U.S. SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                   FORM 10-QSB

                                   (Mark One)

            _X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended October 2, 1999

            ___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
               For the transition period from _______ to _______ .

                           Commission File No. 0-27780


                       UNITED SHIPPING & TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)


           Utah                                          87-0355929
----------------------------                  ---------------------------------
(State or Other Jurisdiction                  (IRS Employer Identification No.)
of Incorporation or Organization)


            9850 51st Avenue North, Suite 110, Minneapolis, MN 55442
            --------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)


       Registrant's Telephone Number, Including Area Code: (612) 941-4080


Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ( )

As of November 1, 1999, there were 13,168,440 shares of common stock of the
registrant issued and outstanding.


Transitional Small Business Disclosure.

                   YES ( )                             NO (X)



<PAGE>



                       UNITED SHIPPING & TECHNOLOGY, INC.


                                   FORM 10-QSB

                      FOR THE QUARTER ENDED OCTOBER 2, 1999

                                      INDEX
                                      -----

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION.................................................3

ITEM 1.

                  Condensed Consolidated Financial Statements (UNAUDITED) .....3


         a)       Condensed Consolidated Balance Sheets -
                  October 2, 1999 and June 30, 1998............................3

         b)       Condensed Consolidated Statements of
                  Operations - Quarters ended
                  October 2, 1999 and September 30, 1998.......................4

         c)       Condensed Consolidated Statements of
                  Cash Flows - Quarters ended
                  October 2, 1999 and September 30, 1998.......................5

         d)       Notes to Condensed Consolidated Financial
                  Statements...................................................6


ITEM 2.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations................9


PART II. OTHER INFORMATION....................................................14

ITEM 1.           Legal Proceedings...........................................14

ITEM 2.           Changes in Securities and Use of Proceeds...................16

ITEM 3.           Defaults upon Senior Securities.............................18

ITEM 4.           Submission of Matters to a Vote of Securities Holders.......18

ITEM 5.           Other Information...........................................18

ITEM 6.           Exhibits ...................................................18

                  SIGNATURES..................................................20

EXHIBIT INDEX.................................................................21


                                       2

<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
             (Dollar amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                          October 2, 1999   June 30, 1999
                                                                          ---------------   -------------
                                                                            (UNAUDITED)
<S>                                                                            <C>                 <C>
                          ASSETS

Current assets:
              Cash .................................................           4,084               252
              Accounts receivable, net of an allowance for .........          66,642               275
                  doubtful accounts ................................              --                --
              Other current assets .................................           5,251             1,449
                                                                            --------           -------

                          Total  current assets ....................          75,977             1,976

Property and equipment:
              Land .................................................             779                --
              Building and leasehold improvements ..................           4,054                --
              Furniture, equipment and vehicles ....................          15,036             1,811
                                                                            --------           -------
                                                                              19,869             1,811
              Less:  accumulated depreciation ......................          (1,479)             (953)
                                                                            --------           -------
                                                                              18,390               858

Goodwill ...........................................................          35,487             1,426

Other assets .......................................................           2,834               128
                                                                            --------           -------

                          Total assets .............................         132,688             4,388
                                                                            ========           =======

Current liabilities:
              Trade accounts payables ..............................          21,229               557
              Accrued auto and workers' compensation claims ........          23,011                --
              Other accrued liabilities ............................          24,257               228
              Current portion of long-term debt and capital leases .           9,802                40
                                                                            --------           -------

                          Total current liabilities ................          78,299               825

Long-term debt and capital leases ..................................          49,287               617
                                                                            --------           -------

                          Total liabilities ........................         127,586             1,442

Shareholder's equity:
              Common stock, $.004 par value, 11,451,892 shares
                  issued and outstanding ...........................              46                42
              Additional paid-in capital ...........................          19,324            15,571
              Retained earnings ....................................         (14,282)          (12,667)
              Other comprehensive income ...........................              14                --
                                                                            --------           -------

                          Total shareholder's equity ...............           5,102             2,946
                                                                            --------           -------

                          Total liabilities and shareholder's equity         132,688             4,388
                                                                            ========           =======
</TABLE>

 The accompanying notes are an integral part of the condensed and consolidated
                             financial statements.


                                       3
<PAGE>

                          U-SHIP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                   (UNAUDITED)
             (Dollar amounts in thousands, except per share amounts)


                                               Quarter Ended    Quarter Ended
                                                October 2,      September 30,
                                                   1999             1998
                                               -------------    -------------

Revenue ....................................    $     53,724     $       124
Cost of Service ............................          42,439             127
                                                ------------     -----------

   Gross Profit (loss) .....................          11,285              (3)

Selling, general and administrative expenses          12,764             623
                                                ------------     -----------

Loss from operations .......................          (1,479)           (626)

Interest expense ...........................             188               3
Interest income ............................             (51)            (24)
                                                ------------     -----------


Net loss ...................................    $     (1,616)    $      (605)
                                                ============     ===========

Basic & diluted
  net loss per share .......................    $      (0.15)    $     (0.12)
                                                ------------     -----------

Basic & diluted weighted
  average number of common
  shares outstanding .......................      11,027,010       4,979,709
                                                ============     ===========

 The accompanying notes are an integral part of the condensed and consolidated
                             financial statements.

                                       4
<PAGE>


                       UNITED SHIPPING & TECHNOLOGY, INC.
               Condensed and Consolidated Statements of Cash Flows
                                   (UNAUDITED)
             (Dollar amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                           Quarter Ended            Quarter Ended
                                                                            October 2,              September 30,
                                                                               1999                     1998
                                                                           -------------            -------------
<S>                                                                          <C>                       <C>
OPERATING ACTIVITIES
     Net Loss ..............................................                 $ (1,615)                 $(605)
     Adjustments to reconcile net loss to net cash flows
         used for operating activities-
             Depreciation and amortization .................                      737                    121
             (Gain)/Loss on retirement of equipment ........                     (118)                    --
     Change in operating assets and liabilities:
             Accounts receivable ...........................                   (4,591)                     4
             Other current assets ..........................                    1,299                     (7)
             Other assets ..................................                     (304)                    --
             Accounts payable ..............................                    3,111                     98
             Accrued liabilities and deferred revenue ......                    1,193                    (82)
                                                                             --------                  -----
                Cash used by operating activities ..........                     (288)                  (471)
                                                                             --------                  -----

INVESTING ACTIVITIES
     Proceeds from sale of equipment .......................                      172                     --
     Purchases of property and equipment ...................                     (373)                   (16)
     Acquisition of business, net of cash received .........                  (55,065)                    --
     Redemption of short-term investments ..................                       --                    400
                                                                             --------                  -----
                Cash provided by investing activities ......                  (55,266)                   384
                                                                             --------                  -----

FINANCING ACTIVITIES
     Payments on notes payable and long-term debt ..........                  (13,671)                   (33)
     Proceeds from notes payable and long-term debt ........                   71,610                     --
     Proceeds from sale of common stock ....................                    1,433                     --
                                                                             --------                  -----
                Cash provided (used) by financing activities                   59,372                    (33)
                                                                             --------                  -----

Effect of currency exchange rat changes on cash ............                       14                     --
                                                                             --------                  -----
Net increase (decrease) in cash and cash equivalents .......                    3,832                   (120)

Cash and cash equivalents, beginning of period .............                      252                    154
                                                                             --------                  -----

Cash and cash equivalents, end of period ...................                 $  4,084                  $  34
                                                                             ========                  =====


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Cash paid for interest ................................                 $     84                  $   3
                                                                             ========                  =====
</TABLE>

 The accompanying notes are an integral part of the condensed and consolidated
                             financial statements.


                                       5
<PAGE>


               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


The condensed consolidated financial statements included herein have been
prepared by United Shipping & Technology, Inc. which, together with its
wholly-owned subsidiaries, shall be referred to herein as the "Company," without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of the Company, all adjustments consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of October 2, 1999, and the results of its operations for the
quarters ended October 2, 1999 and September 30, 1998, and its cash flows for
the quarters ended October 2, 1999 and September 30, 1998 have been included.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements for the year ended June 30, 1999,
and the footnotes thereto, included in the Company's Report on Form 10-KSB,
filed with the Securities and Exchange Commission.


1.   Basis of Presentation:


Principles of consolidation - The consolidated financial statements include the
accounts of United Shipping & Technology, Inc. and its wholly owned
subsidiaries. All inter-Company balances and transactions have been eliminated
in the consolidation.

Change in Fiscal Year - On November 10, 1999, the Company approved a change in
its fiscal year from a June 30th year end to a 52-53 week fiscal year ending on
the Saturday closest to June 30th, beginning in fiscal year 2000. Each quarter
will consist of a 13-week period ending on a Saturday. In fiscal years
consisting of 53 weeks, the final quarter will consist of 14 weeks. For fiscal
2000, the quarter end dates are October 2, 1999, January 1, 2000, April 1, 2000
and July 1, 2000.


2.   Revenue Recognition:


The Company has historically generated revenue from: Same-day delivery
operations conducted through the Company's Advanced Courier Services, Inc.
subsidiary, and to a lesser extent, the per-package shipping revenue generated
from ongoing shipping volume at its intelligent shipping kiosks (ISKs), and the
sale of ISKs and custom built intelligent kiosks. Revenues for the quarter ended
October 2, 1999 also include for the first time, revenues from the Company's
newly-acquired same-day delivery business subsidiary, UST Delivery Services,
Inc. ("Delivery Services").

Revenue from the same-day delivery services is recognized when services are
rendered to customers. Package shipping revenue is recognized when the package
is shipped.


3.   Basic and Diluted Net Loss Per Share:


In the second quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings per Share" which is effective for interim periods ending after
December 15, 1997. As a result, all prior period earnings per share data has
been restated. The adoption of SFAS No. 128 did not have a significant impact on
previously reported earnings per share. Basic earnings per common share was
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the period. Dilutive earnings per common share
were computed similar to the computation of basic earnings per share, as the
inclusion of options and warrants would be antidilutive. Total options and
warrants outstanding for the quarters ended October 2, 1999 and September 30,
1998 were 6,011,285 and 4,418,576, respectively.



                                       6
<PAGE>

4.   Comprehensive Income:


As of July 1, 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME. Statement 130 established new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net loss
or stockholders' equity. Statement 130 requires the foreign currency translation
adjustments to be included in other comprehensive income.


5.   Use of 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.


6.   Acquisitions:


On September 24, 1999 (with an effective date of August 28, 1999), the Company
acquired from CEX Holdings, Inc. ("CEX") all the outstanding shares of common
stock of Corporate Express Delivery Systems, Inc. ("CEDS"), a provider of same
day delivery solutions. The purchase price was approximately $62,500, subject to
adjustment as defined in the merger agreement. The adjustment is expected to be
finalized in the second quarter. The purchase price consisted of $43,000 in cash
provided by institutional debt financing from General Electric Capital
Corporation ("GE") and Bayview Capital Partners, LP ("Bayview"), and the
remainder in a combination of short and long-term notes issued to CEX (see Debt
Footnote). The acquisition has been accounted for under the purchase method of
accounting. The excess purchase price over the estimated fair value of the net
tangible assets acquired has been allocated to goodwill and is being amortized
on a straight-line basis over 20 years.


The purchase price allocation is preliminary, as the Company has not had a
sufficient amount of time to adequately value the assets and liabilities
acquired or evaluate the effects of restructuring activities and deferred taxes.
The Company expects to make adjustments to the allocation of the purchase price
during the second quarter.


The following unaudited pro forma financial information for the first fiscal
quarter gives effect to the CEDS acquisition as if it had occurred at the
beginning of fiscal years 2000 and 1999. The pro forma results were prepared for
comparative purposes only and are not indicative of the results of operations
which actually would result had the acquisition occurred on the date indicated,
or which may result in the future.

                                                     2000                1999

         Revenues                             $   140,319          $  160,843
         Operating income (loss)                   (8,078)               (261)
         Net loss                                  (9,225)             (1,243)
         Net loss per common share                  (0.84)              (0.25)
         Weighted average common shares
          outstanding                          11,027,010           4,979,709

7.   Long-term Debt:


Long-term debt consists of the following:

        GE Revolving Note                                    $ 35,419
        Bayview Senior Subordinated Note and Warrant            3,292
        Long-term Subordinated Note to CEX                      6,519
        Short-term Subordinated Note to CEX                     7,500
        Convertible Subordinated Note to CEX                    3,600
        6% Convertible Subordinated Note                        2,190



                                       7
<PAGE>

        Various Other Notes                                       569
                                                               ------
                                                               59,089
        Less current maturities                                 9,802
                                                               ------
        Total                                                  49,287
                                                               ======


Borrowings under the GE Revolving Note are limited to the lesser of $55,000 or
an amount based on a defined portion of receivables less the amount outstanding
on the $5,000 Swing Line Note issued to GE. Interest is payable monthly at rate
of Prime plus 0.6% (8.85% at October 2, 1999). The Company may elect the rate of
LIBOR plus 3% at its discretion from time to time. All amounts advanced are due
September 23, 2004. In addition, the Company is required to pay a commitment fee
of .375% on unused amounts of the total commitment, as defined in the agreement.

The Bayview Senior Subordinated Note has interest payable quarterly at 12% and
is due September 30, 2004. The note is subordinate to the GE Revolving Note. The
initial carrying value of the Senior Subordinated Note was reduced by $1,708 for
the estimated fair value of the common stock warrant issued to Bayview, recorded
as Additional Paid in Capital on the financial statements. The unamortized
discount aggregated $1,680 at October 2, 1999. The discount is amortized over
the life of the note. The warrant has an exercise price of $3.3125 per share and
entitles Bayview to acquire, in whole or in part, 1,366,200 shares of the
Company's common stock, subject to adjustment for certain anti-dilution rights
as defined in the warrant purchase agreement. The Company is required to redeem
the warrants or repurchase the stock issued upon exercise at the request of the
holder or upon the happening of certain events, such as default, the sale of 50%
of the Company's stock or assets, or after the fifth anniversary of the date of
the warrant. The purchase price for the common stock upon exercise of the
warrant is at the market value (as defined in the warrant purchase agreement) of
the Company's common stock. The future carrying value of the warrant will be
adjusted periodically to its then estimated redemption value. No adjustment was
required for the period ended October 2, 1999.

The Long-term Subordinated Note issued to CEX has interest payable quarterly at
12% and is due September 24, 2004. The note is subordinate to the GE Revolving
Note and the Bayview Senior Subordinated Note.

The Short-term Subordinated Note issued to CEX has interest payable quarterly at
9% and is due September 24, 2000 and requires a mandatory prepayment upon the
exercise of the Company's warrants issued in connection with the purchase of its
Series A Preferred Stock in April and June of 1998. The note is subordinate to
the GE Revolving Note and the Bayview Senior Subordinated Note.

The Convertible Subordinated Note issued to CEX has interest payable quarterly
at 6% and is due September 24, 2004. The note is subordinate to the Revolving
Note and the Senior Subordinated note. The note is convertible in whole or in
part into shares of the Company's common stock at an exchange rate of $4.59 per
share to a maximum of 784,314 shares, subject to certain anti-dilution rights
under an exchange agreement entered into in connection with the Convertible
Subordinated Note.

Substantially all of the assets and operations of the Company's Delivery Systems
subsidiary have been pledged to secure borrowing under the GE Revolving Note,
the Bayview Senior Subordinated Note and the CEX subordinated notes. The Company
is subject to certain restrictive covenants, the more significant of which
include limitations on dividends, loans and investments, capital expenditures,
new indebtedness and changes in capital structure. The Company is also required
to maintain certain financial covenants related to minimum EBITDA and minimum
fixed charge coverage ratio. The agreements with the lenders also require the
Company to obtain the consent of the lenders for additional acquisitions.

As a result of the acquisition of CEDS, the Company is also liable on a 6%
Convertible Subordinated Note. This Note is due January 31, 2000. Interest is
payable quarterly. After December 7, 1996, the note can be converted in whole or
in part into 283,800 shares of CEX common stock at the option of the holder. If
converted, the Company will pay CEX for the principal and interest due on the
note.




                                       8
<PAGE>

8.   Commitments and Contingencies:


The Company leases equipment, vehicles and buildings under various
non-cancelable operating and capital lease agreements with terms generally
ranging from three to ten years. Future minimum lease commitments under
non-cancelable leases at October 2, 1999 range from $50,000 to $60,000. As a
result of the acquisition, the Company has not completed the valuation of these
commitments.

The Company is self-insured for automobile and workers' compensation claims.
However, the Company has elected to retain a portion of expected losses through
the use of deductibles. Provisions for losses expected under these programs are
recorded based upon the Company's estimates of the aggregate liability for
claims incurred. These estimates include the Company's actual experience based
on information received from the Company's insurance carriers and historical
assumptions of development of unpaid liabilities over time.



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS


               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



         IN ACCORDANCE WITH THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY NOTES THAT CERTAIN
STATEMENTS IN THIS FORM 10-QSB AND ELSEWHERE WHICH ARE FORWARD-LOOKING AND WHICH
PROVIDE OTHER THAN HISTORICAL INFORMATION, INVOLVE RISKS AND UNCERTAINTIES THAT
MAY IMPACT THE COMPANY'S RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, STATEMENTS CONCERNING THE COMPANY'S GENERAL BUSINESS
STRATEGIES, FINANCING DECISIONS, AND EXPECTATIONS FOR FUNDING CAPITAL
EXPENDITURES AND OPERATIONS IN THE FUTURE. WHEN USED HEREIN, THE WORDS
"BELIEVE," "PLAN," "CONTINUE," "HOPE," "ESTIMATE," "PROJECT," "INTEND,"
"EXPECT," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, NO STATEMENTS
CONTAINED IN THIS FORM 10-QSB SHOULD BE RELIED UPON AS PREDICTIONS OF FUTURE
EVENTS. SUCH STATEMENTS ARE NECESSARILY DEPENDENT ON ASSUMPTIONS, DATA OR
METHODS THAT MAY BE INCORRECT OR IMPRECISE AND MAY BE INCAPABLE OF BEING
REALIZED. THE RISKS AND UNCERTAINTIES INHERENT IN THESE FORWARD-LOOKING
STATEMENTS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN OR IMPLIED BY THESE STATEMENTS.

         READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE INFORMATION CONTAINED IN THIS FORM 10-QSB IS BELIEVED BY THE COMPANY
TO BE ACCURATE AS OF THE DATE HEREOF. CHANGES MAY OCCUR AFTER THAT DATE, AND THE
COMPANY WILL NOT UPDATE THAT INFORMATION EXCEPT AS REQUIRED BY LAW IN THE NORMAL
COURSE OF ITS PUBLIC DISCLOSURE PRACTICES.

         IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE EXPECTATIONS REFLECTED IN ANY FORWARD-LOOKING STATEMENT HEREIN
INCLUDED, AMONG OTHER THINGS (1) THE ABILITY OF THE COMPANY TO SUCCESSFULLY AND
PROFITABLY OPERATE ITS RECENTLY-ACQUIRED SAME-DAY DELIVERY BUSINESS, CORPORATE
EXPRESS DELIVERY SYSTEMS, INC. ("CEDS"), AND TO INTEGRATE ITS OPERATIONS WITH
THE COMPANY'S EXISTING OPERATIONS; (2) THE ABILITY OF THE



                                       9
<PAGE>

COMPANY TO MEET DEBT SERVICE OBLIGATIONS AND COMPLY WITH DEBT COVENANTS WITH
RESPECT TO THE DEBT INCURRED IN CONNECTION WITH THE FINANCING FOR THE
ACQUISITION OF CEDS; (3) THE ABILITY OF THE COMPANY TO DEVELOP AN E-COMMERCE
FULFILLMENT BUSINESS AND INTEGRATE THIS WITH ITS SAME-DAY DELIVERY OPERATIONS;
(4) THE ABILITY OF THE COMPANY TO MANAGE UNCERTAINTIES SURROUNDING TECHNOLOGICAL
CHANGES IN THE SAME-DAY DELIVERY AND TRANSPORTATION INDUSTRIES, AND THE
COMPANY'S DEPENDENCE UPON COMPUTER AND COMMUNICATIONS SYSTEMS AND THIRD PARTIES
WHO MANUFACTURE, MAINTAIN AND MARKET THE SAME; (5) THE ABILITY OF THE COMPANY TO
DEVELOP AND IMPLEMENT A NATIONAL BRAND IDENTITY STRATEGY FOR ITS PRODUCTS AND
SERVICES; (6) THE ABILITY OF THE COMPANY TO ACCESS PUBLIC AND PRIVATE EQUITY
MARKETS; AND (7) THE ABILITY OF THE COMPANY TO STEM OPERATING LOSSES AND
POSITION THE COMPANY TO ACHIEVE POSITIVE CASH FLOW.


GENERAL


         Beginning in 1991, the primary business of the Company was the
development, manufacturing, marketing and operation of self-service, automated
shipping systems for use by consumers and small businesses who ship packages and
priority letters through major carriers in the air express and package delivery
market. The Company's intelligent shipping kiosks ("ISKs") were designed to be
installed at the shipping hubs of major package carriers such as United Parcel
Service, and to be placed in office services and copy centers, such as Kinko's
Copy Centers, and in other retail locations such as grocery and general
merchandise stores. The Company holds nine patents related to hardware and
software utilized in its ISKs. Each ISK location is centrally controlled and
serviced through an electronic connection to the Company's computer network
system.


         In late 1997, the Company began an extensive evaluation of its
strategies and results from its placement sites. Ultimately, in 1998, the
Company's new management concluded that its historical ISK placement strategy
was not generating the business volume the Company required. In the course of
reviewing alternative directions for its business, the Company's management
determined that the same-day delivery, or "courier" business presented an
opportunity for the Company to employ its advanced technology in a large but
fragmented market and obtain an independent revenue stream in a growing
industry. Based on this determination, the Company adopted a revised business
strategy with the goal of becoming the national leader in same-day delivery and
related services through a series of acquisitions of courier businesses. The
Company's plan was to utilize its kiosks and other technology both for
self-service shipping and hub-automation purposes and in conjunction with a
planned consolidation within the same-day delivery market. The Company believes
that the rapid growth in Internet-based business, or "e-commerce," has also
presented an opportunity to leverage the Company's same-day delivery business
acquisition strategy by offering an array of integrated distribution, product
fulfillment and logistics services to corporate clients and companies engaged in
e-commerce.


         The Company began its courier acquisition strategy in late 1998,
through the acquisition of JEL Trucking, Inc., which enabled it to offer
same-day delivery and package delivery services in the Minneapolis/St. Paul
metropolitan area. In January 1999, the Company acquired Twin City
Transportation, Inc., expanding its same-day delivery service in the
Minneapolis/St. Paul metropolitan area.


         On September 24, 1999 (with an effective date of August 28, 1999), the
Company acquired CEDS from CEX Holdings, Inc. ("CEX") pursuant to a merger of
CEDS with the Company's wholly-owned subsidiary, United Shipping & Technology
Acquisition Corp. The purchase price was approximately $62,500, consisting of
$43,000 in cash provided by institutional debt financing, and the remainder in a
combination of short and long-term notes issued to CEX. CEDS was the surviving
corporation in the merger, and changed its name to UST Delivery Systems, Inc.
("Delivery Systems"). Delivery Systems is incorporated in Delaware.


         With the acquisition of CEDS, the Company believes that it has become a
leading supplier of customized delivery solutions for same-day, time-critical
shipping and distribution in the United States. The Company provides an array of
same-day ground and air delivery services, including scheduled delivery,
on-demand delivery, distribution services and air courier services, from a
network of approximately 200 locations spread among 83 of the top 100
metropolitan areas in the United States. The Company's operations are supported
by a fleet of approximately 9,800 vehicles, including 4,700 Company-leased and
owned vehicles and 5,100 vehicles utilized by



                                       10
<PAGE>

independent contractors. The Company has approximately 15,000 employees and
independent contractors. The Company's Delivery Systems subsidiary has offices
in Australia, Canada, France, Hong Kong and the United Kingdom, to facilitate
its same-day international air delivery business. Although the acquisition of
CEDS has resulted in the Company becoming one of the largest same-day delivery
services in the United States, the same-day delivery market remains highly
fragmented and is dominated by the over 6,000 independently-owned couriers
operating in local markets nationwide.

         The purchase of CEDS is a major step toward the fulfillment of the
Company's goal of becoming one of the premier same-day express delivery and
e-commerce fulfillment services in the United States. While there can be no
assurance that the Company can successfully integrate its technology into its
same-day delivery operations or that the Company's same-day delivery or other
operations will be profitable, the Company believes that its acquisition of CEDS
gives it the revenue, customer base and market penetration needed to pursue its
vision of becoming the branded leader in same-day delivery solutions.


         The Company derives revenues primarily from its same-day ground and air
delivery operations, and to a lesser extent, from package shipping transactions
and selling shipping kiosks and customized interactive kiosks. The Company's
revenues for the fiscal year ended June 30, 1999 were approximately $1,500. For
the fiscal year ended January 30, 1999, CEDS' revenue from operations was
approximately $648,300. As a result of the CEDS acquisition, one month of CEDS'
operations is included in the October 2, 1999 results. The impact of this on the
Management's Discussion and Analysis of the first quarter results has been
identified separately.


RESULTS OF OPERATIONS


         Revenue for the quarter ended October 2, 1999 increased $53,600 to
$53,724 from $124 for the quarter ended September 30, 1998. Revenues for the
Company increased $391 due to acquisitions by its Advanced Courier Systems, Inc.
("ACS") subsidiary. The remaining increase of $53,209 is the result of the
acquisition of CEDS.

         Cost of service expense increased $42,312 to $42,439 from $127 for the
quarter ended September 30, 1998. Cost of service expense for the Company
increased $261 due to acquisitions made by ACS. The remaining increase of
$42,051 is due to the CEDS acquisition.

         Selling, general and administrative expenses for the quarter ended
October 2, 1999, increased $12,141 to $12,764 from $623 for the quarter ended
September 30, 1998. Selling, general and administrative expenses for the Company
contributed $178 to the increase. The remaining increase of $11,963 is the
result of the acquisition of CEDS.

         Interest income increased to $51 for the quarter ended October 2, 1999
compared to $24 for the quarter ended September 30, 1998. The increase primarily
results from the investment of cash surpluses generated from the Company's
issuance of debt associated with the CEDS acquisition. Interest expense
increased from $3 for the quarter ended September 30, 1998, to $188 for the
quarter ended October 2, 1999. The increase is primarily due to the increase in
debt associated with the CEDS acquisition.

         Net loss for the quarter ended October 2, 1999, increased $1,011 to
$1,616 from $605 for the quarter ended September 30, 1998. The Company expects
to incur additional losses while it integrates the acquisition of CEDS into its
current business strategy.


LIQUIDITY AND CAPITAL RESOURCES


         Historically, the Company has operated at a loss and has funded its
operations from the proceeds of public and private equity offerings. Throughout
fiscal 1999 and continuing through the first quarter of fiscal 2000, the Company
has financed the implementation of its revised business strategy through various
private placements of debt and equity, including but not limited to sales of
common stock, sales of preferred stock (subsequently converted into common
stock), issuances of debt (some of which was subsequently converted into common
stock), warrant exercises and the sale of warrants. From April 1998 through
August 12, 1999, the Company raised over $4,400 in connection with these
transactions, and issued an aggregate of 5,103,498 shares of common stock




                                       11
<PAGE>

(taking into account conversions of preferred stock and debt) at prices ranging
from $0.60 to $3.125 per share, and warrants to purchase an aggregate of
2,591,750 shares of common stock at exercise prices ranging from $1.75 to $3.75
per share for periods ranging from one to five years.

         The Company continues its efforts to reduce debt and raise additional
cash for acquisitions and working capital needs. In September 1999, four
investors converted their 1998 Notes in the aggregate principal amount of $600
plus accrued interest to 135,044 shares of the Company's common stock at a
purchase price of $4.57 per share, and one-year warrants to purchase an
aggregate of 33,758 shares of the Company's common stock at an exercise price of
$4.57 per share. Also in September 1999, in connection with the CEDS purchase,
the Company called the warrants issued in connection with its sale in April and
June of 1998 of its Series A Preferred stock, and raised an additional $3,461.
The proceeds from these warrant exercises were received after October 2, 1999,
and therefore were not reflected in the accompanying financial statements. In
October 1999, the Company sold to five accredited investors 124,000 shares of
common stock at a purchase price of $4.50 per share, together with warrants to
purchase an aggregate of 12,400 shares of common stock at an exercise price of
$4.50 per share for a period of one year.

         The Company financed its acquisition of CEDS through a combination of
institutional debt financing the notes to CEX. The Company entered into a
Revolving Note agreement which allows the Company to borrow from GE, in the
aggregate under the Revolving Note, $55,000. The note agreement required, among
other things, that there be unused availability of at least $14,000 at the time
of acquisition. As of October 2, 1999, the loan had an outstanding balance of
$35,419, and the unused portion was $19,581. The proceeds from this loan were
used to fund a portion of the acquisition purchase price and are being used to
fund the Company's present and future working capital needs. The Company
anticipates that this loan will be sufficient to fund its working capital needs
for the foreseeable future.

         In fiscal 2000 and beyond, the Company plans to focus on the various
aspects of its acquisition strategy, making acquisitions in the same-day
delivery market and supporting technology, and the acquisition or building of a
nationally recognized brand name to be used in conjunction with such services.
The Company believes that these efforts will require the Company to expend
significant capital. While the Company will seek to acquire companies that have
profits or positive cash flow, or that have the potential to generate positive
cash flow in the future, it is likely that any positive cashflow that would
otherwise result will be utilized in connection with the Company's ongoing
consolidation strategy. The Company believes that these revised strategies,
while initially requiring additional cash outlays, will result in greater
revenues from same-day delivery operations, and sales and licensure of ISK
technology, although no assurance can be given that such revenues will increase
appreciably as a result of these initiatives in the near future, if at all.

         There can be no assurance that the Company will be able to generate
sufficient revenues to meet its operating cash and growth needs or that any
additional equity or debt funding will be available or at terms acceptable to
the Company in the future to continue operating in its current form. The
Company's loss for the fiscal year ended June 30, 1999 was $2,894. The Company's
loss for the quarter ended October 2, 1999 was $1,616. The Company expects to
incur losses for the foreseeable future due to the ongoing activities of the
Company, and in pursuing other aspects of its revised business strategy. The
Company will continue to require substantial additional debt or equity funding
to continue to implement its revised business strategy, which may include
additional future acquisitions. The Company's cash needs and usage may vary
based on the outcome of these initiatives. At the present time, the Company has
no commitments from any person to provide additional financing to the Company.
There can be no assurance that the necessary financing will be available to the
Company or, if available, that the same will be on terms satisfactory or
favorable to it. While the Company is not now in a position to determine the
price at which its securities may be issued in any subsequent equity or debt
financing, it is likely that additional equity or debt financing will be highly
dilutive to existing shareholders.


THE COMPANY'S YEAR 2000 READINESS


         Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates




                                       12
<PAGE>

from 20th century dates. As a result, in less than a year, computer systems and
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements.

         The Company is presently in the final stages of its efforts to achieve
compliance with Year 2000 requirements for its operations, focusing on critical
operating and applications systems, particularly the Year 2000 compliance of:
(i) voice and data communications systems; (ii) servers, personal computers and
other hardware and software; (iii) infrastructure and facilities; (iv) vendors
and suppliers; (v) the key software/hardware components vendors; and (vi) the
Company's operational systems, including financial accounting systems. The
Company believes that the following areas have been addressed:

<TABLE>
----------------------- -----------------------------------------------------------------------------------------------
<S>                     <C>
VOICE COMMUNICATIONS    All non-compliant voice communications components have been upgraded or replaced.
----------------------- -----------------------------------------------------------------------------------------------
DATA COMMUNICATIONS     All non-compliant data communications components have been upgraded or replaced.
----------------------- -----------------------------------------------------------------------------------------------
SERVERS                 Several operational system servers and file and print servers have been identified as
                        non-compliant and are in the final stages of being upgraded, replaced, or phased out of
                        service.
----------------------- -----------------------------------------------------------------------------------------------
OPERATIONAL             Some operational systems have been identified as non-compliant and are in the final stages
SYSTEMS                 of being upgraded, replaced, or phased out of service.
----------------------- -----------------------------------------------------------------------------------------------
PC HARDWARE             Several PCs in various cities have been identified as non-compliant and are in the final stages
                        of being upgraded or replaced.
----------------------- -----------------------------------------------------------------------------------------------
PC SOFTWARE             All non-compliant PC software is in the final stages of being upgraded, replaced, or phased
                        out of use.
----------------------- -----------------------------------------------------------------------------------------------
INFRASTRUCTURE          All non-compliant Infrastructure and Facilities components have been upgraded, replaced or
 AND FACILITIES         phased out of use.
----------------------- -----------------------------------------------------------------------------------------------
</TABLE>

         The Company plans to have a full support capability at and around the
time of the rollover into Year 2000. Its staff will be on-site at corporate
headquarters and all divisions to verify all major utilities, hardware,
software, and other systems and to identify and address any areas of failure.
The Company is prepared to implement its contingency plans immediately upon any
significant failure.

         The Company recognizes the need for Year 2000 contingency plans in the
event that remediation is not fully successful or that the remediation efforts
of its vendors, suppliers and governmental/regulatory agencies are not timely
completed. Each of the Company's operational functions is being assessed for
potential failures, including systems failures, infrastructure failures,
supplier problems, etc. Based upon the risk assessment, the Company will take
all or some of its contingency plans where appropriate. Contingency plans for
all critical business processes will be complete by November 30, 1999.

         The Company is confirming Year 2000 readiness with all significant
suppliers, and is focusing on those suppliers that provide its most critical
products. The Company's contingency plans with critical suppliers includes the
following steps:

o        Determine additional inventory levels required to meet expected demand
         prior to and immediately after January 1, 2000.
o        Communicate expected increased orders leading up to the Year 2000 and
         get written confirmation from the supplier that those quantities will
         be available to the Company.
o        Identify alternate suppliers for all critical products and confirm
         their Year 2000 readiness.
o        Require additional inventory levels for critical products at other
         sources (e.g. trade wholesalers).

         There can be no assurance that the processes can be completed on the
timetable described above or that remediation will be fully effective. The
failure to identify and remediate Year 2000 issues, or the failure of users of
the Company's ISKs, key vendors or other critical third parties who do business
with the Company to timely remediate their Year 2000 issues could cause system
failures or errors, business interruptions and, in a worst case



                                       13
<PAGE>

scenario, the inability to engage in normal business practices for an unknown
length of time. The effect on the Company's operations, income and financial
condition could be materially adverse.

         If the Company's suppliers or customers fail to complete any required
Year 2000 remediation of their computer systems or product offering, the Company
could suffer delays in product delivery or in processing payments owed to the
Company. In addition, if any products or services sold by the Company to its
customers were to fail, the Company could be liable to its customers for damages
and costs to the extent that the Company's suppliers do not cover such
liability. Any such Year 2000 failures could have a material adverse effect on
the Company's business, operating results, or financial condition.


PART II - OTHER INFORMATION


ITEM 1.  Legal Proceedings

         On September 24, 1999, the Company acquired Corporate Express Delivery
Systems, Inc. ("CEDS") from CEX Holdings, Inc. ("CEX") pursuant to a transaction
involving a merger of CEDS with a wholly-owned subsidiary of the Company. CEDS
and its subsidiaries had active, pending litigation at the time of its
acquisition by the Company.

CEDS is a party to litigation and has claims asserted against it incidental to
its business. Most of such claims are routine litigation that involves workers
compensation claims, claims arising out of vehicle accidents and other claims by
customers arising out of the provision of same-day delivery services. CEDS
self-insurers for workers compensation claims, but has excess insurance coverage
for most claims which are in excess of $250,000. CEDS and its subsidiaries have
insurance coverage for most of its vehicle claims, subject to a $250,000
deductible. As of October 2, 1999, based on actual and anticipated workers
compensation claims, claims and litigation arising out of automobile accidents
and other claims, the Company believes that the aggregate of these claims will
not exceed 10% of its current assets. CEDS and its subsidiaries are named as
defendants in various lawsuits arising out of employment-related matters arising
in the ordinary course of the business of CEDS. The Company vigorously defends
these claims.

On May 19, 1998 William F. Addvensky and other similarly situated individuals
filed a complaint in the Superior Court of the State of California for the
County of San Diego against CEDS and one of its subsidiaries. This involves a
suit brought on behalf of drivers (the "Plaintiffs") who provided services with
their own vehicles and who were paid on a commission basis. The Plaintiffs
allege that they were paid for their services half in the form of wages and half
in the form of expense reimbursement. Based on the amounts that the Plaintiffs
claim were paid as wages, the Plaintiffs seek damages for alleged underpayment
based on California law governing minimum wages and overtime pay. The Plaintiffs
also allege that the amounts paid in reimbursement were insufficient to cover
their expenses. Plaintiffs seek back pay and reimbursement for any underpayment
of wages that may have been paid at a rate less than the minimum wages for all
hours worked and overtime wages for any overtime hours worked from May 19, 1995
through trial. Plaintiffs also request that the Court order the disgorgement of
any profits that were realized from any alleged unlawful conduct. Plaintiffs
further seek punitive damages, waiting time penalties, interest, costs and
attorneys' fees. The case has been certified as a class. Plaintiffs have
indicated they may seek damages in excess of $20 million. CEDS has denied the
Plaintiffs' allegations and is vigorously defending this lawsuit. CEDS has filed
a declaratory judgment case against its insurance carrier who has denied
coverage. The lawsuit is in the early discovery stage.


Cautionary Statements Regarding Pending Litigation and Claims

         The Company's statements above concerning pending litigation constitute
forward-looking statements. Investors should consider that there are many
important factors which could adversely affect the Company's assumptions and the
outcome of claims, and cause actual results to differ materially from those
projected in forward-looking statements. These factors include:



                                       14
<PAGE>

         o        The Company has made estimates of its exposure in connection
                  with the lawsuits and claims that have been made. As a result
                  of litigation or settlement of cases, the actual amount of
                  exposure in a given case could differ materially from that
                  projected. In addition, in some instances, the Company's
                  liability under worker compensation claims may increase or
                  decrease depending upon the ultimate development of those
                  claims.

         o        In estimating the Company's exposure to claims, the Company is
                  relying upon its assessment of insurance coverages and the
                  availability of insurance. In some instances insurers could
                  contest their obligation to indemnify the Company for certain
                  claims, based upon insurance policy exclusions or limitations.
                  In addition, from time to time in connection with routine
                  litigation incidental to the Company's business, plaintiffs
                  may bring claims against the Company which may include
                  undetermined amounts of punitive damages. The Company is
                  currently not aware of any such punitive damages claim or
                  claims in the aggregate which would exceed 10% of its current
                  assets. Such punitive damages are not normally covered by
                  insurance.

         o        Although the Company has numerous claims, few, if any, are
                  believed to have the potential to have a material adverse
                  impact on the Company on a consolidated basis, and only one
                  pending lawsuit or claim, the above described Addvensky case,
                  involves a claim for damages in excess of 10% of the current
                  assets of the Company on a consolidated basis as of October 2,
                  1999, after application of insurance coverages. An award
                  against the Company or a subsidiary, or a settlement paid by
                  it, in connection with currently pending claims could,
                  however, have a material adverse effect upon the Company's
                  cash flow in a given period in which an award or settlement
                  occurs. Further, multiple awards against, or settlements by,
                  the Company or its subsidiaries in a particular period could
                  have a material adverse effect upon the Company's financial
                  condition, cash flow and results of operations.




                                       15
<PAGE>

ITEM 2 - Changes in Securities and Use of Proceeds

         Between December 31, 1998 and February 25, 1999, the Company sold to a
limited number of accredited investors, in two private placement transactions,
an aggregate of $1,350,000 principal amount of unsecured, 12% notes (the
"Notes"). Pursuant to Note Conversion Agreements dated September 25, 1999,
$600,000 in principal amount of the Notes plus accrued interest were converted
by four Note holders into an aggregate of 135,044 shares of common stock at a
purchase price of $4.57 per share and warrants to purchase an aggregate of
33,758 shares of common stock at an exercise price of $4.57 per share for a
period of one year.

         On September 10, 1999, in connection with the acquisition of Corporate
Express Delivery Systems, Inc. ("CEDS"), the Company called the warrants issued
in connection with its sale of Series A Convertible Preferred Stock in April and
June of 1998. In connection with the call of the warrants, the Company issued
1,977,748 shares of common stock and raised total equity of $3,461,059. The
proceeds from these warrant exercises were received after October 2, 1999, and
therefore were not reflected in the accompanying financial statements.

         In October 1999, the Company sold to five accredited investors 124,000
shares of common stock at a purchase price of $4.50 per share, together with
warrants to purchase an aggregate of 12,400 shares of common stock at an
exercise price of $4.50 per share for a period of one year.

         In connection with the purchase of CEDS, the Company's primary source
of financing was through a Credit Agreement (the "Credit Agreement") among the
Company, the Company's UST Delivery Systems, Inc. ("Delivery Systems")
subsidiary, each subsidiary of Delivery Systems, and General Electric Capital
Corporation ("GE"). Pursuant to the Credit Agreement, Delivery Systems issued to
GE a Revolving Note in the amount of $55,000,000 (the "Revolving Note") and a
Swing Line Note in the amount of $5,000,000 (the "Swing Line Note"). All amounts
advanced are due September 23, 2004. The Revolving Note and Swing Line Note are
secured by, among other things, the receivables and other personal property of
Delivery Systems and its subsidiaries. Pursuant to a Guaranty Agreement between
the Company and GE, the Company guaranteed the obligations of Delivery Systems
under the Credit Agreement, the Swing Line Note, the Revolving Note and the
related loan documentation and pledged Delivery Systems' stock to secure the
guaranty.

         The Company, Delivery Systems and each of its subsidiaries also entered
into a Note and Warrant Purchase Agreement (the "Bayview Agreement") with
Bayview Capital Partners LP ("Bayview"). Pursuant to the Bayview Agreement, the
Company and Delivery Systems issued to Bayview a $5,000,000 Senior Subordinated
Note. The Senior Subordinated Note calls for the quarterly payment of interest
at the rate of 12% per annum, subject to increase upon default, and the payment
in full of all unpaid principal and interest on September 30, 2004. The Senior
Subordinated Note is subordinate to certain obligations of the Company pursuant
to an Intercreditor and Subordination Agreement among GE, Bayview, the Company,
and Delivery Systems and its subsidiaries. As additional consideration for
providing the funding, the Company issued to Bayview a ten-year Common Stock
Purchase Warrant (the "Bayview Warrant"). Pursuant to the terms of the Bayview
Warrant, Bayview has the right to purchase up to 1,366,220 shares of the
Company's common stock at an exercise price equal to $3.3125 per share, subject
to adjustment. Also pursuant to the Bayview Warrant, the Company granted to
Bayview certain anti-dilution rights, which provide that the exercise price and
number of shares purchasable under the Bayview Warrant will be adjusted upon the
happening of certain events, such as stock splits or combinations, stock
dividends, mergers or other consolidations, recapitalizations, and the sale by
the Company of common stock or securities convertible or exercisable into common
stock at a price less than the 20-day average of the closing sales price of the
Company's common stock through the date prior to the date the Company fixes the
purchase price for such sale (the "Market Value"). In addition, Bayview has the
right to require the Company to purchase the Bayview Warrant or the stock
issuable upon exercise of the Bayview Warrant (the "Warrant Stock") upon the
happening of certain events, such as default, the sale of 50% of the



                                       16
<PAGE>

Company's stock or assets, or after the fifth anniversary of the date of the
Bayview Warrant. The purchase price (the "Put Exercise Price") for the Warrant
Stock would be the higher of (i) the Market Value of the Company's common stock,
and (ii) six times the Company's EBITDA, plus cash and minus debt, in both cases
divided by the number of outstanding shares of common stock on the date of
notice of exercise of the redemption right, and the purchase price of the
Bayview Warrant would be the same price reduced by the Warrant exercise price in
effect on the date of such notice. After the sixth anniversary of the date of
the Bayview Warrant, the Company has the right to repurchase the Bayview Warrant
or Warrant Stock at the Put Exercise Price. Also pursuant to the Bayview
Warrant, Bayview has certain preemptive rights allowing it the right of first
refusal to purchase its pro rata portion of common stock or securities
convertible into or exercisable for common stock, and demand and incidental
registration rights with respect to the warrant stock.

         Pursuant to a Merger Agreement between CEX, CEDS, the Company and the
Company's acquisition subsidiary, Delivery Systems issued to CEX a Convertible
Subordinated Promissory Note (the "Convertible Note") in the amount of
$3,600,000, a Long-Term Subordinated Promissory Note (the "Long Term Note") in
the amount of $6,519,000, and a Short-Term Subordinated Promissory Note (the
"Short Term Note") in the amount of $7,500,000. The Long Term Note calls for the
quarterly payment of interest at the rate of 12% per annum, subject to increase
upon default, and the payment in full of all unpaid principal and interest on
September 24, 2004. The Short Term Note calls for the quarterly payment of
interest at the rate of 9% per annum, subject to increase upon default, and the
payment in full of all unpaid principal and interest on September 24, 2000, and
requires a mandatory prepayment upon the exercise of the Company's warrants
issued in connection with the purchase of its Series A Preferred Stock in April
and June of 1998, and upon certain debt financings or sales of assets. The
Convertible Note calls for the quarterly payment of interest at the rate of 6%
per annum, subject to increase upon default, and the payment in full of all
unpaid principal and interest on September 24, 2004. Pursuant to the Convertible
Note, and an Exchange Agreement between CEX, Delivery Systems and the Company,
CEX has the right to purchase, by exchanging all or any portion of the principal
balance of the Convertible Note, shares of the Company's common stock at an
exchange rate of $4.59 per share. The maximum number of shares of common stock
that the Company would be required to issue to CEX in connection with the Note
would be 784,314 shares, subject to adjustment. The Convertible Note is
subordinate to the obligations of the Company owing to both GE and Bayview. Also
pursuant to the Exchange Agreement, the Company granted to CEX certain
anti-dilution rights, which provide that the conversion price under the Exchange
Agreement will be adjusted upon the happening of certain events, such as stock
splits or combinations, stock dividends, mergers or other consolidations,
recapitalizations, and the sale by the Company of common stock or securities
convertible or exercisable into common stock at a price less than the 20-day
average of the closing sales price of the Company's common stock through the
date prior to the date the Company fixes the purchase price for such sale. Any
reduction of the conversion price will result in an increase in the number of
shares into which the Convertible Note may be converted. CEX has both demand and
incidental registration rights with respect to the shares issuable upon
conversion of the Convertible Note.

         Pursuant to the terms of the Convertible Note and the Bayview Warrant,
the Company may be required to issue up to a maximum of 2,150,534 shares of
common stock (prior to adjustment), which amount will not be in excess of 20% of
the Company's current outstanding shares of common stock.

         No underwriter or placement agent was used in connection with any of
the above-referenced securities transactions, and no underwriting commissions
were paid. No means of general solicitation was used in offering the securities.
The securities in each transaction were sold to a limited group of accredited
investors in a private placement transactions, exempt from registration under
Section 4(2) of the Securities Act. All purchasers of the Company's securities
were sophisticated investors who qualified as accredited investors within the
meaning of Rule 501(a) of Regulation D under the Securities Act. Except where
otherwise indicated, the Company intends to use the net proceeds from the sale
of these securities for working capital and to fund acquisitions.



                                       17
<PAGE>

ITEM 3 - Defaults upon Senior Securities

          Not Applicable

ITEM 4 - Submission of Matters to a Vote of Securities Holders

         There were no matters submitted to a vote of security holders during
         the fiscal quarter ended October 2, 1999.

ITEM 5 - Other Information

         Not Applicable

ITEM 6 - Exhibits and Reports on Form 8-K

     a.  Exhibits required by Item 601 of Regulation S-B

              Exhibit 2.1 Merger Agreement by and among CEX Holdings, Inc.,
              Corporate Express Delivery Systems, Inc., United Shipping &
              Technology, Inc. and United Shipping & Technology Acquisition
              Corp., dated as of September 8, 1999 (incorporated by reference to
              the Company's Form 8-K, File Number 99725409, filed October 8,
              1999).

              Exhibit 2.2 Amendment No. 1 to Merger Agreement by and among CEX
              Holdings, Inc., Corporate Express Delivery Systems, Inc., United
              Shipping & Technology, Inc. and United Shipping & Technology
              Acquisition Corp., dated as of September 22, 1999 (incorporated by
              reference to the Company's Form 8-K, File Number 99725409, filed
              October 8, 1999).

              Exhibit 10.1 Form of Note Conversion Agreement used in connection
              with the Company's conversion of its 12% Medium Term Unsecured
              Notes to common stock in March of 1999 (incorporated by reference
              to the Company's Annual Report on Form 10-KSB for the year ended
              June 30, 1999).

              Exhibit 10.2 Form of Warrant used in connection with the Company's
              conversion of its 12% Medium Term Unsecured Notes to common stock
              in March of 1999 (incorporated by reference to the Company's
              Annual Report on Form 10-KSB for the year ended June 30, 1999).

              Exhibit 10.3 Form of Note Conversion Agreement used in connection
              with the Company's conversion of its 12% Short Term Unsecured
              Notes to common stock in May of 1999 (incorporated by reference to
              the Company's Annual Report on Form 10-KSB for the year ended June
              30, 1999).

              Exhibit 10.4 Form of Subscription Agreement and Investment Letter
              between Company and investors in private placements of common
              stock and warrants in October 1999.

              Exhibit 10.5 Form of Warrant issued to purchasers in October 1999
              sales of common stock and Warrants.

              Exhibit 10.6 Long-Term Subordinated Promissory Note by and among
              UST Delivery Systems, Inc. and CEX Holdings, Inc., dated September
              24, 1999 (incorporated by reference to the Company's Form 8-K,
              File Number 99725409, filed October 8, 1999).

              Exhibit 10.7 Short-Term Subordinated Promissory Note by and among
              UST Delivery Systems, Inc. and CEX Holdings, Inc., dated September
              24, 1999 (incorporated by reference to the Company's Form 8-K,
              File Number 99725409, filed October 8, 1999).



                                       18
<PAGE>

              Exhibit 10.8 Convertible Subordinated Promissory Note by and among
              UST Delivery Systems, Inc. and CEX Holdings, Inc., dated September
              24, 1999 (incorporated by reference to the Company's Form 8-K,
              File Number 99725409, filed October 8, 1999).

              Exhibit 10.9 Exchange Agreement by and among United Shipping &
              Technology, Inc., UST Delivery Systems, Inc. and CEX Holdings,
              Inc., dated as of September 24, 1999 (incorporated by reference to
              the Company's Form 8-K, File Number 99725409, filed October 8,
              1999).

              Exhibit 10.10 Credit Agreement by and among UST Delivery Systems,
              Inc. and General Electric Capital Corporation, dated as of
              September 24, 1999 (incorporated by reference to the Company's
              Form 8-K, File Number 99725409, filed October 8, 1999).

              Exhibit 10.11 Revolving Note by and among UST Delivery Systems,
              Inc. and General Electric Capital Corporation, dated September 24,
              1999 (incorporated by reference to the Company's Form 8-K, File
              Number 99725409, filed October 8, 1999).

              Exhibit 10.12 Swing Line Note by and among UST Delivery Systems,
              Inc. and General Electric Corporation, dated September 24, 1999
              (incorporated by reference to the Company's Form 8-K, File Number
              99725409, filed October 8, 1999).

              Exhibit 10.13 Note and Warrant Purchase Agreement by and among
              United Shipping & Technology, Inc., UST Delivery Systems, Inc. and
              Bayview Capital Partners LP, dated as of September 24, 1999
              (incorporated by reference to the Company's Form 8-K, File Number
              99725409, filed October 8, 1999).

              Exhibit 10.14 Senior Subordinated Note by and among United
              Shipping & Technology, Inc., UST Delivery Systems, Inc. and
              Bayview Capital Partners LP, dated September 24, 1999
              (incorporated by reference to the Company's Form 8-K, File Number
              99725409, filed October 8, 1999).

              Exhibit 10.15 Warrant to Purchase Common Stock of United Shipping
              & Technology, Inc. issued to Bayview Capital Partners LP, dated
              September 24, 1999 (incorporated by reference to the Company's
              Form 8-K, File Number 99725409, filed October 8, 1999).

              Exhibit 10.16 Intercreditor and Subordination Agreement by and
              among Bayview Capital Partners LP, UST Delivery Systems, Inc.,
              United Shipping & Technology, Inc. and General Electric Capital
              Corporation, dated as of September 24, 1999 (incorporated by
              reference to the Company's Form 8-K, File Number 99725409, filed
              October 8, 1999).

              Exhibit 10.17 Guaranty by and between United Shipping &
              Technology, Inc. and General Electric Capital Corporation, dated
              as of September 24, 1999.

              Exhibit 27 Financial Data Schedule

     b.  Current Reports on Form 8-K for the second quarter ended October 2,
         1999.

              The Company filed a Current Report on form 8-K on September 13,
              1999 in connection with the announcement of a definitive merger
              agreement in connection with the CEDS purchase.



                                       19
<PAGE>


                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned; thereunto duly
authorized, in the City of Plymouth, State of Minnesota on November 16, 1999.



                                     UNITED SHIPPING & TECHNOLOGY, INC.




                                     By: /S/ Peter C. Lytle
                                        --------------------------------------
                                     Peter C. Lytle
                                     President and Chief Executive Officer



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                                    EXHIBIT INDEX

Exhibit 2.1    Merger Agreement by and among CEX Holdings, Inc., Corporate
               Express Delivery Systems, Inc., United Shipping & Technology,
               Inc. and United Shipping & Technology Acquisition Corp., dated as
               of September 8, 1999 (incorporated by reference to the Company's
               Form 8-K, File Number 99725409, filed October 8, 1999).

Exhibit 2.2    Amendment No. 1 to Merger Agreement by and among CEX Holdings,
               Inc., Corporate Express Delivery Systems, Inc., United Shipping &
               Technology, Inc. and United Shipping & Technology Acquisition
               Corp., dated as of September 22, 1999 (incorporated by reference
               to the Company's Form 8-K, File Number 99725409, filed October 8,
               1999).

Exhibit 10.1   Form of Note Conversion Agreement used in connection with the
               Company's conversion of its 12% Medium Term Unsecured Notes to
               common stock in March of 1999 (incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended June
               30, 1999).

Exhibit 10.2   Form of Warrant used in connection with the Company's conversion
               of its 12% Medium Term Unsecured Notes to common stock in March
               of 1999 (incorporated by reference to the Company's Annual Report
               on Form 10-KSB for the year ended June 30, 1999).

Exhibit 10.3   Form of Note Conversion Agreement used in connection with the
               Company's conversion of its 12% Short Term Unsecured Notes to
               common stock in May of 1999 (incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended June
               30, 1999).

Exhibit 10.4   Form of Subscription Agreement and Investment Letter between
               Company and investors in private placements of common stock and
               warrants in October 1999.

Exhibit 10.5   Form of Warrant issued to purchasers in October 1999 sales of
               common stock and Warrants.

Exhibit 10.6   Long-Term Subordinated Promissory Note by and among UST Delivery
               Systems, Inc. and CEX Holdings, Inc., dated September 24, 1999
               (incorporated by reference to the Company's Form 8-K, File Number
               99725409, filed October 8, 1999).

Exhibit 10.7   Short-Term Subordinated Promissory Note by and among UST Delivery
               Systems, Inc. and CEX Holdings, Inc., dated September 24, 1999
               (incorporated by reference to the Company's Form 8-K, File Number
               99725409, filed October 8, 1999).

Exhibit 10.8   Convertible Subordinated Promissory Note by and among UST
               Delivery Systems, Inc. and CEX Holdings, Inc., dated September
               24, 1999 (incorporated by reference to the Company's Form 8-K,
               File Number 99725409, filed October 8, 1999).

Exhibit 10.9   Exchange Agreement by and among United Shipping & Technology,
               Inc., UST Delivery Systems, Inc. and CEX Holdings, Inc., dated as
               of September 24, 1999


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<PAGE>

               (incorporated by reference to the Company's Form 8-K, File Number
               99725409, filed October 8, 1999).

Exhibit 10.10  Credit Agreement by and among UST Delivery Systems, Inc. and
               General Electric Capital Corporation, dated as of September 24,
               1999 (incorporated by reference to the Company's Form 8-K, File
               Number 99725409, filed October 8, 1999).

Exhibit 10.11  Revolving Note by and among UST Delivery Systems, Inc. and
               General Electric Capital Corporation, dated September 24, 1999
               (incorporated by reference to the Company's Form 8-K, File Number
               99725409, filed October 8, 1999).

Exhibit 10.12  Swing Line Note by and among UST Delivery Systems, Inc. and
               General Electric Corporation, dated September 24, 1999
               (incorporated by reference to the Company's Form 8-K, File Number
               99725409, filed October 8, 1999).

Exhibit 10.13  Note and Warrant Purchase Agreement by and among United Shipping
               & Technology, Inc., UST Delivery Systems, Inc. and Bayview
               Capital Partners LP, dated as of September 24, 1999 (incorporated
               by reference to the Company's Form 8-K, File Number 99725409,
               filed October 8, 1999).

Exhibit 10.14  Senior Subordinated Note by and among United Shipping &
               Technology, Inc., UST Delivery Systems, Inc. and Bayview Capital
               Partners LP, dated September 24, 1999 (incorporated by reference
               to the Company's Form 8-K, File Number 99725409, filed October 8,
               1999).

Exhibit 10.15  Warrant to Purchase Common Stock of United Shipping & Technology,
               Inc. issued to Bayview Capital Partners LP, dated September 24,
               1999 (incorporated by reference to the Company's Form 8-K, File
               Number 99725409, filed October 8, 1999).

Exhibit 10.16  Intercreditor and Subordination Agreement by and among Bayview
               Capital Partners LP, UST Delivery Systems, Inc., United Shipping
               & Technology, Inc. and General Electric Capital Corporation,
               dated as of September 24, 1999 (incorporated by reference to the
               Company's Form 8-K, File Number 99725409, filed October 8, 1999).

Exhibit 10.17  Guaranty by and between United Shipping & Technology, Inc. and
               General Electric Capital Corporation, dated as of September 24,
               1999.

Exhibit 27     Financial Data Schedule


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