UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-KSB
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
PERIOD FROM JULY 1, 1999 TO JUNE 30, 2000
Commission file number 0-18094
UNIVERSAL EXPRESS, INC.
A Nevada Corporation ID.# 11-2781803
1350 Broadway, Suite 1203, New York , New York 10018
Registrant's telephone number including area code (212) 239-2570
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Class A Common Stock par value $0.005 per share
Check whether the issuer (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
----- -----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. ___
State issuer's revenues for the period $5,850,198.
<PAGE>
State the aggregate market value of the voting and non-voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days: As of September 8, 2000, $2,539,196 (based on 18,808,858)
shares held by non-affiliates and computed by reference to the average closing
bid and asked prices of the Common Stock).
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes X No
----- -----
The registrant had 18,779,438 shares of its $.005 par value Class A Common Stock
issued and outstanding as of June 30, 2000 and 1,280,000 shares of Class B
Common Stock.
Total number of sequentially numbered pages in this document: (23).
Documents Incorporated by Reference: None.
<PAGE>
PART I
------
ITEM 1
------
DESCRIPTION OF BUSINESS
HISTORY
-------
The Company was originally incorporated in the state of Nevada on April 6, 1983.
Universal Express (USXP), is an integrated business to business service company
under the direction of its Chairman and Chief Executive Officer, Mr. Richard A.
Altomare.
The Company is engaged primarily in the development of its Private Postal
Network.com and a division of PPN called the Postal Business Center Network.com
("PBC Network") and expanding the Company's presence in the private postal and
international shipping industries. The PBC Network is an association with the
goal of unifying and organizing independent and franchised postal stores
nationwide. The Company is also active in acquiring businesses that complement
and improve the PBC Network. This multi-faceted association of packaging centers
nationwide is connected through the World Wide Web and its joint venture
partners.
In the international shipping arena, another division of PPN operates under the
name WorldPost Network.com.
The web site for the company and its businesses is http://www.usxp.com.
THE BUSINESS OF THE CORPORATION
-------------------------------
The Company acquired SkyWorld International Courier (SkyNet) in May, 1999.
SkyNet is part of an international shipping network specializing in discount
shipping prices to its customers.
The Company believes that acquisition of SkyNet should benefit the PBC Network
by providing PBC store owners with reduced international shipping rates not
controlled by their present vendors.
The Company believes that Skynet will add growth to both the PBC Network and
Universal Express stockholder value.
3
<PAGE>
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 Internet.
While PBCNetwork members do not currently compete with traditional overnight
couriers, USXP can provide them with the opportunity to increase revenues
through the use of their own shipping network.
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 Conicerge's web site (www.manhattanconcierge.com).
USXP 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.
Management is now concentrating on raising new capital and focusing on new
ventures, including the PBC Network and SkyNet.
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.
USXP's principal subsidiaries and divisions include:
-- Private Postal Network.com
-- The Postal Business Center Network.com
-- Manhattan Concierge
-- SkyNet
-- WorldPost Network.com
-- UniqueNet, Inc.
-- Packaging Plus Services, Inc.
4
<PAGE>
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. In future reports, the names of these new
entities will be used to cover and describe the present functions and programs
of these networks as well as future programs and functions of this electronic
network of retail, mail, parcel, and business centers, which the Company
believes are positioned to provide goods and services needed to support
E-commerce, as well as the international shipping division, including support
from SkyNet Worldwide.
Private postal and business service centers form a highly fragmented cottage
industry. The Company believes that 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. PBC Network members are connected to other members and the
PBC Network Headquarters via the PBC Web Site (PBCNetwork.com). 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 Company believes that other industries will turn to the Internet to improve
their existing business models or introduce an innovative one, thus utilizing
PBC member stores.
As e-commerce grows, someone must deliver the purchased goods to the consumer.
The Company believes that many companies 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 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.
5
<PAGE>
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.
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:
Discounts for Web Utilization
Savings on shipping prices through quantity discounts
Centralized billing to lower certain costs
PBC Network Web Site linking all members with outside customers
E-mail customer leads
PBC Network shipping insurance
Shipping and tracking for customers
Continual development of new profit centers
National customer service satisfaction department
Discounted air cargo/ next day worldwide rates
Discounted postal meter leasing programs
Discounted long distance rates
Discounted printing programs
Discounted equipment leasing program
Prepaid phone card
Centralized purchasing
Brand recognition of PBC Network Logo
Discounted packaging supplies
Discounted stock and customer boxes
Check authorization program
Video conferencing program
Secure document delivery program
Discounted business supplies
Credit card processing program
Payroll and tax processing program
Travel and entertainment discounts
Free AAdvantage Airline incentive miles
Rental car discounts & upgrade
Customized website design
Discounted promotional items
6
<PAGE>
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.
Skynet Worldwide Express
------------------------
SkyWorld International Couriers, Inc. is the U.S. member of the SkyNet Worldwide
Express Network, an alliance of independently owned and operated express courier
services operating in 268 cities in 120 countries. SkyWorld developed and owns
the Skynet Trademark in the US and in most countries in Latin America. The
SkyNet Network provides global delivery and logistics service to multinational
firms. The Network currently delivers over 300,000 packages per month. It is the
largest independently owned courier network and the 5th largest express network
behind the integrated US express carriers such as FedEx, UPS and DHL.
Unlike the major integrators who operate their own aircraft and thus offer rigid
standardized pick up and delivery schedules, SkyNet Network members offer
flexible, customized international services to meet the clients' specific
distribution needs. Instead of operating its own fleet, SkyNet offers express
international air courier service and expedited air cargo through regularly
scheduled commercial airlines to transport time sensitive documents, parcels,
freight and mail. SkyNet provides on demand and scheduled pick up and delivery
courier and freight service in the US and in foreign countries. SkyNet uses
available cargo and baggage space on scheduled passenger and cargo airlines
throughout the world. SkyNet operates its own facilities in Miami, New York, Los
Angeles, San Francisco, Venezuela and Costa Rica. Using licensees in most
countries in Latin America and the Caribbean, it provides 24 to 48 hour delivery
throughout the region. Hubs operated by SkyNet Network Members in London, Dubai,
Johannesburg, Brussels, Singapore and Sydney allow the swift delivery of
documents and parcels to almost any destination in the world within 72 hours.
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). In the future, 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.
PBC Network Stores use basic corrugated and because of their non-centralized
purchasing and small storage space 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. Packaging Plus Services is the division of
PBC that addresses these trends.
7
<PAGE>
COMPETITION
-----------
The Company further believes that the maturation of the PBC Network will
strengthen the profitable atmosphere in the cottage private postal industry.
Lack of financial strength and market penetration have prevented some excellent
franchisors and independents from properly promoting their services. Individual
store failures are far too great in this industry without a cohesive trade
association. The ability of the PBC Network to create a nationally accepted
private postal industry that the American public will embrace and trust should
make this a viable industry. The Company feels it can convince the independent
and nationwide franchisors that they must self-regulate for consumer acceptance
and seize this opportunity to become part of this new cooperative partnership.
INDUSTRY BACKGROUND
-------------------
The future of the industry lies predominately in the international business
community and domestic acceptance of private postal stores as a natural cohesive
industry. As the world moves towards a Global Economy and trade tariffs begin to
break down, the Company believes that new shipping markets and small business
opportunities will be developed and the key ingredients underlying these
developments will be transportation and outlets for carriers as well as final
mile fulfillment for direct marketing products.
The transportation industry has already developed the necessary infrastructure
and continues to grow. The Company believes that the missing ingredients needed
to make this industry improve are packaging, logistics and inexpensive
residential locations.
The Company believes that a nationwide organized domestic fulfillment network
with an affordable International Delivery System can become a key player in the
Global Economy. The Company has positioned itself to be that public player in
this lucrative market.
Members of PBC Network provide the public with a complement to U.S. Post Offices
for many retail postal services. In addition, our Service Centers offer
individuals and business customers a variety of personal, business and
communications services and merchandise.
MANAGEMENT
----------
Mr. Richard A. Altomare has been President and CEO of Universal Express since
May 1992. Mr. Altomare, a reorganization specialist and investor, was appointed
CEO and Chairman of Universal Express in December 1991. He directs the Company,
and is continuing to build a multi-faceted Company foundation for future growth
in the global marketplace. He envisions a synergistic company capable of
creating a profitable partnership between packaging store owners and its
carriers.
8
<PAGE>
TRADE MARKS AND SERVICE MARKS
-----------------------------
The Company is the owner of trademarks and service marks for the names Universal
Express(R), Skynet(R), Manhattan Concierge(R), Uniquenet(TM), PBC(TM),
WorldPost(TM) and Buyer WeCare(TM).
EMPLOYEES
---------
As of June 30, 2000, the Company employed 100 individuals. The Company has not
experienced any work stoppages and considers its relations with its employees to
be excellent. To facilitate its Skynet and PBC Network expansion plans,
management expects to engage in significant hiring of management, sales,
operational and support personnel during 2000 and beyond. The Company's Stock
Option Plan provides for the issuance of up to 1.25 million shares of the
Company's common stock.
ITEM 2
------
DESCRIPTION OF PROPERTIES
USXP's present corporate headquarters is located at 1350 Broadway, New York
City. Manhattan Concierge has offices in the same building. Skynet has offices
in Florida and New York. The PBC Network has an office in Centereach, NY.
ITEM 3
------
LEGAL PROCEEDINGS
USXP's subsidiary, Skynet Worldwide Express ("Skynet"), obtained a preliminary
injunction in Federal District Court in Florida against a competitor, SKYN
Holdings, Inc. ("Holdings"), for servicemark infringement on courier shipments
throughout the United States. The defendant filed an appeal to the Court of
Appeals for the Eleventh Circuit and that Court held in Skynet's favor. Skynet
has moved for summary judgment on liability and expects to receive a judgment
for substantial damages after a trial. The collectability of these damages,
however, is not assured because of the financial condition of Holdings.
The Company is involved in several lawsuits with vendors and suppliers and
claims for fees of certain professionals. These claims are all disputed by the
Company. The Company believes that the disposition of these matters will not
have a material adverse effect on the Company's financial position.
9
<PAGE>
ITEM 4
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SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No meeting of shareholders was held during the year.
PART II
-------
ITEM 5
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock has been trading under the symbol "USXP" on
the automated quotation system maintained by the National Quotation Bureau,
Inc., (the "Bulletin Board").
The following table sets forth the range of high and low bid quotations on the
Bulletin Board for the Common Stock during the quarterly periods of the Current
Period. The source of these quotations is the National Quotations Bureau. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down, or
commission and may not represent actual transactions.
BID
---
QUARTER ENDED LOW HIGH
------------- --- ----
9/30/99 $0.25 $0.58
12/31/99 $0.24 $0.74
3/31/00 $0.30 $0.69
6/30/00 $0.175 $0.52
As of June 30, 2000, there were over 4,000 holders of record of the Company's
Common Stock.
10
<PAGE>
The Transfer Agent and Registrar of the Company's Common Stock is OTC Corporate
Transfer Service Co.
A second 4% stock dividend was declared in this fiscal year.
ITEM 6
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Included in this report are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward-looking
statements will prove to be correct. The Company's actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors, including sales levels, distribution and competition trends
and other market factors.
OVERVIEW:
---------
Management is continually concentrating on raising new capital to further
develop the PBC Network, its multi-faceted national private postal business
centers nationwide connected through the World Wide Web, and for future
acquisitions.
Management views this year as a period of growth based upon its decision to
concentrate on core business development through the PBC Network and further
acquisitions in the shipping business to compliment its acquisition of SkyNet.
Skynet
------
Upon purchasing Skynet Miami in May of 1999, its revenues were approximately
$6.0 million dollars per annum. Immediately upon announcing USXP's acquisition
of Skynet, Skynet was attacked and damaged by SKYN Holdings, the owner of Skynet
London and Pony Express. SKYN opened "Skynet" locations within the North
American territory using Skynet's trademark. USXP's Skynet revenues decreased to
approximately $2.0 million dollars and USXP was forced to litigate and
financially support Skynet with additional loans of approximately $1.7 million.
Upon winning this lawsuit in July 2000, USXP and Skynet have now returned Skynet
revenues to $700,000 monthly (est. $8.4 million annually). SKYN Holdings has
been delisted and both SKYN London and Pony Express have filed for bankruptcy
protection in their respective countries. Obviously, Skynet, which experienced
lower than expected revenues this past year, is very optimistic about its future
growth and our re-enforced trademark strength in North America.
11
<PAGE>
Development PBC - new vendors
-----------------------------
The Postal Business Center Network also has been re-defined this year as well. A
new Director with e-commerce skills and new strategic partnerships seem to have
poised this futuristic concept of a private postal system to profitability.
Also, many new vendor programs have been put in place during this period to
benefit the postal stores.
Our recent Skynet legal victory now moves along our plans to utilize the
discounted Skynet (or WorldPost) envelopes in the 8000+ postal centers in North
America. Presently the postal stores already ship Internationally in excess of
$300,000,000 with other established carriers. By being able to offer Skynet
envelopes to these same stores, a market share of 5% to 15% is possible ($15
million to $45 million).
In additional, Skynet and PBC prior to last year's unexpected lawsuit had begun
plans to franchise Skynet territories utilizing the existing revenues of postal
stores within that territory. Since protecting its Skynet trademark and the
Skynet business, USXP and the PBC Network appear ready, with proper funding, to
advance the USXP mission statement, which is "to create a private postal system
with its own International delivery company capable of affordable e-commerce
national and international fulfillment contracts".
Manhattan Concierge
-------------------
The Company continues to utilize Manhattan Concierge as a service to the Postal
Stores and develop its base. Last year Manhattan Concierge was the only
concierge service approved by the Better Business Bureau of New York. It
continues to grow and financially create effective daily cash flow for the
entire USXP family of companies.
12
<PAGE>
Results of Operations for the year ended June 30, 2000:
-------------------------------------------------------
Year Ended
June 30, 2000 June 30, 1999
------------- -------------
Revenues:
---------
Ticket Sales $ 1,751,216 $ 1,721,129
Merchandise & Service Sales 100,696 479,077
Delivery Services 4,027,949 402,835
Other income 2,106 23,174
------------ ------------
$ 5,881,967 $ 2,626,215
------------ ------------
Costs & Expenses:
-----------------
Cost of Goods Sold 4,906,925 $ 1,729,182
Selling, General & Admin 6,172,074 5,152,192
Depreciation & Amortization 234,297 160,836
------------ ------------
$ 11,313,296 $ 7,042,210
------------ ------------
Loss From Operations (5,431,329) $ (4,415,995)
Interest Expense (330,684) (172,744)
------------ ------------
Net Loss $ (5,762,013) $ (4,588,739)
============ ============
Twelve Month Analysis
---------------------
During the year, the Company's operating revenues increased to $5,881,967 from
$2,626,215 for 1999, an increase of 123%, as a result of its acquisition of
Skynet in May, 1999. Skynet's contribution to operating income, which is fully
consolidated with the Company's results for this fiscal year was over
$4,000,000.
Cost of revenues, were $4,906,925 and $1,729,182 respectively, an increase of
184%, as a result of the acquisition of Skynet. Skynet's cost of revenue was
approximately $3,600,000.
13
<PAGE>
Selling, general and administrative expenses were $6,172,074 for 2000 compared
with $5,152,192 for 1999, an increase of 20%. More than $2,500,000 of SG&A, was
incurred by Skynet. The Skynet costs arose mainly from maintaining its
operations and businesses at reasonable levels while it was under unfair
competitive attack by SKYN Holdings during fiscal 2000, as discussed above. With
the success of the trademark lawsuit against Holdings and the return of Skynet
to favorable operations and increased revenues, already evident in fiscal 2001,
it is anticipated that overall costs will decrease substantially this year. The
SG&A costs for the other business of the Company other than Skynet, was
decreased by approximately $1,500,000.
Liquidity and Capital Resources
-------------------------------
During the twelve month period ended June 30, 2000, the Company's cash position
increased from $37,000 to 54,000. The Company's financing activities provided
$2,955,879 while $3,122,053 was used in its operating and investing activities.
The Company's working capital deficiency in fiscal 2000 arose primarily from the
support provided by the Company to Skynet while it was under unfair competitive
attack by Holdings and during the lawsuit. With the return of Skynet to
favorable operations and increased revenues, it is anticipated that the
Company's working capital needs will decrease in fiscal 2001 and in the future.
Until the PBC Network is fully operational, the Company will continue to rely on
equity and debt raises to fund its operations. Management is continuing efforts
to raise cash by arranging lines of credit, and obtaining additional equity
capital. The Company's future business operations will require additional
capital.
Management is presently exploring methods to increase available credit lines as
well as methods to increase working capital through both traditional and
non-traditional debt services.
ITEM 7
------
FINANCIAL STATEMENTS
The Company's audited financial statements for the Current Period are found on
the next succeeding pages of this Report on Form 10-KSB.
14
<PAGE>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS' REPORT............................................ F-1
CONSOLIDATED BALANCE SHEET.............................................. F-2
CONSOLIDATED STATEMENTS OF OPERATIONS................................... F-3
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY...................... F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS................................... F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................. F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and
Board of Directors
Universal Express, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Universal
Express, Inc. and Subsidiaries as of June 30, 2000 and the related consolidated
statements of operations, stockholders' deficiency and cash flows for the years
ended June 30, 2000 and 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Universal Express, Inc. and Subsidiaries as of June 30, 2000 and the
consolidated results of their operations and their cash flows for the years
ended June 30, 2000 and 1999 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2(a) to the
consolidated financial statements, the Company incurred losses of approximately
$5,762,000 and $4,589,000 for the years ended June 30, 2000 and 1999
respectively and had a working capital and stockholders' deficiency of
approximately $5,745,000 and $3,072,000, respectively, at June 30, 2000. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern without the raising of additional debt and/or equity financing to
fund operations. Management's plans in regard to these matters are described in
Note 2(a). The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/S/ FELDMAN SHERB & CO., P.C.
-----------------------------
Feldman Sherb & Co., P.C.
Certified Public Accountants
New York, New York
October 23, 2000
(except note 18, as to
which the date is November 1, 2000)
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 53,873
Accounts receivable, net of allowance
for doubtful accounts of $107,600 781,056
Related party receivables 95,781
------------
Total current assets 930,710
------------
PROPERTY AND EQUIPMENT, net 187,677
------------
OTHER ASSETS:
Loan to officer 869,900
Related party receivables 350,259
Non-compete agreement, net 100,000
Goodwill, net 1,927,860
Other 164,318
------------
Total other assets 3,412,337
------------
$ 4,530,724
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 2,622,494
Accrued expenses 1,754,335
Payroll taxes payable 197,058
Other 124,363
Notes payable 1,788,571
Convertible debentures 189,000
------------
Total current liabilities 6,675,821
------------
CONVERTIBLE DEBENTURES 810,000
------------
MINORITY INTEREST 116,567
------------
STOCKHOLDERS' DEFICIENCY:
Common stock, $.005 par value; authorized
147,000,000 shares, 18,819,439 shares issued,
18,779,439 outstanding 94,097
Class B common stock, $.005 par value; authorized
3,000,000 shares, 1,280,000 shares issued
and outstanding 6,400
Additional paid-in capital 23,866,861
Accumulated deficit (26,917,220)
Cumulative translation adjustment 182,883
Stock rights 795,002
Common stock in treasury, at cost, 40,000 shares (12,000)
Deferred compensation related to stock issued for services (1,087,687)
------------
Total stockholders' deficiency (3,071,664)
------------
$ 4,530,724
============
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30,
-----------------------------
2000 1999
-----------------------------
INCOME:
<S> <C> <C>
Ticket sales $ 1,751,216 $ 1,721,129
Merchandise and service sales 100,696 479,077
Delivery services 4,027,949 402,835
Other 2,106 23,174
------------ ------------
5,881,967 2,626,215
------------ ------------
COSTS AND EXPENSES:
Cost of goods sold 4,906,925 1,729,182
Selling, general and administrative 6,172,074 5,152,192
Depreciation and amortization 234,297 160,836
------------ ------------
11,313,296 7,042,210
------------ ------------
LOSS FROM OPERATIONS (5,431,329) (4,415,995)
INTEREST EXPENSE (330,684) (172,744)
------------ ------------
NET LOSS $ (5,762,013) $ (4,588,739)
============ ============
Basic loss per common share $ (0.47) $ (1.29)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 12,189,111 3,561,529
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
Common Stock Class B Stock
------------------------------------ -------------------------- Paid-in
# of Shares Amount # of Shares Amount Capital
----------------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE - JULY 1, 1998 1,835,080 $ 9,175 1,280,000 $ 6,400 $ 17,998,520
Sale of common stock 2,738,833 13,694 -- -- 1,038,306
Common shares canceled (1,718) (9) -- -- 9
Common shares issued for compensation 1,280,000 6,400 -- -- 791,300
Amortization of deferred compensation -- -- -- -- --
Common shares issued for services 233,500 1,168 -- -- 205,581
Common shares issued for interest and penalties 118,200 591 -- -- 30,209
Common shares issued for conversion of notes 315,000 1,575 -- -- 167,425
Common shares issued for conversion of
convertible debentures 400,000 2,000 -- -- 98,000
Common shares issued as good faith deposit 50,000 250 -- -- 49,750
Dividends paid 239,028 1,195 -- -- (1,195)
Cash received for stock rights -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE - JUNE 30, 1999 7,207,923 36,039 1,280,000 6,400 20,377,905
Sale of common stock 9,977,152 49,887 -- -- 2,935,782
Common shares issued for compensation 625,000 3,125 -- -- 234,625
Amortization of deferred compensation -- -- -- -- --
Common shares issued for services 608,001 3,040 -- -- 223,261
Common shares issued for interest and penalties 295,480 1,477 -- -- 77,817
Common shares issued for conversion of notes 105,883 529 -- -- 17,471
Common shares purchased from investor -- -- -- -- --
Cumulative translation adjustment -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE - JUNE 30, 2000 18,819,439 $ 94,097 1,280,000 $ 6,400 $ 23,866,861
============ ============ ============ ============ ============
Treasury Stock Cummulative
Stock -------------------------- Accumulated translation
Rights # of Shares Amount Deficit adjustment
-------------- ------------ ------------ ------------- -----------
BALANCE - JULY 1, 1998 $ 640,000 -- $ -- $(16,566,468) $ --
Sale of common stock -- -- -- -- --
Common shares canceled -- -- -- -- --
Common shares issued for compensation -- -- -- -- --
Amortization of deferred compensation -- -- -- -- --
Common shares issued for services -- -- -- -- --
Common shares issued for interest and penalties -- -- -- -- --
Common shares issued for conversion of notes -- -- -- -- --
Common shares issued for conversion of
convertible debentures -- -- -- -- --
Common shares issued as good faith deposit -- -- -- -- --
Dividends paid -- -- -- -- --
Cash received for stock rights 1,130,002 -- -- -- --
Net loss -- -- -- (4,588,739) --
------------ ------------ ------------ ------------ ------------
BALANCE - JUNE 30, 1999 1,770,002 -- -- (21,155,207) --
Sale of common stock (975,000) -- -- -- --
Common shares issued for compensation -- -- -- -- --
Amortization of deferred compensation -- -- -- -- --
Common shares issued for services -- -- -- -- --
Common shares issued for interest and penalties -- -- -- -- --
Common shares issued for conversion of notes -- -- -- -- --
Common shares purchased from investor -- 40,000 (12,000) -- --
Cumulative translation adjustment -- -- -- -- 182,883
Net loss -- -- -- (5,762,013) --
------------ ------------ ------------ ------------ ------------
BALANCE - JUNE 30, 2000 $ 795,002 40,000 $ (12,000) $(26,917,220) $ 182,883
============ ============ ============ ============ ============
Deferred
Compensation Total
------------ -----
BALANCE - JULY 1, 1998 $ (1,175,166) $ 912,461
Sale of Common Stock -- 1,052,000
Common shares canceled -- --
Common shares issued for compensation (797,700) --
Amortization of deferred compensation 653,350 653,350
Common shares issued for services -- 206,749
Common shares issued for interest and penalties -- 30,800
Common shares issued for conversion of notes -- 169,000
Common shares issued for conversion of
convertible debentures -- 100,000
Common shares issued as good faith deposit -- 50,000
Dividends paid -- --
Cash received for stock rights -- 1,130,002
Net loss -- (4,588,739)
------------ ------------
BALANCE - JUNE 30, 1999 (1,319,516) (284,377)
Sale of common stock -- 2,010,669
Common shares issued for compensation (237,750) --
Amortization of deferred compensation 469,579 469,579
Common shares issued for services -- 226,301
Common shares issued for interest and penalties -- 79,294
Common shares issued for conversion of notes -- 18,000
Common shares purchased from investor -- (12,000)
Cumulative translation adjustment -- 182,883
Net loss -- (5,762,013)
------------ ------------
BALANCE - JUNE 30, 2000 $ (1,087,687) $ (3,071,664)
============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 30,
--------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(5,762,013) $(4,588,739)
----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 234,297 160,836
Common shares issued for services 775,174 890,901
Write down of net fixed assets 75,054 196,523
Write off of reorganization cost -- 290,941
Write down of net goodwill -- 342,664
Minority interest in loss of subsidiary (83,746) --
Increase (decrease) in cash attributable to
changes in assets and liabilities as follows:
(Increase) decrease in accounts receivable (243,922) 134,649
Decrease (increase) in inventory 100,162 (28,730)
Increase in loan to officer (86,455) (37,661)
(Increase) decrease in notes receivable 210,241 (319,654)
Increase in other assets (9,332) (16,486)
Increase in accounts payable and accrued expenses 1,772,679 480,838
Increase in payroll taxes payable 24,963 84,232
(Decrease) increase in other liabilities (6,388) 101,635
----------- -----------
Total adjustments 2,762,727 2,280,688
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,999,286) (2,308,051)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (122,767) (7,933)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debt 810,000 --
Proceeds (Repayments) of notes and loans payable 147,210 (56,745)
Proceeds from stock rights -- 1,130,002
Purchase of treasury stock (12,000) --
Sale of common stock 2,010,669 1,052,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,955,879 2,125,257
----------- -----------
Effect of foreign currency translation on cash 182,883 --
NET INCREASE (DECREASE) IN CASH 16,709 (190,728)
CASH - BEGINNING OF YEAR 37,164 227,892
----------- -----------
CASH - END OF YEAR $ 53,873 $ 37,164
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 26,163 $ 19,301
=========== ===========
Non Cash Activity - See note 13 with
respect to issuance of the company
shares of common shares as
compensation for services rendered
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000 AND 1999
1. DESCRIPTION OF THE BUSINESS
Universal Express, Inc. ("USXP") was incorporated in the state of
Nevada on April 6, 1983 and is an integrated business service company.
Its principal subsidiaries include USXP's entertainment division which
consists of Downtown Theater Ticket Agency, Inc. (DTTA) and Skyworld
International Courier ("SkyNet") acquired on June 8, 1999, Private
Postal Network.com and its division Postal Business Center Network.com,
an association of independent and franchised nationwide postal stores.
In addition, USXP owns several other subsidiaries with little or no
activity. USXP's primary focus is on the development of its postal
business center networks and new acquisitions which will strengthen its
market position.
On June 8, 1999, USXP acquired 5,202 shares (51%) of SkyNet and its 60%
owned subsidiary SkyNet Venezuela ("Venezuela") for a note payable of
$450,000 payable in eighteen installments of $25,000 commencing June
15, 2000. The note was not paid when due and the terms are being
renegotiated. In addition, USXP had provided $50,000 to payoff SkyNet's
loan from a bank with an additional $450,000 to be provided in the
future. USXP also provided SkyNet with $600,000 of additional working
capital. USXP recognized goodwill of approximately $1,500,000 from its
acquisition of SkyNet.
The following unaudited pro-forma information reflects the results of
operations of the Company as though the purchase had been consummated
as of July 1, 1998;
June 30, 1999
----------------------
Revenue $ 7,411,055
Net loss $(4,493,331)
Net loss per share $ (1.26)
On September 15, 1999, USXP sold all of the assets of Leone, Inc. a
subsidiary in consideration for the buyer assuming $85,896 of lease
obligations and trade payables of $24,493.
Hereinafter, all of the aforementioned companies are collectively
referred to as the "Company".
F-6
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
a. BASIS OF PRESENTATION - The accompanying consolidated financial
statements have been prepared assuming the Company will continue
as a going concern. The Company incurred losses of approximately
$5,762,000 and $4,589,000 for the years ended June 30, 2000 and
1999, respectively, and had a working capital and stockholders'
deficiency of approximately $5,745,000 and $3,072,000,
respectively, at June 30, 2000. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern without the raising of additional debt and/or
equity financing to fund operations. Management is actively
pursuing new debt and/or equity financing and is continually
evaluating the Company's profitability, however, any results of
their plans and actions cannot be assured. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
b. PRINCIPLES OF CONSOLIDATION - The accompanying financial
statements consolidate the accounts of USXP and its wholly-owned
subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
c. REVENUE RECOGNITION - Entertainment division sales are recognized
when the ticket is delivered to the customer. Delivery income is
recognized upon the completion of the delivery to its
destination.
d. CASH AND CASH EQUIVALENTS - The Company considers cash
equivalents to be those instruments which have initial maturities
of three months or less.
e. PROPERTY AND EQUIPMENT - Property and equipment are stated at
cost. Depreciation and amortization are provided on a
straight-line basis over the estimated useful life of the
respective assets, ranging from five to ten years.
f. NON-COMPETITION AGREEMENT - Amortization is provided over five
years on a straight-line basis.
g. GOODWILL - Goodwill resulting from the acquisition of certain
subsidiaries represents the remaining unamortized value of the
excess of the purchase price over the fair market value of the
net assets acquired. Goodwill is amortized on a straight line
basis over a period of 15 years.
h. DEFERRED COMPENSATION - Deferred compensation recorded in
connection with Class B common stock issued to the Company's
Chief Executive Officer is amortized over the five years of the
related employment agreement.
F-7
<PAGE>
i. BASIC NET LOSS PER COMMON SHARE - Net loss per common share is
calculated utilizing the weighted average number of common shares
outstanding during the period. Contingently issuable shares are
included in the computation where the effect is dilutive.
j. ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
k. INCOME TAXES - The Company recognizes deferred tax assets and
liabilities based on the difference between the financial
statements carrying amount and the tax basis of assets and
liabilities using the effective tax rates in the years in which
the differences are expected to reverse. A valuation allowance
related to deferred tax assets is also recorded when it is
probable that some or all of the deferred tax assets will not be
realized.
l. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts
reported in the balance sheet for cash, receivables, accounts
payable, notes payable, convertible debt and accrued expenses
approximate fair value based on the short-term maturity of these
instruments.
m. IMPAIRMENT OF LONG-LIVED ASSETS -The Company reviews long-lived
assets for impairment whenever circumstances and situations
change such that there is an indication that the carrying amounts
may not be recovered. At June 30, 2000, the Company believes that
there has been no impairment of its long-lived assets.
n. FOREIGN CURRENCY TRANSLATION - The financial statements of the
Company's Venezuelan operations are measured in its local
currency and then translated into U.S. dollars. All balance sheet
accounts have been translated using the current rate of exchange
at the balance sheet date. Results of operations have been
translated using the average rates prevailing throughout the
year. Translation gains or losses resulting from the changes in
the exchange rates from year-to-year are accumulated in a
separate component of stockholders' equity.
o. CONCENTRATION OF CREDIT RISK - The Company places its cash in
what it believes to be credit-worthy financial institutions.
However, cash balances exceeded FDIC insured levels at various
times during the year.
F-8
<PAGE>
3. BUSINESS SEGMENTS
The Company operates in three business segments; merchandise and
services sales, shipping and entertainment services.
Summarized financial information of the business segments in 2000 is as
follows:
<TABLE>
<CAPTION>
Merchandise Entertain-
and ment
services sales Shipping services Total
------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Revenue $ 102,802 $4,027,949 $1,751,216 $5,881,967
========== ========== ========== ==========
Operating loss $2,888,818 $2,390,101 $ 152,410 $5,431,329
========== ========== ========== ==========
Net loss $3,117,290 $2,492,313 $ 152,410 $5,762,013
========== ========== ========== ==========
Identifiable assets $ 946,677 $1,323,825 $ 223,363 $2,493,865
========== ========== ========== ==========
Depreciation and
amortization $ 156,415 $ 74,526 $ 3,356 $ 234,297
========== ========== ========== ==========
Capital expenditures $ - $ 107,842 $ 14,925 $ 122,767
========== ========== ========== ==========
</TABLE>
4. LOAN TO OFFICER
In accordance with the employment contract of the Company's Chief
Executive Officer, such officer is entitled to secure loans from the
Company in an amount not to exceed $950,000. These loans bear interest
at the applicable federal rate, which approximated 6.5% during the
years ended June 30, 2000. As of June 30, 2000 the amount owed under
such loan is $869,900. As discussed in Note 18 such loan will be
forgiven 10% per year of the outstanding balance. In addition, the
Company has accrued unpaid salary to such officer aggregating
$1,230,000 at June 30, 2000. For these matters also see note 18.
5. RELATED PARTY RECEIVABLES
During the year ended June 30, 2000 , the Company advanced $350,259 to
the spouse of the Chief Executive Officer, who is also an employee of
the Company. The repayment terms of such advances have not yet been
determined. The remaining $95,781 receivable is from Skybox, a company
partially owned by the minority shareholder of SkyNet.
6. NOTE RECEIVABLE
In December 1998, an individual purchased 100% of the stock of one of
the Company's subsidiaries for $545,000 and issued a note as payment.
Collection of the note is over a period of 16 years bearing interest at
6% per annum payable in weekly installments of $629 over the first 53
weeks and $1,060 weekly thereafter. The buyer did not make any payment
and is in default. Accordingly, Company has recorded a 100% reserve
against such note.
F-9
<PAGE>
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Leasehold improvements $ 18,552
Office equipment 246,266
Furniture and fixtures 82,483
Software 70,000
-------------
417,301
Less accumulated depreciation and amortization (229,624)
-------------
$ 187,677
=============
8. NON-COMPETITION AGREEMENT
The Company entered into a non-competition agreement for a period of 5
years with a former subsidiary and paid $200,000 as consideration for
such agreement. At June 30, 2000 the unamortized amount of the
agreement is $100,000.
9. NOTES PAYABLE
Notes payable consist of the following:
Note payable - bearing interest at rate of 10% per annum,
due August 31, 2000 $ 250,000
Bank line of credit, renewable monthly,
bearing interest at 2% above the prime rate 130,000
Note payable, due upon demand, bearing
interest at 10% 28,500
Note payable - due upon demand, at a
fixed interest amount of $15,200 45,000
Loan payable - bearing interest at the
rate of 10% per annum, due upon demand 25,941
Notes payable - individuals, due upon demand,
bearing interest at rates ranging from
8% to 24% per annum 129,000
F-10
<PAGE>
Bank loan due on December 31, 2000,
interest payable at the bank prime
rate plus 1.5 points. Secured by $300,000
letter of credit from the former owner of SkyNet 300,000
Bank loan due on November 24, 2000,
interest payable at bank's certificate of deposit
rate plus 1.5 points. Secured by $150,000
certificate of deposit from the minority
shareholder of SkyNet 150,000
Loan from an investor at a fixed interest
amount of $17,500, due December 15, 2000 82,500
Two notes payable to an individual payable
in weekly payments of aggregate $610 including
interest. These notes provide that if the
controlling interest of SkyNet were to change
then the notes would be due on demand. Additionally,
the note would bear interest at 30% per
annum until paid. The note holder not exercised
his right to demand payment 41,439
Notes payable - to an individual bearing
interest at 14%, payable in monthly payments
of $10,000 including interest, until the total amount
of principal and interest is repaid 116,193
Non-interest bearing loan from investor due
December 15, 2000 39,998
Note payable for purchase of 51% of shares
of stock of SkyNet, was payable in eighteen
installments of $25,000 commencing June 15, 2000
The terms of such note is being renegotiated 450,000
----------
$1,788,571
==========
10. CONVERTIBLE DEBENTURES
The Company issued a series of convertible debentures in the year ended
June 30, 2000 in the amount off $810,000 are due in 2002. In addition,
$189,000 of debentures issued from 1997 are still outstanding. Such
debentures bear interest ranging from 10% to 12% per annum.
F-11
<PAGE>
11. COMMITMENTS AND CONTINGENCIES
a. The Company operates its facilities under operating lease agreements
with unrelated parties. The base rent aggregates approximately $13,000
per month. The related leases expire on February 28, 2001, June 30,
2002 and February 29, 2005.
Lease payment, by year, and in aggregate at June 30, 2000 are as
follows:
Year ended June 30,
2001 $149,628
2002 146,791
2003 81,033
2004 83,796
2005 57,092
--------
$518,340
========
b. The employment agreement with the Company's Chief Executive Officer
provided for an annual base salary of $84,000 in 1994, subject to
annual cost of living adjustments each succeeding January 1st over a
five year period. In connection therewith, the officer was issued
1,000,000 new common shares as compensation for services previously
rendered and expenses previously incurred during the pendency of the
Company's 1994 bankruptcy proceedings. The shares had been valued at
$0.50 per share and compensation of $ 500,000 was included as a charge
to reorganization expense. Additionally, the officer will be issued
500,000 additional shares as additional compensation pursuant to the
employment agreement. If, prior to the termination of the entire
employment period, the officer's employment is terminated for cause (as
defined), the officer will forfeit 8,333 shares for each of the months
of employment that has not been completed over the remaining term of
the agreement. Deferred compensation of $500,000 had been recorded in
connection with the 500,000 shares issuance which was fully amortized
at June 30, 1999. In February, 1999 the employment contract of the
officer was renewed for an additional five year period at an annual
compensation of $300,000 per annum. As of June 30, 2000 Company has
accrued $1,230,000 of salary due to such officer.
c. The Company is obligated under a consulting agreement expiring April,
2004 under which the Company is to receive financial and accounting
services for a fee of approximately $72,000 per annum.
F-12
<PAGE>
d. USXP's subsidiary, Skynet obtained a preliminary injunction in Federal
District Court in Florida against a competitor, Skynet Holdings, Inc.
("Holding"), for servicemark infringement on courier shipments
throughout the United States. The defendant filed an appeal with the
Court of Appeals for the Eleventh Circuit and the Court held in
Skynet's favor. Skynet has moved for summary judgment on liability and
expects to receive a judgment for substantial damages after trial. The
collectibility of these damages, however, is not assured because of the
financial condition of Holding.
e. The Company is involved in various lawsuits and claims in the normal
course of business. The Company believes that the disposition of these
matters will not have a material adverse effect on the Company's
financial position.
12. INCOME TAXES
At June 30, 2000 the Company had approximately $25,000,000 of net
operating loss carry forwards expiring beginning in 2008. A substantial
amount of the carry forwards are subject to annual limitations pursuant
to provisions contained in the Internal Revenue Code which become
effective when an "ownership change", such as the ownership change
effected pursuant to the Plan of Reorganization, occurs. To the extent
that such net operating losses are not utilized in a particular year,
such amounts become available to increase the following year's
limitation.
Deferred tax debits in the amount of approximately $10,188,000
(resulting from the benefit of the aforementioned net operating
losses), have been fully offset by a valuation allowance since
realization of the benefit of the net operating losses is not assured.
Significant components of the deferred tax assets as of June 30, 2000
and 1999 are as follows:
Years ended June 30,
--------------------------------
2000 1999
------------ -------------
Net operating loss carryforward $ 25,000,000 $ 21,000,000
------------ ------------
Total gross deferred asset 10,188,000 8,419,000
Less: valuation allowance (10,188,000) (8,419,000)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
The increase in the valuation allowance of $1,769,000 during the year
ended 2000 was due to the additional allowance provided for the 2000
net operating loss.
F-13
<PAGE>
The provision for income taxes differ from the amount computed by
applying the statutory federal income tax rate to income before
provision for income taxes as follows:
Years ended June 30,
----------------------------
2000 1999
----------- -------------
Benefit computed at the statutory rate $ 1,959,000 $ 1,560,000
Losses for which no benefit recognized (1,959,000) (1,560,000)
----------- -----------
Benefit recorded $ -- $ --
=========== ===========
13. STOCKHOLDERS' EQUITY
The Company's class B common shares (of which 3,000,000 shares have
been authorized) provide for one and one-third votes per share. If the
Company's current Chief Executive Officer exercises any stock options
pursuant to the Company's stock option plan, or if the officer receives
other shares of common stock pursuant to his employment agreement with
the Company in lieu of stock options, the aggregate number of votes to
which the initial 1,500,000 Class B shares issuable to such officer is
entitled shall be reduced by one vote for each additional share which
is received by the officer. During the year ended June 30, 2000, the
Company issued 11,611,516 shares of common stock. Of such shares
issued, 608,001 were issued in exchange for services rendered; 401,363
shares were issued in payment of principal, interest and penalties on
notes payable. In addition, 8,205,724 shares were issued to investors
for cash and 1,771,428 shares were issued to investors for cash rights.
During the year ended June 30, 2000, the Company issued 11,611,516
shares of common stock. Of such shares issued, 608,001 were issued in
exchange for services rendered; 401,363 shares were issued in payment
of principal, interest and penalties on notes payable. In addition,
8,205,724 shares were issued to investors for cash and 1,771,428 shares
were issued to investors for cash rights.
During the year ended June 30, 2000, advisory fees were prepaid to
consultants retained by the Company to provide certain advisory
services via the issuance of 625,000 common shares. The common shares
were valued at their approximate fair market value on the dates of
issuance. The terms of the consulting agreements are from eighteen to
twenty-four months, and the amounts recorded for the issuance of the
shares are being amortized over the respective periods.
14. TREASURY STOCK
The Company bought 40,000 shares from one investor for $12,000.
Treasury stock is recorded at cost. The Company has a verbal agreement
with such investor to repurchase an additional 200,000 shares at $.60
per share under certain circumstances.
F-14
<PAGE>
15. STOCK RIGHTS
Stock rights represent amounts received from investors for their future
rights to purchase shares of stock of the Company at a discount of 20
to 30% of the market value of the stock at the date of exercise subject
to the Company's right of redemption at a premium not to exceed 20% of
the face amount of the right.
16. STOCK OPTION PLAN
The Company's "1994 Stock Option Plan" provides for the issuance of up
to 104,167 shares of common stock. The purchase price per share of
common stock under each option shall not be less than the fair market
value of the common stock on the date such option is granted. No
options have been granted under the plan as of June 30, 2000.
17. MINORITY INTEREST
At June 30, 2000 minority interest represents 750 shares of non-voting
preferred stock of SkyNet issued prior to its acquisition by USXP. The
stock is convertible into 10 shares of common stock of SkyNet at the
option of SkyNet on or before December 31, 2003.
18. SUBSEQUENT EVENTS
In July 2000, the Company's subsidiary, Skynet acquired the operating
assets of Skynet Worldwide Express, Costa Rica.
The Company has announced a 4% stock dividend to stockholders of record
on the close of business July 20, 2000, payable on August 15, 2000.
On November 1, 2000 the Company's board of directors authorized the
issuance of 15,000,000 shares of the Company's common stock to its
Chief Executive Officer, the value of which is to be applied against
accrued salary payable to such officer.
In addition, the board agreed to forgive 10% per year of the
outstanding balance of the Company loans to such officer, commencing
January 2, 2001 as long as the officer continues in the service of the
Company. Such loan had a balance of $869,900 as of June 30, 2000.
F-15
<PAGE>
ITEM 8
------
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Nothing to report.
PART III
--------
ITEM 9
------
MANAGEMENT OF THE COMPANY; COMPLIANCE WITH SECTION 16(a)
A. DIRECTORS
Pursuant the Company's Bylaws, the authorized number of directors of the Board
of Directors of the Company is five (5). Directors are scheduled for election at
each annual meeting. Directors shall be elected by the holders of record of a
plurality of the votes cast at each annual meeting and shall hold office until
the next succeeding annual meeting. The sole Director of the Company at present
is Richard A. Altomare, whose biographical information is set forth below.
B. EXECUTIVE OFFICERS
The following table sets forth certain information concerning the persons who
will serve as Executive Officers of the Company or certain of its subsidiaries.
Each such person shall serve at the pleasure of the Board of Directors of the
Company.
NAME AGE POSITION
---- --- --------
Richard A. Altomare 52 Chairman and CEO
Richard A. Altomare. Mr. Altomare, is the Chairman and Chief Executive Officer
of Universal Express (USXP). Universal, with its wholly owned subsidiary the PBC
Network is a leader of the $5 billion private postal industry. Its other
subsidiaries are engaged in international shipping, advertising and
entertainment concierge services. Prior to Universal Express, Mr. Altomare was
an investment banker specializing in real estate, bankruptcy reorganizations and
equipment transactions. Mr. Altomare also owned and operated professional sports
teams. He served as a Commander in the U.S. Marine Corps. and U.S. Army
specializing in communications and intelligence. Mr. Altomare attended Adelphi
and Hofstra University and has been a political candidate for U.S. Congress and
served on numerous corporate Boards.
15
<PAGE>
C. COMPLIANCE WITH SECTION 16(a)
Based on a review of forms submitted to the Company during and with respect to
the Current Period, the Company is not aware of any Director, Officer, or
Beneficial Owner of more than 10% of any class of equity securities of the
Company that failed to file on a timely basis the reports required by Section
16(a) of the Exchange Act of 1934 during the Current Period.
ITEM 10
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
A. COMPENSATION OF EXECUTIVE OFFICERS.
The following table sets forth information, as required by Section 228.402 of
Regulation S-B, 17 C.F.R. Section 228.402, as currently in effect, concerning
the annual and long-term compensation of the Company's Chief Executive Officer
and other individuals acting in a similar capacity for the past three fiscal
years. No other information is included regarding compensation paid to other
Executive Officers during such three year period because no such Executive
Officer earned annual or long-term compensation in excess of $100,000. Except as
set forth in the tables following, no bonus, other annual compensation,
long-term compensation (in the form of restricted stock awards, options, stock
appreciation rights, long-term incentive plans, or otherwise), or other forms of
compensation were paid to the Company's Chief Executive Officer, any other
individuals acting in a similar capacity, or any other Executive Officer of the
Company at any time during such periods as are reflected in the tables (and
accompanying notes) set forth below. Accordingly, as permitted by Item 402 (a)
(5) of Regulation S-B, tables or columns otherwise required have been omitted
from this Registration Statement where there has been no compensation awarded
to, earned by, or paid to any of the named executives required to be reported in
that table or column in any fiscal period covered by that table.
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SUMMARY COMPENSATION TABLE
--------------------------
Long-Term
Annual Compensation
Compensation Awards
(a) (b) (c) (d) (e) (f)
NAME & PRINCIPAL FISCAL ANNUAL ANNUAL OTHER ANNUAL # of OPTIONS
POSITION YEAR SALARY BONUS COMPENSATION
--------------------------------------------------------------------------------
Richard A. Altomare 1996 100,000 $0 $0 0
Chairman & CEO 1997 100,000 $0 $0 0
1998 300,000 $0 $0 0
1999 300,000 $0 $0 0
2000 300,000 $0 $0 0
Mr. Altomare received no cash compensation from the Company during the Company's
Reorganization and since then, though his employment agreement currently
entitles him to an annual base salary of at least $300,000.
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OPTION GRANTS IN CURRENT PERIOD
Individual Grants
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
% of Total Options
Options Granted to Employees Exercise Expiration
Name Granted in Current Period Price Date
--------------------------------------------------------------------------------
Richard A. Altomare
Chairman. & CEO 0 0 0 0
AGGREGATED OPTION EXERCISES IN CURRENT PERIOD AND FY-END OPTION VALUES
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
value of
unexercised
# of unexercised in-the-money
options at options at
FY-end(#) FY-end($)
Shares
acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
-------------------- -----------------------------------------------------------
Richard A. Altomare
Chairman. & CEO 0 0 0/0 0/0
B. COMPENSATION OF DIRECTORS
In the Company's Current Period, there were no arrangements pursuant to which
any director of the Company was compensated for any service provided as a
Director.
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C. EMPLOYMENT CONTRACTS AND RELATED MATTERS
The Company has an employment contract with Mr. Altomare, which currently
provides an annual base salary of $300,000. The employment agreement with Mr.
Altomare provides that in the event Mr. Altomare's employment is terminated at
any time within nine months following a "change of control event", as defined
therein and generally described below, (i) his salary benefits for the remaining
term of the agreement shall be accelerated and (ii) he shall receive shares of
Class A Common Stock equal to 10% of all outstanding shares of Class A and Class
B Common Stock of the Company, assuming all unexercised and outstanding warrants
had been exercised. For purposes of the employment agreement with Mr. Altomare,
a "change of control event" shall be deemed to have occurred in the event of (A)
a merger or consolidation involving the Company in which the Company is not the
surviving corporation, (B) the sale of all or substantially all of the assets of
the Company, or (C) the acquisition by any individual, entity or group not
affiliated with Mr. Altomare directly or indirectly becoming the beneficial
owner of 20% or more of the combined voting power of the then outstanding voting
securities of the Company. Mr. Altomare's employment agreement further grants to
Mr. Altomare the right under the Court-approved 1994 Stock Option Plan to
purchase not less than 500,000 shares of the Company's Class A Common Stock at
the fair market price of the stock as of the Plan Effective Date. The employment
agreement further provides certain restrictive covenants and nondisclosure
obligations upon Mr. Altomare during the term of the agreement.
On November 1, 2000 the Company's board of directors authorized the issuance of
15,000,000 shares of the Company's common stock to Mr. Altomare the value of
which is to be applied against accrued salary payable to Mr. Altomare.
In addition, the board agreed to forgive 10% per year of the outstanding balance
of the Company loans to such officer, commencing January 2, 2001 as long as the
officer continues in the service of the Company. Such loan had a balance of
$869,900 as of June 30, 2000.
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ITEM 11
-------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below lists each stockholder known to the Company that beneficially
owns as of June 30, 2000 more than five percent of the Class A Common Stock of
the Company. This information is based on 18,779,438 shares of Class A Common
Stock issued and outstanding as of June 30, 2000. For purposes of this section,
it is assumed that all 1.28 million shares of Class B Common Stock, each share
of which is convertible into one share of Class A Common Stock under certain
circumstances as set forth in the Company's Articles of Incorporation, have been
so converted.
NAME AND ADDRESS OF AMOUNT AND NATURE OF % OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
------------------------------------------ -------------------------------------
Richard A. Altomare
1 Central Park West,
Suite 30C 1,290,173 shares 6.4%
New York, NY 10023
B. SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth information with respect to the number of shares of
the Company's Class A Common Stock that are beneficially owned by each director
and executive officer of the Company and by all directors and offices of the
Company as a group as of June 30, 2000. This information is based on 18,779,438
shares of Class A Common Stock issued and outstanding as of June 30, 2000. For
purposes of this section, it is assumed that all 1.28 million shares of Class B
Common Stock (par value $.005), which are convertible into Class A Common Stock
under certain circumstances as set forth in the Company's Articles of
Incorporation, have been so converted.
NAME AND ADDRESS OF AMOUNT AND NATURE % OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON STOCK
-------------------------------------------- -----------------------------------
Richard A. Altomare
1 Central Park West,
Suite 30C, 1,290,173 shares 6.4%
New York, NY 10023
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ITEM 12
-------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Richard A. Altomare, the Company's Chairman and Chief Executive Officer, served
until July, 1993 as advisor and reorganization consultant to the Company during
the Company's Reorganization case. Thereafter, the Company appointed Mr.
Altomare as Chairman and President, a position he has continually occupied
thereafter.
Mr. Altomare received no cash compensation from the Company during its
Reorganization and since then, though his employment agreement currently
entitles him to an annual base salary of at least $300,000.
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ITEM 13
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EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
2.1* Order, dated February 18, 1994. Confirming First Amended Plan of
Reorganization of Packaging Plus Services, Inc., including confirmed
Reorganization Plan and other exhibits.
3.1* Amended and Restated Articles of Incorporation of Packaging Plus
Services, Inc.
3.2** Certificate of Amendment to Change the Number of Authorized Shares of
Stock of Packaging Plus Services, Inc.
3.3** Certificate of Amendment of the Certificate of Incorporation to Change
the Name of Packaging Plus Services, Inc. to Universal Express, Inc.
3.4* Amended and Restated By-Laws of Packaging Plus Services, Inc.
4.1* Specimen Class A Common Stock Certificate.
4.2* Specimen Class B Common Stock Certificate.
4.3** Specimen Class A Warrant Certificate.
4.4** Specimen Class B Warrant Certificate.
10.1* Employment Agreement of Richard A. Altomare.
10.2* 1994 Stock Option Plan.
21.1** List of Subsidiaries of Registrant.
* Incorporated herein by reference to the Registrant's Transition Report on Form
10-KSB for the Transition Period from January 1, 1994 through June 30, 1994 (as
filed December 12, 1994)
** Incorporated herein by reference to the Registrant's Annual Report, as
amended, on Form 10-KSB/A for the Annual Period ended June 30, 1999 (as filed
January 20, 2000).
(B) Reports on Form 8-K: None
22
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SIGNATURES:
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company's report on Form 10-KSB has been signed below by the following person on
behalf of the registrant and in the capacities and on the dates indicated.
UNIVERSAL EXPRESS, INC.
Date: November 6, 2000 /s/ Richard A. Altomare
-----------------------
Richard A. Altomare, President
and Chairman of the Board
23
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