UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the Quarterly Period Ended September 30, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from _________ to _________
Commission File Number: 000-26607
Satellite Newspapers Corp.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0390828
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2140 South Dixie Highway 303, Miami, Florida 33133
---------------------------------------------------
(Address of principal executive offices)
(305) 858-1494
--------------
(Issuer's telephone number)
(Former name, former address and former fiscal year, if
changed since lastreport.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 November 29, 2005, the Company had 224,770,077 issued and outstanding
shares of its $.001 par value common stock.
Transitional Small Business Disclosure Format: Yes |_| No |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes |_| No |X|
Documents incorporated by reference: None.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements for Satellite Newspapers Corp. and
Subsidiary
Item 1. Financial Statements
SATELLITE ENTERPRISE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 2005
ASSETS
CURRENT ASSETS
Cash $ 52,194
Accounts receivable 1,048,881
Inventory 127,259
------------
Total Current Assets 1,228,334
EQUIPMENT, net of depreciation 1,079,457
OTHER ASSETS
Technology rights 15,458
Security deposits 16,785
------------
$ 2,340,034
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
5% Convertible subordinated debentures $ 380,002
Notes payable to financial institutions 156,553
Accounts payable 1,285,304
Accrued expenses 902,269
------------
Total Current Liabilities 2,724,128
LONG-TERM DEBT
Notes payable to related party 2,923,095
STOCKHOLDERS' DEFICIENCY
Preferred Stock, par value of $0.01, authorized
5,000,000 shares, none issued and outstanding
Common stock $0.001 par value, 500,000,000
shares authorized, 224,770,077 issued and
outstanding at September 30, 2005 224,770
Paid-in-capital 7,287,145
Accumulated deficit (11,774,346)
Accumulated comprehensive loss 955,242
------------
(3,307,189)
------------
$ 2,340,034
============
See accompanying notes to consolidated financial statements.
F-1
SATELLITE ENTERPRISE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended Sept 30, Nine Months Ended Sept 30,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
NET SALES $ 341,689 $ 122,883 $ 1,784,466 $ 786,521
COSTS AND EXPENSES
Cost of services 395,250 96,872 666,285 585,754
Selling, general and administrative 529,490 798,777 2,317,005 2,494,350
Interest expense 74,884 155,439
Depreciation and amortization 71,563 75,229 207,717 245,732
------------- ------------- ------------- -------------
Total Costs and Expenses 1,071,187 970,878 3,346,446 3,325,836
------------- ------------- ------------- -------------
NET LOSS $ (729,498) $ (847,995) $ (1,561,980) $ (2,539,315)
============= ============= ============= =============
NET LOSS PER COMMON SHARE
(Basic and diluted) $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============= ============= ============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 225,200,759 183,279,170
============= =============
See accompanying notes to consolidated financial statements.
F-2
SATELLITE ENTERPRISE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended Sept 30,
----------------------------
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,561,980) $(2,539,315)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Unwind of SoliDam acquisition 575,658
Depreciation and amortization 207,717 245,732
Accounts receivable (929,237) (479,081)
Inventory (68,180)
Prepaid license fee (150,000)
Amortization of prepaid consulting and license fees 151,428
Accounts payable 333,533 801,227
Accrued expenses 545,569 217,946
----------- -----------
Net Cash Used in Operating Activities (896,920) (1,752,063)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (10,447) (330,496)
Proceeds on disposition of property and equipment 195,380
Deposits (16,785) 236
----------- -----------
Net Cash Used in Investing Activities (27,232) (134,880)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft (3,442)
Payments on notes payable to related parties (24,458)
Increase in loans payable to related parties, net 395,153 (365,421)
Sale of common stock 2,076,584
Stock subscription receipts 180,000
----------- -----------
Net Cash Provided by Financing Activities 395,153 1,863,263
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 528,999 83,251
----------- -----------
NET INCREASE IN CASH 59,571
CASH AND CASH EQUIVALENTS BEGINNING OF
YEAR 54,194 34,705
----------- -----------
CASH AND CASH EQUIVALENTS END OF YEAR $ 52,194 $ 94,276
=========== ===========
NON-CASH ACTIVITIES
Conversion of $120,000 of 5% Convertible
Subordinated Debentures for common stock $ 120,000
===========
See accompanying notes to consolidated financial statements.
F-3
SATELLITE ENTERPRISE CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
NOTE 1 BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary in order to make the financial statements not
misleading have been included. Results for the nine months ended September
30, 2005 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2005. For further information,
refer to the financial statements and footnotes thereto included in the
Satellite Enterprise Corp. and Subsidiaries annual report on Form 10-KSB
for the year ended December 31, 2004.
NOTE 2 NOTES PAYABLE TO RELATED PARTIES
At September 30, 2005, the principal stockholders of the Company has
advanced to the Company $2,923,000. One loan of $325,000 is past due. For
the other loans there is no specific maturity date. The loans bear
interest at the rate of 10%.
NOTE 3 STOCKHOLDERS' EQUITY
During the third quarter ending September 30, 2005, holders of the 5%
convertible subordinated debenture converted their holdings to common
stock at the stipulated conversion rate of $0.23 per share. Accordingly,
521,732 shares of the Company's common stock were issued to convert
120,000 convertible subordinated debentures.
NOTE 4 SUBSEQUENT EVENTS
On September 15, 2005, the Company and the shareholder of SoliDam decided
that the acquisition of SoliDam in the fourth quarter of 2004 was not in
the best interests of either party. It was mutually agreed to unwind the
transaction. Accordingly, the shareholders of SoliDam returned the 919,926
shares of the Company's common stock and released the Company from its
note obligation in the amount of $125,000. The results of operations for
the nine months ended September 30, 2005 do not included any losses for
SoliDam.
On November 11, 2005, Mr. Roy Piceni, the President and Chief Executive
Officer, agreed to convert $1,500,000 of notes payable to him by the
Company which was loaned to the Company prior to June 30, 2005 into
177,533 shares of the Company's Class A Preferred Stock which is
convertible into common stock at the rate of 1,000 shares of common stock
per share of Class A Preferred Stock and 22,466,806 shares of common stock
of the Company. The Class A Preferred Stock will automatically convert to
common stock when the certificate of incorporation is amended to allow all
of the outstanding shares of Class A Preferred Stock to be converted.
On November 11, 2005, Media Finance en Suisse Holdings GMBH, a major
shareholder of the Company, agreed to convert $1,500,000 of notes payable
to them which was loaned to the Company prior to June 30, 2005 into
120,000,000 shares of restricted common stock, 80,000 shares of Class A
Preferred Stock and loan up to $500,000 to the company at the Company's
request on or prior to October 30, 2006.
On October 31, 2005, the Board of Directors classified 300,000 of its
authorized but unissued shares of preferred stock of the corporation, par
value $0.01 per shares as shares of Class A Preferred Stock. Each share of
Class A Preferred Stock shall be convertible, at the option of the holder
of such share, into 1,000 shares of common stock of the Company at any
time that the Company is authorized to issue such shares.
On October 31, 2005, the Board of Directors authorized an increase in the
authorized number of share of common stock from 500,000 to 1,000,000,000.
F-4
SATELLITE ENTERPRISE CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
NOTE 4 SUBSEQUENT EVENTS (CONTINUED)
On November 10, 2005, Satellite Enterprise Corp. agreed to sell 10,000
share of its common stock to GCH Capital, Ltd for $1,000.
On November 21, 2005, the Company entered into an agreement with GCH
Capital, Ltd., Palisades Capital, LLC, and Dejo Investments, Ltd,
(hereafter, referred to as the "Investors") to convert $380,000 of 5%
convertible subordinated debentures currently outstanding on the Company's
financial statements, exercise the outstanding warrants and waive all
reset, price protection and anti-dilution rights. The Investors purchased
the convertible subordinated debentures and warrants, as well as all
related anti-dilution and reset rights related thereto, from the original
investors that were part of the 2004 private placement agreements, and
obtained signed releases from the original investors to release the
Company from any remaining anti-dilution provisions and reset provisions
which were part of the 2004 private placement agreements. In consideration
for the conversion of the convertible subordinated debentures, exercise of
the warrants and the renegotiation of the anti-dilution and reset
provisions, the Company agreed to issue 49,500,000 shares of its common
stock to the Investors.
One of the terms of GCH Capital entering into the agreement was that Media
Finance en Suisse Holding GmbH, as well as Mr. Roy Piceni converted their
notes payable into shares of common stock.
On November 30, 2005, the Company entered into a Share Sale and Purchase
Agreement whereby the Company agreed to purchase all of the outstanding
securities of Lapre, Van Dreven & Hoog Antink ("LVDH") from EMM Group BV
("EMM"). In consideration for all of the shares of LVDH, the Company
issued EMM 35,000,000 shares of common stock valued at $0.23 per share and
a warrant to purchase 10,000,000 shares of common stock at an exercise
price of $0.10 per share for a period of two years. The Company has
retained the right to repurchase 20,000,000 shares of common stock at the
price of $0.23 per share for a period of one year ("Repurchase Right"). In
addition, EMM has the right to convert 20,000,000 of the Company's common
stock into a non-interest bearing note at the rate of $0.23 per share.
Further, the Company has agreed to repay the note held by EMM or exercise
its Repurchase Right using 33.3% of the net proceeds of any future equity
financing. In the event that the net average cash flow of LVDH is less
than $60,000 per month ending November 30, 2006, then the Repurchase Right
or convertible note will be reduced on a pro rata basis.
F-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
When used in this Form 10-QSB, in other filings by the Company with the
SEC, in the Company's press releases or other public or stockholder
communications, or in oral statements made with the approval of an authorized
executive officer of the Company, the words or phrases "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, are based on
certain assumptions and expectations which may or may not be valid or actually
occur, and which involve various risks and uncertainties, including but not
limited to the risks set forth above. In addition, sales and other revenues may
not commence and/or continue as anticipated due to delays or otherwise. As a
result, the Company's actual results for future periods could differ materially
from those anticipated or projected.
Unless otherwise required by applicable law, the Company does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
Overview
We receive, distribute and sell newspaper data on a daily basis through
multiple outlets or Kiosks. We produce and sell the Kiosks on an international
basis. After introducing the CLiENT Application CD-ROM version, we increasingly
sell Newspaper prints via this channel. We generate revenue as follows:
o we receive a fee for each Kiosk sold;
o we receive a user license fee per Kiosk per year;
o the user printing at a Kiosk pays a printing fee;
o we receive a fee for each client application sold in addition to a
yearly user fee; and
o we receive a percentage of each sale at each user of the client's
kiosks.
We distribute our content through the use of five satellite stations and three
uplink stations.
Managements' Discussion and Analysis
Results of Operations - Period Ended September 30, 2005 Compared to Period Ended
September 30, 2004
Net Sales
We had net sales of $341,689 for the three months ended September 30, 2005
as compared to $122,883 for the three months ended September 30, 2004. This
increase in net sales is a result of the expansion of regional distributors,
which we have entered into agreements during 2004. This has lead to more points
of sales for our KiOSK system as well as our CLiENT application.
Cost and Expenses
Cost and expenses for the period ended September 30, 2005 were $1,071,187
as compared to $970,878 during the period ended September 30, 2004, which
consisted of selling, general and administrative costs, cost of services and
depreciation and amortization. Cost and expenses during the period ended
September 30, 2005 included cost of services ($395,250), selling general and
administrative ($529,490), interest expense ($74,884) and depreciation and
amortization ($71,563). This increase in cost and expenses is a result of the
$300,000 costs involved with the Settlement between two former U.S. employees
and the company, which we have accrued in total.
As a result of the foregoing factors, we realized a net loss of $729,498
for the three months ended September 30, 2005 compared to a net loss of $847,995
for the three months ended September 30, 2004.
Liquidity and Capital Resources
At September 30, 2005, we had a working capital deficit of $1,225,738. At
December 31, 2004, we had a working capital deficit of $1,575,553. As a result,
our auditors have raised, in their current audit report, a substantial doubt
about our ability to continue as a going concern. We will be unable to continue
as a going concern in the event we are not able to raise capital in order to
develop and implement our business plan and continue operations. Media Finance
en Suisse, our largest shareholder, in which Roy Piceni, our CEO and a director,
is a shareholder, has been providing the Company with loans to cover monthly
losses. Until such time as sufficient capital is raised, we intend to limit
expenditures for capital assets and other expense categories.
There is no assurance of financial viability for Swiss Satellite
Newspapers. We depend on the financial viability of Swiss Satellite Newspapers
for our content and satellite transmission. Swiss Satellite Newspapers has
limited revenues to date. Our business would be materially harmed if Swiss
Satellite Newspapers is unable to continue to provide us with its content,
satellite transmission and technical support.
2
To obtain funding for our ongoing operations, on May 19, 2004, pursuant to
an offering conducted under Rule 506 of Regulation D, as promulgated under the
Securities Act of 1933, we sold 10,869,565 shares of common stock to accredited
investors in a private offering. In connection with the offering, we sold
10,869,565 shares of common stock at a price of $.23 per share. In addition, we
also issued 10,869,565 common stock purchase warrants exercisable at $1.50 per
share. We raised an aggregate of $2,500,000 in connection with this offering. In
November 2004, we entered into an amendment of the Securities Purchase Agreement
whereby we cancelled 2,173,913 shares of common stock and issued to the
investors to the investors secured convertible debentures in the amount of
$500,000.
On November 11, 2005, Mr. Roy Piceni, the President and Chief Executive
Officer, agreed to convert $1,500,000 of notes payable to him by the Company
which was loaned to the Company prior to June 30, 2005 into 177,533 shares of
the Company's Class A Preferred Stock which is convertible into common stock at
the rate of 1,000 shares of common stock per share of Class A Preferred Stock
and 22,466,806 shares of common stock of the Company. The Class A Preferred
Stock will automatically convert to common stock when the certificate of
incorporation is amended to allow all of the outstanding shares of Class A
Preferred Stock to be converted.
On November 11, 2005, Media Finance en Suisse Holdings GMBH, a major
shareholder of the Company, agreed to convert $1,500,000 of notes payable to
them which was loaned to the Company prior to June 30, 2005 into 120,000,000
shares of restricted common stock, 80,000 shares of Class A Preferred Stock and
loan up to $500,000 to the Company at the Company's request on or prior to
October 30, 2006.
On November 10, 2005, Satellite Enterprise Corp. agreed to sell 10,000
share of its common stock to GCH Capital, Ltd for $1,000.
On November 21, 2005, the Company entered into an agreement with GCH Capital,
Ltd., Palisades Capital, LLC, and Dejo Investments, Ltd, (hereafter, referred to
as the "Investors") to convert $380,000 of 5% convertible subordinated
debentures currently outstanding on the Company's financial statements, exercise
the outstanding warrants and waive all reset, price protection and anti-dilution
rights. The Investors purchased the convertible subordinated debentures and
warrants, as well as all related anti-dilution and reset rights related thereto,
from the original investors that were part of the 2004 private placement
agreements, and obtained signed releases from the original investors to release
the Company from any remaining anti-dilution provisions and reset provisions
which were part of the 2004 private placement agreements. In consideration for
the conversion of the convertible subordinated debentures, exercise of the
warrants and the renegotiation of the anti-dilution and reset provisions, the
Company agreed to issue 49,500,000 shares of its common stock to the Investors.
On November 30, 2005, the Company entered into a Share Sale and Purchase
Agreement whereby the Company agreed to purchase all of the outstanding
securities of Lapre, Van Dreven & Hoog Antink ("LVDH") from EMM Group BV
("EMM"). In consideration for all of the shares of LVDH, the Company issued EMM
35,000,000 shares of common stock valued at $0.23 per share and a warrant to
purchase 10,000,000 shares of common stock at an exercise price of $0.10 per
share for a period of two years. The Company has retained the right to
repurchase 20,000,000 shares of common stock at the price of $0.23 per share for
a period of one year ("Repurchase Right"). In addition, EMM has the right to
convert 20,000,000 of the Company's common stock into a non-interest bearing
note at the rate of $0.23 per share. Further, the Company has agreed to repay
the note held by EMM or exercise its Repurchase Right using 33.3% of the net
proceeds of any future equity financing. In the event that the net average cash
flow of LVDH is less than $60,000 per month ending November 30, 2006, then the
Repurchase Right or convertible note will be reduced on a pro rata basis.
One of the subsidiaries of LVDH is a production company and produces, through
injection moulds, various plastic half and end products for the retail industry.
It also has its own mould shop. A couple of the plastic products it produces are
the plastics parts of our KiOSK. The Company intends to take over the production
for the whole KiOSK. One of the advantages of this in-house production is that
we believe that the cost of the KiOSK will decrease by producing them internally
as opposed to purchasing them from a third party. A second subsidiary of LVDH
aims on recycling of postindustrial plastic waste and prepare this waste to be
ready to be used in the plastic injection industry.
Although LVDH generates a positive cash flow with its current activities,
we still need additional investments in order to continue operations. Financing
transactions may include the issuance of equity or debt securities, obtaining
credit facilities, or other financing mechanisms. However, the trading price of
our common stock and the downturn in the U.S. stock and debt markets could make
it more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our operations
again.
Cash Flows
Net cash used in operating activities was $896,920 for the nine months
ended September 30, 2005 and $1,752,063 for the nine months ended September 30,
2004. This decrease was primarily due to the unwinding of the SoliDAM
acquisition.
Net cash used in by investing activities was $27,232 and $134,880 for the
nine months ended September 30, 2005 and 2004, respectively.
3
Net cash provided by financing activities was $395,153 and $1,863,263 for
the nine months ended September 30, 2005 and 2004, respectively. The net cash
provided by financing activities in 2004 consisted primarily of proceeds from,
notes payable, sale of common stock and stock subscription receipts and the cash
used in financing activities in 2005 consisted primarily of payments of a note
and loans to a related party.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on us.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act). Based upon this evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms. There was no change in our internal controls or in other
factors that could affect these controls during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
4
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are a party to litigation or other legal proceedings
that we consider to be a part of the ordinary course of our business. Except for
the following, we are not involved currently in legal proceedings that could
reasonably be expected to have a material adverse effect on our business,
prospects, financial condition or results of operations:
o On May 14, 2004, Fred DeVries and Renato Mariani (the "Plaintiffs")
filed suit in the Fifteenth Judicial Circuit Court located in Palm
Beach County, Florida, claiming breach of employment agreements
against the Company and against the Company's CEO claiming fraud.
The Plaintiffs are seeking monies and benefits owed in connection
with the employment agreements as well as other damages. The trial
is set on the three-month docket running from October 3, 2005
through December 16, 2005. The Company has filed an Answer and
Affirmative Defenses. On June 27, 2005, the company has agreed upon
a settlement with the plaintiffs. The company will pay the
plaintiffs an amount of $300,000 within 12 months. First payment
must be made at August 1, 2005 and the last payment on August 1,
2006. The minimum amount payable is $5,000 a month, the maximum
amount will be one third of any monies that the company receives
from investors during equity invested into the business by sale of
shares during the period of the one year.
o Three Dutch companies in the Netherlands have commenced a legal
procedure against Satellite Newspapers Content B.V. claiming an
amount due to them of approximately $156,000. The parties have
agreed to suspend legal action until June 1, 2005 based upon a
settlement reached in February 2004 whereby a shareholder of the
Company will surrender a comparable number of Company shares to
offset the obligation. At this moment the company is still in
negotiation with the three Dutch companies in order to find a
solution. While negotiations are pending, legal actions against the
company are suspended.
We may become involved in material legal proceedings in the future.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
On November 11, 2005, Mr. Roy Piceni, the President and Chief Executive
Officer, agreed to convert $1,500,000 of notes payable to him by the Company
which was loaned to the Company prior to June 30, 2005 into 177,533 shares of
the Company's Class A Preferred Stock which is convertible into common stock at
the rate of 1,000 shares of common stock per share of Class A Preferred Stock
and 22,466,806 shares of common stock of the Company. The Class A Preferred
Stock will automatically convert to common stock when the certificate of
incorporation is amended to allow all of the outstanding shares of Class A
Preferred Stock to be converted.
On November 11, 2005, Media Finance en Suisse Holdings GMBH, a major
shareholder of the Company, agreed to convert $1,500,000 of notes payable to
them which was loaned to the Company prior to June 30, 2005 into 120,000,000
shares of restricted common stock, 80,000 shares of Class A Preferred Stock and
loan up to $500,000 to the company at the Company's request on or prior to
October 30, 2006.
On November 10, 2005, Satellite Enterprise Corp. agreed to sell 10,000
share of its common stock to GCH Capital, Ltd for $1,000.
On November 21, 2005, the Company entered into an agreement with GCH
Capital, Ltd., Palisades Capital, LLC, and Dejo Investments, Ltd, (hereafter,
referred to as the "Investors") to convert $380,000 of 5% convertible
subordinated debentures currently outstanding on the Company's financial
statements, exercise the outstanding warrants and waive all reset, price
protection and anti-dilution rights. The Investors purchased the convertible
subordinated debentures and warrants, as well as all related anti-dilution and
reset rights related thereto, from the original investors that were part of the
2004 private placement agreements, and obtained signed releases from the
original investors to release the Company from any remaining anti-dilution
provisions and reset provisions which were part of the 2004 private placement
agreements. In consideration for the conversion of the convertible subordinated
debentures, exercise of the warrants and the renegotiation of the anti-dilution
and reset provisions, the Company agreed to issue 49,500,000 shares of its
common stock to the Investors.
On November 30, 2005, the Company entered into a Share Sale and Purchase
Agreement whereby the Company agreed to purchase all of the outstanding
securities of Lapre, Van Dreven & Hoog Antink ("LVDH") from EMM Group BV
("EMM"). In consideration for all of the shares of LVDH, the Company issued EMM
35,000,000 shares of common stock valued at $0.23 per share and a warrant to
purchase 10,000,000 shares of common stock at an exercise price of $0.10 per
share for a period of two years. The Company has retained the right to
repurchase 20,000,000 shares of common stock at the price of $0.23 per share for
a period of one year ("Repurchase Right"). In addition, EMM has the right to
convert 20,000,000 of the Company's common stock into a non-interest bearing
note at the rate of $0.23 per share. Further, the Company has agreed to repay
the note held by EMM or exercise its Repurchase Right using 33.3% of the net
proceeds of any future equity financing. In the event that the net average cash
flow of LVDH is less than $60,000 per month ending November 30, 2006, then the
Repurchase Right or convertible note will be reduced on a pro rata basis.
5
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On October 31, 2005, the Board of Directors classified 300,000 of its authorized
but unissued shares of preferred stock of the corporation, par value $0.01 per
shares as shares of Class A Preferred Stock. Each share of Class A Preferred
Stock shall be convertible, at the option of the holder of such share, into
1,000 shares of common stock of the Company at any time that the Company is
authorized to issue such shares.
Effective November 30, 2005 the Company changed its name from Satellite
Enterprises Corp. to Satellite Newspapers Corp. In addition, effective November
30, 2005, the Registrant's quotation symbol on the OTC Bulletin Board changed
from SENR to SNWP.
ITEM 6. EXHIBITS
3.1 Form of Certificate of Designation of Powers, Designations, Preferences
and Relative Participating, Optional, or Other Special Rights and
Qualifications, Limitations and Restrictions of the Class A Preferred
Stock
10.1 Conversion and Settlement Agreement between the Company and GCH Capital
Ktd., Palisades Capital LLC and Dojo Investmetns, Ltd.
10.2 Conversion and Settlement Agreement between the Company and Media Finance
en Suisse Holdings GmnH
10.3 Conversion and Settlement Agreement between the Company and Roy Piceni
10.4 Share Sale and Purchase Agreement between the Company and EMM Group BV
31.1 Certification by the Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
6
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SATELLITE NEWSPAPERS CORP.
(Registrant)
Date: December 1, 2005 By: /s/ ROY PICENI
---------------------------------
Roy Piceni
Chief Operating Officer
(Duly Authorized Officer)
Date: December 1, 2005 By: /s/ Randy Hibma
---------------------------------
Randy Hibma
Chief Financial Officer
(Principal Financial
and Accounting Officer)