UNITED STATES 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, 2000
Commission File Number 0-18094
UNIVERSAL EXPRESS, INC.
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(Exact name of Registrant as specified in its charter)
NEVADA 11-2781803
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1350 BROADWAY, NEW YORK, NY 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 239-2575.
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant on September 30, 2000:
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$ 3,144,952
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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, 2000
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Class "A" 29,811,904
Class "B" 1,280,000
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UNIVERSAL EXPRESS, INC.
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INDEX
PAGE
NUMBER
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 2000 1
Consolidated Statement of Operations - Three
months ended September 30, 2000 2
Consolidated Statement of Cash Flows - Three
months ended September 30, 2000 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis 6-12
of Financial Condition and Plan of
Operations
PART II - OTHER INFORMATION 12
SIGNATURE 13
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2000
ASSETS
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CURRENT ASSETS:
Cash $ 17,269
Accounts receivable, net of allowance for doubtful
accounts of $107,600 1,147,825
Related party receivables 481,572
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Total current assets 1,646,666
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PROPERTY AND EQUIPMENT, net 214,499
OTHER ASSETS:
Loan to officer 886,570
Non-compete agreement, net 90,000
Goodwill, net 1,891,350
Other 172,340
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Total other assets $ 3,040,260
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4,901,425
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 3,003,722
Accrued expenses 1,960,767
Payroll taxes payable 170,910
Other 170 924
Notes payable 1,762,270
Convertible debentures 189,000
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Total current liabilities 7,257,593
CONVERTIBLE DEBENTURES 810,000
------------
MINORITY INTEREST 107,987
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STOCKHOLDERS' DEFICIENCY:
Common stock, $0.005 par value; authorized 147,000,000
shares, 29,811,904 shares issued, and outstanding 149,060
Class B common stock, $.005 part value; authorized
3,000,000 shares 1,280,000 shares issued and outstanding 6,400
Additional paid-in capital 25,048,326
Accumulated deficit (27,802,080)
Cumulative translation adjustment 66,303
Stock rights 345,002
Common stock in treasury, at cost, 40,000 shares (12,000)
Deferred compensation related to stock issued for services (1,075,166)
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Total stockholders' deficiency $ (3,274,155)
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4,901,425
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See notes to consolidated financial statements
1
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<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
THREE MONTHS ENDED
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SEPTEMBER 30
------------
2000 1999
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INCOME:
<S> <C> <C>
Delivery Service 1,363,750 $ 950,677
Ticket sales 376,820 281,176
Merchandise and service sales 525 102,591
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1,741,095 1,334,444
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COST AND EXPENSES:
Cost of goods sold 1,072,477 1,028,256
Selling, general and administrative 1,454,402 1,295,957
Depreciation and amortization 63,887 79,681
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2,590,776 2,403,894
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LOSS FROM OPERATIONS (849,671) (1,069,450)
INTEREST EXPENSE (35,189) (3,180)
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NET LOSS (884,860) (1,072,630)
============ ============
Basic loss per common share ($0.04) ($0.11)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES $ 23,911,037 $ 9,428,670
============ ============
</TABLE>
See notes to consolidated financial statements
2
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<TABLE>
<CAPTION>
UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (884,860) $(1,072,630)
Adjustment to reconcile net loss to net
cash used by operating activities:
Common Stock issued as compensation 348,949 198,150
Depreciation and Amortization 63,887 79,681
Minority interest in loss of subsidiary (8,580) --
Change in assets and liabilities:
(Increase)/Decrease in accounts receivable (366,769) (156,788)
(Increase)/Decrease in inventory -- 1,313
Increase in loan to officer (16,670)
(Increase)/Decrease in other assets (8,022) --
(Increase)/Decrease in notes receivable (35,532) 1,151
Increase/(Decrease) in accounts payable and
accrued expenses 587,661 (268,537)
Increase/Decrease in taxes payable (26,148) (4,453)
Increase/(Decrease) in other liabilities 46,561 (32,307)
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585,337 181,790
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Net Cash Used In Operating Activities (299,523) (1,254,420)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of property and equipment (44,199) --
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CASH FLOW FROM FINANCING ACTIVITIES
Sale of common stock 450,000 648,876
Proceeds from notes and loans payables (26,301) 60,000
Proceeds from Stock Rights -- 400,000
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NET CASH PROVIDED BY FINANCING ACTIVITIES 423,699 1,108,876
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Effect of foreign currency translation on cash (116,580) --
NET INCRASE (DECREASE) IN CASH (36,604) (145,544)
CASH-Beginning of period 53,873 37,164
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CASH-End of PERIOD $ 17,269 $ (108,380)
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest 35,189 3,180
=========== ===========
</TABLE>
See notes to consolidated financial statements
3
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UNIVERSAL EXPRESS, INC. AND SUBSIDIARIES
Notes To Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB. Accordingly, they
do not include all of the information and disclosures required for annual
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements and related footnotes included in the
Company's annual report on Form 10-KSB for the year ended June 30, 2000.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of September 30, 2000 and the results of operations and cash flows
for the three-months ended September 30, 2000 have been included.
The results of operations for the three-months ended September 30, 2000, are not
necessarily indicative of the results to be expected for the full year ended
June 30, 2001.
2. ISSUANCE OF COMMON STOCK
During the three months ended September 30, 2000, the Company issued 10,992,466
shares of common stock. Of such shares issued, 5,035,714 shares were sold for
$450,000 and 2,497,000 shares were issued for payment of $325,725 in services.
964,263 shares were issued as dividends. The remaining 2,495,489 shares were
issued in conversions of previously sold stock rights and loans.
3. TAXES PAYABLE
A substantial portion of taxes payable consists of payroll taxes of Skynet.
Skynet is seeking to negotiate a settlement agreement with the Internal Revenue
Service to provide for periodic payments.
4. SUBSEQUENT EVENTS
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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
$886,570 as of September 30, 2000.
4
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ITEM 2
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MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN 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. The Company's web site is www.usxp.com.
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.
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.
The Company purchased its Entertainment division 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).
5
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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:
o Private Postal Network.com
o The Postal Business Center Network.com
o Manhattan Concierge
o SkyNet
o WorldPost Network.com
o UniqueNet, Inc.
o 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. 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.
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.
6
<PAGE>
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.
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. Branding of this network requires first
building it.
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
7
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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
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.
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.
8
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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.
9
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RESULTS OF OPERATIONS - THREE MONTHS
------------------------------------
Universal Express, Inc. (USXP), is an integrated business services conglomerate.
Its principal subsidiaries and divisions include SkyNet and the Private Postal
Network.com (with two divisions, Postal Business Center Network.com (PBC
Network)and WorldPost. Network.com)and Manhattan Concierge.
Net loss was $884,860 for the three months ended September 30, 2000 compared to
$1,072,630 for the three months ended September 30, 1999.
During the three months ending September 30, 2000, the Company's current
business operations generated revenues of $1,741,095 as compared with operating
revenues from such business of $1,334,444 for the same three month period in
1999, an increase of 30%. Delivery Service Revenues for the first quarter of
$1,363,750 arose from the operations of Skynet.
Ticket sales for Manhattan Concierge for the first quarter were $376,820 as
compared with $281,176 for the same period of 1999, an increase of 34%.
Selling, general and administrative expenses were approximately $1,454,402 for
the three months ended September 30, 2000, compared to $1,295,957 for the
corresponding 1999 period.
LIQUIDITY AND CAPITAL RESOURCES - FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
The net proceeds from new loans and investments in the Company was $450,000.
$349,939 was used in its operating activities. Common stock in the amount of
$325,725 was issued for services rendered.
The Company had a working capital deficiency of $5,610,927 at September 30,
2000, as compared with a working capital deficiency of $1,845,267 at September
30, 1999.
The Company's working capital deficiency 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.
10
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Management continues to explore methods to increase working capital through
convertible debt and additional equity infusions, as well as possible
acquisitions.
PART II -- OTHER INFORMATION
----------------------------
Item 1. 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.
Item 2. CHANGES IN SECURITIES -- NONE
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Item 3. DEFAULTS ON SENIOR SECURITIES -- NONE
-----------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- NONE
---------------------------------------------------
Item 5. OTHER INFORMATION -- NONE
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) EXHIBITS
27.1 Financial Data Sheet
(B) REPORTS ON FORM 8-K:
--------------------
None
11
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SIGNATURES
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Pursuant to the requirement 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: November 20, 2000
12
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