UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20459




FORM
      10-KSB/A


(Amendment
      No. 2)




ANNUAL
      REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934




For
      the
      Fiscal Year ended June 30, 2006




Commission
      file number 0-18094




Universal
      Express, Inc.


(Name
      of
      small business owner in its charter)




Nevada
            
            11-2781803(State
                of incorporation)
            
            (IRS
                Employer Identification No.)




1230
      Avenue of the Americas, Suite 771, New York, NY 10020


(Address
      of principal executive office)




Issuer’s
      telephone number: (917) 639-4157




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 is not required to file reports pursuant to Section 13 or
      15(d) of Exchange Act. ____




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
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B 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 X .




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes No X




State
      issuer’s revenues for the most recent fiscal year: $1,073,486.




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 August 23, 2006, $89,794,717 (based on 12,647,143,170 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 XNo




The
      issuer had 12,670,133,343 shares of its $.005 par value class A common stock
      issued and outstanding as of June 30, 2006 and 1,280,000 shares of class B
      common stock.




Documents
      Incorporated by Reference: None.




Transitional
      Small Business Disclosure Format (check one): Yes No X.







**EXPLANATORY
      NOTE**





We
      are
      filing this Amendment No. 2 to our annual report on Form 10-KSB for the
      year ended June 30, 2006 to amend our annual report in response to certain
      requests of the staff of the Securities and Exchange Commission. We have not
      restated our consolidated financial statements for the periods
      presented.









PART
      I




ITEM
      1




DESCRIPTION
      OF BUSINESS




History




We
      were
      originally incorporated in the State of Nevada on April 6, 1983.




We
      have
      evolved into a conglomerate of supportive companies centered on our private
      postal network, UniversalPostTM Private Postal Network/Postal
      Nation.




Our
      principal businesses include the UniversalPost Private Postal Network/Postal
      Nation, UniversalPostTM International Courier Service, Universal Express
      Logistics, Inc., Virtual Bellhop®, Luggage Express®, Luggage Express Associate
      ProgramTM, MadPackers, Inc., Universal Express Capital Corp., Universal Cash
      Express and Universal Express Properties.




Our
      association of independent and franchise nationwide postal stores
      (UniversalPost/Postal Nation) continues to evolve into a sophisticated buying
      service trade association, and market penetration vehicle.




UniversalPost
      International Courier Service earns revenues from selling discounted rates
      and
      services to the postal stores.




Virtual
      Bellhop® is a premier door-to-door luggage transportation service.




Luggage
      ExpressTM will enable consumers to have their baggage picked up at their home by
      one of its carriers or a local UniversalPost member store and delivered to
      the
      traveler’s destination.




MadPackers
      is a logistics subsidiary for the futuristic form of shipping personal items
      for
      college and university students.




Universal
      Express Capital Corp. is a full service asset based transportation/equipment
      leasing company. Its Universal Cash Express division provides stored value
      cards
      of all types to consumers.




Universal
      Express Properties concentrates on commercial property
      acquisitions.




We
      continue to mature as an accepted participant within the shipping and postal
      store industry.




Our
      website is *www.usxp.com* *.* The
      contents of our website should not be considered part of this annual
      report.




1




The
      Business of the Corporation




We
      have
      evolved into a conglomerate of supportive companies and divisions centered
      around its private postal system.




Our
      principal subsidiaries and divisions are:





·
            UniversalPost
                Private Postal Network/Postal
                Nation


·
            UniversalPost
                International Courier Service


·
            Universal
                Express Logistics, Inc.


·  Virtual
      Bellhop®


·  Luggage
      Express®


·  LEAP
      (Luggage Express Associate ProgramTM)


·
            MadPackersTM,
                Inc.


·
            Universal
                Express Capital Corp.


·
            Universal
                Cash Express


·
            Universal
                Express Properties




Marketplace




A
      challenging global economy has grown over the past decade. Internet, catalog
      and
      retail sales continue to mandate an inexpensive and responsive outsourced final
      mile domestic and international delivery network. We continue to address that
      innovative and outsourced final mile network, and we have undergone visionary
      expansion in the last decade. We currently are establishing strong strategic
      relationships with companies and manufacturers, thus strengthening our long
      term
      private postal network, luggage business and logistical courier network. Members
      of UniversalPost’s private postal network provide the public with a complement
      to the U.S. Post Office for many retail and business postal services. In
      addition, these postal service centers offer individuals and business customers
      an additional variety of personal business services and
      merchandise.




Luggage
      Express has begun to separate passengers from suitcases and offer a safer and
      more pleasurable travel experience.




These
      courier companies and private postal centers form a highly fragmented cottage
      industry. We believe that since this industry generates over $14 billion in
      sales and presently consists of more than 30,000 independent operators, there
      is
      a market opportunity for the development of an association with the goal of
      unifying and organizing the independent and franchised postal stores and
      couriers nationwide. These members are electronically connected to other members
      via our new website, new sales and products.




We
      believe that an affordable outsourced distribution system is needed to suit
      consumers’ future needs. We believe that we have positioned ourself to be a
      contender in the global economy for the next decade with the development of
      its
      outsourced and innovative subsidiaries.




We
      are
      now positioned as a significant player in the international shipping and
      transportation industries. By building our divisions through classic outsourcing
      techniques, our future revenue growth will not be offset by increased
      overhead.




2




In
      just
      the past few years, we have identified more than 9,000 private postal centers
      in
      a network called UniversalPost that produces growing revenue streams for both
      its members and us. We offer our UniversalPost Network members discounted
      services from some of the country’s largest vendors, as well as innovative new
      luggage services that resonate in the world’s present security-conscious travel
      climate.




Our
      business strategy is far more than the sum of today’s parts. Our three highly
      synergistic divisions position us to create an entirely new industry paradigm
      by
      offering the private postal industry and consumers value-added services and
      products, logistical services, equipment leasing and cost-effective delivery
      of
      goods and services worldwide.




UniversalPostTM
      Network, the name for our private postal network, taps the purchasing power
      of
      over 20,000 privately owned and operated postal stores to create the nation’s
      first truly organized and funded private postal system.




Our
      web-based CRM software system empowers swift delivery of business products
      and
      services to the network: commercial mail receiving; office products and
      supplies; packaging and shipping; copying, imaging, photo finishing and digital
      services; home office boutique items; and even concierge services.




Universal
      Express Logistics, Inc. joins our visionary Luggage ExpressTM service offered
      through the UniversalPost Network and its Internet-based Virtual Bellhop®
luggage pickup and delivery service to free travelers from the stress of dealing
      with their luggage as they travel across the country and around the world.
      Today’s target customer is the upscale traveler planning extended stays at
      destination resorts, but the service is equally appealing to any traveler who
      prefers not to pay extra airline fees or struggle with heavy and awkward baggage
      at either end of their trip. When you consider that domestic airline luggage
      is
      expected to exceed 3 billion pieces annually, Our revenue potential is
      substantial as acceptance of luggage transportation services reaches critical
      mass with further branding and advertising.




MadPackersTM
      is a service oriented company that is assisting the college world by moving
      students and their belongings into their rooms ahead of time; creating a fluid
      move in process on the first days of school for students, parents and
      administrations across the country through a “door to dormTM” shipping service.
      MadPackers takes students’ belongings from their home and sends them directly to
      their college residences. They also take students’ belongings back home after
      the semester has ended. They store students’ belongings during winter, summer,
      and study abroad breaks, as well as ship to study abroad and spring break
      destinations. MadPackers provides students, parents, and administrations an
      innovative solution to the move in process on and off campuses across the
      country.




Universal
      Express Capital Corp. is a full-service, asset based transportation and leasing
      service that provides capital acquisition funding for the business sector.
      We
      have established strategic alliances with a number of major manufacturing firms
      in the limousine, livery, small fleet, vehicle rental, delivery truck and van,
      bus and aircraft industries.




Universal
      Cash Express, a division of Universal Express Capital, is a leader in the
      pre-paid PIN based products industry. Cash Express develops products and
      services for companies wishing to




3




expand
      their current market penetration into this exciting and growing market segment.
      Cash Express employs industry experts that are able to advise these companies
      on
      which products are desired by this market niche. Cash Express is further able
      to
      assist our corporate clients by designing the perfect product for them to
      accelerate their profit potential.




We
      are
      also affiliated with The Coalition for Luggage Security (the “Coalition”). The
      Coalition is made of companies and individuals with the mission of creating
      safer air travel by separating luggage from passengers. The founder and
      president of the Coalition is Richard Altomare, who is also our CEO and
      Chairman. Currently, his white paper entitled, “More Safety, Less Hassle for
      American Travelers: A Private Sector Solution” has been circulated in Congress.
      You can read more about the Coalition and this white paper at *www.luggagesecuritycoalition.com* .
      You
      should not consider the contents of this website part of this annual
      report.




UniversalPostTM
      Network- The Private Postal Network/Postal Nation




UniversalPost
      Network/Postal Nation, a private postal network, is an association formed to
      create a very much needed partnership between previously unconnected shipping
      and packaging store owners. This concept has been accomplished many times before
      in American industries, most notably by FTD’s maturation of the independent
      florists across America and Interflora’s unification and development of florists
      in Europe. UniversalPost Network provides independent store-owners with a
      variety of cost effective services and products to help increase their
      profitability, while they are still able to maintain their local or franchised
      identities.




Individual
      Services and Products




·
            Flowers/Gift
                Baskets


·
            Corrugated
                & Packaging


·
            Moving
                Supplies


·
            Customized
                Corrugated


·
            Parcel
                Insurance


·
            E-Bay
                Power Selling Franchises


·
            Certified/Registered
                E-mail’s


·
            Personalized
                Postage


·
            Discounted
                Supplies


·
            Joint
                Promotions


·
            Fingerprinting


·
            Credit
                Union


·
            Consolidated
                Shipping rates


·
            Supplemental
                Health Insurance


·
            Print
                Certified Mail


·
            On-line
                Purchasing


·
            Van
                Sales


·
            Visa
                Debit Card





PostalNation,
      a website and primary search engine for all postal store members, vendors and
      consumers for product and service needs offered through
      UniversalPost.




4




On
      April
      25, 2006, Universal Post and PostalNation agreed with QuikDrop International
      to
      offer its technology and hardware for eBay marketing for customers of postal
      store members throughout the United States.




On
      May
      12, 2006, we announced a pilot program for a number of UniversalPost
      Network/Postal Nation members for the use of R-Post’s registered e-mail secured
      program.




On
      August
      23, 2006, we announced a UniversalPost Network/Postal Nation program with
      Enterprise Rent-A-Car.




UniversalPostTM
      Network- International Courier Service




UniversalPost
      Network, the International Courier Service, is an alliance of independently
      owned and operated express courier services operating in 268 cities in 120
      countries. UniversalPost Network provides global delivery and services to
      international firms. This network currently delivers over 650,000 packages
      per
      month and is part of the world’s largest independently owned courier network. It
      is the fifth largest express courier network in the world behind the integrated
      United States express carriers such as FedEx, UPS and DHL.




Unlike
      the major integrators who operate their own aircraft and thus offer rigid pick
      up and delivery schedule, UniversalPost Network members offer flexible,
      customized International services to meet a client’s specific distribution
      needs. Instead of operating our own costly fleet, UniversalPost Network offers
      express International air courier service and expedited air cargo through
      regularly scheduled commercial airlines to transport time-sensitive documents,
      parcels, freight and mail.




According
      to industry estimates, private postal stores alone ship $600 million annually
      in
      International packages and without UniversalPost Network are totally dependent
      upon their suppliers’ shipping. The obvious synergy between UniversalPost, the
      International Courier Service and UniversalPost Network, the private postal
      network, enhances our unusual position in the shipping service
      industry.




Now
      UniversalPost Network members can offer an in-house solution for international
      deliveries at a higher profit margin for themselves and increase the value
      of
      international delivery service to their customers rather than the more expensive
      traditional carriers. The UniversalPost Networks’ use of the UniversalPost
      envelope for their international shipping method instead of outsourced options
      strengthens the local postal stores’ position as an international delivery
      solution.




Luggage
      ExpressTM and Virtual Bellhop®




Luggage
      Express and its premier service, the Virtual Bellhop, facilitate and manage
      the
      movement of baggage door-to-door for leisure and business
      travelers.




With
      many
      years of logistical corporate and entrepreneurial experience in relevant core
      businesses, Universal Express has created a powerful logistical business model
      driven by multi-channel distribution and multi-market demand. We have
      established relationships with travel service providers and distribution
      partners.




5




There
      are
      significant market opportunities not limited to the abundance of checked bags
      presently being moved each year. Making travel easier and more enjoyable through
      luggage free travel is the goal of our two companies.




Whether
      it be through partners like hotels, airlines, cruise lines, credit card
      companies, airline or travel agencies, or simply our neighborhood postal store,
      we continue to introduce Americans to luggage-free travel.




With
      over
      1.5 billion suitcases presently being checked by domestic passengers, our
      companies offer significant benefits to the airlines. Customer satisfaction,
      easier check-in, a secure alternative to curb-side check-in, less congestion
      in
      the departure hall and minimizing departure delays, defines our service. The
      FAA
      expects the number of airline passengers to double, making domestic luggage
      exceed 3 billion suitcases. Luggage Express and Virtual Bellhop are indeed
      poised for luggage-free travel.




Luggage
      Express is developing an innovative revenue program for the selling of Luggage
      Express Associate Program (LEAP) territories to investors and business
      entrepreneurs. The development of this program is in its final stages. We have
      been working with Francorp, Inc. the premier franchising organization to guide
      and assist us in the franchising program for its L.E.A.P. (Luggage Express
      Associate Program) division.




On
      April
      13, 2006, MadPackers, our college shipping and logistics division, launched
      its
      promotional tour of universities. On April 25, 2006, Madpackers signed an
      agreement with Florida Atlantic University.




On
      May
      16, 2006, Luggage Express strategically aligned itself with Preferred Boutique,
      the newest brand within the Preferred Hotel Group. On May 17, 2006, Luggage
      Express entered into a partnership with The Association of Corporate Travel
      Executives, an association that provides global and regional leadership of
      the
      business travel industry.




On
      June
      21, 2006, we announced the signing of a contract to purchase Global Trucking
      Services, a provider of luggage delivery services and trucking services for
      major airlines serving the Miami, Florida market.




On
      July
      18, 2006, we announced the implementation of the new website for Madpackers, *www.madpackers.com* .
      You
      should not consider the contents of this website part of this annual
      report.




Universal
      Express Capital Corp.




The
      Universal Express family of companies has broadened the nature of its core
      business by entering the financial services industry via its subsidiary
      Universal Express Capital Corp. A full service, asset based transportation
      and
      equipment lessor, Universal Express Capital Corp. provides capital acquisition
      funding, in the form of lease financing, to the national business community
      as
      well as within the framework of our other affiliates and
      subsidiaries.




6




Universal
      Cash Express




Universal
      Cash Express, a division of Universal Express Capital Corp., is a leader in
      the
      pre-paid PIN based products industry. Cash Express develops products and
      services for companies wishing to expand their current market penetration into
      this exciting and growing market segment. Cash Express employs industry experts
      that are able to advise these companies on which products are desired by this
      market niche. Cash Express is further able to assist our corporate clients
      by
      designing the perfect product for them to accelerate their profit
      potential.




Universal
      Express Properties




We
      announced our real estate division on November 12, 2004. The division
      concentrates on commercial property acquisitions, commercial loans and other
      lending activities, and seeks to be the lead investor in private placements,
      limited partnerships and other activities with a goal to develop a portfolio
      sufficient to operate the company as a real estate investment trust
      (REIT).




On
      February 27, 2006, we announced the signing of a letter of intent to purchase
      a
      South Florida based fuel and wholesale jobber, which services 144 gas stations
      and directly owns 46 of them.




On
      July
      18, 2006, we announced the signing of an agreement to purchase Jacksonville
      Oil
      Company, a North Florida oil and gas retailer.




Competition




We
      believe that the maturation of the Private Postal Network (UniversalPost) will
      strengthen the profitable atmosphere of this cottage private postal industry.
      Lack of financial strength and market penetration have prevented some excellent
      franchisors and independent stores from properly promoting their services.
      The
      ability of UniversalPost to create a nationally accepted private postal industry
      that the American public will embrace and trust should recreate a viable
      industry. We feel that we can convince through financial discounts 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 and private postal network.




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, we believe 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
      opportunities to expand our corporate scope are limitless due to shipping,
      logistical distribution needs and growth of services through the
      world.




The
      transportation industry has already developed the necessary infrastructure
      and
      continues to grow. We believe that the missing ingredients needed to make this
      industry improve are packaging, logistics and inexpensive residential
      locations.




7




We
      believe that a nationwide organized domestic fulfillment network with an
      affordable international delivery system can become a key player in the global
      economy. We have positioned ourself to be that public player in this lucrative
      market. Members of UniversalPost provide the public with a complement to the
      U.S. Post Office 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 our President and CEO since May 1992, upon
      appointment by the U.S. Bankruptcy Court for the Eastern District of New York
      (the “Reorganization Court”) for Packaging Plus Services, Inc. (our predecessor
      company) during Packaging Plus Services, Inc.’s reorganization, completed in May
      of 1994. Mr. Altomare directs our business, 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 their carriers, as well as building
      innovative businesses in the logistics, commercial vehicles capital funding
      and
      leasing and transportation fields.




Trade
      Marks and Service Marks




We
      are
      the owner of tradenames, trademarks and service marks for the names and marks
      Universal Express®, USXP®, Private Postal Network®, USXP Capital®, USXP Cash
      ExpressTM, USXP LogisticsTM, UniversalPostTM, Luggage Express®, Virtual Bellhop®,
      MadPackersTM, USXP LogisticsTM, USXP PostalNationTM PlatinumTM and USXP
      TransportationTM.




Employees




As
      of
      June 30, 2006, we had 37 employees. We have not experienced any work stoppages,
      and we consider our relations with our employees to be excellent. To facilitate
      its UniversalPost Network, USXP Capital, Luggage Express, MadPackers and
      UniversalPost International Delivery expansion plans, management expects to
      engage in significant hiring of management, sales, operational and support
      personnel during 2006 and beyond.




ITEM
      2




DESCRIPTION
      OF PROPERTIES




Our
      corporate headquarters is located at 1230 Avenue of the Americas, New York,
      New
      York, with operating and administrative offices at 5295 Town Center Road, Boca
      Raton, Florida.




ITEM
      3




LEGAL
      PROCEEDINGS




We
      filed
      a lawsuit for $168 million in 2003 against North American Airlines and its
      President Mr. McKinnon in New York Supreme Court, Queens County, New York,
      for
      breach of contract and fraud, plus punitive damages. This suit was predicated
      upon Mr. McKinnon’s actions




8




following
      the signing of a contract for us to purchase this charter airline, the breach
      of
      that contract in various ways by Mr. McKinnon and Mr. McKinnon’s attempts to
      frustrate the accomplishment of the proposed acquisition. This case is
      pending.




In
      2005,
      we filed a lawsuit for $269 million against Capitalliance Financial Services
      and
      individuals and firms associated with Capitalliance in New York Supreme Court,
      New York County. This suit was predicated upon a series of failed transactions
      proposed to us, which were grounded on fraud, misrepresentation and a series
      of
      forged instruments and documents. This case is pending.




In
      2006,
      we brought an action in New York Supreme Court, County of Albany, for $160
      Million against Coach Industries Group and related companies. This suit is
      predicated on fraud and breach of contract, with respect to the violation of
      a
“right of first refusal” we had to purchase a courier management company,
      Corporate Development Services (formerly, SubContracting Concepts, Inc.). This
      case is pending.




On
      March
      2, 2004, we brought suit against the SEC in federal court in Florida seeking
      damages from “naked shorting” of its shares and other matters. Thereafter, on
      March 23, 2004, the SEC brought an action in federal court in New York against
      certain of our officers. These matters are pending. We and our president have
      been leading opponents of the growing “naked shorting” scandal for ten years and
      has joined with many other public companies in focusing on this national problem
      in press releases and public forums. It is significant that we have received
      very substantial jury verdicts and judgments concerning this problem, as
      indicated below.




On
      July
      26, 2001, a jury in the Circuit Court of the Eleventh Circuit, Dade County,
      Florida awarded the Company a damage verdict after trial, of $87,622,000
      compensatory damages, $275,000,000 punitive damages and $26,286,000 pre-judgment
      interest, or a total judgment entered of $389 Million, against Select Capital
      and various stock manipulators and “naked shorters.” This judgment continues to
      grow with post-judgment interest. On August 23, 2003, another jury in the
      Circuit Court, Dade County, Florida, after trial, awarded another verdict to
      us
      in the total amount of $137 Million, against South Beach Financial and related
      stock manipulators and “naked shorters”. Judgment was entered in favor of the
      Company upon this verdict. This judgment continues to grow with post-judgment
      interest. These judgments were non-appealable. Our
      collection efforts with respect to these judgments are ongoing, and we believe
      that the judgments are substantially collectable.




We
      are
      involved in several lawsuits with vendors, suppliers, and professionals. We
      dispute all these claims. We believe that the disposition of these matters
      will
      not have a material adverse effect on our financial position.




ITEM
      4




SUBMISSION
      OF MATTERS TO A VOTE OF SHAREHOLDERS




No
      meeting of shareholders was held during the year.




9




PART
      II




ITEM
      5




MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS




Our
      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, Inc.
      These quotations reflect inter-dealer prices, without retail mark-up, mark-down,
      or commission and may not represent actual transactions.




BidQuarter
                Ended
            
            Low
            
            High9/30/05
            
            $0.0006
            
            $0.00312/31/05
            
            $0.0003
            
            $0.0013/31/06
            
            $0.0004
            
            $0.0376/30/06
            
            $0.004
            
            $0.014







As
      of
      June 30, 2006, there were over 15,000 holders of record of our common
      stock.




The
      transfer agent and registrar of our common stock is Continental Stock Transfer
      & Trust Company.




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 and Section 21E of the Securities Exchange Act
      of
      1934. Although we believe that the expectations reflected in such
      forward-looking statements are reasonable, we can give no assurance that such
      expectations reflected in such forward-looking statements will prove to be
      correct. Our 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
      UniversalPostNetwork/Postal Nation, our multi-faceted national private postal
      business centers nationwide connected through the World Wide Web, and for future
      acquisitions.




10




Management
      views this year as a period of growth based upon its decision to concentrate
      on
      core business development through the UniversalPost Network/Postal Nation,
      Virtual Bellhop®, Luggage ExpressTM, MadPackersTM, UniversalPost International
      Delivery and USXP CapitalTM.




Results
      of Operations




During
      the year ended June 30, 2006, our revenues increased 15.3%, from $931,009 in
      the
      year ended June 30, 2005, to $1,073,486. We attribute this increase to the
      improvement in the performance of our luggage business. During the year ended
      June 30, 2006, our cost of goods sold decreased 9.1%, from $914,404 in the
      year
      ended June 30, 2005, to $830,883. We attribute this decrease to better pricing
      terms, including larger discounts, that we were able to obtain in the year
      ended
      June 30, 2006. Due to our increased revenues and decreased cost of goods sold,
      our gross profit increased to $242,603 from $16,605.




During
      the year ended June 30, 2006, our selling, general and administrative expenses
      increased 37% to $5,445,311 from $3,973,999 in the year ended June 30, 2005.
      We
      attribute the increase in these expenses to the larger number of employees
      and
      increase in overall operating costs in the year ended June 30, 2006 compared
      to
      the prior year. Our amortization of deferred compensation increased 117% to
      $12,434,041 in the year ended June 30, 2005 compared to $5,732,540 in the prior
      year. This increase was generally due to the timing of payments which came
      due
      under various employment contracts and contracts with outside advisors and
      consultants. For these reasons we also expect this increase to continue in
      the
      year ended June 30, 2007. Our stock based compensation also increased
      substantially in the year ended June 30, 2006 compared to the prior year,
      increasing 258%, to $1,245,876 from $348,431, as a result of the greater amount
      of stock that we used to pay for various outside services compared to the prior
      year. Our depreciation expense was virtually unchanged in the year ended June
      30, 2006 compared to the prior year.




In
      the
      year ended June 30, 2006, our loss recoupment from discontinued operations
      increased 188%, to $27,500 from 9,545, compared to the year ended June 30,
      2005.
      This increase was the result of the collection of amounts owed to us in the
      settlement in the suit involving the sale of Downtown Theater Ticket Agency,
      Inc. In the year ended June 30, 2006 we had no income from the sale of a
      subsidiary, compared to the year ended June 30, 2005 when we earned $54,133
      from
      the sale of Downtown Theater Ticket Agency, Inc. We had other income of $25,000
      due to insurance payments in the year ended June 30, 2006, but we had no other
      income in the prior year. Our interest income in the years ended June 30 2006
      and 2005 was essentially the same. In the year ended June 30, 2006, our interest
      expense increased 117%, to 46,021 from 21,166, due to a combination of increased
      borrowing and higher interests rates on these borrowings.




As
      a
      result of the factors described above, particularly the $12,434,041 of amortized
      deferred compensation, our net comprehensive loss for the year ended June 30,
      2006 increased 89% to $18,899,026 from $9,985,868.




Liquidity
      and Capital Resources




During
      the twelve-month period ended June 30, 2006, our financing activities provided
      $8,686,856 while we used $6,532,973 in our operating and investing
      activities.




11




Our
      working capital equity for fiscal 2006 was $1,312,543 compared with a deficiency
      of $2,200,428 in fiscal 2005.




Until
      the
      UniversalPost Network/Postal Nation, Virtual Bellhop, Luggage Express,
      MadPackers, USXP Capital and UniversalPost International Delivery are fully
      developed, we will continue to rely on equity and debt raises to fund our
      operations. We are continuing efforts to raise cash by arranging lines of
      credit, and obtaining additional equity capital. Our 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.






Off-Balance
      Sheet Arrangements




We
      have
      no off-balance sheet arrangements.




12


ITEM
      7




FINANCIAL
      STATEMENTS




Our
      audited financial statements for the current period are found on the next
      succeeding pages of this Report on Form 10-KSB.




INDEX
      TO
      FINANCIAL STATEMENTS


Independent
                  Auditors’ Reports
              F-2Consolidated
                  Balance Sheets
              F-4Consolidated
                  Statements of Operations and Comprehensive Income
                  (Loss)
              F-5Consolidated
                  Statements of Cash Flows
              F-6Consolidated
                  Statements of Stockholders’ Equity
                  (Deficiency)
              F-7Notes
                  to Consolidated Financial Statements
              F-8









**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**




The
      Board
      of Directors and Stockholders


Universal
      Express, Inc.





We
      have
      audited the accompanying consolidated statements of operations and comprehensive
      income (loss), stockholders equity (deficit) and cash flows of Universal
      Express, Inc. (the Company) for the year ended June 30, 2005. 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 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 its operations and its
      cash flows for the period ended June 30, 2005 of Universal Express, Inc. 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 Note 4 to the
      consolidated financial statements, the Company has experienced net losses since
      inception. The Company’s financial position and operating results raise
      substantial doubt about its ability to continue as a going concern. Management’s
      plans with regard to these matters are also described in Note 4. The
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.








Durland
      & Company, CPAs, P.A.





/s
      /
      Durland & Company, CPAs, P.A.








New
      York,
      New York


September
      23, 2005




F-2




*Pollard-Kelley
              Auditing Services,
              Inc.*Auditing Services
            3250 West Market St, Suite 307, Fairlawn,
              OH
              44333 330-864-2265






Report
      of Independent Registered Public Accounting Firm




Board
      of
      Directors & Stockholders


Universal
      Express, Inc. and Subsidiaries




We
      have
      audited the accompanying consolidated balance sheet of Universal Express, Inc.
      and Subsidiaries as of June 30, 2006, and the related consolidated statements
      of
      operations, changes in stockholders’ equity, and cash flows for the one year in
      the period ended June 30, 2006. 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
      conduct our audits 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 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.




The
      Company has generated losses to date. This factor among others raises
      substantial doubt the Company will be able to continue as a going concern.
      The
      Company’s continuation as a going concern depends upon its ability to generate
      sufficient cash flow to conduct its operations and its ability to obtain
      additional sources of capital and financing. The accompanying consolidated
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company at June 30, 2006,
      and
      the results of its operations and it cash flows for the one year in the period
      ended June 30, 2006, in conformity with U.S. generally accepted accounting
      standards.




Pollard-Kelley
      Auditing Services, Inc.




/S/
      Pollard-Kelley Auditing Services, Inc.




Fairlawn,
      Ohio




September
      22, 2006




F-3


Universal
      Express Inc. and Subsidiaries


Consolidated
      Balance Sheet




June
      30,




**ASSETS**
            **2006****Current
                Assets:**Cash
                and Equivalents
            
            $
            2,102,459Accounts
                Receivable
            
            
            78,266Other
                Receivables
            
            
            -Other
                Current Assets
            
            
            730,856Total
                Current Assets
            
            
            2,911,581**Property
                and Equipment**Computers
                and Equipment
            
            
            373,968Less
                Accumulated Depreciation
            
            
            (167,136
            )Net
                Property and Equipment
            
            
            206,832**Other
                Assets:**Loan
                to Officer
            
            
            722,709Related
                Party Receivables
            
            
            906,000Notes
                Receivable
            
            
            848,053Goodwill
            
            
            397,107Other
                Assets
            
            
            29,868Total
                Other Assets
            
            
            2,903,737Total
                Assets
            
            $
            6,022,150**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities**:Accounts
                Payable
            
            $
            862,708Accrued
                ExpensesTrade
            
            
            197,633Officers'
                Salary
            
            
            2,047Interest
            
            
            285,303Current
                Portion of Long-Term Debt
            
            
            90,829Bank
                Line of Credit
            
            
            13,018Notes
                Payable
            
            
            47,500Convertible
                Debentures
            
            
            100,000Total
                Current Liabilities
            
            
            1,599,038Long-Term
                Debt, Net of Current Portion
            
            
            -Total
                Liabilities
            
            
            1,599,038**Stockholders'
                Equity:**Common
                Stock, $.005 par value; Authorized 12,950,000,000 Shares12,670,133,343
                Shares Issued, 12,670,093,343 Shares Outstanding
            
            
            63,350,667Class
                B Common Stock, $.005 par value; Authorized 3,000,000shares
                1,280,000 shares issued and outstanding
            
            
            6,400Additional
                Paid-in Capital
            
            
            24,460,847Accumulated
                Comprehensive Income (loss)
            
            
            (146,459
            )Stock
                Rights
            
            
            17,351,424Treasury
                stock, at cost, 40,000 shares
            
            
            (14,350
            )Deferred
                Compensation
            
            
            (18,847,082
            )Collateral
                stock
            
            
            (3,920,000
            )Accumulated
                Deficit
            
            
            (77,818,335
            )Total
                Stockholders' Equity
            
            
            4,423,112**TOTAL
                LIABILITIES & STOCKHOLDERS' EQUITY**
            
            $
            6,022,150




See
      accompanying notes and accountants'
      report.




F-4




Universal
      Express Inc. and Subsidiaries


Consolidated
      Statements of Operations and Comprehensive Income (Loss)


Year
      Ended June 30,




**2006**
            
            **2005**Revenues
            
            $
            1,073,486
            
            
            
            $
            931,009Cost
                of Goods Sold
            
            
            830,883
            
            
            
            
            914,404Gross
                Profit
            
            
            242,603
            
            
            
            
            16,605**OPERATING
                EXPENSES**Selling,
                General and Administrative
            
            
            5,445,311
            
            
            
            
            3,973,999Amortization
                of Deferred Compensation
            
            
            12,434,041
            
            
            
            
            5,732,540Stock
                Based Compensation
            
            
            1,245,876
            
            
            
            
            348,431Depreciation
            
            
            39,583
            
            
            
            
            35,281Total
                Operating Expenses
            
            
            19,164,811
            
            
            
            
            10,090,251**OPERATING
                LOSS**
            
            
            (18,922,208
            )
            
            
            
            (10,073,646
            )**Other
                Income (Expense)**-Loss
                Recoupment from Discontinued Operations
            
            
            27,500
            
            
            
            
            9,545Income
                from Sale of Subsidiary
            
            
            -
            
            
            
            
            54,133Other
                Income
            
            
            25,000
            
            
            
            
            -Interest
                Income
            
            
            43,462
            
            
            
            
            45,266Interest
                Expense
            
            
            (46,021
            )
            
            
            
            (21,166
            )Total
                other income (expense)
            
            
            49,941
            
            
            
            
            87,778**TAX
                PROVISIONS**
            
            
            -
            
            
            
            
            -Net
                Loss
            
            
            (18,872,267
            )
            
            
            
            (9,985,868
            )**COMPREHENSIVE
                LOSS - Net of tax**
            
            
            (26,759
            )
            
            
            
            -**NET
                COMPREHENSIVE LOSS**
            
            $
            (18,899,026
            )
            
            
            $
            (9,985,868
            )**LOSS
                PER SHARE****Net
                Loss**
            
            $
            (0.00
            )
            
            
            $
            (0.01
            )**Comprehensive
                Loss**
            
            $
            (0.00
            )
            
            
            $
            -**Net
                Comprehensive Loss**
            
            $
            (0.00
            )
            
            
            $
            (0.01
            )Weighted
                average number of common shares outstanding
            
            
            5,670,235,320
            
            
            
            
            1,185,567,376





See
      accompanying notes and accountants' report.





F-5


Universal
      Express Inc, and Subsidiaries


Consolidated
      Statements of Cash Flows


Year
      Ended June 30




**2006**
            
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES**:Net
                Loss
            
            $
            (18,899,026
            )
            
            
            $
            (9,985,868
            )Adjustments
                to reconcile net loss to net cash used by operating
                activities:Depreciation
                and amortization
            
            
            39,583
            
            
            
            
            35,281Amortization
                of Deferred Compensation
            
            
            12,434,041
            
            
            
            
            5,732,540Common
                shares issued for services
            
            
            1,245,876
            
            
            
            
            348,431Forgiveness
                of officer loan
            
            
            74,185
            
            
            
            
            77,345Issuance
                of stock for Bonus
            
            
            98,500
            
            
            
            
            -Changes
                in operating assets and liabilities:(Increase)
                decrease in accounts receivable
            
            
            (9,502
            )
            
            
            
            (24,144
            )(Increase)
                decrease in other current assets
            
            
            (523,756
            )
            
            
            
            (63,300
            )(Increase)
                decrease in other receivables
            
            
            -
            
            
            
            
            7,700(Increase)
                decrease in notes receivables
            
            
            6,460
            
            
            
            
            (344,523
            )(Increase)
                decrease in loan to officers
            
            
            (43,398
            )
            
            
            
            (45,247
            )(Increase)
                decrease in other assets
            
            
            (15,063
            )
            
            
            
            (3,250
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            72,757
            
            
            
            
            17,280Increase
                (decrease) in accrued officers salary
            
            
            (933,010
            )
            
            
            
            (43,258
            )Increase
                (decrease) in accrued interest
            
            
            27,428
            
            
            
            
            19,241Net
                cash provided (used) by operating activities:
            
            
            (6,424,925
            )
            
            
            
            (4,271,772
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Credit
                Card Line of Credit
            
            
            -
            
            
            
            
            20,315Purchase
                of property and equipment
            
            
            (108,048
            )
            
            
            
            (71,435
            )Net
                cash provided (used) by investing activities
            
            
            (108,048
            )
            
            
            
            (51,120
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**:Bank
                line of credit payments
            
            
            (5,034
            )
            
            
            
            (7,075
            )Credit
                Card Line of Credit payments
            
            
            (20,316
            )
            
            
            
            -Notes
                payable payments
            
            
            (9,400
            )
            
            
            
            (7,500
            )Long
                Term Debt payments
            
            
            (35,814
            )
            
            
            
            (30,431
            )Issuance
                of common stock for cash
            
            
            2,311,394
            
            
            
            
            630,000Issuance
                of stock rights for cash
            
            
            6,375,462
            
            
            
            
            3,657,000Net
                cash provided by financing activities
            
            $
            8,616,292
            
            
            
            $
            4,241,994Net
                increase (decrease) in cash and equivalents
            
            
            2,083,319
            
            
            
            
            (80,898
            )**CASH**and equivalents, beginning of period
            
            
            19,140
            
            
            
            
            100,038**CASH**and equivalents, end of period
            
            $
            2,102,459
            
            
            
            $
            19,140**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION**:Interest
                paid in cash
            
            $
            18,594
            
            
            
            $
            1,925**Non-Cash
                Financing Activities:**Issuance
                of common stock for deferred compensation
            
            
            16,954,635
            
            
            
            
            10,539,059Issuance
                of common stock for loan Repayment
            
            
            -
            
            
            
            
            400,000Issuance
                of common stock for Conversion of Stock Rights
            
            
            59,000
            
            
            
            
            50,000





See
      accompanying notes and accountants' report.




F-6


Universal
      Express Inc. and Subsidiaries


Consolidated
      Statements of Stockholders' Equity




**Common
                Stock**
            
            **Class
                B Stock**
            
            **Paid
                In**
              **Capital**
            
            **Stock**
              **Rights**
            
            **Treasury
                Stock**
            
            **Accumulated**
              **Deficit**
            
            **Other**
              **Comprehensive**
              **Income**
            
            **Deferred**
              **Services**
            
            **Totals****#
                of**
              **Shares**
            
            **$**
              **Amount**
            
            **#
                of**
              **Shares**
            
            **$**
              **Amount**
            
            
            
            
            
            **#
                of**
              **Shares**
            
            **$**
              **Amount****BALANCE
                JUNE 30, 2004**
            
            
            718,265,970
            
            $
            3,591,330
            
            
            1,280,000
            
            $
            6,400
            
            $
            51,583,289
            
            $
            7,427,962
            
            
            40,000
            
            $
            (14,350
            )
            $
            (48,960,200
            )
            $
            (119,700
            )
            $
            (9,519,969
            )
            $
            74,763Sale
                of Common Stock
            
            
            44,666,667
            
            
            223,333
            
            
            
            
            
            
            
            
            406,667
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            630,000Common
                Shares Issued for Deferred Serv.
            
            
            1,234,241,921
            
            
            6,171,210
            
            
            
            
            
            
            
            
            4,367,849
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (10,539,059
            )
            
            (0
            )Amortization
                of Deferred Services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,732,540
            
            
            5,732,540Common
                Shares Issued for Services
            
            
            31,587,500
            
            
            157,938
            
            
            
            
            
            
            
            
            190,493
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            348,431Common
                Shares Issued for Repayment of Loans
            
            
            33,000,000
            
            
            165,000
            
            
            
            
            
            
            
            
            235,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            400,000Common
                Shares Issued for Warrants
            
            
            -
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Common
                Shares Issued for Accrued Officers Salary
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Common
                Shares Issued for Collateral
            
            
            
            
            
            -Common
                Shares Issue for Stock Rights
            
            
            1,666,666
            
            
            8,333
            
            
            
            
            
            
            
            
            41,667
            
            
            (50,000
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            0Cash
                Received for Stock Rights
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,657,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,657,000Common
                Shares Issued for Notes Payable
            
            
            -
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Unrealized
                Loss on Marketable Securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (9,985,868
            )
            
            
            
            
            
            
            
            (9,985,868
            )**BALANCE
                JUNE 30, 2005**
            
            
            2,063,428,724
            
            
            10,317,144
            
            
            1,280,000
            
            
            6,400
            
            
            56,824,965
            
            
            11,034,962
            
            
            40,000
            
            
            (14,350
            )
            
            (58,946,068
            )
            
            (119,700
            )
            
            (14,326,488
            )
            
            856,866Sale
                of Common Stock
            
            
            3,466,847,620
            
            
            17,334,238
            
            
            
            
            
            
            
            
            (15,022,844
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,311,394Common
                Shares Issued for Deferred Serv.
            
            
            6,564,701,500
            
            
            32,823,508
            
            
            
            
            
            
            
            
            (15,868,872
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (16,954,635
            )
            
            -Amortization
                of Deferred Services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,434,041
            
            
            12,434,041Common
                Shares Issued for Services
            
            
            569,743,000
            
            
            2,848,715
            
            
            
            
            
            
            
            
            (1,602,839
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,245,876Common
                Shares Issued for Bonuses
            
            
            2,462,500
            
            
            12,313
            
            
            
            
            
            
            
            
            86,187
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            98,500Common
                Shares Issue for Stock Rights
            
            
            2,950,000
            
            
            14,750
            
            
            
            
            
            
            
            
            44,250
            
            
            (59,000
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Cash
                Received for Stock Rights
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,375,462
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,375,462Net
                Loss
            
            
            10,606,704,620
            
            
            53,033,523
            
            
            -
            
            
            -
            
            
            (32,364,118
            )
            
            6,316,462
            
            
            -
            
            
            -
            
            
            (18,872,267
            )
            
            (26,759
            )
            
            (4,520,594
            )
            
            3,566,247**BALANCE
                JUNE 30, 2006**
            
            
            12,670,133,344
            
            $
            63,350,667
            
            
            1,280,000
            
            $
            6,400
            
            $
            24,460,847
            
            $
            17,351,424
            
            
            40,000
            
            $
            (14,350
            )
            $
            (77,818,335
            )
            $
            (146,459
            )
            $
            (18,847,082
            )
            $
            4,423,112




See
      accompanying notes and accountants' report




F-7




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


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").





The
      PPN
      Network is an association with the goal of unifying and organizing independent
      and franchised postal stores nationwide.





Universal
      Express Capital Corp. was a full service asset based transportation/equipment
      leasing brokerage company.





Virtual
      Bellhop, Inc. and Luggage Express are door to door luggage transportation
      services with established unique strategic relationships with well known travel
      service providers and distribution partners.





On
      January 2, 2001, USXP sold its 51% interest in SkyWorld International Couriers,
      Inc. ("SkyNet") in exchange for 400,000, a non-exclusive license to sublicense
      the SkyNet name in connection with an international courier service in the
      United States, and delivery service credits of $700,000 provided that USXP
      shall
      not use more than $50,000 in credits in any one month, unless authorized by
      SkyNet. Through June 30, 2005 the Company has used $20,177 & June 30, 2006
      $32,506 of the aforementioned credits. Total credits used to date are $52,683.
      These credits are classed as income as used.





On
      May
      11, 2001 USXP sold all of the assets of its subsidiary Downtown Theater Ticket
      Agency, Inc. ("DTTA") for $50,000 and a promissory note of approximately
      $392,000 payable over approximately 33 years. The present value of this note
      using a 9% discount rate is $119,402. Due to the uncertainty of collectability
      and the non-recourse nature of this long-term note the Company has recorded
      a
      reserve of $111,702, resulting in an unreserved other receivable of $7,700,
      representing approximately 1 year of payments. The Company did not receive any
      payments on this note after July 2001, and filed a lawsuit to collect. This
      suit
      was settled after June 30, 2004, and the Company received an initial payment
      under the settlement of $60,000, and another $55,000 to be paid $1,833 per
      month
      for 30 months. As of June 30, 2006, the Company has received $89,333 of this
      amount.





In
      addition, USXP owns several other subsidiaries with little or no activity and
      seeks new acquisitions which will complement the PBC Network.




F-8




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





Hereinafter,
      all of the aforementioned companies are collectively referred to as the
      "Company".





Going
      Concern


The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. The Company incurred losses from
      operations of $18,872,267 and $9,985,868 for the years ended June 30, 2006
      and
      2005, respectively. This condition raises 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
      operations, 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.





Principles
      of Consolidation


The
      accompanying financial statements consolidate the accounts of USXP and its
      wholly-owned subsidiaries. All significant inter-company transactions and
      balances have been eliminated in consolidation.





Revenue
      Recognition


For
      the
      luggage transportation operations, revenue is recognized upon delivery of the
      luggage.





For
      the
      transportation/equipment leasing brokerage company, revenue is recognized upon
      delivery of the transportation/equipment to the end user.





Shipping
      and Handling Costs


Shipping
      and handling costs for the luggage transportation operations are charged to
      costs of goods sold as incurred.





Advertising
      Costs


Advertising
      costs are charged to operations when incurred.


Advertising
      expense was $1,279,662 and $394,658 for the years ended June 30, 2006 and 2005,
      respectively.





Goodwill


Goodwill
      represents the excess of the purchase price of companies acquired over the
      fair
      market value of their net assets at the date of acquisition. The Company tests
      goodwill for impairment on an annual basis, relying on a number of factors
      including operating results, business plans and future cash flows. If the
      carrying value of the goodwill of a reporting unit exceeds the fair value of
      that goodwill, an impairment loss is recognized in an amount equal to the
      excess. At June 30, 2006, the Company believes that there has been no impairment
      of goodwill. This subsidiary is vital to the revenues generated in our luggage
      division and as such it is still a very valuable asset to the
      Company.




F-9




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





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.





Deferred
      Service Costs


Deferred
      service costs are recorded in connection with common stock issued to advisors
      for future services and are amortized over the period of the agreement, ranging
      from six months to ten years.





Stock
      Based Compensation


Financial
      Accounting Statement No. 123 ("SFAS No. 123), Accounting for Stock Based
      Compensation, encourages, but does not require companies to record compensation
      cost for stock-based employee compensation plans at fair value. The Company
      has
      chosen to continue to account for stock-based compensation using the intrinsic
      method prescribed in Accounting Principles Board Opinion No. 25, Accounting
      for
      Stock Issued to Employees, and related interpretations through June 30, 2006.
      Accordingly, compensation cost for stock options is measured as the excess,
      if
      any, of the quoted market price of the Company's stock at the date of the grant
      over the amount an employee must pay to acquire the stock. The Company has
      adopted the "disclosure only" alternative described in SFAS 123 and SFAS 148,
      which require pro-forma disclosures of net income and earnings per share as
      if
      the fair value method of accounting had been applied.





Stock
      Based Compensation, continued


As
      required by Statement No. 123 the Company accounts for stock issued for services
      to non-employees by reference to the fair market value of the Company's stock
      on
      the date of issuance.





Basic
      Loss Per Common Share


Net
      loss
      per common share is calculated utilizing the weighted average number of common
      shares outstanding during the period. Common stock equivalents and contingently
      issuable shares have not been included in the computation since the effect
      would
      be anti-dilutive.





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.





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




F-10




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





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.





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, 2006, the Company believes that there has been
      no
      impairment of its long-lived assets.





Marketable
      Securities


Investments
      in marketable securities are classified as available-for-sale and are recorded
      at fair value with any unrealized holding gains or losses included in unrealized
      loss on marketable securities, which is a component of accumulated other
      comprehensive income (loss) in stockholders' equity.





Segment
      Disclosure


The
      Company uses the "management approach" model for segment reporting. The
      management approach model is based on the way a company's management organizes
      segments within the company for making operating decisions and assessing
      performance.





As
      such,
      the Company has two major segments for the year ended June 30, 2006: Logistics
      and International Shipping, Transportation/Equipment Leasing Brokerage and
      Parent (other). Logistics and International Shipping includes Virtual Bellhop,
      LLC, Luggage Express, Worldpost, and Private Postal Center
      Network.com.





Comprehensive
      Income


The
      Company has adopted Statement of Financial Accounting Standards No. 130 ("SFAS
      130") "Reporting Comprehensive Income". Comprehensive income is comprised of
      net
      income (loss) and all changes to the statements of stockholders' equity, except
      those due to investments by stockholders, changes in paid-in capital and
      distributions.





NOTE
      2 -
      CONCENTRATION OF CREDIT RISK





The
      Company places its cash in what it believes to be credit-worthy financial
      institutions. However, cash balances may exceed FDIC insured levels at various
      times during the year.





NOTE
      3 -
      LOAN TO OFFICER





Prior
      to
      the enactment of the Sarbanes-Oxley act, the Company's Chief Executive Officer,
      in accordance with the such officer' employment contract was entitled to secure
      loans from the Company in an amount not to exceed $950,000. The board agreed
      to
      forgive 10% per year




F-11





UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





(2.5%
      quarterly) of the outstanding balance of the Company loans to such officer,
      commencing January 2, 2001. These loans bear interest at the applicable federal
      rate, which approximated 6%. As of June 30, 2006 the amount owed under such
      loan
      is $722,709.





NOTE
      4 -
      RELATED PARTY RECEIVABLES





As
      of
      June 30, 2006, the Company had advanced $906,000 to the spouse of the Chief
      Executive Officer, who is also an employee of the Company. These loans were
      advanced from 1999-2003, pursuant to the First Amended Plan of Reorganization
      of
      Packaging Plus Services, Inc., that the Reorganization Court approved in
      February 18, 1994 (the “Reorganization Plan”) and the Long Term Employment
      Agreement part of the Reorganization Plan, which authorized the Chief Executive
      Officer of the Company to receive loans from the Company. In 1999, at the
      recommendation of the Company’s then accountants, all future loans under the
      Reorganization Plan and Employment Agreement for the Chief Executive Officer
      were recorded in the name of his spouse. The Company feels that there is
      adequate security for the advances based on the relationship of the borrower
      to
      the Chief Executive Officer of the Company.





NOTE
      5 -
      NOTES RECEIVABLES





These
      notes are from previous acquisitions of Universal Jet Aviation and Bags To
      Go.
      These acquisitions were resold immediately to the former owners within the
      same
      acquisition period. The note due from Universal Jet Aviation is $631,305 and
      Bags To Go is $216,748. The Company believes these notes are collectable and
      are
      pursuing avenues to collect them.





NOTE
      6 -
      MARKETABLE INVESTMENT SECURITIES





Cost
      and
      fair value of the Company's investment in available for sale equity securities
      as of June 30, 2006 are as follows:


AMORTIZED
                  COSTS
              GROSS
                  UNRELATED LOSS
              FAIR
                  VALUE$
                  120,000
              $
                  (119,700)
              $      
                   300$
                  200,000
              $  
                  (26,759)
              $
                  173,241


F-12




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE
      7
      -PROPERTY AND EQUIPMENT


Property
                  and equipment at June 30, 2006 consists of the following:Leasehold
                  improvements
              
              $
              47,028Office
                  equipment
              
              
              153,389Furniture
                  and fixtures
              
              
              98,490Vehicles
              
              
              75,061373,968Less
                  accumulated depreciation and amortization
              
              
              167,136$
              206,832




NOTE
      8 -
      OTHER CURRENT ASSETS





Other
      current assets as of June 30, 2006 consist of the following:




Prepaid
                  legal fees
              
              $
              170,000Employee
                  advance
              
              
              20,315Deposit
              
              
              92,000Escrow
                  deposits
              
              
              275,000Investment
              
              
              173,541$
              730,856




Escrow
      deposits are earnest monies deposited on three separate real estate
      transactions. All three deposits were returned to the Company subsequent to
      year-end as each transaction failed to go forward.





NOTE
      9 -
      NOTES PAYABLE





Notes
      payable at June 30, 2006 consist of the following:




Note
                  payable, due upon demand, bearing interestat
                  rate of 18% per annum
              
              $
              25,000Notes
                  payable, due upon demand, bearing interestat
                  a rate of 18% per annum
              
              
              22,500$
              47,500


F-13


UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE
      10 -
      BANK LINE OF CREDIT





The
      Company has a line of credit under which the bank has agreed to make loans
      up to
      $70,000 at 1.75% above the prime interest rate. At June 30, 2006, the
      outstanding balance on the line of credit was $13,018.





NOTE
      11 -
      LONG-TERM DEBT





Long-term
      debt at June 30, 2006, is comprised of the following:




Promissory
                  note to bank payable in equal monthly installmentsof
                  $2,167 plus interest through October 2006. The note bearsinterest
                  at the rate of 2% over the then prevailing prime rate.The
                  note is secured by substantially all the Company's assets.
              
              $
              8,831Loans
                  payable to former owners of Virtual Bellhop, LLC, payable in monthlyinstallments
                  of $3,333 plus interest at 4% through May 2005 (in default)
              
              
              81,998Total
              
              
              90,829Less
                  current maturities
              
              
              90,829Long-Term
                  Debt, Net of Current Maturities
              
              $
              0




Total
      maturities of long-term debt are as follows:




Year
                  ended June 30,2007
              
              $
              90,8292008
              
              
              02009
              
              
              02010
              
              
              02011
              
              
              0$
              90,829


NOTE
      12 -
      CONVERTIBLE DEBENTURE





The
      Company issued a $100,000 convertible debenture in 1997. Such debenture is
      still
      outstanding and bears interest at 18% per annum. Any payment or conversion
      of
      this debenture is disputed by the Company.


F-14


UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE
      13 -
      COMMITMENTS AND CONTINGENCIES





The
      Company leases certain office space and equipment under operating lease
      agreements with unrelated parties. The base rent under these agreements
      aggregates approximately $21,934 per month. The related leases expire between
      July 2006 and 2008.





The
      following is a schedule of future minimum rental payments (exclusive of common
      area charges) required under operating leases that have remaining non-cancelable
      lease terms in excess of one year as of June 30, 2005.




Year
                  ended June 30,2007
              
              
              506,5942008
              
              
              353,066$
              859,660


Rent
      expense charged to operations was $410,660 and $306,438 for the years ended
      June
      30, 2006 and 2005, respectively.





The
      leases also contain provisions for contingent rental payments based upon
      increases in taxes, insurance and common area maintenance expenses as well
      as
      renewal options.





The
      employment agreement with the Company's Chief Executive Officer provides for
      an
      annual base salary of $650,000 per annum.





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.





On
      July
      5, 2001, the Company was awarded a $389 million judgment by a jury in Dade
      County, Florida against the Company's former investment banker. On April 23,
      2003, the Company was awarded an additional $137 million judgment against two
      other parties related to this matter. The Company is currently pursuing
      collection of the judgments. At this time, however, no estimate can be made
      as
      to the time or amount of collection.





NOTE
      14 -
      INCOME TAXES





At
      June
      30, 2006 the Company had approximately $77,000,000 of net operating loss carry
      forwards expiring beginning in 2009 through 2026. A substantial amount of the
      carry forwards are subject to annual limitations pursuant to provisions
      contained in the Internal Revenue Code





F-15




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





which
      become effective when an "ownership change", such as the ownership change
      effected pursuant to the Reorganization Plan 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 limitations.





Deferred
      tax assets in the amount of approximately $26,000,000 (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, 2006 were from net
      operating losses. The deferred tax assets have been presented in the Company's
      financial statements as follows:




Total
                  deferred tax assets
              
              $
              26,000,000Less:
                  valuation allowance
              
              
              (26,000,000
              )Net
                  deferred tax assets
              
              $
              0


The
      increase in the valuation allowance of $2,400,000 during the year ended 2006
      was
      due to the additional allowance provided for the 2006 net operating
      loss.





The
      Provision for Income Taxes differs from the amount computed by applying the
      statutory federal income tax rate to income before provision for income taxes
      as
      follows:


JUNE
                  30,2006
              
              2005Benefit
                  computed at the statutory rate
              
              $
              2,400,000
              
              $
              4,000,000Losses
                  for which no benefit recognized
              
              
              (2,400,000
              )
              
              (4,000,000
              )Benefit
                  recorded
              
              $
              0
              
              $
              0




NOTE
      15 -
      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.





F-16




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





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, 2006, the Company issued 4,042,003,120 shares of common
      stock for the following; 569,743,000 shares were issued in exchange for advisory
      services rendered, 2,950,000 shares were issued to investors for stock rights,
      3,466,847,620 shares were issued in exchange for cash and 2,462,500 shares
      were
      issued for bonuses. In addition, advisory fees were prepaid to consultants
      retained by the Company to provide certain advisory services via the issuance
      of
      6,564,701,500 common shares. The common shares were valued at their approximate
      fair market value on the dates of issuance and are being amortized over their
      respective contract periods.





NOTE
      16 -
      TREASURY STOCK





The
      Company has bought an aggregate 50,000 shares from one investor for $18,000.
      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. During the years ended June 30, 2006 the Company retired
      0 shares of treasury stock.





NOTE
      17 -
      STOCK RIGHTS





Stock
      rights represent amounts received from investors for their future rights to
      purchase restricted shares of stock of the Company at prices to be negotiated
      with the Company at a future date. At such future date, as determined by the
      investor, the investor will determine with the Company the price for the shares
      and the investor and the Company will enter into a Subscription Agreement for
      the price per share and the amount of the restricted shares will be set forth
      in
      the Subscription Agreement. Sometime thereafter, the amount of the restricted
      shares set forth in the Subscription Agreement will be issued from Treasury
      and
      transmitted to the investor. The future price for the shares are determined
      by
      the investor and the Company dependent on the prospects for the Company, its
      development and other factors. The purchase price for shares under these
      Subscription Agreements have varied from $.0003 to $0.32 per share.





NOTE
      18 -
      COLLATERAL STOCK





This
      stock was given as collateral for part of the purchase price for the proposed
      acquisition of North American Airlines in 2003. This matter is presently in
      litigation.





NOTE
      19 -
      DEFERRED COMPENSATION





Deferred
      Compensation is Stock issued to advisors for future services under an agreement
      for a specific term. The terms range anywhere from 3 months to 10 years. The
      stock is valued at


F-17


UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





market
      price on the date of issuance and is amortized and expensed based on the terms
      of the agreement.





NOTE
      20 -
      SEGMENT INFORMATION





YEAR
      ENDED JUNE 30, 2006:


Transportation/Logistics
                  &
              
              EquipmentInternational
              
              Leasing
              
              ParentShipping
              
              Brokerage
              
              (Other)
              
              ConsolidatedREVENUE
              
              $
              1,073,486
              
              $
              0
              
              $
              0
              
              $
              1,073,486OPERATING
                  LOSS
              
              $
              (2,330,282
              )
              $
              0
              
              $
              (16,591,926
              )
              $
              (18,922,208
              )YEAR
                  ENDED JUNE 30, 2005:Transportation/Logistics
                  &
              
              
              EquipmentInternational
              
              
              Leasing
              
              
              ParentShipping
              
              
              Brokerage
              
              
              (Other)
              
              
              ConsolidatedREVENUE
              
              $
              575,652
              
              $
              355,357
              
              $
              0
              
              $
              931,009OPERATING
                  LOSS
              
              $
              (796,434
              )
              $
              (531,501
              )
              $
              (8,745,711
              )
              $
              (10,073,646
              )


Assets
      of
      the segment groups are not relevant for management of the businesses, or for
      disclosure.




NOTE
      21 -
      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.





NOTE
      22 -
      LEGAL PROCEEDINGS





The
      Company filed a lawsuit in New York against North American Airlines and its
      principal for $168,000,000 plus damages. The suit is pending.




F-18




UNIVERSAL
      EXPRESS, INC.


June
      30,
      2006


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





On
      July
      26, 2001, the Company was awarded a $389 million judgment by a jury in Dade
      County, Florida against the Company's former investment banker. On April 23,
      2003, the Company was awarded an additional $137 million judgment against two
      other parties related to this matter. The





Company
      is currently pursuing collection of the judgments. At this time, however, no
      estimate can be made as to the time or amount of collection.





NOTE
      23 -
      LEGAL PROCEEDINGS, continued





On
      March
      2, 2004, the Company brought an action against the SEC in Federal Court in
      Florida on damages from the “naked shorting” of its shares and other matters.
      Thereafter, on March 23, 2004, the SEC brought an action in Federal Court in
      New
      York against certain officers of the Company. Both suits are
      pending.





On
      October 5, 2005, the Company brought suit against Capitalliance Financial
      Services, LLC, and individuals and firms associated with Capitalliance
      $269,000,000 for fraud, false documents and misrepresentation. The suit is
      pending.





On
      January 3, 2006, the Company brought suit against Coach Industries Group, and
      related companies for $160,000,000 for fraud and breach of contract. The suit
      is
      pending.





The
      Company is involved in several lawsuits with vendors, suppliers and
      professionals. These claims are disputed by the Company. The Company believes
      these matters will not have a material adverse effect on the Company’s financial
      position.





F-19


ITEM
      8




CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS


ON
      ACCOUNTING AND FINANCIAL DISCLOSURE




On
      May
      15, 2006, our independent auditor, Durland & Company, CPAs, PA (“Durland”),
      resigned unexpectedly, and on July 21, 2006, we engaged Pollard-Kelly Auditing
      Services, Inc. (“Pollard”) as our new independent auditor. Our board of
      directors approved the engagement of Pollard on July 21, 2006. During
      the fiscal years 2004 and 2005 and through July 21, 2006, we had no
      disagreements with Durland on any matter of accounting principle or practice,
      financial statement disclosure, or auditing scope or procedure. Durland’s audit
      report for each of the fiscal years 2004 and 2005 contained no adverse opinion
      or disclaimer of opinion nor were they qualified or modified as to uncertainty,
      audit scope or accounting principles.





ITEM
      8A




CONTROLS
      AND PROCEDURES




As
      of the
      end of the period covered by this report, our management, with the participation
      of our chief executive officer, carried out an evaluation of the effectiveness
      of our disclosure controls and procedures (as defined in Rule 13a-15(e)
      under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that
      evaluation, our chief executive officer concluded that these disclosure controls
      and procedures were effective as of the end of the period covered by this
      report. In addition, no change in our internal control over financial reporting
      (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the
      fourth quarter of our fiscal year ended June 30, 2006 that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.




PART
      III




ITEM
      9






DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a)
      OF THE EXCHANGE ACT




A.
       DIRECTORS




Pursuant
      our Bylaws, the authorized number of members of our board of directors is five
      (5). Our sole director 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 our executive officers or certain of our subsidiaries. Each such person
      shall serve at the pleasure of the our board of directors.




13







Name
            Age
            PositionRichard
                A. Altomare
            58
            Chairman
                and CEO





Richard
      A. Altomare .
      Mr.
      Altomare, is our chairman and chief executive officer. Along with our wholly
      owned subsidiary the UniversalPost Network/Postal Nation, we are a leader of
      the
      $7 billion private postal industry. Its division, the UniversalPost
      International Courier System is engaged in international shipping. Previously,
      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 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.




C.
      COMPLIANCE WITH SECTION 16(a)




Based
      on
      a review of forms submitted to us during and with respect to the current period,
      we are not aware of any director, officer, or beneficial owner of more than
      10%
      of any class of our equity securities that failed to file on a timely basis
      the
      reports required by Section 16(a) of the Exchange Act during the current
      period.




ITEM
      10




EXECUTIVE
      COMPENSATION




A.
       COMPENSATION OF EXECUTIVE OFFICERS.




The
      following table sets forth information concerning the annual and long-term
      compensation of our chief executive officer and other individuals acting in
      a
      similar capacity for the past five fiscal years. No other information is
      included regarding compensation paid to other executive officers during such
      five 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 our chief
      executive officer, any other individuals acting in a similar capacity, or any
      other executive officer 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 annual report 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.




14




SUMMARY
      COMPENSATION TABLE




Annual
                Compensation
            
            Long-Term
              Compensation
                Awards(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)Name
                & Principal
              Position
            
            Fiscal
              year
            
            Annual
              Salary
            
            Annual
              Bonus
            
            Other
                Annual
              Compensation
            
            #
                of
              OptionsRichard
                A. Altomare
            
            
            2002
            
            
            300,000
            
            $
            0
            
            $
            0
            
            
            0Chairman
                & CEO
            
            
            2003
            
            
            300,000
            
            $
            0
            
            $
            0
            
            
            02004
            
            
            500,000
            
            $
            0
            
            $
            0
            
            
            02005
            
            
            600,000
            
            $
            0
            
            $
            0
            
            
            02006
            
            
            650,000
            
            $
            0
            
            $
            0
            
            
            0




During
      our reorganization commencing in 1991 until June 30, 2002, Mr. Altomare received
      no cash compensation under his employment agreement approved by the
      Reorganization Court. Such agreement currently entitles him to an annual base
      salary of at least $650,000. For fiscal year ended June 30, 2006, Mr. Altomare
      received $650,000 in cash compensation under his employment
      agreement.




OPTION
      GRANTS IN CURRENT PERIOD




Individual
                Grants(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)Name
            
            Options
                Granted
            
            %
                of Total Options Granted to Employees in Current Period
            
            Exercise
                Price
            
            Expiration
                DateRichard
                A. AltomareChairman
                & CEO
            
            
            0
            
            
            0
            
            
            0
            
            
            0





15


AGGREGATED
      OPTION EXERCISES


IN
      CURRENT PERIOD AND FY-END OPTION VALUES





(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)Name
            
            Shares
                acquired on Exercise (#)
            
            Value
              Realized
                ($)
            
            #
                  of unexercised options atFY-end(#)Exercisable/Unexercisable
            
            value
                  of unexercised
                in-the-money
                  options at
                FY-end($)Exercisable/UnexercisableRichard
                A. AltomareChairman
                & CEO
            
            
            0
            
            
            0
            
            
            0/0
            
            
            0/0








B.
       COMPENSATION OF DIRECTORS




In
      our
      current period, there were no arrangements pursuant to which any director was
      compensated for any service provided as a director.




C.
       EMPLOYMENT CONTRACTS AND RELATED MATTERS




We
      have
      an employment contract with Mr. Altomare that was approved by the Reorganization
      Court as part of our Reorganization Plan, which currently provides an annual
      base salary of $650,000. 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 our class A and class
      B
      common stock, 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 us in which we are not the surviving corporation,
      (B)
      the sale of all or substantially all of our assets, 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 our then outstanding voting securities. The employment agreement
      further provides certain restrictive covenants and nondisclosure obligations
      upon Mr. Altomare during the term of the agreement.




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
      our service. Such loan had a balance of $722,709 as of June 30,
      2006.




16




ITEM
      11




SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS




A.
       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS




We
      know
      of no stockholder that beneficially owns, as of June 30, 2006, more than five
      percent of our class A common stock. This information is based on 12,670,133,343
      shares of class A common stock issued and outstanding as of June 30, 2006.
      For
      purposes of this section, we assume 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 our articles of
      incorporation, have been so converted.




B.
       SECURITY OWNERSHIP OF MANAGEMENT




The
      table
      below sets forth information with respect to the number of shares of our class
      A
      common stock that are beneficially owned by each director and executive officer
      and by all of our directors and officers as a group as of June 30, 2006. This
      information is based on 12,670,133,343 shares of class A common stock issued
      and
      outstanding as of June 30, 2006. 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 our Articles of Incorporation, have been so converted.




Name
                and Address of
              Beneficial
                Owner
            Amount
                and Nature of
              Beneficial
                Ownership
            %
                of
              Common
                StockRichard
                A. Altomare5295
                Town Center Rd.
              Boca
                Raton, FL 33486
            22,990,173
                shares
            .0018%




ITEM
      12




CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS




Richard
      A. Altomare, our chairman and chief executive officer, served from 1991 until
      May 11, 1994 as advisor and reorganization consultant to us and the
      Reorganization Court during our reorganization. We and the Reorganization Court
      appointed Mr. Altomare as chairman and president through a long-term employment
      agreement, approved by the Reorganization Court as part of our Reorganization
      Plan, a position he has continually occupied thereafter.




During
      our reorganization, commencing in 1991 until June 30, 2002, Mr. Altomare
      received no cash compensation under his employment agreement approved by the
      Reorganization Court. Such agreement currently entitles him to an annual base
      salary of at least $650,000. For fiscal year ended June 30, 2006, Mr. Altomare
      received $650,000 in cash compensation under his employment
      agreement.




17




Mr.
      Altomare’s outstanding loan balance under his employment agreement as of June
      30, 2006 is $722,709.




As
      of
      June 30, 2006, we have advanced $906,000 to the spouse of the chief executive
      officer, who is also one of our employees.






18


ITEM
      13




EXHIBITS


(A)
              Exhibits2.1*
              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.31
              Rule
                  13a-14(a) Certifications32
              Section
                  1350 Certifications
 _______________________
 *
              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).




19




ITEM
      14




PRINCIPAL
      ACCOUNTANT FEES AND SERVICES




We
      paid
      or accrued the following fees in each of the prior two fiscal years to our
      principal accountants, for 2006, Pollard-Kelly Auditing Services, Inc. and
      Durland & Company, CPA’s, P.A., and, for 2005, Durland & Company, CPA's,
      P.A.:




Year
                ended
              June
                30,
              2006
            
            Year
                ended
              June
                30,
              2005Audit
                fees
            
            $
            75,500
            
            $
            71,000Audit-related
                fees
            
            
            -
            
            
            -Tax
                fees
            
            
            -
            
            
            -All
                other fees
            
            
            -
            
            
            -Totals
            
            $
            75,000
            
            $
            71,000





We
      have
      not designated a formal audit committee. However, as defined in Sarbanes-Oxley
      Act of 2002, our entire board of directors, in the absence of a formally
      appointed committee, is, by definition, our audit committee.




In
      discharging its oversight responsibility as to the audit process, commencing
      with the engagement, the board obtained from its independent auditors a formal
      written statement describing all relationships between the auditors and us
      that
      might bear on the auditors’ independence as required by Independence Standards
      Board Standard No. 1, “Independence Discussions with Audit Committees.” The
      board discussed with the auditors any relationships that may impact their
      objectivity and independence, including fees for non-audit services, and
      satisfied itself as to the auditors' independence. The board also discussed
      with
      management and the independent auditors the quality and adequacy of our internal
      controls. The board reviewed with the independent auditors their management
      letter on internal controls, if one was issued by our auditors.




The
      board
      discussed and reviewed with the independent auditors all matters required to
      be
      discussed by auditing standards generally accepted in the United States,
      including those described in Statement on Auditing Standards No. 61, as amended,
      “Communication with Audit Committees”.




The
      board
      reviewed our audited financial statements as of and for the years ended June
      30,
      2006 and 2005 with management and its independent auditors. Management has
      the
      sole ultimate responsibility for the preparation of our financial statements,
      and the respective independent auditors have the responsibility for their
      examination of those statements.


20


Based
      on
      the above-mentioned review and discussions with the respective independent
      auditors and management, the board of directors approved our audited financial
      statements and recommended that they be included in our annual report on Form
      10-KSB for the year ended June 30, 2006, for filing with the Securities and
      Exchange Commission.




Our
      principal accountants for the year ended June 30, 2006, Pollard-Kelley Auditing
      Services, Inc., and, for the year ended June 30, 2005, Durland & Company,
      CPA's P.A., did not engage any other persons or firms other than the respective
      principal accountant's full-time, permanent employees.




SIGNATURES:




In
      accordance with Section 13 and 15(d) the Securities Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned
      thereunto duly authorized.




UNIVERSAL
                EXPRESS, INC.Date:
                December 21, 2006
            By:
            /s/ Richard
              AltomareRichard
              A. Altomare, Chief Executive Officerand
                Chairman of the Board






21