<PAGE>

================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

                                   (Mark One)

            [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 29, 2001

                                   ----------


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

                           Commission File No. 0-28452


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


               Utah                                   87-0355929
   (State or Other Jurisdiction of       (IRS Employer Identification No.)
   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: (952) 941-4080

                                   ----------





Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                 YES (X)          NO (_)

As of October 31, 2001, there were 17,146,399 shares of common stock of the
registrant issued and outstanding.

================================================================================
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES

                               INDEX TO FORM 10-Q

                               SEPTEMBER 29, 2001



                                                                            Page
                                                                            ----
PART I.      FINANCIAL INFORMATION
     ITEM 1. Consolidated Financial Statements (Unaudited)
               Balance Sheets as of September 29, 2001 and June 30, 2001..... 3
               Statements of Operations for the Three Months Ended
                  September 29, 2001 and September 30, 2000.................. 4
               Statement of Shareholders' Deficit............................ 5
               Statements of Cash Flows for the Three Months Ended
                  September 29, 2001 and September 30, 2000.................. 6
               Notes to Consolidated Financial Statements for the Three
                  Months Ended September 29, 2001 and September 30, 2000..... 7

    ITEM 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations.............12

    ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk......17


PART II.     OTHER INFORMATION
     ITEM 1. Legal Proceedings...............................................17
     ITEM 2. Changes in Securities and Use of Proceeds.......................18
     ITEM 3. Defaults Upon Senior Securities.................................19
     ITEM 4. Submission of Matters to a Vote of Security Holders.............20
     ITEM 5. Other Information...............................................22
     ITEM 6. Exhibits and reports on Form 8-K................................22
SIGNATURES...................................................................23
EXHIBIT INDEX................................................................24

                                       2
<PAGE>

PART I.

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                    (Amounts in thousands, except par value)

<TABLE>
<CAPTION>
                                                           September 29,        June 30,
                                                               2001              2001
                                                           -------------       ---------
                                                            (unaudited)
<S>                                                          <C>             <C>
                                     ASSETS
Current assets:
     Cash                                                    $   1,959       $   2,932
     Accounts receivable, net                                   42,256          47,752
     Accounts receivable - other                                 1,471           1,700
     Prepaid workers' compensation                              15,567          13,024
     Other prepaid expenses                                      2,209           1,735
     Other current assets                                          220             241
                                                             ---------       ---------
         Total current assets                                   63,682          67,384

Property and equipment, net                                      8,436           8,842

Goodwill, net                                                   39,714          80,468
Notes receivable from related party                                182             182
Other assets                                                     1,276           1,499
                                                             ---------       ---------
Total assets                                                 $ 113,290       $ 158,375
                                                             =========       =========

                     LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
     Trade accounts payable                                  $  23,841       $  32,600
     Accrued insurance and claims                                9,492           9,601
     Accrued wages and benefits                                  5,467           5,095
     Accrued legal and claims                                    5,032           5,957
     Other accrued liabilities                                   4,754          16,913
     Current portion of long-term debt                              19              27
                                                             ---------       ---------
         Total current liabilities                              48,605          70,193

Long-term debt, less current portion                            32,738          61,242
Accrued insurance and claims                                    13,004          23,111

Redeemable preferred stock and preferred warrants               53,893          35,421

Shareholders' deficit:
     Common stock, $0.004 par value, 150,000 and 75,000
         shares authorized at September 29, 2001 and
         June 30, 2001, respectively;
         17,146 shares issued and outstanding at
         September 29, 2001 and June 30, 2001                       69              69
     Additional paid-in-capital                                 55,910          47,812
     Accumulated deficit                                       (90,823)        (79,409)
     Foreign currency translation                                 (106)            (64)
                                                             ---------       ---------
         Total shareholders' deficit                           (34,950)        (31,592)
                                                             ---------       ---------
         Total liabilities and shareholders' deficit         $ 113,290       $ 158,375
                                                             =========       =========
</TABLE>


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

                                       3
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                  (Amounts in thousands, except per share data)


                                                    Three Months Ended
                                               -----------------------------
                                               September 29,   September 30,
                                                   2001            2000
                                               -------------   -------------

Revenue                                          $  95,788       $ 133,091

Cost of services                                    75,983         104,802
                                                 ---------       ---------
        Gross profit                                19,805          28,289

Operating expenses:
        Occupancy                                    3,517           4,019
        Selling, general and administrative         16,969          29,805
                                                 ---------       ---------
Total operating expenses                            20,486          33,824
                                                 ---------       ---------
Loss from operations                                  (681)         (5,535)

Other income (expense):
        Interest expense                            (5,745)         (1,617)
        Common stock warrant charge                 (1,020)           --
        Other                                           12             (33)
                                                 ---------       ---------
Net loss                                         $  (7,434)      $  (7,185)
                                                 =========       =========

Net loss applicable to common shareholders       $ (11,414)      $  (9,575)
                                                 =========       =========

Basic and diluted net loss per share             $   (0.67)      $   (0.58)
                                                 =========       =========

Basic and diluted weighted average number
        of common shares outstanding                17,146          16,529
                                                 =========       =========

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

                                       4
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
                                   (Unaudited)
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                              Common Stock
                                                           -------------------  Additional                Foreign
                                                                                  Paid-in   Accumulated   Currency
                                                            Shares     Amount     Capital     Deficit    Translation     Total
                                                           --------   --------  ----------  -----------  -----------   ---------
<S>                                                        <C>        <C>       <C>         <C>          <C>           <C>
Balance at June 30, 2001                                     17,146   $     69    $ 47,812   $(79,409)      $  (64)    $(31,592)
      Beneficial conversion of Bridge Notes                    --         --         4,120       --           --          4,120
      Beneficial conversion of Subscription notes              --         --         2,700     (2,700)        --           --
      Value of Common Warrants issued
           in connection with sale of Series F Preferred       --         --           258       (258)        --           --
      Accretion of Series B Redeemable Preferred
           Stock to its redemption value                       --         --          --         (190)        --           (190)
      Accretion of Series D Redeemable Preferred
           Stock to its redemption value                       --         --          --          (52)        --            (52)
      Adjustments to Series C and D warrants                   --         --          --         (780)        --           (780)
      Common Stock warrants issued
           for services rendered                               --         --         1,020       --           --          1,020

      Net loss                                                 --         --          --       (7,434)        --         (7,434)
      Foreign currency translation                             --         --          --         --            (42)         (42)
                                                                                                                       --------
      Comprehensive loss                                                                                                 (7,476)
                                                           --------   --------    --------   --------       ------     --------
Balance at September 29, 2001                                17,146   $     69    $ 55,910   $(90,823)      $ (106)    $(34,950)
                                                           ========   ========    ========   ========       ======     ========
</TABLE>

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

                                       5
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                            ----------------------------
                                                            September 29,  September 30,
                                                                2001           2000
                                                            -------------  -------------
<S>                                                         <C>            <C>
OPERATING ACTIVITIES
        Net loss                                              $ (7,434)      $ (7,185)
        Adjustments to reconcile net loss to net
           cash flows used in operating activities:
            Depreciation                                         1,029          1,324
            Amortization                                           209          1,705
            Equity instruments issued in lieu of
                payment for services received                    1,170           --
            Interest expense on 18% Bridge Notes                 4,716           --
            Other                                                  105            147
            (Gain) loss on retirement of equipment                  (5)            25
        Change in operating assets and liabilities:
            Accounts receivable                                  5,496         (7,380)
            Other current assets                                (2,657)         1,332
            Other assets                                            14            147
            Accounts payable                                      (400)        (1,184)
            Accrued liabilities                                 (3,056)        (7,416)
                                                              --------       --------
               Cash used in operating activities                  (813)       (18,485)

INVESTING ACTIVITIES
        Proceeds from sale of equipment                              5             27
        Purchases of equipment                                    (643)          (704)
        Other                                                      (49)             4
                                                              --------       --------
               Cash used in investing activities                  (687)          (673)

FINANCING ACTIVITIES
        Borrowings under revolving credit agreement, net        (4,067)         4,499
        Payments on acquisition notes                           (2,000)          (523)
        Proceeds from Series F Preferred, net                    6,795           --
        Debt financing costs                                      (201)          --
        Proceeds from issuance of common stock, net               --              994
        Proceeds from issuance of preferred stock, net            --           12,000
                                                              --------       --------
               Cash provided by financing activities               527         16,970
                                                              --------       --------
Net decrease in cash and cash equivalents                         (973)        (2,188)
Cash and cash equivalents, beginning of period                   2,932          3,993
                                                              --------       --------
Cash and cash equivalents, end of period                      $  1,959       $  1,805
                                                              ========       ========
</TABLE>

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

                                       6
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
--------------------------------------------------------------------------------


1.       SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation - The 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 September 29, 2001,
and the results of its operations for the three months ended September 29, 2001,
and its cash flows for the three months ended September 29, 2001 have been
included. Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles has 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, 2001, and the footnotes thereto, included in the Company's Report on
Form 10-KSB, filed with the Securities and Exchange Commission.

         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.

         Reclassifications - Certain reclassifications have been made to the
prior period consolidated financial statements to conform to the current period
presentation.

         Comprehensive loss - Comprehensive loss was $7.5 million and $7.2
million for the three months ended September 29, 2001 and September 30, 2000,
respectively. The difference between net loss and total comprehensive loss
related to foreign currency translation adjustments.

                                       7
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------


         Earnings per Share - Basic net loss per share excludes dilution and is
computed by dividing net loss by the weighted average number of common shares
outstanding for the period. Diluted net loss per share reflects the potential
dilution that could occur if securities or other obligations to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the Company. For all periods
presented, diluted net loss per share is equal to basic net loss per share
because the effect of including such securities or obligations would have been
antidilutive.

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                     -----------------------------
                                                                     September 29,  September 30,
                                                                         2001            2000
                                                                     -------------  --------------
                                                                         (Amounts in thousands,
                                                                         except per share data)
<S>                                                                    <C>            <C>
Numerator
        Net loss                                                       $ (7,434)      $ (7,185)
        Beneficial conversion feature                                    (2,700)          --
        Adjustment of Common Warrants issued in connection
            with sale of Series F Preferred to market value                (258)          --
        Accretion of Series B Redeemable Preferred Stock
            to its redemption value                                        (190)           (95)
        Accretion of Series D Redeemable Preferred Stock
            to its redemption value                                         (52)          --
        Adjustment of Preferred Series B Warrants to market value          --           (2,295)
        Adjustment of Preferred Series C Warrants to market value          (130)          --
        Adjustment of Preferred Series D Warrants to market value          (650)          --
                                                                       --------       --------

        Net loss applicable to common shareholders                     $(11,414)      $ (9,575)
                                                                       ========       ========

Denominator for basic and diluted loss per share
        Weighted average shares                                          17,146         16,529
                                                                       ========       ========

Basic and Diluted Loss Per Share                                       $  (0.67)      $  (0.58)
                                                                       ========       ========
</TABLE>

2.    ACQUISITIONS

      Effective August 28, 1999, the Company acquired from CEX Holdings, Inc.
("CEX") all of the outstanding shares of common stock of Velocity Express, Inc.
("Velocity"), formerly known as Corporate Express Delivery Systems, Inc., a
provider of same-day delivery solutions. The acquisition purchase price, which
was accounted for using the purchase method of accounting, was approximately
$91.2 million, subject to adjustment as defined in the merger agreement. The
purchase price consisted of $43 million in cash provided by an institutional
debt financier and an investment firm, and $19.5 million in a combination of
short and long-term notes issued to CEX. The Company, as a result of the
acquisition, received approximately $86.6 million of Velocity's assets and
assumed approximately $115.3 million of Velocity's liabilities, which resulted
in the Company recognizing approximately $91.2 million in goodwill.

                                       8
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------


         On August 2, 2001, the Company completed certain purchase price
adjustments to the CEX merger agreement related to the acquisition of Velocity.
Under the terms of the settlement regarding the purchase price, the Company was
no longer liable for the convertible subordinated note to CEX in the amount of
$3.6 million, the long-term subordinated note to CEX of $6.5 million, the
short-term subordinated note to CEX of $4.4 million and the accrued interest
related to the notes of approximately $2.8 million. Additionally, the purchase
price adjustments provide for the discharge of certain pre-acquisition insurance
liabilities totaling approximately $13.5 million as well as certain other
adjustments which had the impact of reducing specific liabilities by
approximately $12.0 million. The purchase price adjustments totaling
approximately $42.8 million were recorded as an offset to the goodwill in the
Company's first quarter of fiscal 2002. In conjunction with the agreement
pertaining to the purchase price adjustments, the Company issued common stock
warrants for services rendered by an outside consultant, who subsequently was
appointed Chairman of the Board of the Company. The fair value of the warrants
amounted to approximately $1.0 million and is included in other expense in the
statement of operations.

3.       RESTRUCTURING

         The Company began implementing a multi-faceted restructuring program in
March 2001 to allow it to achieve a cost structure to better position itself to
achieve profitability in the ever-changing logistics and transportation
marketplace. The Company as a result has streamlined and downsized its
operations by reducing its workforce and consolidating various locations. In
fiscal 2001, the Company took a restructuring charge of $7.1 million consisting
of: severance costs in the amount of $2.2 million related to the workforce
reduction of 234 full-time employees, $3.3 million for rental costs associated
with the termination of building leases and location rationalization costs, and
$1.6 million for the write-off of equipment. As of September 29, 2001,
approximately $6.6 million in costs have been charged against the reserve.

4.       LONG-TERM DEBT AND CAPITAL LEASES

         Long-term debt and capital leases consisted of the following:

                                                 September 29,    June 30,
                                                     2001           2001
                                                 -------------    --------
                                                   (Amounts in thousands)

         Revolving note                            $ 28,696       $ 32,763
         Senior subordinated note                     4,004          3,919
         Long-term subordinated note to CEX            --            6,519
         Short-term subordinated note to CEX           --            4,404
         Convertible subordinated note to CEX          --            3,600
         18% Bridge notes                              --            5,000
         Subscription notes                            --            5,000
         Other                                           57             64
                                                   --------       --------
                                                     32,757         61,269
         Less current maturities                        (19)           (27)
                                                   --------       --------
         Total                                     $ 32,738       $ 61,242
                                                   ========       ========

         Borrowings under the revolving note are limited to the lesser of $55
million or an amount based on a defined portion of receivables. Interest is
payable monthly at a rate of prime plus 2.75% (8.75% at September 29, 2001). The
Company may elect the rate of LIBOR plus 6% at its discretion from time to time.
All amounts advanced are due September 30, 2002. In addition, the Company is
required to pay a commitment fee of 0.375% on unused amounts of the total
commitment, as defined in the agreement.

                                       9
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------


         The senior subordinated note has interest payable quarterly at 12% and
is due September 30, 2004. The note is subordinate to the revolving note. The
initial carrying value of the senior subordinated note was reduced by $1.7
million for the fair value of the common stock warrant issued to the senior
subordinated lender. The warrant is subject to anti-dilution provisions. The
unamortized discount aggregated $1.0 million at September 29, 2001, and is being
amortized over the five-year life of the note.

         In August 2001, the Company completed certain purchase price
adjustments to the CEX merger agreement whereby the convertible subordinated
note, the long-term subordinated note, and the short-term subordinated note
along with all accrued interest thereon, totaling approximately $14.5 million of
notes and $2.8 million of accrued interest, were terminated.

         Substantially all of the assets and operations of Velocity have been
pledged to secure borrowings under the revolving note and the senior
subordinated note. 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. The agreements with the lenders also require the
Company to obtain the consent of the lenders for additional acquisitions.

5.       EQUITY

         Series F Convertible Preferred Stock - In July 2001, the Company
entered into Subscription Note Purchase Agreements whereby the Company issued
subscription notes payable February 2, 2002 in the aggregate principal amount of
approximately $7.1 million (collectively, the "Series F Subscription Notes"), to
a group of institutional investors and executive management of the Company. In
September 2001, the Company's shareholders approved the issuance of Series F
Preferred, and all of the principal balances of the Series F Subscription Notes
were converted into 646,029 shares of Series F Preferred. Each share of Series F
Preferred is immediately convertible into twenty shares of the Company's common
stock. The Company also issued warrants to purchase 1,110,384 shares of common
stock in connection with these sales.

         Series D Convertible and Redeemable Preferred Stock - The Company
entered into a bridge loan agreement dated January 4, 2001, and a supplemental
bridge loan agreement dated January 31, 2001 (collectively, the "Bridge Loan
Agreement"), pursuant to which the Company received $3.5 million on January 4,
2001, and an additional $1.5 million on January 31, 2001. The indebtedness was
represented by promissory notes, payable on July 4, 2001, bearing interest at a
rate of 18% per annum (the "Bridge Notes"), which were convertible at the option
of the lender into 909,090 shares of the Company's Series D Preferred at an
exercise price of $5.50 per share upon shareholder approval of the conversion.

         The Company entered into note purchase agreements in connection with
the issuance of promissory notes convertible into shares of Series D Preferred
(the "Subscription Notes"). During March and April 2001, the Company sold
Subscription Notes convertible into 624,906 shares of Series D Preferred to
accredited investors for an aggregate $5.0 million. Each Subscription Note was
converted into shares of Series D Preferred at an effective purchase price of
$8.00 per share of Series D Preferred after shareholder approval of the
conversion.

         During March 2001, the Company entered into securities purchase
agreements in connection with the sale of Series D Preferred. The Company sold
252,429 shares of Series D Preferred at $8.00 per share for approximately $2.0
million.

                                       10
<PAGE>

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------


         Each share of Series D Preferred is immediately convertible into ten
shares of the Company's common stock. The Series D shares have a mandatory
redemption feature that requires the Company to redeem each outstanding share on
the redemption date, March 1, 2007, at a price equal to the liquidation value
per such share. In connection with the Bridge Loan Agreement, the Company issued
warrants to purchase an aggregate 216,533 shares of Series D Preferred at a
purchase price of $0.01 per share (the "Bridge Warrants").

         In September 2001 at a special shareholders' meeting, the Company's
shareholders approved proposals which accomplished the following: (1) conversion
of $5.0 million principal amount of the Bridge Notes into Series D Preferred;
and (2) issuance of shares of Series D Preferred to subscribers for such
securities and holders of subscription notes which were convertible into Series
D Preferred.

         As a result of the conversion of the 18% Bridge Notes into the
Company's Series D Preferred, the Company recorded a $4.7 million non-cash
interest charge. $880,000 from the 18% Bridge Notes was allocated to the Series
D Preferred warrants at the date of shareholder approval in September 2001. The
warrants were subsequently marked to market by adjusting the warrant value by
$650,000 at September 29, 2001.

         The Company's Series D Preferred that resulted from the conversion of
the subscription notes was deemed to have contained beneficial conversion
features that were recognized as a deemed dividend to preferred shareholders.
The value of the proceeds allocated to the beneficial conversion feature was
$2.7 million and was recognized as a return to the preferred shareholders at the
date of shareholder approval in September 2001 since the Series D Preferred was
immediately convertible.

                                       11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES

         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-Q 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 that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, no
statements contained in this Form 10-Q 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 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-Q 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.

                                       12
<PAGE>

Use of EBITDA and Cash Net Income

      The Company evaluates operating performance based on several measures,
including income (loss) applicable to common shareholders plus interest,
non-cash depreciation and amortization, non-cash charges associated with the
valuation of the Company's redeemable preferred stock and preferred warrants,
and non-cash charges associated with the granting of equity as payment for
certain services ("EBITDA") and income (loss) applicable to common shareholders
plus non-cash depreciation and amortization, non-cash charges associated with
the valuation of the Company's redeemable preferred stock and preferred
warrants, and non-cash charges associated with the granting of equity as payment
for certain services ("cash net income"). The Company considers EBITDA and cash
net income important indicators of the operational strength and performance of
its business; however, EBITDA and cash net income are supplemental measures of
performance and are not intended to represent measures of performance in
accordance with disclosures required by generally accepted accounting principles
("GAAP"). In the first quarter of fiscal 2002, the Company reported positive
EBITDA of $569,000 as compared to negative EBITDA of $2.6 million in the first
quarter of fiscal 2001, an improvement of $3.1 million or 122%. Also in the
first quarter of fiscal 2002, the Company reported cash net loss of $0.4 million
as compared to cash net loss of $4.1 million in the first quarter of fiscal
2001, an improvement of $3.7 million. These improvements are the result of the
Company's focus on cost containment, back office consolidation, and improvements
to the balance sheet which will be discussed in detail below.

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                -----------------------------
                                                                September 29,   September 30,
                                                                    2001            2000
                                                                -------------   -------------
                                                                    (Amounts in thousands,
                                                                    except per share data)
<S>                                                              <C>            <C>
         Revenue                                                  $  95,788       $ 133,091
         Loss from operations                                          (681)         (5,535)
         Net loss applicable to common shareholders                 (11,414)         (9,575)
         EBITDA                                                         569          (2,580)
         Net income cash basis                                         (383)         (4,112)

         Basic and diluted net loss per share - GAAP basis        $   (0.67)      $   (0.58)
         Basic and diluted net loss per share - EBITDA basis      $    0.03       $   (0.16)
         Basic and diluted net loss per share - cash basis        $   (0.02)      $   (0.25)
</TABLE>

Historical Results of Operations

Quarter ended September 29, 2001 Compared to Quarter Ended September 30, 2000

         Revenue for the quarter ended September 29, 2001 was in line with
management expectations, decreasing $37.3 million or 28.0% to $95.8 million from
$133.1 million for the quarter ended September 30, 2000. The decrease in revenue
for the quarter ended September 29, 2001 is primarily the result of the loss of
revenues from divesture of non-core business operations of approximately $14.0
million over the same quarter last year, the elimination by the Company of $13.6
million of low-margin business through the consolidation of its networks, the
closing or consolidation of unprofitable locations of approximately $7.8
million, and $1.9 million due to the overall slowing of the economy and the
impact on the Company of the events of September 11th. Revenue by service
offering for the quarter was as follows:

         Scheduled services                        53%
         Distribution services                     21%
         Demand services                           21%
         Critical parts services                    5%

                                       13
<PAGE>

         Cost of services for the quarter ended September 29, 2001 was $76
million, a reduction of $28.8 million or 27.5% from $104.8 million for the
quarter ended September 30, 2000. As a percentage of revenue, cost of services
increased from 78.7% to 79.3% for the quarter ended September 29, 2001. The
overall dollar decrease is consistent with the revenue trend discussed above,
and is consistent with the expectation of savings as a result of the initiatives
begun in fiscal 2001. The increase in cost of services as a percentage of
revenue is principally a reflection of the timing of the implementation of
various initiatives that were instituted during the last fiscal year. Because
the savings in cost of services is a result of the initiatives begun in the
second half of fiscal 2001, management believes a more meaningful analysis of
the results comes from comparing the results of the first quarter of 2002 to
those of the fourth quarter of 2001, where the Company achieved a 1.4 percent
improvement in gross profit percentage over the fourth quarter of fiscal 2001.
This savings is principally the result of continuing to move towards a variable
cost model under which the Company uses owner-operators and independent
contractors in greater proportion than employee drivers, as well as insurance
and safety initiatives resulting in lower claims and insurance expense.

         Selling, general and administrative ("SG&A") expenses for the quarter
ended September 29, 2001 were $17.0 million or 17.7% of revenue, a reduction of
$12.8 million or 43.1% as compared with $29.8 million or 22.4 % of revenue for
the quarter ended September 30, 2000. The decrease in SG&A for the quarter is a
result of the continued efforts by the Company to integrate, through technology,
all back office processes into one national platform, as well as its aggressive
approach to continued cost cutting of approximately $10.4 million, and the sale
of non-core business of $2.4 million. This focus has enabled the company to
realize a year-over-year improvement of 4.7 percent as a percent of revenue and
a 2.2 percent improvement as a percent of revenue over the fourth quarter of
fiscal 2001. The cost reduction initiatives which began in the second half of
fiscal 2001 included the flattening of the corporate and regional management
structure, the closing and consolidation of unprofitable locations, and the
selling of non-core business. The Company also realized additional savings in
the first quarter of fiscal 2002 through the centralization of the back office,
credit and cash applications, finance, and driver service functions. The Company
believes that further savings will be realized as it continues to centralize its
billing and invoicing processes, accounts payable and payroll functions.

         As compensation for structuring and finalizing the agreement between
the Company and CEX, the Company issued common stock warrants. The fair value of
the warrants was approximately $1.0 million and is included in other expense in
the statement of operations.

         Interest expense for the quarter ended September 29, 2001 increased
$4.1 million to $5.7 million from $1.6 million for the quarter ended September
30, 2000. Included in interest expense for the quarter are certain non-cash
charges related to the conversion of the Series D Bridge Notes and interest
thereon amounting to approximately $4.7 million. Interest expense related to the
Company's borrowings decreased $0.6 million over the same quarter in the prior
year primarily as a result of lower interest rates and lower borrowings.

         As a result of the foregoing factors, the net loss for the quarter
ended September 29, 2001, including one-time non-cash charges relating to equity
financing costs of $5.7 million, was $7.4 million, compared with $7.2 million
for the same period in fiscal 2001. Had the effect of the one-time charges been
excluded, net loss for the quarter ended September 29, 2001 would have been $1.7
million, compared with $7.2 million for the same period in fiscal 2001.

                                       14
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES:

         Historically, the Company has operated at a loss and has funded its
operations through a credit facility with a commercial lender, various private
placements of equity and debt, including sales of preferred stock, the issuance
of warrants, and various bridge loan agreements.

         Series F Convertible Preferred Stock - In July 2001, the Company
entered into Subscription Note Purchase Agreements whereby the Company issued
subscription notes payable February 2, 2002 in the aggregate principal amount of
approximately $7.1 million (collectively, the "Series F Subscription Notes"), to
a group of institutional investors and executive management of the Company. In
September 2001, the Company's shareholders approved the issuance of Series F
Preferred, and all of the principal balances of the Series F Subscription Notes
were converted into 646,029 shares of Series F Preferred. Each share of Series F
Preferred is immediately convertible into twenty shares of the Company's common
stock. The Company also issued warrants to purchase 1,110,384 shares of common
stock in connection with these sales.

         Series D Convertible and Redeemable Preferred Stock - The Company
entered into a bridge loan agreement dated January 4, 2001, and a supplemental
bridge loan agreement dated January 31, 2001 (collectively, the "Bridge Loan
Agreement"), pursuant to which the Company received $3.5 million on January 4,
2001, and an additional $1.5 million on January 31, 2001. The indebtedness was
represented by promissory notes, payable on July 4, 2001, bearing interest at a
rate of 18% per annum (the "Bridge Notes"), which were convertible at the option
of the lender into 909,090 shares of the Company's Series D Preferred at an
exercise price of $5.50 per share of Series D Preferred.

         The Company entered into note purchase agreements in connection with
the issuance of promissory notes convertible into shares of Series D Preferred
(the "Subscription Notes"). During March and April 2001, the Company sold
Subscription Notes convertible into 624,906 shares of Series D Preferred to
accredited investors for an aggregate $5.0 million. Each Subscription Note was
converted into shares of Series D Preferred at an effective purchase price of
$8.00 per share of Series D Preferred after shareholder approval of the
conversion.

         Each share of Series D Preferred is convertible into ten shares of the
Company's common stock. The Series D Preferred shares have a mandatory
redemption feature that requires the Company to redeem each outstanding share on
the redemption date, March 1, 2007, at a price equal to the liquidation value
per such share. In connection with the Bridge Loan Agreement, the Company issued
warrants to purchase an aggregate 216,533 shares of Series D Preferred at a
purchase price of $0.01 per share (the "Bridge Warrants").

         In September 2001 at a special shareholders' meeting, the Company's
shareholders approved proposals which accomplished the following: (1) conversion
of $5.0 million principal amount of the Bridge Notes into Series D Preferred;
and (2) issuance of shares of Series D Preferred to subscribers for such
securities and holders of subscription notes which were convertible into Series
D Preferred.

         As a result of the conversion of the 18% Bridge Notes into the
Company's Series D Preferred, the Company recorded a $4.7 million non-cash
interest charge. $880,000 from the 18% Bridge Notes was allocated to the Series
D Preferred warrants at the date of shareholder approval in September 2001. The
warrants were subsequently marked to market by adjusting the warrant value by
$650,000 at September 29, 2001.

         The Company's Series D Preferred that resulted from the conversion of
the subscription notes was deemed to have contained beneficial conversion
features that were recognized as a deemed dividend to preferred shareholders.
The value of the proceeds allocated to the beneficial conversion feature was
$2.7 million and was recognized as a return to the preferred shareholders at the
date of shareholder approval in September 2001 since the Series D Preferred was
immediately convertible.

                                       15
<PAGE>

         The principal financing agreements consist of a revolving note and a
senior subordinated note. The Company's subsidiary is the borrower on the notes
with the Company, and its other subsidiaries, acting as guarantors.

         Borrowings under the revolving note are limited to the lesser of $55
million or an amount based on a defined portion of receivables. Interest is
payable monthly at a rate of prime plus 2.75% (8.75% at September 29, 2001). The
Company may elect the rate of LIBOR plus 6% at its discretion from time to time.
All amounts advanced are due September 30, 2002. In addition, the Company is
required to pay a commitment fee of 0.375% on unused amounts of the total
commitment, as defined in the agreement.

         The senior subordinated note has interest payable quarterly at 12% and
is due September 30, 2004. The note is subordinate to the revolving note. The
initial carrying value of the senior subordinated note was reduced by $1.7
million for the fair value of the common stock warrant issued to the senior
subordinated lender. The warrant is subject to anti-dilution provisions. The
unamortized discount aggregated $1.0 million at September 29, 2001, and is being
amortized over the five-year life of the note.

         In August 2001, the Company completed certain purchase price
adjustments to the CEX merger agreement whereby the convertible subordinated
note, the long-term subordinated note, and the short-term subordinated note
along with all accrued interest thereon, totaling approximately $14.5 million of
notes and $2.8 million of accrued interest, were terminated.

         Substantially all of the assets and operations of Velocity have been
pledged to secure borrowings under the revolving note and the senior
subordinated note. 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. The agreements with the lenders also require the
Company to obtain the consent of the lenders for additional acquisitions.

         Cash flows from operations -- The Company incurred an operating loss of
approximately $0.7 million for the quarter ended September 29, 2001 and has
positive working capital of approximately $15.1 million at September 29, 2001.
In August 2001, the Company completed certain purchase price adjustments to the
CEX merger agreement related to the acquisition of Velocity that resulted in an
improvement to working capital of approximately $14.9 million. The improvement
to working capital over the fourth quarter of fiscal 2001 was approximately
$17.9 million.

         As of September 29, 2001, the Company had no outstanding purchase
commitments for capital improvements.

         Cash flow used in operations was $0.8 million during the first quarter
of fiscal 2002, driven principally by the positive cash flow generated from
accounts receivable of $5.5 million offset with negative cash flow from other
current assets, accounts payable and miscellaneous accruals of $6.1 million.

         Cash flow used as a result of investing activities was primarily for
capital expenditures that amounted to $0.7 million.

         Cash flow generated through financing activities amounted to $0.5
million during the first quarter of 2002. Net proceeds from private placement of
Preferred Stock of $6.6 million was the primary source of cash during the
quarter. Long-term debt and notes payable resulted in negative cash flow of $6.1
million during the quarter ended September 29, 2001.

         The Company's operating plans include the continued implementation and
consolidation activities it had initiated in fiscal 2001 to further improve the
operating performance of the Company, as well as specific initiatives to reduce
specific cash expenditures related to general and administrative expenses. The
Company continues with the cost initiatives already in place, its back office
consolidation, and is quickly moving to achieve a variable cost model of service
to enable it to generate profitable revenue.

                                       16
<PAGE>

         The Company is dependent upon achieving certain revenue and expense
targets in its financial plan for fiscal 2002. The Company expects to meet its
financial projections for the next fiscal year and to continue to secure
additional financing from its lenders or through the issuance of additional
Company equity securities; however, there can be no assurance that such funding
can be obtained.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company's operations are not currently subject to material market
risks for interest rates, foreign currency rates, or other market price risks.



PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

         As of September 29, 2001, the Company was not a party to any material
legal proceedings.

         The Company is a party to litigation and has claims asserted against it
incidental to its business. Most of such claims are routine litigation that
involve workers compensation claims, claims arising out of vehicle accidents and
other claims arising out of the performance of same-day delivery services. The
Company carries workers' compensation insurance and auto liability coverage for
the current policy year. The Company is also named as a defendant in various
employment-related lawsuits arising in the ordinary course of business. The
Company vigorously defends against all of the foregoing claims.

         The Company does not believe that the pending lawsuits, if resolved or
settled unfavorably to the Company, would have a material adverse effect upon
the Company's financial position or results of operations. A monetary settlement
paid by the Company or an award against it in any of such actions could,
however, have a material adverse effect upon the Company's cash flow in a given
period in which a settlement or award occurs.

         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 that could adversely affect the Company's assumptions and the
outcome of claims, and cause actual results to differ materially from those
projected in the forward-looking statements. These factors include:

         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 for 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 that 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.

                                       17
<PAGE>

         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. 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.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         The following describes sales of the Company's securities in the last
fiscal quarter without registration under the Securities Act of 1933 (the
"Securities Act"):

         Pursuant to Subscription Note Purchase Agreements entered into during
July 2001 (collectively, the "Series F Note Agreements"), the Company issued
subscription notes in the aggregate principal amount of $7,055,700
(collectively, the "Series F Subscription Notes"), to a group of institutional
investors and executive management of the Company. No interest accrued on the
unpaid principal balances of the Series F Subscription Notes. On September 5,
2001, the Company's shareholders approved the issuance of Series F Preferred
having voting power greater than 20% of the outstanding voting securities of the
Company, and all of the principal balance of the Series F Subscription Notes was
converted into a number of shares of the Company's Series F Preferred equal to
the quotient of the principal being converted divided by $11.00. Subsequent to
shareholder approval on September 5, 2001, the principal amount of the Series F
Subscription Notes was converted into 641,412 shares of Series F Preferred. Each
share of Series F Preferred is convertible into twenty shares of the Company's
common stock. The Company also issued warrants to purchase 1,102,445 shares of
common stock in connection with these sales.

         In December 2000, the Company entered into a bridge loan agreement with
TH Lee Putnam Ventures ("THLPV"), and related entities, dated January 4, 2001,
and a supplemental bridge loan agreement dated January 31, 2001 (collectively,
the "Bridge Loan Agreement"). Pursuant to the Bridge Loan Agreement, THLPV
loaned the Company $3,500,000 on January 4, 2001 and an additional $1,500,000 on
January 31, 2001. In connection with the Bridge Loan Agreement, the Company
issued bridge notes to THLPV in the aggregate amount of $5,000,000, which were
due and payable on July 4, 2001. The bridge notes were subordinate to the
Company's senior indebtedness. Each bridge note carried interest on the unpaid
principal amount at an annual percentage rate of 18%. Interest on each of the
bridge notes was payable at maturity in immediately available funds or in shares
of Series D Preferred.

         On September 5, 2001, the shareholders approved the bridge notes and
their conversion into Series D Preferred. The bridge notes provided that the
number of shares of Series D Preferred issuable upon conversion of the bridge
notes would equal the principal value of the bridge notes and all accrued
interest divided by the lesser of: (a) the average closing price of common stock
as reported by Nasdaq for the five days prior to the conversion, or (b) a price
25% lower than the price per share at which the Series D Preferred, or any
voting stock that we issued subsequent to issuance of the bridge notes, was last
sold to one or more third party investors. Accordingly, pursuant to the purchase
price of the Series D Preferred established in the Series D Preferred purchase
agreement, the conversion price of the bridge notes was $0.55 per share, and
resulted in the issuance to THLPV of 1,017,538 shares of Series D Preferred, or
10,175,380 shares of common stock upon conversions.

         Pursuant to the Bridge Loan Agreement, the Company also issued to THLPV
bridge warrants to purchase an aggregate 216,533 shares of Series D Preferred at
a per share purchase price of $0.01. The bridge warrants were issued on January
4, 2001, and expire on January 4, 2006.

                                       18
<PAGE>

         Pursuant to Stock Purchase Agreements entered into during March and
April 2001, the Company issued two subscription notes in the total principal
amount of $3,999,250 to two institutional investors, and two subscription notes,
each in the principal amount of $500,000 to two non-U.S. investors (collectively
the "Series D Subscription Notes"). No interest accrued on the unpaid principal
balance outstanding on the Series D Subscription Notes. The Company's
shareholders approved of the issuance of Series D Preferred having voting power
greater than 20% of the Company's outstanding voting securities and all of the
principal balance of the Series D Subscription Notes have been converted 624,906
shares of Series D Preferred. Each share of Series D Preferred is convertible
into ten shares of common stock.

         In connection with the sales of the Series D Preferred, the Company
engaged BB&T Capital Markets as its exclusive agent and has agreed to pay BB&T
Capital Markets approximately $200,000 as commissions on these sales. Except
with respect to its private placement of Series D Preferred Shares, 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 within the meaning of Rule 501(a) of Regulation D under the Securities
Act of 1933 (the "Securities Act") in a private placement transactions, exempt
from registration under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not Applicable

                                       19
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         In September 2001, the Company submitted to its shareholders eleven
matters, all of which were approved at a special meeting held on September 5,
2001. The matters and voting thereon were as follows:

1.       To amend the certificate of designation of the Company's Series B
         Convertible Preferred Stock to create a priority upon liquidation in
         favor of the holders of the Series D Preferred and the Series F
         Convertible Preferred Stock ("Series F Preferred")

                   For        12,172,390    Abstain               66,900
                   Against       282,497    Broker non-votes   8,191,258

2.       To amend the certificate of designation of the Company's Series C
         Convertible Preferred Stock to create a priority upon liquidation in
         favor of the holders of the Series D Preferred and the Series F
         Preferred

                   For        12,173,136    Abstain               67,154
                   Against       281,497    Broker non-votes   8,191,258

3.       To amend the certificate of designation of the Company's Series D
         Convertible Preferred Stock to create a priority upon liquidation in
         favor of the holders of the Series D Preferred and the Series F
         Preferred

                   For        12,172,850    Abstain               66,940
                   Against       281,997    Broker non-votes   8,191,258

4.       To convert $5.0 million principal amount of Convertible Bridge Notes
         issued to THLPV in January 2001 into Series D Preferred

                   For        12,232,744    Abstain               67,692
                   Against       221,351    Broker non-votes   8,191,258

5.       To issue Warrants to THLPV to purchase an aggregate of 216,533 shares
         of Series D Preferred

                   For        12,373,954    Abstain               66,893
                   Against        80,940    Broker non-votes   8,191,258

6.       To issue up to 2,092,576 shares of Series D Preferred, plus additional
         shares issuable upon conversion of interest on the Convertible Bridge
         notes after July 25, 2001, to subscribers for such securities and
         holders of subscription notes which are convertible into Series D
         Preferred

                   For        12,307,894    Abstain               63,292
                   Against       150,601    Broker non-votes   8,191,258

7.       To issue 534,000 shares of Series F Preferred, and warrants to purchase
         917,812 shares of common stock, to subscribers for such securities and
         holders of subscription notes which are convertible into Series F
         Preferred

                   For        12,237,514    Abstain               64,585
                   Against       219,688    Broker non-votes   8,191,258

                                       20
<PAGE>

8.       To amend the Amended and Restated Articles of Incorporation to increase
         the number of shares of authorized stock

                   For        12,334,133    Abstain               62,493
                   Against       125,161    Broker non-votes   8,191,258

9.       To authorize the Company's Board of Directors to effect a reverse split
         of the Company's common stock at a later date, at their discretion, at
         a ratio of one-for-two

                   For        18,950,667    Abstain               66,133
                   Against       343,396    Broker non-votes   1,352,849

10.      To authorize the Company's Board of Directors to effect a reverse split
         of the Company's common stock at a later date, at their discretion, at
         a ratio of one-for-five

                   For        18,910,183    Abstain               68,547
                   Against       381,466    Broker non-votes   1,352,849

11.      To authorize the Company's Board of Directors to effect a reverse split
         of the Company's common stock at a later date, at their discretion, at
         a ratio of one-for-eight

                   For        18,693,033    Abstain               75,333
                   Against       591,830    Broker non-votes   1,352,849

                                       21
<PAGE>

ITEM 5.  OTHER INFORMATION.

         Not Applicable.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         a.       Exhibits required by Item 601 of Regulation S-K:

                  Reference is made to the Exhibit Index.

         b.       Reports on Form 8-K

                  The Company filed five reports on Form 8-K during the fiscal
                  quarter ended September 29, 2001, as follows:

                  (1)      Current Report on Form 8-K filed on July 16, 2001,
                           relating to the announcement that the Company
                           negotiated a settlement with Corporate Express, Inc.
                           which would eliminate approximately $43 million of
                           balance sheet liabilities.

                  (2)      Current Report on Form 8-K filed on July 26, 2001,
                           relating to a notice that the Company received from
                           Nasdaq indicating that its securities were subject to
                           delisting from the Nasdaq SmallCap Market.

                  (3)      Current Report on Form 8-K Filed on July 30, 2001,
                           relating to the filing of a Certificate of
                           Designation of Preferences and Rights of Series F
                           Convertible Preferred Stock and Articles of Amendment
                           to the Restated Articles of incorporation with the
                           Secretary of State of Utah on July 13, 2001 relating
                           to its Series F Convertible Preferred Stock.

                  (4)      Current Report on Form 8-K filed on August 14, 2001,
                           relating to an improvement to its balance sheet by
                           $50 million by way of the completion of a convertible
                           preferred stock private placement financing in excess
                           of $7 million and the closing of a previously
                           announced settlement with Corporate Express, Inc.,
                           which eliminated approximately $43 million of balance
                           sheet liabilities.

                  (5)      Current report on Form 8-K filed on August 29, 2001
                           relating to the appointment of Vince Wasik and Alex
                           Paluch to its Board of Directors. In addition, Mr.
                           Wasik was elected as the Chairman of the Board of
                           Directors, replacing Peter Lytle, who retired from
                           the Company's Board of Directors.

                                       22
<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 13, 2001.


                                        UNITED SHIPPING & TECHNOLOGY, INC.


                                        By  /s/ Jeffry J. Parell
                                            ----------------------------------
                                            JEFFRY J. PARELL
                                            Chief Executive Officer


                                        By  /s/ Mark E. Ties
                                            ----------------------------------
                                            MARK E. TIES
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)

                                       23
<PAGE>

                                INDEX TO EXHIBITS


  Exhibit No.     Description
  -----------     -----------

     10.1         Amendment No. 2 to Merger Agreement, Settlement and General
                  Release Agreement by and among Corporate Express, Inc.,
                  successor by merger to CEX Holdings, Inc., Velocity Express,
                  Inc. f/k/a Corporate Express Delivery Systems, Inc., and
                  United Shipping & Technology, Inc. dated August 2, 2001

     10.2         Contractor Services Agreement between United Shipping &
                  Technology, Inc. and MCG Global, LLC dated May 15, 2001

     10.3         Warrant to purchase up to 1,000,000 shares of Common Stock at
                  a price of $0.40 per share issued by the Company to MCG
                  Global, LLC dated May 15, 2001

     10.4         Warrant to purchase up to 1,000,000 shares of Common Stock at
                  a price of $0.40 per share issued by the Company to BLG
                  Ventures, LLC dated August 23, 2001

                                       24
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{"company-data": {"conformed-name": "UNITED SHIPPING & TECHNOLOGY INC", "cik": "0001002902", "assigned-sic": "4513", "irs-number": "870355929", "state-of-incorporation": "UT", "fiscal-year-end": "0627"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-28452", "film-number": "1783495"}, "business-address": {"street1": "9850 51ST AVE N", "street2": "STE 110", "city": "MINNEAPLOLIS", "state": "MN", "zip": "55442", "phone": "6129414080"}, "mail-address": {"street1": "5583 WEST 78TH ST", "city": "EDINA", "state": "MN", "zip": "55439"}, "former-company": {"former-conformed-name": "U SHIP INC", "date-changed": "19960313"}}
================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

                                   (Mark One)

            [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 29, 2001

                                   ----------

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

                           Commission File No. 0-28452

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

               Utah                                   87-0355929
   (State or Other Jurisdiction of       (IRS Employer Identification No.)
   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: (952) 941-4080

                                   ----------

Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                 YES (X)          NO (_)

As of October 31, 2001, there were 17,146,399 shares of common stock of the
registrant issued and outstanding.

================================================================================
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES

                               INDEX TO FORM 10-Q

                               SEPTEMBER 29, 2001

                                                                            Page
                                                                            ----
PART I.      FINANCIAL INFORMATION
     ITEM 1. Consolidated Financial Statements (Unaudited)
               Balance Sheets as of September 29, 2001 and June 30, 2001..... 3
               Statements of Operations for the Three Months Ended
                  September 29, 2001 and September 30, 2000.................. 4
               Statement of Shareholders' Deficit............................ 5
               Statements of Cash Flows for the Three Months Ended
                  September 29, 2001 and September 30, 2000.................. 6
               Notes to Consolidated Financial Statements for the Three
                  Months Ended September 29, 2001 and September 30, 2000..... 7

    ITEM 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations.............12

    ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk......17

PART II.     OTHER INFORMATION
     ITEM 1. Legal Proceedings...............................................17
     ITEM 2. Changes in Securities and Use of Proceeds.......................18
     ITEM 3. Defaults Upon Senior Securities.................................19
     ITEM 4. Submission of Matters to a Vote of Security Holders.............20
     ITEM 5. Other Information...............................................22
     ITEM 6. Exhibits and reports on Form 8-K................................22
SIGNATURES...................................................................23
EXHIBIT INDEX................................................................24

                                       2
PART I.

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                    (Amounts in thousands, except par value)
September 29,        June 30,
                                                               2001              2001
                                                           -------------       ---------
                                                            (unaudited)
ASSETS
Current assets:
     Cash                                                    $   1,959       $   2,932
     Accounts receivable, net                                   42,256          47,752
     Accounts receivable - other                                 1,471           1,700
     Prepaid workers' compensation                              15,567          13,024
     Other prepaid expenses                                      2,209           1,735
     Other current assets                                          220             241
                                                             ---------       ---------
         Total current assets                                   63,682          67,384

Property and equipment, net                                      8,436           8,842

Goodwill, net                                                   39,714          80,468
Notes receivable from related party                                182             182
Other assets                                                     1,276           1,499
                                                             ---------       ---------
Total assets                                                 $ 113,290       $ 158,375
                                                             =========       =========

                     LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
     Trade accounts payable                                  $  23,841       $  32,600
     Accrued insurance and claims                                9,492           9,601
     Accrued wages and benefits                                  5,467           5,095
     Accrued legal and claims                                    5,032           5,957
     Other accrued liabilities                                   4,754          16,913
     Current portion of long-term debt                              19              27
                                                             ---------       ---------
         Total current liabilities                              48,605          70,193

Long-term debt, less current portion                            32,738          61,242
Accrued insurance and claims                                    13,004          23,111

Redeemable preferred stock and preferred warrants               53,893          35,421

Shareholders' deficit:
     Common stock, $0.004 par value, 150,000 and 75,000
         shares authorized at September 29, 2001 and
         June 30, 2001, respectively;
         17,146 shares issued and outstanding at
         September 29, 2001 and June 30, 2001                       69              69
     Additional paid-in-capital                                 55,910          47,812
     Accumulated deficit                                       (90,823)        (79,409)
     Foreign currency translation                                 (106)            (64)
                                                             ---------       ---------
         Total shareholders' deficit                           (34,950)        (31,592)
                                                             ---------       ---------
         Total liabilities and shareholders' deficit         $ 113,290       $ 158,375
                                                             =========       =========
The accompanying notes are an integral
                 part of the consolidated financial statements.

                                       3
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                  (Amounts in thousands, except per share data)

                                                    Three Months Ended
                                               -----------------------------
                                               September 29,   September 30,
                                                   2001            2000
                                               -------------   -------------

Revenue                                          $  95,788       $ 133,091

Cost of services                                    75,983         104,802
                                                 ---------       ---------
        Gross profit                                19,805          28,289

Operating expenses:
        Occupancy                                    3,517           4,019
        Selling, general and administrative         16,969          29,805
                                                 ---------       ---------
Total operating expenses                            20,486          33,824
                                                 ---------       ---------
Loss from operations                                  (681)         (5,535)

Other income (expense):
        Interest expense                            (5,745)         (1,617)
        Common stock warrant charge                 (1,020)           --
        Other                                           12             (33)
                                                 ---------       ---------
Net loss                                         $  (7,434)      $  (7,185)
                                                 =========       =========

Net loss applicable to common shareholders       $ (11,414)      $  (9,575)
                                                 =========       =========

Basic and diluted net loss per share             $   (0.67)      $   (0.58)
                                                 =========       =========

Basic and diluted weighted average number
        of common shares outstanding                17,146          16,529
                                                 =========       =========

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

                                       4
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
                                   (Unaudited)
                             (Amounts in thousands)
Common Stock
                                                           -------------------  Additional                Foreign
                                                                                  Paid-in   Accumulated   Currency
                                                            Shares     Amount     Capital     Deficit    Translation     Total
                                                           --------   --------  ----------  -----------  -----------   ---------
Balance at June 30, 2001                                     17,146   $     69    $ 47,812   $(79,409)      $  (64)    $(31,592)
      Beneficial conversion of Bridge Notes                    --         --         4,120       --           --          4,120
      Beneficial conversion of Subscription notes              --         --         2,700     (2,700)        --           --
      Value of Common Warrants issued
           in connection with sale of Series F Preferred       --         --           258       (258)        --           --
      Accretion of Series B Redeemable Preferred
           Stock to its redemption value                       --         --          --         (190)        --           (190)
      Accretion of Series D Redeemable Preferred
           Stock to its redemption value                       --         --          --          (52)        --            (52)
      Adjustments to Series C and D warrants                   --         --          --         (780)        --           (780)
      Common Stock warrants issued
           for services rendered                               --         --         1,020       --           --          1,020

      Net loss                                                 --         --          --       (7,434)        --         (7,434)
      Foreign currency translation                             --         --          --         --            (42)         (42)
                                                                                                                       --------
      Comprehensive loss                                                                                                 (7,476)
                                                           --------   --------    --------   --------       ------     --------
Balance at September 29, 2001                                17,146   $     69    $ 55,910   $(90,823)      $ (106)    $(34,950)
                                                           ========   ========    ========   ========       ======     ========
The accompanying notes are an integral
                 part of the consolidated financial statements

                                       5
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Amounts in thousands)
Three Months Ended
                                                            ----------------------------
                                                            September 29,  September 30,
                                                                2001           2000
                                                            -------------  -------------
OPERATING ACTIVITIES
        Net loss                                              $ (7,434)      $ (7,185)
        Adjustments to reconcile net loss to net
           cash flows used in operating activities:
            Depreciation                                         1,029          1,324
            Amortization                                           209          1,705
            Equity instruments issued in lieu of
                payment for services received                    1,170           --
            Interest expense on 18% Bridge Notes                 4,716           --
            Other                                                  105            147
            (Gain) loss on retirement of equipment                  (5)            25
        Change in operating assets and liabilities:
            Accounts receivable                                  5,496         (7,380)
            Other current assets                                (2,657)         1,332
            Other assets                                            14            147
            Accounts payable                                      (400)        (1,184)
            Accrued liabilities                                 (3,056)        (7,416)
                                                              --------       --------
               Cash used in operating activities                  (813)       (18,485)

INVESTING ACTIVITIES
        Proceeds from sale of equipment                              5             27
        Purchases of equipment                                    (643)          (704)
        Other                                                      (49)             4
                                                              --------       --------
               Cash used in investing activities                  (687)          (673)

FINANCING ACTIVITIES
        Borrowings under revolving credit agreement, net        (4,067)         4,499
        Payments on acquisition notes                           (2,000)          (523)
        Proceeds from Series F Preferred, net                    6,795           --
        Debt financing costs                                      (201)          --
        Proceeds from issuance of common stock, net               --              994
        Proceeds from issuance of preferred stock, net            --           12,000
                                                              --------       --------
               Cash provided by financing activities               527         16,970
                                                              --------       --------
Net decrease in cash and cash equivalents                         (973)        (2,188)
Cash and cash equivalents, beginning of period                   2,932          3,993
                                                              --------       --------
Cash and cash equivalents, end of period                      $  1,959       $  1,805
                                                              ========       ========
The accompanying notes are an integral
                 part of the consolidated financial statements.

                                       6
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
--------------------------------------------------------------------------------

1.       SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation - The 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 September 29, 2001,
and the results of its operations for the three months ended September 29, 2001,
and its cash flows for the three months ended September 29, 2001 have been
included. Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles has 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, 2001, and the footnotes thereto, included in the Company's Report on
Form 10-KSB, filed with the Securities and Exchange Commission.

         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.

         Reclassifications - Certain reclassifications have been made to the
prior period consolidated financial statements to conform to the current period
presentation.

         Comprehensive loss - Comprehensive loss was $7.5 million and $7.2
million for the three months ended September 29, 2001 and September 30, 2000,
respectively. The difference between net loss and total comprehensive loss
related to foreign currency translation adjustments.

                                       7
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------

         Earnings per Share - Basic net loss per share excludes dilution and is
computed by dividing net loss by the weighted average number of common shares
outstanding for the period. Diluted net loss per share reflects the potential
dilution that could occur if securities or other obligations to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the Company. For all periods
presented, diluted net loss per share is equal to basic net loss per share
because the effect of including such securities or obligations would have been
antidilutive.
Three Months Ended
                                                                     -----------------------------
                                                                     September 29,  September 30,
                                                                         2001            2000
                                                                     -------------  --------------
                                                                         (Amounts in thousands,
                                                                         except per share data)
Numerator
        Net loss                                                       $ (7,434)      $ (7,185)
        Beneficial conversion feature                                    (2,700)          --
        Adjustment of Common Warrants issued in connection
            with sale of Series F Preferred to market value                (258)          --
        Accretion of Series B Redeemable Preferred Stock
            to its redemption value                                        (190)           (95)
        Accretion of Series D Redeemable Preferred Stock
            to its redemption value                                         (52)          --
        Adjustment of Preferred Series B Warrants to market value          --           (2,295)
        Adjustment of Preferred Series C Warrants to market value          (130)          --
        Adjustment of Preferred Series D Warrants to market value          (650)          --
                                                                       --------       --------

        Net loss applicable to common shareholders                     $(11,414)      $ (9,575)
                                                                       ========       ========

Denominator for basic and diluted loss per share
        Weighted average shares                                          17,146         16,529
                                                                       ========       ========

Basic and Diluted Loss Per Share                                       $  (0.67)      $  (0.58)
                                                                       ========       ========
2.    ACQUISITIONS

      Effective August 28, 1999, the Company acquired from CEX Holdings, Inc.
("CEX") all of the outstanding shares of common stock of Velocity Express, Inc.
("Velocity"), formerly known as Corporate Express Delivery Systems, Inc., a
provider of same-day delivery solutions. The acquisition purchase price, which
was accounted for using the purchase method of accounting, was approximately
$91.2 million, subject to adjustment as defined in the merger agreement. The
purchase price consisted of $43 million in cash provided by an institutional
debt financier and an investment firm, and $19.5 million in a combination of
short and long-term notes issued to CEX. The Company, as a result of the
acquisition, received approximately $86.6 million of Velocity's assets and
assumed approximately $115.3 million of Velocity's liabilities, which resulted
in the Company recognizing approximately $91.2 million in goodwill.

                                       8
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------

         On August 2, 2001, the Company completed certain purchase price
adjustments to the CEX merger agreement related to the acquisition of Velocity.
Under the terms of the settlement regarding the purchase price, the Company was
no longer liable for the convertible subordinated note to CEX in the amount of
$3.6 million, the long-term subordinated note to CEX of $6.5 million, the
short-term subordinated note to CEX of $4.4 million and the accrued interest
related to the notes of approximately $2.8 million. Additionally, the purchase
price adjustments provide for the discharge of certain pre-acquisition insurance
liabilities totaling approximately $13.5 million as well as certain other
adjustments which had the impact of reducing specific liabilities by
approximately $12.0 million. The purchase price adjustments totaling
approximately $42.8 million were recorded as an offset to the goodwill in the
Company's first quarter of fiscal 2002. In conjunction with the agreement
pertaining to the purchase price adjustments, the Company issued common stock
warrants for services rendered by an outside consultant, who subsequently was
appointed Chairman of the Board of the Company. The fair value of the warrants
amounted to approximately $1.0 million and is included in other expense in the
statement of operations.

3.       RESTRUCTURING

         The Company began implementing a multi-faceted restructuring program in
March 2001 to allow it to achieve a cost structure to better position itself to
achieve profitability in the ever-changing logistics and transportation
marketplace. The Company as a result has streamlined and downsized its
operations by reducing its workforce and consolidating various locations. In
fiscal 2001, the Company took a restructuring charge of $7.1 million consisting
of: severance costs in the amount of $2.2 million related to the workforce
reduction of 234 full-time employees, $3.3 million for rental costs associated
with the termination of building leases and location rationalization costs, and
$1.6 million for the write-off of equipment. As of September 29, 2001,
approximately $6.6 million in costs have been charged against the reserve.

4.       LONG-TERM DEBT AND CAPITAL LEASES

         Long-term debt and capital leases consisted of the following:

                                                 September 29,    June 30,
                                                     2001           2001
                                                 -------------    --------
                                                   (Amounts in thousands)

         Revolving note                            $ 28,696       $ 32,763
         Senior subordinated note                     4,004          3,919
         Long-term subordinated note to CEX            --            6,519
         Short-term subordinated note to CEX           --            4,404
         Convertible subordinated note to CEX          --            3,600
         18% Bridge notes                              --            5,000
         Subscription notes                            --            5,000
         Other                                           57             64
                                                   --------       --------
                                                     32,757         61,269
         Less current maturities                        (19)           (27)
                                                   --------       --------
         Total                                     $ 32,738       $ 61,242
                                                   ========       ========

         Borrowings under the revolving note are limited to the lesser of $55
million or an amount based on a defined portion of receivables. Interest is
payable monthly at a rate of prime plus 2.75% (8.75% at September 29, 2001). The
Company may elect the rate of LIBOR plus 6% at its discretion from time to time.
All amounts advanced are due September 30, 2002. In addition, the Company is
required to pay a commitment fee of 0.375% on unused amounts of the total
commitment, as defined in the agreement.

                                       9
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------

         The senior subordinated note has interest payable quarterly at 12% and
is due September 30, 2004. The note is subordinate to the revolving note. The
initial carrying value of the senior subordinated note was reduced by $1.7
million for the fair value of the common stock warrant issued to the senior
subordinated lender. The warrant is subject to anti-dilution provisions. The
unamortized discount aggregated $1.0 million at September 29, 2001, and is being
amortized over the five-year life of the note.

         In August 2001, the Company completed certain purchase price
adjustments to the CEX merger agreement whereby the convertible subordinated
note, the long-term subordinated note, and the short-term subordinated note
along with all accrued interest thereon, totaling approximately $14.5 million of
notes and $2.8 million of accrued interest, were terminated.

         Substantially all of the assets and operations of Velocity have been
pledged to secure borrowings under the revolving note and the senior
subordinated note. 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. The agreements with the lenders also require the
Company to obtain the consent of the lenders for additional acquisitions.

5.       EQUITY

         Series F Convertible Preferred Stock - In July 2001, the Company
entered into Subscription Note Purchase Agreements whereby the Company issued
subscription notes payable February 2, 2002 in the aggregate principal amount of
approximately $7.1 million (collectively, the "Series F Subscription Notes"), to
a group of institutional investors and executive management of the Company. In
September 2001, the Company's shareholders approved the issuance of Series F
Preferred, and all of the principal balances of the Series F Subscription Notes
were converted into 646,029 shares of Series F Preferred. Each share of Series F
Preferred is immediately convertible into twenty shares of the Company's common
stock. The Company also issued warrants to purchase 1,110,384 shares of common
stock in connection with these sales.

         Series D Convertible and Redeemable Preferred Stock - The Company
entered into a bridge loan agreement dated January 4, 2001, and a supplemental
bridge loan agreement dated January 31, 2001 (collectively, the "Bridge Loan
Agreement"), pursuant to which the Company received $3.5 million on January 4,
2001, and an additional $1.5 million on January 31, 2001. The indebtedness was
represented by promissory notes, payable on July 4, 2001, bearing interest at a
rate of 18% per annum (the "Bridge Notes"), which were convertible at the option
of the lender into 909,090 shares of the Company's Series D Preferred at an
exercise price of $5.50 per share upon shareholder approval of the conversion.

         The Company entered into note purchase agreements in connection with
the issuance of promissory notes convertible into shares of Series D Preferred
(the "Subscription Notes"). During March and April 2001, the Company sold
Subscription Notes convertible into 624,906 shares of Series D Preferred to
accredited investors for an aggregate $5.0 million. Each Subscription Note was
converted into shares of Series D Preferred at an effective purchase price of
$8.00 per share of Series D Preferred after shareholder approval of the
conversion.

         During March 2001, the Company entered into securities purchase
agreements in connection with the sale of Series D Preferred. The Company sold
252,429 shares of Series D Preferred at $8.00 per share for approximately $2.0
million.

                                       10
UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
--------------------------------------------------------------------------------

         Each share of Series D Preferred is immediately convertible into ten
shares of the Company's common stock. The Series D shares have a mandatory
redemption feature that requires the Company to redeem each outstanding share on
the redemption date, March 1, 2007, at a price equal to the liquidation value
per such share. In connection with the Bridge Loan Agreement, the Company issued
warrants to purchase an aggregate 216,533 shares of Series D Preferred at a
purchase price of $0.01 per share (the "Bridge Warrants").

         In September 2001 at a special shareholders' meeting, the Company's
shareholders approved proposals which accomplished the following: (1) conversion
of $5.0 million principal amount of the Bridge Notes into Series D Preferred;
and (2) issuance of shares of Series D Preferred to subscribers for such
securities and holders of subscription notes which were convertible into Series
D Preferred.

         As a result of the conversion of the 18% Bridge Notes into the
Company's Series D Preferred, the Company recorded a $4.7 million non-cash
interest charge. $880,000 from the 18% Bridge Notes was allocated to the Series
D Preferred warrants at the date of shareholder approval in September 2001. The
warrants were subsequently marked to market by adjusting the warrant value by
$650,000 at September 29, 2001.

         The Company's Series D Preferred that resulted from the conversion of
the subscription notes was deemed to have contained beneficial conversion
features that were recognized as a deemed dividend to preferred shareholders.
The value of the proceeds allocated to the beneficial conversion feature was
$2.7 million and was recognized as a return to the preferred shareholders at the
date of shareholder approval in September 2001 since the Series D Preferred was
immediately convertible.

                                       11
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

               UNITED SHIPPING & TECHNOLOGY, INC. AND SUBSIDIARIES

         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-Q 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 that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, no
statements contained in this Form 10-Q 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 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-Q 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.

                                       12
Use of EBITDA and Cash Net Income

      The Company evaluates operating performance based on several measures,
including income (loss) applicable to common shareholders plus interest,
non-cash depreciation and amortization, non-cash charges associated with the
valuation of the Company's redeemable preferred stock and preferred warrants,
and non-cash charges associated with the granting of equity as payment for
certain services ("EBITDA") and income (loss) applicable to common shareholders
plus non-cash depreciation and amortization, non-cash charges associated with
the valuation of the Company's redeemable preferred stock and preferred
warrants, and non-cash charges associated with the granting of equity as payment
for certain services ("cash net income"). The Company considers EBITDA and cash
net income important indicators of the operational strength and performance of
its business; however, EBITDA and cash net income are supplemental measures of
performance and are not intended to represent measures of performance in
accordance with disclosures required by generally accepted accounting principles
("GAAP"). In the first quarter of fiscal 2002, the Company reported positive
EBITDA of $569,000 as compared to negative EBITDA of $2.6 million in the first
quarter of fiscal 2001, an improvement of $3.1 million or 122%. Also in the
first quarter of fiscal 2002, the Company reported cash net loss of $0.4 million
as compared to cash net loss of $4.1 million in the first quarter of fiscal
2001, an improvement of $3.7 million. These improvements are the result of the
Company's focus on cost containment, back office consolidation, and improvements
to the balance sheet which will be discussed in detail below.
Three Months Ended
                                                                -----------------------------
                                                                September 29,   September 30,
                                                                    2001            2000
                                                                -------------   -------------
                                                                    (Amounts in thousands,
                                                                    except per share data)
Revenue                                                  $  95,788       $ 133,091
         Loss from operations                                          (681)         (5,535)
         Net loss applicable to common shareholders                 (11,414)         (9,575)
         EBITDA                                                         569          (2,580)
         Net income cash basis                                         (383)         (4,112)

         Basic and diluted net loss per share - GAAP basis        $   (0.67)      $   (0.58)
         Basic and diluted net loss per share - EBITDA basis      $    0.03       $   (0.16)
         Basic and diluted net loss per share - cash basis        $   (0.02)      $   (0.25)
Historical Results of Operations

Quarter ended September 29, 2001 Compared to Quarter Ended September 30, 2000

         Revenue for the quarter ended September 29, 2001 was in line with
management expectations, decreasing $37.3 million or 28.0% to $95.8 million from
$133.1 million for the quarter ended September 30, 2000. The decrease in revenue
for the quarter ended September 29, 2001 is primarily the result of the loss of
revenues from divesture of non-core business operations of approximately $14.0
million over the same quarter last year, the elimination by the Company of $13.6
million of low-margin business through the consolidation of its networks, the
closing or consolidation of unprofitable locations of approximately $7.8
million, and $1.9 million due to the overall slowing of the economy and the
impact on the Company of the events of September 11th. Revenue by service
offering for the quarter was as follows:

         Scheduled services                        53%
         Distribution services                     21%
         Demand services                           21%
         Critical parts services                    5%

                                       13
Cost of services for the quarter ended September 29, 2001 was $76
million, a reduction of $28.8 million or 27.5% from $104.8 million for the
quarter ended September 30, 2000. As a percentage of revenue, cost of services
increased from 78.7% to 79.3% for the quarter ended September 29, 2001. The
overall dollar decrease is consistent with the revenue trend discussed above,
and is consistent with the expectation of savings as a result of the initiatives
begun in fiscal 2001. The increase in cost of services as a percentage of
revenue is principally a reflection of the timing of the implementation of
various initiatives that were instituted during the last fiscal year. Because
the savings in cost of services is a result of the initiatives begun in the
second half of fiscal 2001, management believes a more meaningful analysis of
the results comes from comparing the results of the first quarter of 2002 to
those of the fourth quarter of 2001, where the Company achieved a 1.4 percent
improvement in gross profit percentage over the fourth quarter of fiscal 2001.
This savings is principally the result of continuing to move towards a variable
cost model under which the Company uses owner-operators and independent
contractors in greater proportion than employee drivers, as well as insurance
and safety initiatives resulting in lower claims and insurance expense.

         Selling, general and administrative ("SG&A") expenses for the quarter
ended September 29, 2001 were $17.0 million or 17.7% of revenue, a reduction of
$12.8 million or 43.1% as compared with $29.8 million or 22.4 % of revenue for
the quarter ended September 30, 2000. The decrease in SG&A for the quarter is a
result of the continued efforts by the Company to integrate, through technology,
all back office processes into one national platform, as well as its aggressive
approach to continued cost cutting of approximately $10.4 million, and the sale
of non-core business of $2.4 million. This focus has enabled the company to
realize a year-over-year improvement of 4.7 percent as a percent of revenue and
a 2.2 percent improvement as a percent of revenue over the fourth quarter of
fiscal 2001. The cost reduction initiatives which began in the second half of
fiscal 2001 included the flattening of the corporate and regional management
structure, the closing and consolidation of unprofitable locations, and the
selling of non-core business. The Company also realized additional savings in
the first quarter of fiscal 2002 through the centralization of the back office,
credit and cash applications, finance, and driver service functions. The Company
believes that further savings will be realized as it continues to centralize its
billing and invoicing processes, accounts payable and payroll functions.

         As compensation for structuring and finalizing the agreement between
the Company and CEX, the Company issued common stock warrants. The fair value of
the warrants was approximately $1.0 million and is included in other expense in
the statement of operations.

         Interest expense for the quarter ended September 29, 2001 increased
$4.1 million to $5.7 million from $1.6 million for the quarter ended September
30, 2000. Included in interest expense for the quarter are certain non-cash
charges related to the conversion of the Series D Bridge Notes and interest
thereon amounting to approximately $4.7 million. Interest expense related to the
Company's borrowings decreased $0.6 million over the same quarter in the prior
year primarily as a result of lower interest rates and lower borrowings.

         As a result of the foregoing factors, the net loss for the quarter
ended September 29, 2001, including one-time non-cash charges relating to equity
financing costs of $5.7 million, was $7.4 million, compared with $7.2 million
for the same period in fiscal 2001. Had the effect of the one-time charges been
excluded, net loss for the quarter ended September 29, 2001 would have been $1.7
million, compared with $7.2 million for the same period in fiscal 2001.

                                       14
LIQUIDITY AND CAPITAL RESOURCES:

         Historically, the Company has operated at a loss and has funded its
operations through a credit facility with a commercial lender, various private
placements of equity and debt, including sales of preferred stock, the issuance
of warrants, and various bridge loan agreements.

         Series F Convertible Preferred Stock - In July 2001, the Company
entered into Subscription Note Purchase Agreements whereby the Company issued
subscription notes payable February 2, 2002 in the aggregate principal amount of
approximately $7.1 million (collectively, the "Series F Subscription Notes"), to
a group of institutional investors and executive management of the Company. In
September 2001, the Company's shareholders approved the issuance of Series F
Preferred, and all of the principal balances of the Series F Subscription Notes
were converted into 646,029 shares of Series F Preferred. Each share of Series F
Preferred is immediately convertible into twenty shares of the Company's common
stock. The Company also issued warrants to purchase 1,110,384 shares of common
stock in connection with these sales.

         Series D Convertible and Redeemable Preferred Stock - The Company
entered into a bridge loan agreement dated January 4, 2001, and a supplemental
bridge loan agreement dated January 31, 2001 (collectively, the "Bridge Loan
Agreement"), pursuant to which the Company received $3.5 million on January 4,
2001, and an additional $1.5 million on January 31, 2001. The indebtedness was
represented by promissory notes, payable on July 4, 2001, bearing interest at a
rate of 18% per annum (the "Bridge Notes"), which were convertible at the option
of the lender into 909,090 shares of the Company's Series D Preferred at an
exercise price of $5.50 per share of Series D Preferred.

         The Company entered into note purchase agreements in connection with
the issuance of promissory notes convertible into shares of Series D Preferred
(the "Subscription Notes"). During March and April 2001, the Company sold
Subscription Notes convertible into 624,906 shares of Series D Preferred to
accredited investors for an aggregate $5.0 million. Each Subscription Note was
converted into shares of Series D Preferred at an effective purchase price of
$8.00 per share of Series D Preferred after shareholder approval of the
conversion.

         Each share of Series D Preferred is convertible into ten shares of the
Company's common stock. The Series D Preferred shares have a mandatory
redemption feature that requires the Company to redeem each outstanding share on
the redemption date, March 1, 2007, at a price equal to the liquidation value
per such share. In connection with the Bridge Loan Agreement, the Company issued
warrants to purchase an aggregate 216,533 shares of Series D Preferred at a
purchase price of $0.01 per share (the "Bridge Warrants").

         In September 2001 at a special shareholders' meeting, the Company's
shareholders approved proposals which accomplished the following: (1) conversion
of $5.0 million principal amount of the Bridge Notes into Series D Preferred;
and (2) issuance of shares of Series D Preferred to subscribers for such
securities and holders of subscription notes which were convertible into Series
D Preferred.

         As a result of the conversion of the 18% Bridge Notes into the
Company's Series D Preferred, the Company recorded a $4.7 million non-cash
interest charge. $880,000 from the 18% Bridge Notes was allocated to the Series
D Preferred warrants at the date of shareholder approval in September 2001. The
warrants were subsequently marked to market by adjusting the warrant value by
$650,000 at September 29, 2001.

         The Company's Series D Preferred that resulted from the conversion of
the subscription notes was deemed to have contained beneficial conversion
features that were recognized as a deemed dividend to preferred shareholders.
The value of the proceeds allocated to the beneficial conversion feature was
$2.7 million and was recognized as a return to the preferred shareholders at the
date of shareholder approval in September 2001 since the Series D Preferred was
immediately convertible.

                                       15
The principal financing agreements consist of a revolving note and a
senior subordinated note. The Company's subsidiary is the borrower on the notes
with the Company, and its other subsidiaries, acting as guarantors.

         Borrowings under the revolving note are limited to the lesser of $55
million or an amount based on a defined portion of receivables. Interest is
payable monthly at a rate of prime plus 2.75% (8.75% at September 29, 2001). The
Company may elect the rate of LIBOR plus 6% at its discretion from time to time.
All amounts advanced are due September 30, 2002. In addition, the Company is
required to pay a commitment fee of 0.375% on unused amounts of the total
commitment, as defined in the agreement.

         The senior subordinated note has interest payable quarterly at 12% and
is due September 30, 2004. The note is subordinate to the revolving note. The
initial carrying value of the senior subordinated note was reduced by $1.7
million for the fair value of the common stock warrant issued to the senior
subordinated lender. The warrant is subject to anti-dilution provisions. The
unamortized discount aggregated $1.0 million at September 29, 2001, and is being
amortized over the five-year life of the note.

         In August 2001, the Company completed certain purchase price
adjustments to the CEX merger agreement whereby the convertible subordinated
note, the long-term subordinated note, and the short-term subordinated note
along with all accrued interest thereon, totaling approximately $14.5 million of
notes and $2.8 million of accrued interest, were terminated.

         Substantially all of the assets and operations of Velocity have been
pledged to secure borrowings under the revolving note and the senior
subordinated note. 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. The agreements with the lenders also require the
Company to obtain the consent of the lenders for additional acquisitions.

         Cash flows from operations -- The Company incurred an operating loss of
approximately $0.7 million for the quarter ended September 29, 2001 and has
positive working capital of approximately $15.1 million at September 29, 2001.
In August 2001, the Company completed certain purchase price adjustments to the
CEX merger agreement related to the acquisition of Velocity that resulted in an
improvement to working capital of approximately $14.9 million. The improvement
to working capital over the fourth quarter of fiscal 2001 was approximately
$17.9 million.

         As of September 29, 2001, the Company had no outstanding purchase
commitments for capital improvements.

         Cash flow used in operations was $0.8 million during the first quarter
of fiscal 2002, driven principally by the positive cash flow generated from
accounts receivable of $5.5 million offset with negative cash flow from other
current assets, accounts payable and miscellaneous accruals of $6.1 million.

         Cash flow used as a result of investing activities was primarily for
capital expenditures that amounted to $0.7 million.

         Cash flow generated through financing activities amounted to $0.5
million during the first quarter of 2002. Net proceeds from private placement of
Preferred Stock of $6.6 million was the primary source of cash during the
quarter. Long-term debt and notes payable resulted in negative cash flow of $6.1
million during the quarter ended September 29, 2001.

         The Company's operating plans include the continued implementation and
consolidation activities it had initiated in fiscal 2001 to further improve the
operating performance of the Company, as well as specific initiatives to reduce
specific cash expenditures related to general and administrative expenses. The
Company continues with the cost initiatives already in place, its back office
consolidation, and is quickly moving to achieve a variable cost model of service
to enable it to generate profitable revenue.

                                       16
The Company is dependent upon achieving certain revenue and expense
targets in its financial plan for fiscal 2002. The Company expects to meet its
financial projections for the next fiscal year and to continue to secure
additional financing from its lenders or through the issuance of additional
Company equity securities; however, there can be no assurance that such funding
can be obtained.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company's operations are not currently subject to material market
risks for interest rates, foreign currency rates, or other market price risks.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         As of September 29, 2001, the Company was not a party to any material
legal proceedings.

         The Company is a party to litigation and has claims asserted against it
incidental to its business. Most of such claims are routine litigation that
involve workers compensation claims, claims arising out of vehicle accidents and
other claims arising out of the performance of same-day delivery services. The
Company carries workers' compensation insurance and auto liability coverage for
the current policy year. The Company is also named as a defendant in various
employment-related lawsuits arising in the ordinary course of business. The
Company vigorously defends against all of the foregoing claims.

         The Company does not believe that the pending lawsuits, if resolved or
settled unfavorably to the Company, would have a material adverse effect upon
the Company's financial position or results of operations. A monetary settlement
paid by the Company or an award against it in any of such actions could,
however, have a material adverse effect upon the Company's cash flow in a given
period in which a settlement or award occurs.

         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 that could adversely affect the Company's assumptions and the
outcome of claims, and cause actual results to differ materially from those
projected in the forward-looking statements. These factors include:

         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 for 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 that 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.

                                       17
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. 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.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         The following describes sales of the Company's securities in the last
fiscal quarter without registration under the Securities Act of 1933 (the
"Securities Act"):

         Pursuant to Subscription Note Purchase Agreements entered into during
July 2001 (collectively, the "Series F Note Agreements"), the Company issued
subscription notes in the aggregate principal amount of $7,055,700
(collectively, the "Series F Subscription Notes"), to a group of institutional
investors and executive management of the Company. No interest accrued on the
unpaid principal balances of the Series F Subscription Notes. On September 5,
2001, the Company's shareholders approved the issuance of Series F Preferred
having voting power greater than 20% of the outstanding voting securities of the
Company, and all of the principal balance of the Series F Subscription Notes was
converted into a number of shares of the Company's Series F Preferred equal to
the quotient of the principal being converted divided by $11.00. Subsequent to
shareholder approval on September 5, 2001, the principal amount of the Series F
Subscription Notes was converted into 641,412 shares of Series F Preferred. Each
share of Series F Preferred is convertible into twenty shares of the Company's
common stock. The Company also issued warrants to purchase 1,102,445 shares of
common stock in connection with these sales.

         In December 2000, the Company entered into a bridge loan agreement with
TH Lee Putnam Ventures ("THLPV"), and related entities, dated January 4, 2001,
and a supplemental bridge loan agreement dated January 31, 2001 (collectively,
the "Bridge Loan Agreement"). Pursuant to the Bridge Loan Agreement, THLPV
loaned the Company $3,500,000 on January 4, 2001 and an additional $1,500,000 on
January 31, 2001. In connection with the Bridge Loan Agreement, the Company
issued bridge notes to THLPV in the aggregate amount of $5,000,000, which were
due and payable on July 4, 2001. The bridge notes were subordinate to the
Company's senior indebtedness. Each bridge note carried interest on the unpaid
principal amount at an annual percentage rate of 18%. Interest on each of the
bridge notes was payable at maturity in immediately available funds or in shares
of Series D Preferred.

         On September 5, 2001, the shareholders approved the bridge notes and
their conversion into Series D Preferred. The bridge notes provided that the
number of shares of Series D Preferred issuable upon conversion of the bridge
notes would equal the principal value of the bridge notes and all accrued
interest divided by the lesser of: (a) the average closing price of common stock
as reported by Nasdaq for the five days prior to the conversion, or (b) a price
25% lower than the price per share at which the Series D Preferred, or any
voting stock that we issued subsequent to issuance of the bridge notes, was last
sold to one or more third party investors. Accordingly, pursuant to the purchase
price of the Series D Preferred established in the Series D Preferred purchase
agreement, the conversion price of the bridge notes was $0.55 per share, and
resulted in the issuance to THLPV of 1,017,538 shares of Series D Preferred, or
10,175,380 shares of common stock upon conversions.

         Pursuant to the Bridge Loan Agreement, the Company also issued to THLPV
bridge warrants to purchase an aggregate 216,533 shares of Series D Preferred at
a per share purchase price of $0.01. The bridge warrants were issued on January
4, 2001, and expire on January 4, 2006.

                                       18
Pursuant to Stock Purchase Agreements entered into during March and
April 2001, the Company issued two subscription notes in the total principal
amount of $3,999,250 to two institutional investors, and two subscription notes,
each in the principal amount of $500,000 to two non-U.S. investors (collectively
the "Series D Subscription Notes"). No interest accrued on the unpaid principal
balance outstanding on the Series D Subscription Notes. The Company's
shareholders approved of the issuance of Series D Preferred having voting power
greater than 20% of the Company's outstanding voting securities and all of the
principal balance of the Series D Subscription Notes have been converted 624,906
shares of Series D Preferred. Each share of Series D Preferred is convertible
into ten shares of common stock.

         In connection with the sales of the Series D Preferred, the Company
engaged BB&T Capital Markets as its exclusive agent and has agreed to pay BB&T
Capital Markets approximately $200,000 as commissions on these sales. Except
with respect to its private placement of Series D Preferred Shares, 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 within the meaning of Rule 501(a) of Regulation D under the Securities
Act of 1933 (the "Securities Act") in a private placement transactions, exempt
from registration under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not Applicable

                                       19
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         In September 2001, the Company submitted to its shareholders eleven
matters, all of which were approved at a special meeting held on September 5,
2001. The matters and voting thereon were as follows:

1.       To amend the certificate of designation of the Company's Series B
         Convertible Preferred Stock to create a priority upon liquidation in
         favor of the holders of the Series D Preferred and the Series F
         Convertible Preferred Stock ("Series F Preferred")

                   For        12,172,390    Abstain               66,900
                   Against       282,497    Broker non-votes   8,191,258

2.       To amend the certificate of designation of the Company's Series C
         Convertible Preferred Stock to create a priority upon liquidation in
         favor of the holders of the Series D Preferred and the Series F
         Preferred

                   For        12,173,136    Abstain               67,154
                   Against       281,497    Broker non-votes   8,191,258

3.       To amend the certificate of designation of the Company's Series D
         Convertible Preferred Stock to create a priority upon liquidation in
         favor of the holders of the Series D Preferred and the Series F
         Preferred

                   For        12,172,850    Abstain               66,940
                   Against       281,997    Broker non-votes   8,191,258

4.       To convert $5.0 million principal amount of Convertible Bridge Notes
         issued to THLPV in January 2001 into Series D Preferred

                   For        12,232,744    Abstain               67,692
                   Against       221,351    Broker non-votes   8,191,258

5.       To issue Warrants to THLPV to purchase an aggregate of 216,533 shares
         of Series D Preferred

                   For        12,373,954    Abstain               66,893
                   Against        80,940    Broker non-votes   8,191,258

6.       To issue up to 2,092,576 shares of Series D Preferred, plus additional
         shares issuable upon conversion of interest on the Convertible Bridge
         notes after July 25, 2001, to subscribers for such securities and
         holders of subscription notes which are convertible into Series D
         Preferred

                   For        12,307,894    Abstain               63,292
                   Against       150,601    Broker non-votes   8,191,258

7.       To issue 534,000 shares of Series F Preferred, and warrants to purchase
         917,812 shares of common stock, to subscribers for such securities and
         holders of subscription notes which are convertible into Series F
         Preferred

                   For        12,237,514    Abstain               64,585
                   Against       219,688    Broker non-votes   8,191,258

                                       20
8.       To amend the Amended and Restated Articles of Incorporation to increase
         the number of shares of authorized stock

                   For        12,334,133    Abstain               62,493
                   Against       125,161    Broker non-votes   8,191,258

9.       To authorize the Company's Board of Directors to effect a reverse split
         of the Company's common stock at a later date, at their discretion, at
         a ratio of one-for-two

                   For        18,950,667    Abstain               66,133
                   Against       343,396    Broker non-votes   1,352,849

10.      To authorize the Company's Board of Directors to effect a reverse split
         of the Company's common stock at a later date, at their discretion, at
         a ratio of one-for-five

                   For        18,910,183    Abstain               68,547
                   Against       381,466    Broker non-votes   1,352,849

11.      To authorize the Company's Board of Directors to effect a reverse split
         of the Company's common stock at a later date, at their discretion, at
         a ratio of one-for-eight

                   For        18,693,033    Abstain               75,333
                   Against       591,830    Broker non-votes   1,352,849

                                       21
ITEM 5.  OTHER INFORMATION.

         Not Applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         a.       Exhibits required by Item 601 of Regulation S-K:

                  Reference is made to the Exhibit Index.

         b.       Reports on Form 8-K

                  The Company filed five reports on Form 8-K during the fiscal
                  quarter ended September 29, 2001, as follows:

                  (1)      Current Report on Form 8-K filed on July 16, 2001,
                           relating to the announcement that the Company
                           negotiated a settlement with Corporate Express, Inc.
                           which would eliminate approximately $43 million of
                           balance sheet liabilities.

                  (2)      Current Report on Form 8-K filed on July 26, 2001,
                           relating to a notice that the Company received from
                           Nasdaq indicating that its securities were subject to
                           delisting from the Nasdaq SmallCap Market.

                  (3)      Current Report on Form 8-K Filed on July 30, 2001,
                           relating to the filing of a Certificate of
                           Designation of Preferences and Rights of Series F
                           Convertible Preferred Stock and Articles of Amendment
                           to the Restated Articles of incorporation with the
                           Secretary of State of Utah on July 13, 2001 relating
                           to its Series F Convertible Preferred Stock.

                  (4)      Current Report on Form 8-K filed on August 14, 2001,
                           relating to an improvement to its balance sheet by
                           $50 million by way of the completion of a convertible
                           preferred stock private placement financing in excess
                           of $7 million and the closing of a previously
                           announced settlement with Corporate Express, Inc.,
                           which eliminated approximately $43 million of balance
                           sheet liabilities.

                  (5)      Current report on Form 8-K filed on August 29, 2001
                           relating to the appointment of Vince Wasik and Alex
                           Paluch to its Board of Directors. In addition, Mr.
                           Wasik was elected as the Chairman of the Board of
                           Directors, replacing Peter Lytle, who retired from
                           the Company's Board of Directors.

                                       22
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 13, 2001.

                                        UNITED SHIPPING & TECHNOLOGY, INC.

                                        By  /s/ Jeffry J. Parell
                                            ----------------------------------
                                            JEFFRY J. PARELL
                                            Chief Executive Officer

                                        By  /s/ Mark E. Ties
                                            ----------------------------------
                                            MARK E. TIES
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)

                                       23
INDEX TO EXHIBITS

  Exhibit No.     Description
  -----------     -----------

     10.1         Amendment No. 2 to Merger Agreement, Settlement and General
                  Release Agreement by and among Corporate Express, Inc.,
                  successor by merger to CEX Holdings, Inc., Velocity Express,
                  Inc. f/k/a Corporate Express Delivery Systems, Inc., and
                  United Shipping & Technology, Inc. dated August 2, 2001

     10.2         Contractor Services Agreement between United Shipping &
                  Technology, Inc. and MCG Global, LLC dated May 15, 2001

     10.3         Warrant to purchase up to 1,000,000 shares of Common Stock at
                  a price of $0.40 per share issued by the Company to MCG
                  Global, LLC dated May 15, 2001

     10.4         Warrant to purchase up to 1,000,000 shares of Common Stock at
                  a price of $0.40 per share issued by the Company to BLG
                  Ventures, LLC dated August 23, 2001

                                       24