Network had formed an Advisory
Council. This council consists of PBC members from 7 regions of the United
States. The goal of the Council is to obtain a more specific regional view of
the CMRA industry through the cooperative efforts of the PBC members.
In 1998 the Company announced that the PBC Network had formed a strategic
alliance with Kodak to make available the Kodak Image Magic Picture Maker to the
PBC Network member stores nationwide.
During the year, the PBC Network 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.
American Airlines Advantages Frequent Flyer Miles
Reslinx Incentive Travel Program
Century Marking/Stamper 2000 - Discounted rates on custom rubber stamps
for resale.
Discounts on planning and scheduling products available through Wescosa-Florida.
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.
Paychex - Discounts on payroll services.
Rediform - Discounts on business forms and other office products and services.
Risk Management - Business Insurance Services.
Hertz - 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.
Future PBC Network benefits should include but not be limited to e-commerce,
mail order contract for individual stores, Internet document delivery systems,
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.
9
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This value-added Network with the goal of revitalizing the private postal
industry and positioning 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. 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 Business Centers, thereby
inexpensively maximizing promotion of the Universal Express and the PBC names
and trademarks.
Management expects to reduce advertising expenditures for PBC Network 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 and
auction E-Commerce fulfillment may be originated from this site.
PACKAGING PLUS SERVICES
- -----------------------
Packaging Plus Services, Inc. is the corrugated box subsidiary of USXP. A
manufacturing facility is being sought relatively close to the main office. The
Company intends to be a full service corrugated box manufacturer. Additionally,
other equipment has been identified and readied for purchase. The Company
believes that this core business will lend itself to expanding the customer base
and "trim-out" a new and enhanced market. The Company believes that the
additional equipment and marketing effort will enable Packaging Plus Services,
Inc. to become a significant player in the corrugated market.
PBC Network Stores use basic corrugated and because of their non-centralized
purchasing, they are forced to pay above market prices. Through the PBC Network,
the stores will be able to purchase through a centralized purchasing, thus
lowering their costs and making their overall operations more competitive. This
would enable the Member to create a new market for customized boxes the Company
believes will help to expand their customer base and increase their market
share.
10
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RESULTS OF OPERATIONS
- ---------------------
The three months ended September 30, 1999, as compared to the three months ended
- --------------------------------------------------------------------------------
September 30, 1998:
- -------------------
Three Months Ended
September 30,
1999 1998
------------------- -------
Revenues
- --------
Merchandise and Service Income $ 102,591 $ 138,299
Ticket Sales 281,176 497,539
Delivery Services 950,677 --
---------- ----------
Total Revenues from Current Operations $1,334,444 635,838
---------- ----------
Total - Revenues $1,334,444 635,838
Cost of Goods and Services $1,028,256 430,034
Universal Express, Inc. (USXP), is an integrated business service conglomerate.
Its principal subsidiaries and divisions include the Private Postal Network.com
(with two divisions, Postal Business Center Network.com (PBC Network Inc. and
WorldPost Network.com), Manhattan Concierge, Packaging Plus Services, Inc.
(corrugated business), Images Design and Marketing, and UniqueNet.
During the three months ended September 30, 1999, the Company's current business
operations generated revenues of $1,334,444, as compared with operating revenues
of $635,838 for the same three month period in 1998, an increase of 110%.
Merchandise and service income was $102,519 for the September 30, 1999 quarter,
as compared with $138,299 for the 1998 quarter, a decrease of 26%, due to the
discontinuation of the Office Quick business.
Ticket sales for Manhattan Concierge for the 1999 quarter were $281,176, as
compared with $497,539 for the 1998 quarter, a decrease of 43% due to seasonal
factors.
Delivery service revenues for the 1999 quarter of $950,677 arose from the
operations of SkyNet Miami.
Selling, general and administrative expenses were $1,295,957 for the three
months ended September 30, 1999, as compared with $901,953 for the same three
month period in 1998, an increase of 43%
LIQUIDITY AND CAPITAL RESOURCES - FOR THE FIRST QUARTER
- -------------------------------------------------------
The net proceeds from new loans and investments in the Company was approximately
$540,000, all of which was used in its operating activities. Common stock in the
amount of approximately $198,150 was issued for services rendered.
11
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Until the PBC Network 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.
THE YEAR 2000
- -------------
The Company made an assessment of its Year 2000 readiness in 1999. Based on the
simulations and contacts with hardware and software vendors, the Company
upgraded systems and software in Universal Express, and one of its subsidiaries,
Manhattan Concierge. The approximate cost of the hardware and software upgrades
was $25,000.
The process of upgrading and making all system Year 2000 compliant was
completed. Simulations and testing was also completed and all systems and
hardware are currently Year 2000 compliant.
As of January, 2000 no problems have arisen and all Year 2000 upgrades and
changes were successful.
PART II -- OTHER INFORMATION
- ----------------------------
Item 1. LEGAL PROCEEDINGS
-----------------
The Company is involved in several old lawsuits with vendors and
suppliers. 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.
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Item 2. CHANGES IN SECURITIES -- NONE
---------------------
Item 3. DEFAULTS ON SENIOR SECURITIES -- NONE
-----------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- NONE
---------------------------------------------------
Item 5. OTHER INFORMATION -- NONE
-----------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) Exhibits
--------
10.1 NetEx Contract
-------------------
27.1 Financial Data Schedule
----------------------------
(B) Reports on Form 8-K: -- NONE
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
and Chairman of the Board.
Dated: January 6, 2000
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of November 1, 1999,
between IMAGING TECHNOLOGY SOLUTIONS, L.L.C. (d/b/a NetEx) ("NetEx") and the
POSTAL BUSINESS CENTER NETWORK, INC. ("pbcnetwork.com) (the "PBC Network").
RECITALS
A. NetEx is engaged in the business of providing a secured Internet document
delivery service (the "Program").
B. The PBC Network, on behalf of its present and future member stores, wishes to
provide for the exclusive use of the Program in the Western Hemisphere by such
members.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
intending to be legally bound, hereby agree as follows:
1. GRANT.
- ---------
NetEx shall provide, exclusively, the Program to present and future postal store
members of the PBC Network located in the Western Hemisphere during the term of
this Agreement. "Postal store members" shall mean retail, mail, parcel and
shipping centers, and is hereinafter collectively referred to as "Member" or
"Members."
2. TERM.
- --------
The initial term of this Agreement shall be for a period of ten (10) years
commencing on November 1, 1999 and ending on November 1, 2009. Thereafter, this
Agreement shall automatically renew for successive five-year periods, unless
either party notifies the other of desired contract modifications no later than
six (6) months prior to the end of the then-current term. Upon such
notification, the parties shall agree to modify terms within three (3) months or
else this Agreement will terminate at the end of the then-current term.
3. PROMOTIONS.
- --------------
The PBC Network and its parent corporation, Universal Express, Inc. ("USXP"),
will use their best efforts to promote the Program with its Members,
exclusively, and with subsidiaries and business affiliates of USXP
("Affiliates"), including without limitation, the members of the SkyNet
International Courier Network (USXP, the PBC Network, Members and Affiliates
hereinafter sometimes collectively referred to as "Customers"). USXP and the PBC
Network shall not promote or offer to its Members and Affiliates any other
product or service in competition with the Program.
<PAGE>
4. PRICING AND CONSIDERATION.
- -----------------------------
a) USXP and the PBC Network will use their best efforts to raise from present
and future investment sources available to them and make available to
NetEx, depending upon the roll-out schedule for the Program to the Members
as determined by USXP and PBC Network, a total amount over a 24 month
period of $1,700,000.00 (specific payment terms are attached hereto as
Exhibit A).
b) Amount. Each Member receiving the Program will pay to NetEx additional
charges based upon the monthly volume of use of the Program by such member
("Monthly Charges") as set forth on the pricing model attached hereto as
Exhibit B.
c) Invoices. NetEx shall invoice Customers on a monthly basis. All invoices
remaining unpaid after ninety (90) days shall accrue interest at the rate
of eighteen (18%) percent per annum
5. TRADEMARKS.
- --------------
The Customers may display NetEx's trademarks to identify, promote and market the
Program on their business cards, stationery and other promotional materials
indicating that the party is an authorized dealer of the Program. No other use
of NetEx's trademarks is authorized, without NetEx's prior written consent.
6. USER SUPPORT.
- ----------------
NetEx will provide customer dealer support for the Program to all authorized
customers for so long as this Agreement is in force.
7. COPYRIGHT RESTRICTIONS.
- --------------------------
This Agreement shall not be construed to grant any right, title, or interest in
any intellectual property rights embodied in or associated with the Program.
Unauthorized copying of the Program, including modifications of the Program or
the creation of programs in which the Program has been merged or included with
other data products, for distribution to third parties, whether gratuitously or
for sale, is expressly forbidden.
8. PATENT AND COPYRIGHT ACTIONS AND INDEMNIFICATION.
- ----------------------------------------------------
a) Obligation to Defend. NetEx will, at NetEx's expense, defend any
action brought against a Customer, as defined in Section 3, that is
based on a claim of U.S. copyright or patent infringement by the
Program used within the scope of the license granted under this
Agreement. The Customer must promptly inform NetEx, in writing, of any
claim and allow NetEx to control the defense of such action and agree
to any settlement of claims.
2
<PAGE>
b) Liability. NetEx will pay all damages and costs awarded, or that
result from NetEx's settlement of claims, in any such action.
c) Right to Replace or Alter. If the Program, in NetEx's opinion, is
likely to be the subject of a copyright or patent infringement claim,
NetEx may:
i. obtain the right to continue using the Program; or
ii. replace or alter the Program to make it non-infringing,
provided that the new Program is equal to or better than the
existing Program.
9. LIMITATION OF LIABILITY.
- ---------------------------
a) Amount. NetEx's liability for damages with respect to this Agreement
and the license provided, except for liability for patent or copyright
infringement, will not exceed the lesser of the subject Customer's
actual damage or $100 (or equivalent in local currency).
b) Type. NetEx in no event will be liable for:
i) lost profits or for other special, indirect, incidental or
consequential damages;
ii) acts or omissions of a Customer, including but not limited to
improper or insufficient addressing or instructions for proper
transmission or delivery;
iii) a Customer or recipient violating any of the terms of this
Agreement; or
iv) for loss, damage or delay caused by an event beyond NetEx's
control, including but not limited to acts of God, weather
conditions, acts of public enemies, war, strikes, civil
commotion, or acts of public authorities with actual or
apparent authority.
10. FORCE MAJEURE AND EXCUSABLE DELAYS.
- ---------------------------------------
a) Neither party shall be liable for any costs or damages attributable to
non-performance arising out of any event of force majeure, which shall consists
of any cause not within its reasonable control or not reasonably foreseeable and
not due to its fault or negligence.
b) Each party shall give the other party prompt notice of the occurrence of any
event of force majeure that is expected to cause delay hereunder, and the date
of performance by any such party shall be extended for a period not exceeding
the period of delay caused by the event of force majeure identified in such
notice.
3
<PAGE>
c) Unless the performance by either party of its obligations under this
Agreement is delayed by the occurrence of an event of force majeure for a period
of more than one (1) month (and such delay is excused under the foregoing
provisions), no event of force majeure shall excuse permanent nonperformance,
but shall excuse only delays in performance and only to the extent that such
delays are directly attributable to such cause.
d) Neither party shall be liable for any delay or failure in the performance of
its obligations under this Agreement that directly results from any failure of
the other party to perform its obligations as set forth in this Agreement.
11. EARLY TERMINATION OF AGREEMENT
- ----------------------------------
This Agreement may be terminated by a party when the other party does or fails
to do any of the following:
a) FAILURE TO PAY. Fails to pay amounts due hereunder within 60 days
after notice that same is due.
b) BANKRUPTCY. Is adjudicated as a bankrupt.
c) INSOLVENCY. Insolvency, the appointment of a receiver, the making of
an assignment for the benefit of creditors or entering into a
composition with a creditor.
d) ASSIGNMENT. Assigns or transfers this Agreement, except as provided
herein.
e) BREACH OF THE CONDITIONS OF AGREEMENT. The breach of any of the
other material terms and conditions of this Agreement and fails to
cure such breach within sixty (60) days after such breach.
12. CUSTOMER'S REMEDIES.
- ------------------------
Customer's remedies, as provided in this Agreement, are exclusive.
13. Notices.
- ------------
All notices hereunder shall be in writing and shall be deemed to have been duly
given when sent by certified mail, return receipt requested or by private
overnight mail service providing evidence of delivery (e.g. Federal Express) to
the following addresses until such time as a party hereto shall give the other
parties hereto not less than ten (10) days' prior written notice of a change of
address in accordance with the provisions hereof:
4
<PAGE>
If to NetEx: Mr. Greg Meffert, President
Imaging Technology Solutions, LLC
1340 Poydras Street
Suite 600
New Orleans, LA 70112
With copy to: E. Howell Crosby, Esq.
Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P.
2300 Energy Centre, 1100 Poydras Street
New Orleans, LA 70163-2300
If to the PBC Network: Mr. Richard A. Altomare, Chairman
Postal Business Center Network, Inc.
20 South Terminal Drive
Plainview, NY 11803
If to USXP: Mr. Richard A. Altomare, President & CEO
Universal Express, Inc.
20 South Terminal Drive
Plainview, NY 11803
14. DISPUTE RESOLUTION.
- -----------------------
The parties hereto shall use all reasonable efforts to amicably resolve all
disputes arising under this Agreement. If despite such efforts any matter cannot
be amicably resolved, the matter shall be referred to the Presidents of NetEx
and USXP and the Chairman of the PBC Network, who shall promptly meet for the
purpose of resolving such dispute.
15. CONFIDENTIALITY.
- --------------------
The parties hereto will hold and will use its best efforts to cause its
officers, directors, employees and other agents (collectively, its "Agents") to
hold, in confidence, all confidential documents and information concerning the
other parties hereto furnished to such party in connection with this Agreement,
except to the extent that such information can be shown to have been (a)
previously known by such on a non-confidential basis, (b) in the public domain
through no fault of such party or (c) later lawfully acquired by such party on a
non-confidential basis from a source other than the parties hereto; provided
that the parties may disclose such information in connection with this Agreement
to their Agents so long as such persons are informed by the parties of the
confidential nature of such information and are directed by the parties to keep
such information confidential and not use it for any purpose other than its
intended use. Notwithstanding the foregoing, the parties hereto may disclose
such information if (i) compelled to disclose by judicial or administrative
5
<PAGE>
process or by other requirements of law or (ii) necessary to establish such
party's position in any litigation or any arbitration or other proceeding based
upon or in connection with the subject matter of this Agreement. Prior to any
disclosure pursuant to the preceding sentence, a party shall give reasonable
prior notice to the other party of such intended disclosure, and if requested by
the notified party, the disclosing party shall use all reasonable efforts to
obtain a protective order or similar protection for such information and shall
other disclose only such information as is legally required. If the Agreement is
terminated, the parties hereto will use their best efforts to cause its Agents
to, destroy or deliver to the other party, upon request, all documents and other
materials, and all copies thereof, containing confidential information obtained
from such party in connection with the Agreement.
16. MISCELLANEOUS.
- ------------------
a) The parties hereto are independent contractors. Nothing contained in this
Agreement is intended or shall be deemed to constitute a partnership, joint
venture, franchise, or agency relationship between the parties hereto. Neither
party shall incur any debts or make any commitments upon the other, except to
the extent specifically provided herein.
b) Each party represents and warrants that it has full power and authority to
undertake the obligations set forth in this Agreement and that it has not
entered into any other agreements nor will it enter into any agreements that
would render it incapable of satisfactorily performing its obligations
hereunder.
c) Each party agrees that it will comply with all applicable laws and
regulations of governmental bodies or agencies in its performance under this
Agreement.
d) All questions concerning the validity, operation, interpretation, and
construction of this Agreement will be governed by and determined in accordance
with the laws of New York.
e) Each party hereto shall bear its own expenses in the negotiation and
execution of this Agreement.
f) Neither party shall by mere lapse of time, without giving notice or taking
other action hereunder, be deemed to have waived any breach by the other party
of any of the provisions of this Agreement. Further, the waiver by either party
of a particular breach of this Agreement by the other shall not be construed as
or constitute a continuing waiver of such breach or of other breaches of the
same or other provisions of this Agreement.
g) The captions in this Agreement are for reference purposes only and shall not
in any way affect the meaning or interpretation of this Agreement.
6
<PAGE>
h) The parties hereto acknowledge that this Agreement is the complete and
exclusive statement of agreement respecting the subject matter hereto and
supersedes all proposals, oral or written, understandings, representations,
conditions, and other communications between the parties relating hereto. This
Agreement may be amended only by a subsequent writing that specifically refers
to this Agreement and is signed by both parties, and no other act, document,
usage, or customer shall be deemed to amend this Agreement.
i) None of the parties shall sell, assign, transfer, convey, delegate or
encumber its duties and obligations hereunder, or any rights or interest
hereunder, and shall not suffer or permit any voluntary assignment or transfer
or encumbrance thereof, by operation of law or otherwise, without the prior
written consent of the other parties.
j) This Agreement may be signed in two or more counterparts, all of which taken
together shall constitute one and the same Agreement, binding on all of the
parties hereto.
k) If any portion of this Agreement is declared to be invalid by any court of
competent jurisdiction, such determination shall not affect the remainder hereof
and the same shall remain in full force and effect.
WHEREBY, the parties have caused this Agreement to be executed by their
duly authorized officers as set forth below effective as of November 1, 1999.
IMAGING TECHNOLOGY SOLUCTIONS
/s/GREG MEFFERT
---------------
Greg Meffert, President
POSTAL BUSINESS CENTER NETWORK, INC.
/s/RICHARD A. ALTOMARE
----------------------
Richard A. Altomare, President & CEO
UNIVERSAL EXPRESS, INC.
/s/ RICHARD A. ALTOMARE
-----------------------
Richard A. Altomare, Chairman
7
<PAGE>
EXHIBIT A
Specific payment terms and actions based on payments are as follows:
$200,000 raised by USXP or outside funding sources in accordance with the
roll-out schedule.
$10,000 due and payable for each 100 members who prepay for the NetEx service
and are eligible for a free flatbed scanner.
Balance due and payable in accordance with the roll-out schedule.
8
<PAGE>
EXHIBIT B
The NetEx service charges its customers based on the size of the documents that
are transmitted.
Below is the NetEx pricing schedule:
$9.95 per month for between 0 and 5 megabytes
$17.95 per month for between 5 and 10 megabytes
$32.95 per month for between 10 and 20 megabytes
$74.95 per month for between 20 and 50 megabytes
$129.95 per month for between 50 and 100 megabytes
$219.95 per month for between 100 and 200 megabytes
Additional usage above 200 are $1.00 per megabyte.
In order for PBC Network members to receive a flatbed scanner at no charge,
again it will depend on the rollout, they must prepay for two years. In return,
the PBC Network members will be paid the following:
- -- of revenue generated from the document transmissions below the first 5
megabytes of data transmission.
- -- of the revenue generated from the NetEx subscriptions to other individuals
or businesses.
- -- of the revenue generated by resellers that are introduced to NetEx for the
purpose of reselling the NetEx product.
- -- The remaining of the charge to the PBC Network customer after a $1.00 per
transaction charge is paid to NetEx.
9
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> (108,380)
<SECURITIES> 0
<RECEIVABLES> 693,922
<ALLOWANCES> 182,400
<INVENTORY> 98,849
<CURRENT-ASSETS> 2,320,564
<PP&E> 0
<DEPRECIATION> 79,681
<TOTAL-ASSETS> 4,485,629
<CURRENT-LIABILITIES> 4,165,831
<BONDS> 0
0
0
<COMMON> 56,730
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,485,629
<SALES> 1,334,444
<TOTAL-REVENUES> 1,334,444
<CGS> 1,028,256
<TOTAL-COSTS> 1,028,256
<OTHER-EXPENSES> 1,375,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,180
<INCOME-PRETAX> (1,072,630)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,072,630)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,072,630)
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