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, 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
URBANI HOLDINGS, 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.
29-24 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 3, 2003 was 40,739,264 shares.
URBANI HOLDINGS, INC.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements
Balance Sheet - March 31, 2003............................................ 3
Statements of Operations - For the three Months Ended
March 31, 2003 and 2002.................................................. 4
Statements of Cash Flows - For the three Months Ended
March 31, 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............................................9
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
-2-
Part I Financial Information
Item 1. Financial Statements
URBANI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2003
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 2,654
Accounts receivable, less allowance of $350,000 1,375,492
Inventories 3,725,552
Prepaid expenses and other current assets 154,420
----------
TOTAL CURRENT ASSETS 5,258,118
PROPERTY AND EQUIPMENT 175,464
OTHER ASSETS 45,375
----------
$ 5,478,957
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable - bank $ 2,906,198
S.B.A Loan payable - current maturites 9,188
Accounts payable and accrued expenses 1,201,352
Short-term debt 69,089
----------
TOTAL CURRENT LIABILITIES 4,185,827
----------
S.B.A Loan payable 190,812
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 100,000,000
shares authorized; 40,739,264 shares issued
and outstanding 40,739
Additional paid-in capital 6,109,151
Accumulated deficit (5,047,572)
----------
TOTAL STOCKHOLDERS' EQUITY 1,102,318
----------
$ 5,478,957
==========
See notes to consolidated financial statements
-3-
URBANI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------------------
2003 2002
--------------------- ---------------
NET SALES $ 1,951,215 $ 3,235,574
COST OF SALES 1,568,502 2,219,532
--------------- ------------
GROSS PROFIT 382,713 1,016,042
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 755,999 884,064
--------------- -------------
INCOME (LOSS) FROM OPERATIONS (373,286) 131,978
INTEREST EXPENSE 48,355 37,880
--------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (421,641) 94,098
PROVISION FOR INCOME TAXES - 41,000
--------------- -------------
NET INCOME (LOSS) $ (421,641) $ 53,098
=============== =============
NET INCOME (LOSS) PER SHARE -
Basic and diluted $ (0.01) $ 0.00
=============== =============
AVERAGE SHARES OUTSTANDING 40,739,264 15,150,000
================ ===============
See notes to consolidated financial statements
-4-
URBANI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
------------------------------
2003 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (421,641) $ 53,098
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 28,485 37,825
Changes in assets and liabilities:
Accounts receivable 717,910 734,055
Inventories 103,182 (103,600)
Prepaid expenses and other assets (43,728) 2,164
Due to related parties (63,651) -
Accounts payable and accrued expenses (229,571) (963,043)
---------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 90,986 (239,501)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment from stockholder - 205,029
Decrease in bank loans (99,449) (150,000)
---------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (99,449) 55,029
---------- -----------
NET (DECREASE) IN CASH (8,463) (184,472)
CASH - beginning of period 11,117 250,493
---------- ----------
CASH - end of period $ 2,654 $ 66,021
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 48,355 $ 37,880
========== ==========
Income taxes $ - $ 3,245
========== ==========
See notes to consolidated financial statements.
-5-
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 conjuction with the financial statements for the year
ended December 31, 2002 and notes thereto contained in the Report on
Form 10-KSB 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, 2003 are not necessarily indicative of the
results for the full fiscal year ending December 31, 2003.
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.
-6-
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 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.
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 ended March 31, 2003 compared to three months ended March 31, 2002
Net Sales
For the three months ended March 31, 2003 net sales were $1,951,215 as
compared to $3,235,574 for the three months ended March 31, 2002, a decrease of
39.7%. Management believes that the decrease in net sales is primarily
attributable to lack of availability of truffle products. The Company has found
new suppliers of truffle products and are currently selling such products.
Gross Profit
For the three months ended March 31, 2003 gross profit was $382,713,
19.6 % 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 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.
Selling General and Administrative Expenses
For the three months ended March 31, 2003, selling general and
administrative expenses were $755,999, 38.7% 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 due to the cost of the
development of da Rosario brand and products, as well as lower sales.
Interest Expense
For the three months ended March 31, 2003 and 2002, we had interest
expense of $48,355 and $37,880, respectively.
-7-
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, 2003, we had working capital of $1,072,291 and a debt to equity ratio of 3.9
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
$925,000. The facility contains certain reporting and other conditions, and
financial covenants. In addition, Rosario Safina has personally guaranteed the
loan. As of March 31, 2003 the company is in technical default of its loan
agreement with HSBC.
For the three months ended March 31, 2003 the net cash flows provided
by operating activities were $90,986. The increase in cash provided by operating
activities for the three months ended March 31,2003 was primarily attributable
to net loss of $421,641, offset by decreases in accounts receivable of $717,910
and decrease of inventories of $103,182 together with depreciation and
amortization of $28,485 offset by decreases of accounts payable and accrued
expenses of $229,571 due to related parties $63,651 and prepaid expenses
$43,728.
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.
For the three months ended March 31, 2003 net cash used in financing
activities was $99,449.
For the three months ended March 31, 2002, net cash provided by
financing activities was $55,029 which was attributable to a repayment from a
stockholder in the amount of $205,029 offset by 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 anticipated cash generated from operations 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.
Item 3. Controls and Procedures
The Company's Chief Executive Officer and 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 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.
-8-
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
99.1 Certification of Chief Executive Officer/Acting Chief Financial Officer
(b) Reports on Form 8-K
None.
-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: June 20, 2003 By: /s/ Rosario Safina
---------------------
Name: Rosario Safina
Title: Chief Executive Officer and Acting Chief
Financial Officer
-10-
Certification
I, Rosario Safina, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Urbani
Holdings, Inc.;
2.Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4.As Chief Executive Officer and Acting Chief Financial Officer I am
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to myself by others within
those entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: June 20, 2003 By:/s/ Rosario Safina
Name: Rosario Safina
Title: Chief Executive Officer and
Acting Chief Financial Officer
-11-