Its been going great last couple of days good profitability on thisJust hope it'll keep it up for a couple more days
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Universal Express, Inc.
We have audited the accompanying consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows of Universal Express, Inc.,and Subsidiaries for the year ended June 30, 2003. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of their operations and their cash flows for the year ended June 30, 2003, of Universal Express, Inc. And Subsidiaries as of June 30, 2003, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the Consolidated Financial Statements, the Company incurred an operating loss of $6,531,815 for the year ended June 30, 2003 and had a working capital deficiency of $2,015,902 at June 30, 2003. 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 the notes to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Rosenberg Rich Baker Berman & Company.
Bridgewater, New Jersey
August 28, 2003
F-3
UNIVERSAL EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
June 30,
ASSETS
2004
------------
CURRENT ASSETS
Cash and equivalents $ 100,038
Accounts receivable, net of reserve of $13,240 and $0 44,619
Other receivable 7,700
Other current assets 143,800
------------
Total current assets 296,157
------------
PROPERTY AND EQUIPMENT
Computers and equipment 194,486
Less accumulated depreciation (92,272)
------------
Net property and equipment 102,214
------------
OTHER ASSETS
Loan to officer 785,595
Related party receivables 906,000
Notes receivable 509,990
Goodwill 397,107
Other assets 11,555
------------
Net other assets 2,610,247
------------
Total Assets $ 3,008,618
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 761,487
Accrued Expenses
Trade 208,817
Officers' salary 978,315
Interest 238,634
Current portion of long-term debt 120,591
Bank line of credit 25,128
Notes payable 464,400
Convertible debenture 100,000
------------
Total current liabilities 2,897,372
------------
LONG-TERM DEBT
Long term debt, net of current portion 36,483
------------
Total long-term debt 36,483
------------
Total Liabilities 2,933,855
------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $0.005 par value, authorized
850,000,000 shares; 718,265,969
and 718,225,969 issued and outstanding 3,591,331
Class B common stock, $0.005 par value,
authorized 3,000,000 shares; 1,280,000
issued and outstanding shares 6,400
Additional paid-in capital 51,583,289
Stock rights 7,427,962
Treasury stock, at cost, 40,000 shares (14,350)
Deferred compensation (9,519,969)
Collateral stock (3,920,000)
Accumulated comprehensive income (loss) (119,700)
Accumulated deficit (48,960,200)
------------
Total stockholders' equity (deficiency) 74,763
------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 3,008,618
============
F-4
UNIVERSAL EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Year Ended June 30,
2004 2003
------------- -------------
REVENUES $ 2,775,336 $ 2,435,540
COST OF GOODS SOLD 2,507,528 2,370,817
------------- -------------
GROSS PROFIT 267,808 64,723
OPERATING EXPENSES
Selling, general and administrative 4,844,773 2,961,937
Amortization of deferred compensation 3,465,453 3,547,439
Stock based compensation 96,660 64,383
Depreciation 197,270 22,779
------------- -------------
Total operating expenses 8,604,156 6,596,538
------------- -------------
Operating Loss (8,336,348) (6,531,815)
------------- -------------
OTHER INCOME (EXPENSE):
Net loss from discontinued operations (272,673) 0
Write off failed acquisition deposit (500,078) 0
Interest income 89,523 49,202
Interest expense (41,717) (40,711)
------------- -------------
Total other income (expense) (724,945) 8,491
------------- -------------
Net loss (9,061,293) (6,523,324)
Other comprehensive income (loss):
Unrealized loss on marketable securities,
net of tax effect of $0 0 (300)
------------- -------------
Comprehensive loss $ (9,061,293) $ (6,523,624)
============= =============
Basic net loss per common share $ (0.01) $ (0.02)
============= =============
Weighted average number of common shares outstanding 624,964,652 353,208,736
============= =============
The accompanying notes are an integral part of the financial statements
F-5
UNIVERSAL EXPRESS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
COMMON COMMON CLASS B CLASS B
STOCK STOCK COMMON COMMON ADDITIONAL STOCK
NUMBER PAR NUMBER STOCK PAID-IN RIGHTS
OF SHARES VALUE OF SHARES PAR CAPITAL
------------ ------------ ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 2002 224,126,498 $ 1,120,634 1,280,000 $ 6,400 $ 34,087,036 $ 2,721,502
Shares issued for deferred
compensation 253,149,000 1,265,745 0 0 2,857,075 0
Shares issued for services 3,958,000 19,790 0 0 44,593 0
Retirement of treasury shares (10,000) (50) 0 0 (3,600) 0
Cancellation of dividend shares (239,328) (1,197) 0 0 1,197 0
Shares issued for stock rights 10,264,063 51,320 0 0 2,510,180 (2,561,500)
Cash received for stock rights 0 0 0 0 0 3,024,960
Deferred compensation amortization 0 0 0 0 0 0
Other comprehensive income (loss) 0 0 0 0 0 0
Net loss 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 2003 491,248,233 2,456,241 1,280,000 6,400 39,496,481 3,184,962
Shares issued for cash 20,400,000 102,000 0 0 897,600 0
Shares issued for deferred
compensation 148,942,918 744,715 0 0 7,261,008 0
Shares issued for services 1,579,000 7,895 0 0 88,765 0
Shares issued for warrants 95,819 479 0 0 9,435 0
Shares issued for stock rights 16,000,000 80,000 0 0 110,000 (190,000)
Shares issued for collateral 40,000,000 200,000 0 0 3,720,000 0
Cash received for stock rights 0 0 0 0 0 4,433,000
Deferred compensation amortization 0 0 0 0 0 0
Other comprehensive income (loss) 0 0 0 0 0 0
Net loss 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 2004 718,265,970 $ 3,591,330 1,280,000 $ 6,400 $ 51,583,289 $ 7,427,962
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
F-6
UNIVERSAL EXPRESS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
TREAS TOTAL
STOCK TREASURY OTHER STOCKHOLDERS'
NUMBER STOCK COMPREHENSIVE DEFERRED ACCUMULATED EQUITY
SHARES AMOUNT INCOME COMPENSATION DEFICIT (DEFICIT)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 2002 50,000 $ (18,000) $ (119,400) $ (4,404,318) $(33,375,583) $ 18,271
Shares issued for deferred comp 0 0 0 (4,122,820) 0 0
Shares issued for services 0 0 0 0 0 64,383
Retirement of treasury shares (10,000) 3,650 0 0 0 0
Cancellation of dividend shares 0 0 0 0 0 0
Shares issued for stock rights 0 0 0 0 0 3,024,960
Cash received for stock rights 0 0 (300) 0 0 (300)
Deferred compensation amortization 0 0 0 3,547,439 0 3,547,439
Other comprehensive income (loss) 0 0 0 0 0 0
Net loss 0 0 0 0 (6,523,324) (6,523,324)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 2003 40,000 (14,350) (119,700) (4,979,699) (39,898,907) 131,429
Shares issued for cash 0 0 0 0 0 999,600
Shares issued for deferred comp 0 0 0 (8,005,723) 0 0
Shares issued for services 0 0 0 0 0 96,660
Shares issued for warrants 0 0 0 0 0 9,914
Shares issued for stock rights 0 0 0 0 0 0
Shares issued for collateral 0 0 0 0 0 0
Cash received for stock rights 0 0 0 0 0 4,433,000
Deferred compensation amortization 0 0 0 3,465,453 0 3,465,453
Other comprehensive income (loss) 0 0 0 0 0 0
Net loss 0 0 0 0 (9,061,293) (9,061,293)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 2004 40,000 $ (14,350) (119,700) $ (9,519,969) $(48,960,200) $ 74,763
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
F-7
UNIVERSAL EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(9,061,293) $(6,523,324)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 197,270 22,779
Common stock issued for services 96,660 64,383
Amortization of deferred compensation 3,465,453 3,547,439
Unrealized loss on marketable securities 0 (300)
Forgiveness of officer loan 80,640 59,751
Officer salary accrued 250,000 0
Net loss from discontinued operations 272,673 0
Write off acquisition deposit 500,078 0
Bad debt expense 19,340 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (28,929) (10,891)
(Increase) decrease in other current assets (100,968) 3,559
(Increase) decrease in other receivables 0 0
(Increase) decrease in notes receivable (509,990) 0
(Increase) decrease in loan to officer (47,175) 0
(Increase) decrease in other assets 3,601 (771)
Increase (decrease) in accounts payable
and accrued expenses - trade 209,115 29,807
Increase (decrease) in accrued officers salary (98,241) 64,156
Increase (decrease) in accrued interest 39,259 30,995
----------- -----------
Net cash provided (used) by operating activities (4,712,507) (2,712,417)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (29,515) (40,788)
Acquisition payments and deposits (780,000) 0
Loan to employee (2,500) 0
Advance related party receivables 0 (14,576)
----------- -----------
Net cash provided (used) by investing activities (812,015) (55,364)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock for cash 999,600 0
Issuance of stock rights for cash 4,433,000 3,024,960
Long term debt payments (34,164) (30,535)
Notes payable payments (6,000) (1,000)
Bank line of credit payments (9,913) (14,949)
----------- -----------
Net cash provided by financing activities 5,382,523 2,978,476
----------- -----------
Net increase (decrease) in cash and equivalents (141,999) 210,695
CASH and equivalents, beginning of period 242,037 31,342
----------- -----------
CASH and equivalents, end of period $ 100,038 $ 242,037
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 2,458 $ 9,716
=========== ===========
NON-CASH FINANCING ACTIVITIES:
Issuance of common stock for SCI acquisition $ 500,000 $ 0
=========== ===========
Return of common stock issued for SCI acquisition $ (500,000) $ 0
=========== ===========
Issuance of common stock for collateral for NAA acquisition $ 3,920,000 $ 0
=========== ===========
Issuance of common stock for conversion of stock rights $ 190,000 $ 2,561,500
=========== ===========
Issuance of common stock for deferred compensation $ 8,005,123 $ 4,122,820
=========== ===========
The accompanying notes are an integral part of the financial statements
F-8
UNIVERSAL EXPRESS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Nature of Organization
Universal Express, Inc. ("USXP" or "the Company") was incorporated in the state of Nevada on April 6, 1983 and is an integrated business to business services company centered around the private postal and international shipping industries. Its principal subsidiaries include Universal Express Capital Corp. and Universal Express Logistics, Inc. (which includes Virtual Bellhop, LLC, Luggage Express and Worldpost, its international shipping divisions), and Private Postal Center Network.com (PPN Network) and its division Postal Business Center Network.com ("PBC Network").
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