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 June 30, 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
------------- -------------
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
------ ------
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of June 30,2002 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 - June 30, 2002.................................. 1
Statements of Operations - For the Three and Six Months
Ended June 30, 2002 and 2001................................. 2
Statements of Cash Flows - For the Three and Six Months
Ended June 30, 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
June 30, 2002
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 50,509
Accounts receivable, less allowance of $125,000 1,522,218
Inventories 4,304,803
Prepaid expenses and other current assets 114,515
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TOTAL CURRENT ASSETS 5,992,045
DUE FROM STOCKHOLDER 85,805
PROPERTY AND EQUIPMENT 276,045
INTANGIBLE AND OTHER ASSETS 260,311
-------------
$ 6,614,206
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable - bank $ 3,100,000
Accounts payable and accrued expenses 2,353,945
-------------
TOTAL CURRENT LIABILITIES 5,453,945
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STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01; 10,000,000 shares
authorized, none issued and outstanding
Common stock, $0.001 par value; 100,000,000 shares
authorized, 15,150,000 shares issued and outstanding 15,150
Additional paid-in capital 1,108,267
Retained earnings 36,844
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TOTAL STOCKHOLDERS' EQUITY 1,160,261
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$ 6,614,206
=============
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 Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2002 2001 2002 2001
---------- ------------- ---------- -------------
NET SALES $ 3,064,223 $ 2,921,328 $ 6,299,797 $ 6,300,554
COST OF SALES 2,034,618 1,813,245 4,254,150 4,301,686
---------- ----------- ---------- ----------
GROSS PROFIT 1,029,605 1,108,083 2,045,647 1,998,868
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 974,108 868,758 1,858,172 1,712,823
---------- ----------- ---------- ----------
INCOME FROM OPERATIONS 55,497 239,325 187,475 286,045
INTEREST EXPENSE 82,751 117,142 120,631 153,887
---------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (27,254) 122,183 66,844 132,158
PROVISION (BENEFIT) FOR INCOME TAXES (11,000) 42,500 (a) 30,000 46,000 (a)
---------- ----------- ---------- ----------
NET INCOME (LOSS) $ (16,254) $ 79,683 $ 36,844 $ 86,158
========== =========== ========== ==========
NET INCOME (LOSS) PER SHARE
- Basic and diluted $ (0.00) $ 0.00 $ 0.00 $ 0.00
========== =========== ========== ==========
AVERAGE SHARES OUTSTANDING 15,150,000 10,125,000 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)
Six Months Ended
June 30,
------------------------
2002 2001
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 36,844 $ 86,158
Adjustments to reconcile net income to net
cash provided by (used in)operating activities:
Depreciation and amortization 75,650 74,946
Changes in assets and liabilities:
Accounts receivable 776,505 1,719,676
Inventories (219,429) (524,986)
Prepaid expenses and other assets 48,042 92,380
Accounts payable and accrued expenses (820,139) (259,226)
--------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (102,527) 1,188,948
--------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,467) (84,725)
--------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - (11,073)
Repayment from (loan to) stockholder 202,543 (67,951)
Decrease in bank loans (300,000) (900,000)
Repayment of equipment notes payable - (9,302)
Proceeds of loan - related party - 78,659
--------- -------------
NET CASH USED IN FINANCING ACTIVITIES (97,457) (909,667)
--------- -------------
NET INCREASE (DECREASE) IN CASH (199,984) 194,556
CASH - beginning of period 250,493 17,786
--------- -------------
CASH - end of period $ 50,509 $ 212,342
========= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 120,667 $ 154,931
========= =============
Income taxes $ 4,395 $ -
========= =============
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 and six months ended June 30, 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 June 30, 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
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
Six months ended June 30, 2002 compared to Six months ended June 30, 2001
Net Sales
For the six months ended June 30, 2001 net sales were $6,299,797 as
compared to $6,300,554 for the six months ended June 30, 2002.
Gross Profit
For the six months ended June 30, 2001 gross profit was $1,998,868,
31.7% as a percentage of net sales, as compared to $2,045,647, 32.5% as
percentage of net sales for the six months ended June 30, 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 six months ended June 30, 2001, selling general and
administrative expenses were $1,712,823, 27.2% 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 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 six months ended June 30, 2001 and 2002, we had interest
expense of $153,887 and $120,631, 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 June
30, 2002, we had working capital of $538,100 and a debt to equity ratio of 4.7
to 1.
As of June 30, 2002, we had advanced the sum of $85,805 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 six months ended June 30, 2001 the net cash flows provided
by operating activities were $1,188,948. The increase in cash provided by
operating activities for the six months ended June 30,2001 was primarily
attributable to net income of $86,158, increased by decreases in accounts
receivable of $1,719,676 and prepaid expenses $92,380 together with depreciation
and amortization of $74,946 offset by increases of inventories of $524,986, and
decreases of accounts payable of $259,226.
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.
7
For the six months ended June 30, 2001 and 2002, net cash used in
investing activities was $84,725 and $1,467, respectively which was attributable
to capital expenditures.
For the six months ended June 30, 2001, net cash used in financing
activities was $909,667 which was attributable to a loan to a stockholder in
the amount of $67,951, a decrease in bank loans of $900,000, dividends paid of
$11,073 and repayment of an equipment note by $9,302 offset by a loan from a
related party of $78,659.
For the six months ended June 30, 2002, net cash used in financing
activities was $97,457 which was attributable to a repayment of a
stockholder in the amount of $202,543 and 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 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
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
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
(b) Reports on Form 8-K
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: August 19, 2002 By: /s/ Rosario Safina
---------------------------
Rosario Safina
President
10