FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2002
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-22783
URBANI HOLDINGS, INC
f/k/a Sattel Global Networks, Inc.
(Exact Name of Registrant as Specified in its Charter)
Colorado 95-3966853
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
20-24 40th Avenue, Long Island City, New York, 11101
(Address of Principal Executive Office) (Zip Code)
(718) 392-5050
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of March 31,2002 was 15,150,000 shares.
URBANI HOLDINGS, INC.
(f/k/a Sattel Global Networks, Inc.)
INDEX
Page
Number
PART I - FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements
Balance Sheet - March 31, 2002................................. 1
Statements of Operations - For the Three Months
Ended March 31, 2002 and 2001................................ 2
Statements of Cash Flows - For the Three Months
Ended March 31, 2002 and 2001................................ 3
Notes to Financial Statements.................................. 4-5
Item 2. Management's Discussion and Analysis or Plan of Operations..... 6-8
PART II - OTHER INFORMATION
Item 1 Legal Proceedings............................................... 9
Item 2 Changes in Securities and Use of Proceeds....................... 9
Item 3 Defaults Upon Senior Securities................................. 9
Item 4 Submission of Matters to a Vote of Security Holders............. 9
Item 5 Other Information............................................... 9
Item 6 Exhibits and Reports on Form 8-K................................ 9
SIGNATURES................................................................ 10
URBANI HOLDINGS, INC.
(f/k/a Sattel Global Networks, Inc.)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2002
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 66,021
Accounts receivable, less allowance of $125,000 1,564,668
Inventories 4,188,974
Prepaid expenses and other current assets 160,572
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TOTAL CURRENT ASSETS 5,980,235
DUE FROM STOCKHOLDER 83,319
PROPERTY AND EQUIPMENT 317,333
INTANGIBLE AND OTHER ASSETS 260,490
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$ 6,641,377
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable - bank $ 3,250,000
Accounts payable and accrued expenses 2,214,862
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TOTAL CURRENT LIABILITIES 5,464,862
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STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01; 10,000,000 shares
authorized, none issued and outstanding
Common stock, $0.001 par value; 100,000,000 shares
authorized, 15,150,000 shares issued and outstanding 15,150
Additional paid-in capital 1,108,267
Retained earnings 53,098
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TOTAL STOCKHOLDERS' EQUITY 1,176,515
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$ 6,641,377
=============
See notes to consolidated financial statements
-1-
URBANI HOLDINGS, INC.
(f/k/a Sattel Global Networks, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
------------------------------
2002 2001
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NET SALES $ 3,235,574 $ 3,379,226
COST OF SALES 2,219,532 2,488,441
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GROSS PROFIT 1,016,042 890,785
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 884,064 844,065
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INCOME FROM OPERATIONS 131,978 46,720
INTEREST EXPENSE 37,880 36,745
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INCOME BEFORE INCOME TAXES 94,098 9,975
PROVISION FOR INCOME TAXES 41,000 3,500
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NET INCOME (LOSS) $ 53,098 $ 6,475
============= =============
NET INCOME PER SHARE - Basic and diluted $ 0.00 $ 0.00
============= =============
AVERAGE SHARES OUTSTANDING 15,150,000 10,125,000
============= =============
(a) Pro forma provision for income taxes at 35 percent assumed tax rates,
are presented for comparative purposes only. The Company was an "S"
Corp. during 2001 and accordingly paid no federal and NY state income
taxes.
See notes to consolidated financial statements
-2-
URBANI HOLDINGS, INC.
(f/k/a Sattel Global Networks, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2002 2001
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 53,098 $ 9,975
Adjustments to reconcile net income to net
cash provided by (used in)operating activities:
Depreciation and amortization 37,825 32,881
Changes in assets and liabilities:
Accounts receivable 734,055 1,431,048
Inventories (103,600) (532,882)
Prepaid expenses and other assets 2,164 (14,488)
Accounts payable and accrued expenses (963,043) 462,229
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (239,501) 1,388,763
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (9,768)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - (95,056)
Repayment from stockholder 205,029 -
Decrease in bank loans (150,000) (1,050,000)
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NET CASH PROVIDED BY (USED IN)FINANCING ACTIVITIES 55,029 (1,145,056)
------------ -------------
NET INCREASE (DECREASE) IN CASH (184,472) 233,939
CASH - beginning of period 250,493 17,786
------------ -------------
CASH - end of period $ 66,021 $ 251,725
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 37,880 $ 36,745
============ =============
Income taxes $ 3,245 $ -
============ =============
See notes to consolidated financial statements.
-3-
URBANI HOLDINGS, INC.
(f/k/a Sattel Global Networks, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. REVERSE ACQUISITION
On March 15, 2002, pursuant to the agreement dated August 7, 2001,
by and among Sattel Global Networks, Inc., Urbani Acquisition Corp., a
wholly-owned subsidiary of Sattel Global Networks, Inc., and Rosario's
Epicureo, Ltd. d/b/a Urbani Truffles & Caviar, U.S.A., Urbani
Acquisition Corp. merged into Rosario's Epicureo, Ltd. In connection
with the agreement, the shares of common stock of Rosario's Epicure,
Ltd. were converted into 10,125,000 shares of common stock of Sattel
Global Networks, Inc. In connection with the transaction, Sattel
Global Networks, Inc. changed its name to Urbani Holdings, Inc.
Upon the closing of the merger, Sattel Global Networks, Inc. had
15,150,000 shares of common stock outstanding, together with warrants
to purchase 2,400,000 shares of common stock at an exercise price of
$1.50 per share. If the gross proceeds from the exercise of the
warrants is less than $500,000 within 270 days of the closing the
stockholders of Rosario's Epicureo, Ltd. shall be issued additional
shares equal to the difference between 975,000 and a fraction, the
numerator of which shall be equal to the product of 975,000 and the
gross proceeds from the exercise of the warrants and the denominator of
which shall be equal to 500,000.
The number of shares of common stock referred to above and to the
related financial statements included herein give effect to a one for
12 reverse stock split effective January 25, 2002.
For accounting purposes the acquisition has been treated as a
recapitalization of Rosario's Epicureo, Ltd. with such entity as the
acquirer (reverse acquisition). The historical financial statements
prior to March 15, 2002 are those of Rosario's Epicureo, Ltd.
4
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for the interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
accompanying consolidated financial statements for the interim periods
are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management
necessary for a fair presentation of the financial position and
operating results for the periods presented. These financial statements
should be read in conjuction with the financial statements for the year
ended December 31, 2001 and notes thereto contained in the Report on
Form 10-KSB and Form 8-K of Urbani Holdings, Inc. (the "Company") as
filed with the Securities and Exchange Commission. The results of
operations for the three months ended March 31, 2002 are not
necessarily indicative of the results for the full fiscal year ending
December 31, 2002.
The consolidated statements include the accounts of Urbani Holdings,
Inc. and its wholly owned subsidiaries. All significant inter-company
balances and transactions have been eliminated.
3. STOCK OPTION PLAN
The 2001 Plan provides for the grant to employees, officers, directors,
consultants and independent contractors of up to 750,000 non-qualified
stock options as well as for the grant of stock options to employees
that qualify as incentive stock options under Section 422 of the
Internal Revenue code of 1986 ("Code"). The purpose of the 2001 Plan is
to enable the Company to attract and retain qualified persons as
employees, officers and directors and others whose services are
required by the Company, and to motivate such persons by providing them
with an equity participation in the Company. As of March 31, 2002 no
options had been granted.
4. TERMINATION OF "S CORP"
Effective January 1, 2002 Rosario's Epicureo, Ltd. and its shareholder
elected to terminate such entity's tax status and accordingly became
subject to Federal and New York State taxes on income.
5
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-QSB includes forward-looking statements that reflect our current
plans and expectations about our future results, performance, prospects and
opportunities. We have tried to identify these forward-looking statements by
using words such as "may," "will," "expect," "anticipate," "believe," "intend,"
"plan," "estimate" and similar expressions. These forward-looking statements are
based on information currently available to us and may become inaccurate due to
a number of risks, uncertainties and other factors that could cause our actual
results, performance, prospects or opportunities to differ materially from those
expressed in, or implied by, these forward-looking statements. These risks,
uncertainties and other factors include: - the market acceptance of our
products, the intense competition in the industry; our ability to manage and
integrate acquisitions and other factors. Except as otherwise required by
federal securities laws, we are not obligated to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events, changed circumstances or any other reason, after the date of this Form
10-QSB.
5A
Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements, the notes to our financial statements and the other financial
information contained elsewhere in this information statement.
Overview
We are a specialty food distributor of truffles, caviar, wild
mushrooms, smoked fish and speciialty game and foie gras to fine restaurants. We
also sell our products to gourmet shops, supermarkets, wholesalers, distributors
and private retail customers. We have a database of over 15,000 customers,
including 5,000 accounts of which up to 2,000 are active at any one time. Our
customers include some of the finest and most well-known restaurants in the
country. Pursuant to an exclusive license agreement we are the sole distributor
of Urbani branded products in the United States. Urbani is an unaffiliated
company, which has been engaged in the truffle business in Italy for over 100
years.
We are committed to providing our customers high quality products
at competitive prices and credit terms, at a range of price points with short
lead times. We serve our customers through two locations, one on the east coast
in Long Island City, New York and the other on the west coast in Culver City,
California. Both facilities include warehouse and refrigeration facilities from
which we package and ship our products. We utilize our own fleet of trucks to
handle local deliveries and for out-of- town deliveries we utilize common
carriers, Federal Express and airlines. Our distribution infrastructure is
designed to warehouse and transport our products in temperature controlled
environments that ensure delivery in optimal conditions.
Based on industry reports, the specialty food industry is a $20
billion a year industry, which has grown at an annual rate of 7% per year since
2000. We believe that the industry is highly fragmented consisting of small and
medium sized companies selling a limited number of items and as a result, there
is an opportunity for consolidation. Our consolidation strategy is based on
leveraging our industry knowledge, experienced management team, and brand
recognition to acquire other specialty food distributors which market products
that complement our current product lines, serve new customers or add geographic
coverage to our existing operations. We intend to leverage our distribution
infrastructure and combined purchasing power to realize operating efficiencies
and reduce duplicative overhead.
Results of Operations
Three months ended March 31, 2002 compared to three months ended March 31, 2001
Net Sales
For the three months ended March 31, 2001 net sales were $3,379,226 as
compared to $3,235,574 for the three months ended March 31, 2002, a decrease of
4.3%. Management believes that the decrease in net sales is primarily
attributable to production problems at our principal supplier. Management
believes that the production problems have been resolved, however there can be
no assurance that this is case.
Gross Profit
For the three months ended March 31, 2001 gross profit was $890,785,
26.4 % as a percentage of net sales, as compared to $1,016,042, 31.4% as
percentage of net sales for the three months ended March 31, 2002. Management
attributes the increase in gross profit percentage is primarily attributable to
an increase in net sales of higher profit margin products.
6
Selling General and Administrative Expenses
For the three months ended March 31, 2001, selling general and
administrative expenses were $844,065, 25.0% as a percentage of net sales, as
compared to $884,064, 27.3% as a percentage of net sales for the three months
ended March 31, 2002. Management attributes the increase in selling general and
administrative expenses as a percentage of net sales to an increase in
organizational costs and an expansion of our sales efforts.
Interest Expense
For the three months ended March 31, 2001 and 2002, we had interest
expense of $36,745 and $37,880, respectively.
Liquidity and Capital Resources
We have funded our requirements for working capital primarily through
the sale of our products and borrowings from financial institutions. As of March
31, 2002, we had working capital of $515,373 and a debt to equity ratio of 4.6
to 1.
As of March 31, 2002, we had advanced the sum of $83,319 to Rosario
Safina, our chairman and chief executive officer. The loan is payable upon
demand and bears interest at the rate of 6.24% per annum.
We have a $4,244,000 secured credit facility with HSBC Bank which
provides for short-term loans, banker's acceptances, and letters of credit,
which letters of credit and acceptances are issued in connection with the
purchases of inventories. Advances for direct loans, banker's acceptances and
letters of credit are based on a monthly borrowing base of up to 80% of eligible
accounts receivable and up to 40% of eligible inventory. The loan is secured by
all of our assets and the pledge of certain assets of Rosario Safina valued at
$225,000. The facility contains certain reporting and other conditions, and
financial covenants. In addition, Rosario Safina has personally guaranteed the
loan.
For the three months ended March 31, 2001 the net cash flows provided
by operating activities were $1,388,763. The increase in cash provided by
operating activities for the three months ended March 31,2001 was primarily
attributable to net income of $9,975, increased by decreases in accounts
receivable of $1,431,048 and increases of accounts payable of $462,229 together
with depreciation and amortization of $32,881 offset by increases of inventories
of $532,882 and prepaid expenses $14,488.
For the three months ended March 31, 2002, net cash used in operating
activities was $239,501 consisting of decreases in accounts payable of $963,043
and an increase in inventories of $103,600 and offset by net income of $53,098
depreciation and amortization of $37,825, decreases in accounts receivable of
$734,055 and decreases in prepaid and other assets of $2,164.
7
For the three months ended March 31, 2001, net cash used in investing
activities was $9,768 which was attributable to capital expenditures. No cash
was used or provided by operating activities in the three months ended March 31,
2002.
For the three months ended March 31, 2001, net cash used in financing
activities was $1,145,056 which was attributable to a loan to a stockholder in
the amount of $95,056 and a decrease in bank loans of $1,050,000.
For the three months ended March 31, 2002, net cash provided by
financing activities was $55,029 which was attributable to a repayment of a
stockholder in the amount of $205,029 and a decrease in bank loans of $150,000.
Although we have no material commitments for capital expenditures, we
anticipate an increase in our capital expenditures consistent with anticipated
growth in operations, infrastructure and personnel.
Our capital requirements depend on numerous factors, including, market
acceptance of our products, the resources we devote to marketing and selling our
services and our brand promotions, capital expenditures and other factors. We
believe that our current cash will be sufficient to meet our anticipated needs
for working capital and capital expenditures for the next 12 months. However, if
cash generated from operations is insufficient to satisfy our liquidity
requirements, we may seek to sell additional equity or debt securities. The sale
of additional equity or convertible debt securities could result in additional
dilution to our stockholders. There can be no assurance that financing will be
available in amounts or on terms acceptable to us, if at all.
Seasonality
Our business is seasonal. Our sales are typically the strongest
commencing in September and continuing through December. If our sales were to be
substantially below seasonal norms, then our profitability would be adversely
affected.
8
PART II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
In connection with the acquisition of all of the shares of common stock
of Rosario's Epicureo, Ltd., the Company issued an aggregate 10,275,000 shares
of common stock and warrants to purchase up to 2,400,000 shares of common stock
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed a report on Form 8-k on March 29, 2002 in connection with the
acquisition of Rosario's Epicureo, Ltd.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
URBANI HOLDINGS, INC.
Dated: May 20, 2002 By: /s/ Rosario Safina
---------------------------
Rosario Safina
President
10