UNITED STATES
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 Six Months Ended June 30, 2003
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
UNITED SPECIALITIES, INC
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(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.
29-24 40th Avenue, Long Island City, New York 11101
- --------------------------------------------- --------------
(Address of Principal Executive Office) (Zip Code)
(718) 392-5050
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(Registrant's telephone number including area code)
URBANI HOLDINGS, INC.
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(Former name, former address and former fiscal year,
if changed since last report)
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 June 30, 2003 was 40,739,264 shares.
UNITED SPECIALITIES, INC.
(Formerly Urbani Holdings, Inc.)
INDEX
Page
Number
PART I - FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements
Balance Sheet June 30, 2003 . . . . . . . . . . . . . . . . . . . .3
Statements of Operations - For the three and six Months Ended
June 30, 2003 and 2002 . . . . . . . . . . . . . . . . . . . . .4
Statements of Cash Flows - For the six Months Ended
June 30, 2003 and 2002 . . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis or Plan of Operation . . .7-8
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 10
Item 2 Changes in Securities and Use of Proceeds. . . . . . . . . 10
Item 3 Defaults Upon Senior Securities. . . . . . . . . . . . . . 10
Item 4 Submission of Matters to a Vote of Security Holders. . . . 10
Item 5 Other Information. . . . . . . . . . . . . . . . . . . . . 10
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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Part I Financial Information
Item 1. Financial Statements
UNITED SPECIALITIES, INC
(Formerly Urbani Holdings, Inc.)
CONSOLIDATED BALANCE SHEET
June 30, 2003
(UNAUDITED)
<Table>
ASSETS
CURRENT ASSETS:
Cash $ 39,190
Accounts receivable, less allowance of $350,000 1,060,629
Inventories 3,057,065
Prepaid expenses and other current assets 71,000
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TOTAL CURRENT ASSETS 4,227,884
PROPERTY AND EQUIPMENT 147,739
OTHER ASSETS 40,115
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$ 4,415,738
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable - bank $ 2,898,337
S.B.A Loan payable - current maturities 24,606
Accounts payable and accrued expenses 1,008,933
Short-term debt 43,159
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TOTAL CURRENT LIABILITIES 3,975,035
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S.B.A Loan payable 175,394
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 100,000,000
shares authorized; 40,739,264 shares issued
and outstanding 39,439
Additional paid-in capital 6,059,751
Accumulated deficit (5,833,881)
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TOTAL STOCKHOLDERS' EQUITY 265,309
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$ 4,415,738
============
</Table>
See notes to consolidated financial statements
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United Specialties, Inc.
(Formerly Urbani Holdings, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
NET SALES $ 1,508,674 $ 3,064,223 $ 3,459,889 $ 6,299,797
COST OF SALES 1,079,255 2,034,618 2,647,757 4,254,150
------------ ------------ ------------ ------------
GROSS PROFIT 429,419 1,029,605 812,132 2,045,647
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,144,761 974,108 1,900,760 1,858,172
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (715,342) 55,497 (1,088,628) 187,475
INTEREST EXPENSE 70,967 82,751 119,322 120,631
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES (786,309) (27,254) (1,207,950) 66,844
PROVISION FOR INCOME TAXES - (11,000) - 30,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (786,309) $ (16,254) $ (1,207,950) $ 36,844
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE -
Basic and diluted $ (0.02) $ 0.00 $ (0.03) $ 0.00
============ ============ ============ ============
AVERAGE SHARES OUTSTANDING 39,439,264 15,150,000 39,439,264 15,150,000
============ ============ ============ ============
</Table>
See notes to consolidated financial statements
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UNITED SPECIALITIES INC.
(Formerly Urbani Holdings, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
Six Months Ended
June 30,
--------------------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,207,950) $ 36,844
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 56,970 75,650
Changes in assets and liabilities:
Accounts receivable 1,032,773 776,505
Inventories 771,669 (219,429)
Prepaid expenses and other assets 44,192 48,042
Accounts payable and accrued expenses (421,990) (820,139)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 275,664 (102,527)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES: - (1,467)
CAPITAL EXPENDITURES
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment from stockholder (93,286) 202,543
Decrease in bank loans (103,605) (300,000)
Decrease in capital stock (50,700) -
------------ ------------
NET CASH PROVIDED BY (USED IN)FINANCING ACTIVITIES (247,591) (97,457)
------------ ------------
NET INCREASE (DECREASE) IN CASH 28,073 (199,984)
CASH - beginning of period 11,117 250,493
------------ ------------
CASH - end of period $ 39,190 $ 50,009
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 119,322 $ 120,667
============ ============
Income taxes $ - $ 4,395
============ ============
</Table>
See notes to consolidated financial statements.
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UNITED SPECIALITIES, INC.
(Formerly Urbani Holdings, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. 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 conjunction with the financial statements
for the year ended December 31, 2002 and notes thereto contained in
the Report on Form 10-KSB of United Specialities, Inc. (the "Company")
as filed with the Securities and Exchange Commission. The results of
operations for the three months and six months ended June 30, 2003 are
not necessarily indicative of the results for the full fiscal year
ending December 31, 2003.
The consolidated statements include the accounts of United
Specialities, Inc. and its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated.
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Item 2. 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 Speciality 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.
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 5% 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 and six months ended June 30, 2003 compared to three months
and six months ended June 30, 2002
Net Sales
For the three months ended June 30, 2003 net sales were $ 1,508,674 as
compared to $3,064,223 for the three months ended June 30, 2002, a decrease
of %50.8. Management believes that the decrease in net sales is primarily
attributable to lack of availability of truffle products and cash flow
restraints. The Company has found new suppliers of truffle products and are
currently selling such products. However inability to purchase adequate
quantity has caused a significant reduction in volume.
-7-
For the six months ended June 30, 2003 Net Sales were $ 3,459,889 was
compared to $ 6,299,797 for the six months ended June 30, 2002, a decrease
of % 45.1. Management believes that the decrease in net sales is primarily
attributed to lack of availability of truffle products and cash flow
restraints. The company has found new suppliers of truffle products and is
currently selling such products. However inability to purchase adequate
quantity has caused a significant reduction in volume.
Gross Profit
For the three months ended June 30, 2003 gross profit was $ 429,419, 28.5%
as a percentage of net sales, as compared to $ 1,029,605, 33.6% as
percentage of net sales for the three months ended June 30, 2002.
Management attributes the decrease in gross profit percentage primarily due
to a change in product mix, which resulted in a decrease in sale of higher
profit margin products.
For the six months ended June 30, 2003, gross profit was $ 812,132, 23.5%
as a percentage of net sales, as compared to $2,045,647, 32.5% as a
percentage of net sales for the six months ended June 30, 2002. Management
attributes the decrease in gross profit percentage primarily due to a
chance in product-mix which is a decrease in sales of higher margin
products.
Selling General and Administrative Expenses
For the three months ended June 30, 2003, selling general and
administrative expenses were $1,144,761, 75.9% as a percentage of net
sales, as compared to $974,108, 31.8% as a percentage of net sales for the
three months ended June 30, 2002. Management attributes the increase in
selling general and administrative expenses as a percentage of net sales
due to the cost of the development of establishing and promoting the da
Rosario brand and product line, as well as lower sales and writedowns of
inventory and bad debts.
For the six months ended June 30, 2003, selling general and administrative
expenses were $1,900,760, 54.9% as a percentage of net sales, as compared
to $1,858,172, 29.5% as a percentage of net sales for the six months ended
June 30, 2002. Management attributes the increase the selling general and
administrative expenses as a percentage of net sales due to the cost of
establishing and promoting the da Rosario brand and product line, as well
as lower sales and writedowns of inventory and bad debts.
Interest Expense
For the three months ended June 30, 2003 and 2002, we had interest expense
of $70,967 and $82,751, respectively. For the six months ended June 30,
2003 and 2002, we had interest expenses of $ 119,322 and $120,631
respectively.
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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 June
30, 2003, we had working capital of $252,849 and a debt to equity ratio of
1.0 to 1.
We have a $3,200,000 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 $777,000. The facility contains certain reporting and
other conditions, and financial covenants. In addition, Rosario Safina has
personally guaranteed the loan. As of June 30, 2003 the company is in
technical default of its loan agreement with HSBC.
For the six months ended June 30, 2003 the net cash flows provided by
operating activities were $275,664. The increase in cash provided by
operating activities for the six months ended June 30,2003 was primarily
attributable to net loss of $1,207,950, offset by decreases in accounts
receivable of $1,032,773 and decrease of inventories of $771,669 together
with depreciation and amortization of $56,970 offset by decreases of
accounts payable and accrued expenses of $421,990 and prepaid expenses
$44,192.
For the six months ended June 30, 2002, net cash used in operating
activities was $102,527 consisting of decreases in accounts payable of
$820,139 and an increase in inventories of $219,429 and offset by net
income of $36,844 depreciation and amortization of $75,650, decreases in
accounts receivable of $776,505 and decreases in prepaid and other assets
of $48,042.
For the six months ended June 30, 2003 net cash used in financing
activities was $247,591 which was attributable to decrease in capital stock
and additional paid-in stock of $50,700, decrease in bank loans $103,605
and a decrease in short debt $93,286.
For the six months ended June 30, 2002, net cash provided by financing
activities was $97,457 which was attributable to a repayment from a
stockholder in the amount of $205,029 offset by a decrease in bank loans of
$300,000.
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 anticipated cash generated from operations
will be insufficient 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
will seek to sell additional equity or debt securities or affiliate with
another entity in the same or affiliated business. 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 or if required
we will be able to align ourselves with another company.
-9-
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.
Item 3. Controls and Procedures
The Company's Chief Executive Officer as the acting Chief Financial Officer
has evaluated the Company's disclosure controls and procedures (as such
term is defined in Rule 13a-14 (c) under the Exchange Act) as of a date
within 90 days of the date of filing of this Form 10-QSB. Based upon such
evaluation, the Company's Chief Executive Officer/acting Chief Financial
Officer has concluded that such controls and procedures are now effective
to ensure that the information required to be disclosed by the Company in
the reports it files under the Exchange Act is gathered, analyzed and
disclosed with adequate timeliness. There have been no significant changes
in the Company's internal controls or in other factors that could
significantly affect internal controls subsequent to the date of the
evaluation described above.
PART II - Other Information
Item 1. Legal Proceedings
Other than as previously disclosed in the Company's Form 10-KSB for the
year ended December 31, 2002, the Company is not a party to any material
legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
None.
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 required by item 601 of Regulation S-B
Exhibit 31. Rule 13a-14(a)/15d-14(a) Certifications.
Exhibit 32 Certification by the Chief Executive Officer/Acting Chief
Financial Officer Relating to a Periodic Report Containing Financial
Statements.*
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(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the period covered by this
report, however, on August 18, 2003 the Company filed a report on Form 8-K
pursuant to Item 5 and on September 16, 2003 the Company filed a report on
Form 8-K pursuant to Items 4 and 7.
* The Exhibit attached to this Form 10-QSB shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934 (the
"Exchange Act") or otherwise subject to liability under that section, nor
shall it be deemed incorporated by reference in any filing under the
Securities Act of 1933, as amended, or the Exchange Act, except as
expressly set forth by specific reference in such filing.
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.
UNITED SPECIALITIES, INC.
Dated: Sept 16, 2003 By: /s/ Rosario Safina
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Name: Rosario Safina
Title: Chief Executive Officer and
Acting Chief Financial Officer
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