RETROSPETTIVA INC, SB-2/A, 1997-09-10

RETROSPETTIVA INC
SB-2/A, 1997-09-10
WOMEN'S, MISSES', AND JUNIORS OUTERWEAR

Previous: CAPSTAR HOTEL CO, S-3/A, 1997-09-10

Next: CALGAARD RONALD K, 4, 1997-09-10

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997.

REGISTRATION NO. 333-29295
- ------------------------------------------------------------
- ------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

AMENDMENT NO. 2
TO
FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------

RETROSPETTIVA, INC.
(Exact Name of Small Business Issuer As Specified In Its Charter)

<TABLE>
<S> <C> <C>
CALIFORNIA 2337 95-4298051
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code No.) I.D. Number)
incorporation or organization)
</TABLE>

8825 WEST OLYMPIC BLVD.
BEVERLY HILLS, CA 90211
(310) 657-4488
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

MICHAEL D. SILBERMAN, CHIEF FINANCIAL OFFICER
RETROSPETTIVA, INC.
8825 WEST OLYMPIC BLVD.
BEVERLY HILLS, CA 90211
(310) 657-1745

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES OF ALL COMMUNICATIONS TO:

GARY A. AGRON, ESQ. DONALD C. REINKE, ESQ.
Law Office of Gary A. Agron BRUCE P. JOHNSON, ESQ.
5445 DTC Parkway, Suite 520 Pezzola & Reinke, A Professional
Englewood, CO 80111 Corporation
(303) 770-7254 1999 Harrison Street, Suite 1300
(303) 770-7257 (Fax) Oakland, CA 94612
(510) 273-8750
(510) 834-7440 (Fax)

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective and the
Underwriting Agreement is executed.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box:
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Units, consisting of two shares of Common Stock, 575,000
no par value and one Warrant(1)................. Units $12.00 $6,900,000 $2,091
575,000
Common Stock, no par value, underlying Warrants... Shares $7.50 $4,312,500 $1,307
50,000
Representatives' Warrants(2)...................... Warrants $ .002 $ 100 $ --0--
Units underlying Representatives' Warrants
consisting of two shares of Common Stock and one 50,000
Warrant......................................... Units $14.40 $720,000 $219
Common Stock, no par value, underlying Warrants 50,000
included in Representatives' Warrants(2)........ Shares $7.50 $375,000 $114
Common Stock, no par value offered by Selling 75,000
Shareholders.................................... Shares $6.00 $450,000 $136
Totals............................................ $12,757,600 $3,776
</TABLE>

(1) Includes the overallotment option granted to the Underwriters of 75,000
Units.

(2) Pursuant to Rule 416 of the Securities Act of 1933, as amended, the number
of shares issuable upon exercise of the Representatives' Warrants is subject
to adjustment in accordance with anti-dilution provisions of such warrants.
------------------------------

THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

(EXHIBIT INDEX LOCATED ON PAGE OF THIS FILING)

- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED SEPTEMBER 10, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
RETROSPETTIVA, INC.

500,000 UNITS
------------------

Retrospettiva, Inc. (the "Company") is offering (the "Offering") through
Kensington Securities, Inc. and Gunn Allen Financial, Inc., as the
representatives (the "Representatives") of the underwriters herein named (the
"Underwriters"), 500,000 Units of the Company's securities ("Units"), each Unit
consisting of two shares of no par value common stock ("Common Stock") and one
redeemable common stock purchase warrant ("Warrant"), at a price of $12.00 per
Unit. The Common Stock and Warrants are separately tradeable immediately upon
issuance. Each Warrant is exercisable to purchase one share of Common Stock at
an exercise price of $7.50 per share for a period of five years from the date
hereof and may be redeemed by the Company after six months from the date hereof
for $.01 per Warrant on 30 days' written notice to the Warrantholders if the
closing price of the Common Stock on the Nasdaq National Market System (the
"National Market") is at least $8.50 per share for 20 consecutive trading days,
ending not earlier than five days before the Warrants are called for redemption.
The Unit price and Warrant exercise price have been determined by negotiations
between the Company and the Representatives and such prices are not necessarily
related to the Company's financial condition, net worth or other established
criteria of value. See "Risk Factors" and "Underwriting."

There is no trading market for the Units, Common Stock and Warrants and
there can be no assurance that a trading market will develop in these securities
upon completion of the Offering. The Company has applied to have the Common
Stock and Warrants (but not the Units) listed on the National Market under the
symbols "RTRO" and "RTROW," respectively.

This Prospectus also covers the sale of 75,000 shares of Common Stock which
may be sold from time to time in open market transactions at prevailing prices
by two shareholders (the "Selling Shareholders"). All registration expenses
associated with the sale of the Selling Shareholders' shares (excluding sales
commissions) will be paid by the Company. See "Selling Shareholders."
--------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS ABLE TO SUSTAIN A TOTAL
LOSS OF THEIR INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6.

The Units are offered by the Underwriters on a firm commitment basis,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to certain conditions, including the right of the
Underwriters to reject orders in whole or in part. It is expected that delivery
of certificates representing the securities will be made against payment
therefor in Scottsdale, Arizona on or about three business days from the date of
this Prospectus.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
Per Unit................................... $12.00 $1.20 $10.80
<S> <C> <C> <C>
Total(3)................................... $6,000,000 $600,000 $5,400,000
</TABLE>

(1) Excludes a nonaccountable expense allowance payable to the Representatives
of $180,000 ($207,000 if the Overallotment Option is exercised) and the
issuance of warrants to the Representatives (the "Representatives'
Warrants") to purchase up to 50,000 Units at a price of $14.40 per Unit. The
Company has granted certain registration rights with respect to the Units
underlying the Representatives' Warrants and has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933 (the "1933 Act"). See "Underwriting."

(2) Before deducting costs of the Offering estimated to be $455,000, including
the Representatives' nonaccountable expense allowance. See "Underwriting."

(3) Assumes no exercise of the Underwriters' option (the "Overallotment
Option"), exercisable within 30 days from the date of this Prospectus, to
purchase from the Company up to 75,000 additional Units on the same terms as
the Units offered hereby solely to cover overallotments, if any. If the
Overallotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Proceeds to Company will be $6,900,000, $690,000
and $6,210,000, respectively. See "Underwriting."

KENSINGTON SECURITIES, INC. GUNN ALLEN FINANCIAL, INC.

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK AND
WARRANTS INCLUDING OVERALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

The Company will furnish annual reports to its shareholders which will
include year end audited financial statements. The Company may also furnish to
its shareholders quarterly financial statements and such other reports as may be
authorized by its Board of Directors. See "Available Information."

[Woman wearing blazer]

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND
FINANCIAL STATEMENTS THAT APPEAR ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL SHARE AND OTHER INFORMATION IN THIS PROSPECTUS REFLECTS AN
APPROXIMATELY 2.3825731 SHARES FOR ONE SHARE FORWARD STOCK SPLIT EFFECTED BY THE
COMPANY ON JUNE 20, 1997 AND ASSUMES THAT THE WARRANTS, THE OVERALLOTMENT OPTION
AND THE REPRESENTATIVES' WARRANTS HAVE NOT BEEN EXERCISED.

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS SET
FORTH IN THIS PROSPECTUS INCLUDE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY.
THESE RISKS AND UNCERTAINTIES ARE DETAILED UNDER THE CAPTION "RISK FACTORS" AND
ELSEWHERE THROUGHOUT THE PROSPECTUS AND WILL BE FURTHER DISCUSSED FROM TIME TO
TIME IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE COMMISSION. THE
FORWARD-LOOKING STATEMENTS INCLUDED IN THE PROSPECTUS SPEAK ONLY AS OF THE DATE
HEREOF.

THE COMPANY

The Company contracts for the manufacture of a variety of garments,
primarily basic women's activewear, sportswear and businesswear which include
skirts, blouses, blazers, pants, shorts, vests and dresses, using assorted
fabrics including rayons, linens, cotton and wool. The Company offers such
garments to customers under its own labels, "Magellan" and "Retrospettiva" and
under private labels selected by its customers and markets its products
exclusively in the United States to (i) large wholesalers such as Giorgio Sant'
Angelo, Jeans Collectibles, V.S. Sport, Positive Influence, David N., Synari and
Wild Life, (ii) national retailers including department stores such as Dayton
Hudson, J.C. Penney, Casual Corner and Newton's, and (iii) women's chain
clothing stores such as Marshalls, TJ Maxx, Chadwicks, Hit or Miss, Fred Mayer
and Cato.

Substantially all of the Company's garments are sold on a "package" basis
pursuant to which the Company markets at fixed prices finished garments to the
customer's specifications and quantity requirements, arranges for production of
the garments and delivers the garments directly to the customer at the port of
entry. In its marketing, the Company emphasizes these package arrangements and
what it believes to be the better quality and lower prices of garments produced
by skilled Macedonian workers as compared to lower paid workers in certain other
regions. See "Business--Marketing."

As a package provider, the Company sources and purchases fabrics and trims,
arranges for cutting and sewing, and coordinates any other services required to
provide a completed garment. Since the Company manufactures its finished
products only upon receipt of purchase orders from its wholesale and retail
customers, and therefore does not maintain an inventory of finished products,
the Company believes that it minimizes the marketing and fashion risk generally
associated with the apparel industry. Fabrics and trims are purchased from
suppliers in China, India, Russia, Romania, Italy and the United States. After
dying the fabric, if necessary, the fabric and trim are shipped to factories
selected by the Company (located in Macedonia) where they are manufactured into
completed garments under the Company's management and quality control guidance.

3
<PAGE>
at relatively lower costs than in more economically developed regions, (ii) a
lack of quotas and lower tariffs in the importation into the United States of
finished goods from Macedonia, and (iii) lower shipping costs and faster garment
delivery as a result of the closer geographical proximity to the United States
of the Company's Macedonian contract manufacturers compared to manufacturers in
the Pacific Rim nations. See "Business--Competition."

The Company was organized in November 1990 initially to manufacture and
import textile products from Italy including finished garments and fabrics. By
1993, the Company was purchasing fabrics from firms and factories around the
world and contracting for the manufacture of finished garments in Macedonia for
importation into the United States.

The Company's executive offices are located at 8825 West Olympic Blvd.,
Beverly Hills, California 90211, and its telephone number is (310) 657-1745.

THE OFFERING

<TABLE>
<S> <C>
Securities Offered............ 500,000 Units, each Unit consisting of two shares of Common
Stock and one Warrant

Offering Price................ $12.00 per Unit

Common Stock Outstanding Prior
to the Offering(1).......... 1,750,000 shares

Securities Outstanding After
the Offering(1)............. 2,750,000 shares and 500,000 Warrants

Use of Proceeds............... The net proceeds of the Offering will be used to purchase
fabric, purchase apparel manufacturing equipment, repay debt
and for working capital. See "Use of Proceeds."

Nasdaq National Market RTRO--Common Stock
Symbols..................... RTROW--Warrants

Transfer and Warrant Agent.... Corporate Stock Transfer, Inc.
</TABLE>

- ------------------------

(1) Excludes exercise of: (i) the Warrants; (ii) the Overallotment Option; (iii)
the Representatives' Warrants; and (iv) outstanding stock options to
purchase up to 1,761,633 shares of Common Stock issued under the Company's
1996 Stock Option Plan. See "Dilution," "Capitalization," "Management--1996
Stock Option Plan," "Description of Securities" and "Underwriting."

4
<PAGE>
SUMMARY FINANCIAL INFORMATION

The financial information of the Company set forth below for the two years
ended December 31, 1995 and 1996 has been derived from the Company's audited
financial statements included herein. Interim information for the six months
ended June 30, 1996 and 1997 has been derived from unaudited financial
statements which are also included herein. The results of operations for the six
months ended June 30, 1997 are not necessarily indicative of the results to be
expected for the year ending December 31, 1997. The financial information should
be read in conjunction with the financial statements, related notes and other
financial information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995
------------- ------------- SIX MONTHS ENDED JUNE 30,
--------------------------
1997 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>

INCOME STATEMENT DATA:

Net sales.............................................. $ 12,902,195 $ 11,379,826 $ 7,921,299 $ 5,680,696

Gross profit........................................... 1,896,142 1,402,893 1,162,968 762,355

Operating income....................................... 1,168,766 856,776 849,459 255,152

Interest expense....................................... 61,457 21,241 23,784 18,024

Net income............................................. 656,056 666,495 497,282 140,902

Weighted average shares outstanding.................... 1,750,000 1,750,000 1,750,000 1,750,000

Net income per share................................... .37 .38 .28 .08
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30, AS
1997 ADJUSTED(1)
------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 1,666,715 $ 6,026,715
Total assets......................................................................... 5,843,820 10,423,820
Long-term debt....................................................................... -- --
Total liabilities.................................................................... 4,034,165 3,554,165
Shareholders' equity................................................................. 1,809,655 6,754,655
</TABLE>

- ------------------------

(1) As adjusted to give effect to the receipt and application of the estimated
net proceeds of the Offering without giving effect to exercise of the
Warrants, the Overallotment Option, the Representatives' Warrants or
outstanding stock options. See "Use of Proceeds" and "Description of
Securities."

5
<PAGE>
RISK FACTORS

Prospective purchasers of the Units should carefully consider the following
risk factors and the other information contained in this Prospectus before
making an investment in the securities. Information contained in this Prospectus
includes "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. See, e.g., "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business--Strategy." No assurance can be given that the future results
addressed by the forward-looking statements will be achieved. The following
matters constitute cautionary statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results addressed in such forward-looking statements. Other factors could
also cause actual results to vary materially from the future results addressed
in such forward-looking statements.

LIMITED OPERATING HISTORY. The Company began operations in November 1990,
and has a limited operating history upon which potential investors may evaluate
its performance. Although the Company reported net income for the years ended
December 31, 1995 and 1996, and the six months ended June 30, 1997, there can be
no assurance that future operations will be profitable. The likelihood of the
Company's success must be considered relative to the problems, difficulties,
complications and delays frequently encountered in connection with the
development and operation of a relatively new business and the intensely
competitive environment in which the Company operates. The business risks to
which the Company are subject include, but are not limited to, inability to
develop products, competition, unanticipated marketing and promotional expenses,
unanticipated negative publicity, unanticipated difficulties in obtaining
appropriate supply of raw materials, cutting and sewing services and warehouse
and shipping services, lack of operating experience and limitations on its
ability to raise capital or finance operations. Many of the risks may be
unanticipated or beyond the control of management, including the introduction of
superior products to the market by competitors. See "Business" and "Financial
Statements."

DEPENDENCE ON THE COMPANY'S PRESIDENT AND OTHER KEY PERSONNEL. The success
of the Company is largely dependent upon the personal efforts, relationships and
abilities of the executive officers of the Company, especially Mr. Vukadinovic,
who is the Chief Executive Officer and President of the Company. In May 1996,
Mr. Vukadinovic entered into a three-year employment agreement with the Company
which includes a non-competition provision effective through the term of the
agreement and for two additional years thereafter. The Company intends to apply
for life insurance upon Mr. Vukadinovic's life in the face amount of $1,000,000
but does not maintain key man life insurance on the lives of any other executive
officers. The loss of the services of Mr. Vukadinovic would have a material
adverse effect on the Company. See "Management."

DEPENDENCE UPON UNAFFILIATED MANUFACTURERS AND FABRIC SUPPLIERS; DEPENDENCE
UPON EXTENSION OF CREDIT TERMS. The Company does not own or operate any fabric
making or manufacturing facilities and is therefore dependent upon independent
fabric suppliers and manufacturers to manufacture products to the Company's
specifications. The inability of a fabric supplier to deliver fabric to the
manufacturers, or of a manufacturer to produce or ship the Company's products at
agreed upon times, or to meet the Company's quality standards, could adversely
affect the Company's ability to deliver products to its customers in a timely
manner. Delays in delivery could also result in missing certain retailing
seasons with respect to products ordered by customers or could otherwise have an
adverse effect on the Company's financial condition and results of operations.
The Company is dependent upon two fabric suppliers (Newbel, Inc. and Farnet
Trading Co.) which provided approximately 37% and 11%, respectively, of the
Company's fabric purchases for the year ended December 31, 1996 and three fabric
suppliers (Newbel, Inc., Elvana Trading Limited and One Four Four) accounted for
41%, 15% and 31%, respectively, of the Company's fabric purchases for the six
months ended June 30, 1997. The loss of any of these suppliers could have a

6
<PAGE>

material adverse affect on the Company's operations. Additionally, the Company
is dependent upon one manufacturing agent who selects factories in Macedonia to
manufacture the Company's products and oversees such production. The Company
does not have any written contracts with any of its contractors or suppliers.
One of these suppliers has extended credit terms to the Company for fabric
purchased of up to $1,200,000. The loss of credit terms from this or any other
supplier would have a material adverse effect on the Company's operations. There
can be no assurance that this or other suppliers will provide credit terms to
the Company in the future. See "Business--Manufacturing and Suppliers."

DEPENDENCE ON CERTAIN CUSTOMERS. Three of the Company's customers each
accounted for 10% or more of sales (and 87% of sales in the aggregate) for the
year ended December 31, 1996, and two customers each accounted for 10% or more
of sales (and 91% of sales in the aggregate) for the six months ended June 30,
1997. A loss of any of these customers would have a material adverse effect on
the Company's operations. See "Business--Marketing."

FOREIGN OPERATIONS. During 1996, substantially all of the Company's fabric
purchases were made outside the United States, and all of the apparel sold by
the Company was manufactured in Macedonia. The Company's operations would be
adversely affected by political instability resulting in disruption of trade
with foreign countries in which the Company's contractors and suppliers are
located, the imposition of additional regulations related to imports or duties,
taxes and other charges on imports, significant fluctuations in the value of the
United States' dollar against foreign currencies and restrictions on the
international transfer of funds. The Company's import operations may be subject
to constraints imposed by bilateral textile agreements between the United States
and a number of foreign countries (not currently including Macedonia). These
agreements impose quotas on the amount and type of goods which can be imported
into the United States from these countries and can limit or prohibit
importation of products on very short notice. The Company's imported products
are also subject to United States customs duties which may be a material portion
of the Company's cost of imported goods. A substantial increase in customs
duties or the imposition of quota limits applicable to the Company's imports
(especially from Macedonia) could have a material adverse effect on the
Company's financial condition and results of operations. Because the Company's
foreign manufacturers are located at greater geographic distances from the
Company's customers than domestic manufacturers, the Company is generally
required to allow greater lead time for its orders. See "Business."

COMPETITION. The apparel industry is highly competitive and consists of
numerous manufacturers, importers and retailers. The Company's strategy relies
upon its ability to deliver high-quality products to its wholesale and retail
customers in a timely fashion and at competitive prices. Many of the Company's
competitors are significantly larger and more diversified and have significantly
greater financial, distribution, marketing, name recognition and other resources
than the Company. The Company also encounters competition from department stores
and mass merchandisers, including some of the Company's own retail customers,
who sell apparel under their own private labels. Recently, department stores and
mass merchandisers have increased the amount of sportswear and activewear
manufactured specifically by them or their contract manufacturers and sold under
their own labels. See "Business--Competition."

RISKS ASSOCIATED WITH SIGNIFICANT GROWTH. The Company has experienced rapid
growth which has placed, and could continue to place, a significant strain on
its employees and operations. The Company remains vulnerable to a variety of
business risks generally associated with rapidly growing companies as well as
risks related to the broadening of its product offerings and the expansion of
its distribution channels. No assurance can be given that the Company will be
able to continue to deliver products in a timely manner at competitive prices.
To manage growth effectively, the Company will be required to continue to
implement changes in certain aspects of its business, expand its information
systems and operations to respond to current demand and develop, train and
manage employees. In addition, failure to enhance operating control systems or
unexpected difficulties encountered during expansion could adversely affect the
Company's financial condition and results of operations. See "Financial
Statements."

7
<PAGE>
UNCERTAINTIES IN APPAREL INDUSTRY; GENERAL ECONOMIC CONDITIONS;
SEASONALITY. The apparel industry has historically been subject to substantial
cyclical variations. During recessionary periods, when disposable income is low,
purchases of apparel and related goods tend to decline. Accordingly, a recession
in the general economy or uncertainties regarding future economic prospects that
affect consumer spending habits could have a material adverse effect on the
Company's results of operations. Additionally, the retail apparel industry has
experienced significant changes and difficulties over the past several years,
including consolidation of ownership, increased centralization of buying
decisions, restructurings, bankruptcies and liquidations. Various retailers,
including some of the Company's customers, experienced financial difficulties in
the past few years which increased the risk of extending credit to such
retailers. Financial problems of a retailer could cause the Company to curtail
business with such retailer, require the Company to assume more credit risk
relating to the retailer's receivables or even write off the retailer's
receivables. The Company cannot predict what effect, if any, continued changes
within the retail industry will have on the Company's business. In addition,
apparel manufacturers face the risks of delays in delivery of products,
imperfections in the manufacture of products and returns from customers, all of
which could have an adverse effect on the Company. The Company's business is
somewhat seasonal, with historically greater sales in the first and fourth
quarters, but management believes that it is less so than many other apparel
companies, primarily because of the Company's focus on basic sportswear, which
tends to be less seasonal than fashion sportswear. The Company does not believe
this seasonality has had a material adverse impact on its cash flow or
operations, although there can be no assurance that this will not be the case in
the future. See "Business."

POLITICAL INSTABILITY. All of the apparel sold by the Company is
manufactured in Macedonia, which was formerly a part of Yugoslavia. Some regions
of the former Yugoslavia, most notably Bosnia, Croatia and Serbia, have
experienced significant political instability, including warfare and rebellion.
Although Macedonia has not experienced such instability, there can be no
assurance that future unrest will not occur in Macedonia. Any unrest,
instability, warfare, or rebellion in Macedonia would have a material adverse
effect on the Company's operations.

CONCENTRATION OF ACCOUNTS RECEIVABLE. At December 31, 1996 and June 30,
1997, two customers accounted in the aggregate for 93% and 73%, respectively, of
the Company's accounts receivable. All payments on these accounts are current;
however, if either customer defaulted on its account receivable obligation to
the Company, the Company's financial condition would be adversely affected. See
"Financial Statements."

POSSIBLE FLUCTUATIONS IN OPERATING RESULTS. The Company's operating results
could vary from period to period as a result of the purchasing patterns of
customers, the timing of new product introductions by the Company and its
competitors, variations in sales and competitive pricing. Seasonal variations in
sales and unanticipated events, including delays in manufacturing new garments,
could also have a material adverse effect on the Company's operating results.
These factors could result in significant fluctuations in operating results in
future periods. See "Financial Statements."

LIMITATION ON LIABILITY. The Company's Articles of Incorporation provide
that liability of directors to the Company for monetary damages is eliminated to
the full extent provided by California law. Under California law, a director is
not personally liable to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Company or its shareholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) for authorizing the unlawful
payment of a dividend or other distribution on the Company's capital stock or
the unlawful purchases of its capital stock; or (iv) for any transaction from
which the director derived any improper personal benefit.

8
<PAGE>
resulting from negligent or grossly negligent behavior) except in the situations
described in clauses (i) through (iv) above. This provision does not limit or
eliminate the rights of the Company or any shareholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care or any liability for violation of the federal securities
laws. See "Description of Securities--Limitation on Liability."

LACK OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE. Prior to the
Offering, there has been no public trading market for the Common Stock or
Warrants underlying the Units. The initial public offering price of the Units
and the exercise price of the Warrants were determined by negotiations between
the Company and the Representatives and do not necessarily bear any relationship
to recognized criteria for the valuation of such securities. Factors considered
in such negotiations included the Company's current level of revenues and
earnings, its prospects for future growth based upon proceeds of the Offering,
the nature of the Company's products, the apparel industry in general and the
level of competition within the industry. There can be no assurance that a
regular trading market for the Common Stock or Warrants will develop or continue
after the Offering or, if such a market develops, that the market price of the
component securities will equal or exceed the Offering price. See
"Underwriting."

IMMEDIATE SUBSTANTIAL DILUTION. The Offering involves an immediate and
substantial dilution of $3.55 per share of Common Stock, a 59% difference
between the public offering price of $6.00 per share of Common Stock (ascribing
no value to the Warrants included in the Units) and the net tangible book value
of $2.45 per share of Common Stock upon completion of the Offering, assuming no
exercise of the Warrants, the Overallotment Option, the Representatives'
Warrants or other outstanding stock options of the Company. See "Dilution."

SIGNIFICANT NUMBER OF STOCK OPTIONS OUTSTANDING. The Company's officers,
directors, employees and consultants hold stock options to purchase an aggregate
of 1,761,633 shares of the Company's Common Stock at prices ranging from $.63 to
$9.90 per share. Exercise of these stock options would significantly increase
the number of shares of Common Stock outstanding, dilute the ownership of the
investors in the Offering and reduce any per share earnings otherwise realized
by the Company.

NO DIVIDENDS. The Company has not paid any dividends on its Common Stock
and does not intend to pay dividends in the foreseeable future. See "Description
of Securities--Dividends."

POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price of the Company's
Common Stock and Warrants following the Offering may be highly volatile, as has
been the case with the securities of other companies completing initial public
offerings. Factors such as the Company's operating results or announcements by
the Company or its competitors may have a significant effect on the market price
of the Company's securities. In addition, market prices for securities of many
emerging and small capitalization companies have experienced wide fluctuations
in response to variations in quarterly operating results and general economic
indicators and conditions, as well as other factors beyond the control of the
Company.

SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the open market or the availability of such shares for sale following
the Offering could adversely affect the market price for the Common Stock.
Following the Offering, the 1,000,000 shares of Common Stock and the 500,000
Warrants included in the Units, together with the 500,000 shares of Common Stock
underlying the Warrants and the 75,000 shares registered hereby on behalf of the
Selling Shareholders may all be sold in the open market. An additional 1,340,241
shares of the Company's Common Stock are currently eligible for sale in the open
market under Rule 144 ("Rule 144") promulgated under the 1933 Act, and the
remaining 334,759 shares will be eligible for sale in March 1998.
Notwithstanding the above, the Company's officers, directors and 5% or greater
shareholders (holding an aggregate of 1,101,991 shares after deducting the
75,000 shares to be registered hereby which are excluded from the following
restriction on resale) have agreed with the Representatives not to sell or
otherwise dispose of their shares of Common Stock without the prior written
consent of the Representatives for a period of two years from the date of this
Prospectus provided,

9
<PAGE>
however, that 50% of such shares (550,996 shares) may be sold after one year
from the date of this Prospectus if the Company reports at least $1,000,000 of
after tax net income for the year ending December 31, 1997. In addition, the
holders of an additional 573,009 shares have agreed not to sell or otherwise
dispose of their shares without the prior written consent of the Representatives
for a period of one year from the date of this Prospectus. See "Description of
Securities--Common Stock Eligible for Future Sale" and "Underwriting."

UNDERWRITERS' INFLUENCE ON THE MARKET. A significant amount of the Common
Stock and Warrants offered hereby may be sold to customers of the
Representatives and the Underwriters. Such customers subsequently may engage in
transactions for the sale or purchase of such securities through or with the
Underwriters. Although it has no obligation to do so, the Representatives intend
to make a market in the Company's Common Stock and Warrants and may otherwise
effect transactions in the Common Stock and Warrants. This market-making
activity may terminate at any time. If it participates in the market, the
Representatives may exert a dominating influence on the market, if one develops,
for the Common Stock and Warrants. The price and liquidity of the Common Stock
and Warrants may be significantly affected by the degree, if any, of the
Underwriters' participation in such market.

POSSIBLE RESTRICTIONS ON MARKET-MAKING ACTIVITIES IN THE COMPANY'S
SECURITIES. Although they have no obligation to do so, the Representatives
intend to engage in market-making activities or soliciting brokerage activities
with respect to the purchase or sale of the Common Stock and Warrants in the
National Market where such securities will trade. However, no assurance can be
given that the Representatives will continue to participate as market makers for
the Common Stock and Warrants or that other broker/dealers will make a market in
such securities. In connection with the Offering, the Company has granted the
Representatives the right to act as the Company's agent in connection with any
future solicitation of holders of the Warrants to exercise their Warrants.
Unless granted an exemption by the Commission from Regulation M under the 1934
Act, the Representatives will be prohibited from engaging in any market-making
activities or solicited brokerage activities with regard to the Company's
securities during a period prescribed by Regulation M before the solicitation of
the exercise of any Warrants until the latter of the termination of such
solicitation activities or the termination by waiver or otherwise of any right
the Representatives may have to receive a fee for the exercise of the Warrants
following such solicitation. As a result, the Representatives and soliciting
broker/dealers may be unable to continue to make a market for the Company's
securities during certain periods while the Warrants are exercisable. Such a
limitation, while in effect, could impair the liquidity and market prices of the
Company's securities.

CONTROL BY MANAGEMENT; AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK;
PREVENTION OF CHANGES IN CONTROL. Upon completion of the Offering, the
Company's officers and directors will own approximately 40.1% of the then issued
and outstanding shares of Common Stock (assuming no exercise of the Warrants,
the Overallotment Option, the Representatives' Warrants or other outstanding
stock options) and will continue to be able to elect substantially all of the
Company's directors and control the affairs of the Company. The Company's
Articles of Incorporation authorize the issuance of up to 1,000,000 shares of
Preferred Stock with such rights and preferences as may be determined from time
to time by the Board of Directors. Accordingly, under the Articles of
Incorporation, the Board of Directors may, without shareholder approval, issue
Preferred Stock with dividend, liquidation, conversion, voting, redemption or
other rights which could adversely affect the voting power or other rights of
the holders of the Common Stock. The issuance of any shares of Preferred Stock
having rights superior to those of the Common Stock may result in a decrease of
the value or market price of the Common Stock and could further be used by the
Board of Directors as a device to prevent a change in control of the Company.
The Company has no other anti-takeover provisions in its Articles of
Incorporation or Bylaws. Holders of Preferred Stock may have the right to
receive dividends, certain preferences in liquidation, and conversion rights.
See "Description of Securities."

10
<PAGE>
REPRESENTATIVES' LACK OF UNDERWRITING EXPERIENCE. Kensington Securities,
Inc., one of the Representatives, was organized in July 1989 under the name
Chadwick Securities, Incorporated, was registered as a broker-dealer in October
1989 and changed its name to Kensington Securities, Inc. in September 1994.
Kensington Securities, Inc. acted as a representative of the underwriters in
only one prior public offering and Gunn Allen Financial, Inc. has never acted as
a representative of the underwriters, although both firms have participated as
dealers in offerings underwritten by others. This lack of underwriting
experience may (i) adversely affect the development or continuation of a trading
market for the Common Stock and Warrants, (ii) have limited the effectiveness of
the Representatives in negotiating the offering price of the Units and the
exercise price of the Warrants, and (iii) negatively influence the market price
of the Common Stock and Warrants following the Offering. The Representatives had
no material relationship with the Company or its promoters prior to this
Offering.

NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES OF COMMON STOCK
UNDERLYING THE WARRANTS. The Warrants are not convertible or exercisable
unless, at the time of exercise, the Company has a current prospectus covering
the shares of Common Stock issuable upon exercise of the Warrants and such
shares of Common Stock have been registered, qualified or deemed to be exempt
under the securities laws of the states of residence of the holders of such
Warrants. There can be no assurance that the Company will have or maintain a
current prospectus or that the securities will be qualified or registered under
any state laws. Although the Company has undertaken and intends to use its best
efforts to maintain a current prospectus covering the Common Stock issuable upon
exercise of the Warrants following completion of the Offering to the extent
required by federal securities laws, there can be no assurance that the Company
will be able to do so. The value of the Warrants may be greatly reduced if a
prospectus covering the Common Stock issuable upon exercise of the Warrants is
not kept current or if the Common Stock issuable upon exercise of the Warrants
is not qualified, or exempt from qualification, in the states in which the
holders of Warrants reside. Persons holding Warrants who reside in jurisdictions
in which such securities are not qualified and in which there is no exemption
will be unable to exercise their Warrants and would either have to sell their
Warrants in the open market or allow them to expire unexercised. If and when the
Warrants become redeemable by the terms thereof, the Company may exercise its
redemption right even if it is unable to qualify the Common Stock issuable upon
exercise of the Warrants for sale under all applicable state securities laws.
See "Description of Securities--Warrants."

REDEMPTION OF WARRANTS. The Warrants may be redeemed by the Company under
certain circumstances (if there is a current prospectus covering exercise of the
Warrants) upon 30 days' written notice to the Warrantholders at $.01 per
Warrant. In such event, the Warrants will be exercisable until the close of
business on the date fixed for redemption in such notice. Any Warrants not
exercised by such time will cease to be exercisable, and the holders will be
entitled only to the redemption price, which is likely to be substantially less
than the market value of the Warrants. Accordingly, such redemption could force
the Warrantholders to exercise the Warrants and pay the exercise price at a time
when it might be disadvantageous for them to do so or to sell the Warrants at
the then market price when they might otherwise prefer to hold the Warrants. See
"Description of Securities--Warrants."

The Common Stock and the Warrants, which comprise the Units offered hereby,
are detachable and separately transferable immediately upon issuance. Purchasers
may buy Warrants in the aftermarket or may move to jurisdictions in which the
shares of Common Stock underlying the Warrants are not registered or qualified
during the period that the Warrants are exercisable. In this event, the Company
would be unable to issue Common Stock to those persons desiring to exercise
their Warrants unless and until such shares could be qualified for sale in
jurisdictions in which the purchasers reside, or an exemption from qualification
exists in such jurisdiction. In this event, Warrantholders would have no choice
but to attempt to sell the Warrants in a jurisdiction where such sale is
permissible or allow them to expire unexercised. See "Description of
Securities--Warrants."

11
<PAGE>

LISTING AND MAINTENANCE CRITERIA FOR NASDAQ SECURITIES. The Company has
applied for listing on the Nasdaq National Market and believes it meets the
recently adopted standards for such listing which require: (i) net tangible
assets to $6,000,000, (ii) pre-tax earnings to $1,000,000, (iii) a public float
of 1,100,000 shares, (iv) a market value of the public float of $8,000,000, (v)
three market makers, (vi) a minimum $5.00 bid price per share and (vii) at least
400 shareholders.

The National Association of Securities Dealers, Inc. (the "NASD"), which
administers Nasdaq (which includes the National Market), recently adopted
certain criteria for continued Nasdaq eligibility. In order to continue to be
included on at least the Nasdaq Small Cap Market, (thereby exempting a company
from the "penny stock" regulations described below) a company must maintain at
least two market makers, 300 holders of the Common Stock and a minimum bid price
of $1 per share. In addition a company must have net tangible assets of $2
million unless the Company had net income of $500,000 in two of the last three
years or a market capitalization of $35 million, 500,000 shares in the public
float and a net value of the float of $1 million. The Company's failure to meet
these maintenance criteria in the future may result in the discontinuance of the
inclusion of its securities on at least the Nasdaq SmallCap Market. In such
event, trading, if any, in the securities may then continue to be conducted in
the non-Nasdaq over-the-counter market in what are commonly referred to as the
electronic bulletin board and the "pink sheets." As a result, an investor may
find it more difficult to dispose of or to obtain accurate quotations as to the
market value of the securities.

DISCLOSURE RELATED TO PENNY STOCKS. The Commission has adopted rules that
define a "penny stock" as equity securities priced at under $5.00 per share
which are not listed for trading on Nasdaq (unless (i) the issuer has a net
worth of $2,000,000 if in business for more than three years or $5,000,000 if in
business for less than three years or (ii) the issuer has had average annual
revenues of $6,000,000 or more for the prior three years). In the event that any
of the Company's securities are characterized in the future as penny stock,
broker-dealers dealing in the securities will be subject to the disclosure rules
for transactions involving penny stocks which require the broker-dealer among
other things to (i) determine the suitability of purchasers of the securities,
and obtain the written consent of purchasers to purchase such securities and
(ii) disclose the best (inside) bid and offer prices for such securities and the
price at which the broker-dealer last purchased or sold the securities. The
additional burdens imposed upon broker-dealers may discourage them from
affecting transactions in penny stocks, which could reduce the liquidity of the
securities offered hereby.

12
<PAGE>
DILUTION

At June 30, 1997, the net tangible book value of the Company was $1,679,150,
or $.96 per share of Common Stock. "Net tangible book value" per share
represents the total amount of tangible assets of the Company, less the total
amount of liabilities of the Company, divided by the number of shares of Common
Stock outstanding. Without taking into account any changes in net tangible book
value after June 30, 1997, other than to give effect to the sale by the Company
of the 1,000,000 shares of Common Stock included in the Units and offered
hereby, less underwriting discounts and commissions and estimated costs of the
Offering not recorded as deferred costs as of June 30, 1997, the net tangible
book value of the Company at June 30, 1997 would have been $6,738,655 or
approximately $2.45 per share. This represents an immediate increase in net
tangible book value of $1.49 per share of Common Stock to existing shareholders
and an immediate dilution of $3.55 per share to new shareholders. "Dilution" per
share represents the difference between the $6.00 per share price to be paid by
the new shareholders (without ascribing any value to the Warrants included in
the Units) and the net tangible book value per share of Common Stock immediately
after this Offering.

The foregoing is illustrated in the following table:

<TABLE>
<S> <C>
Public offering price per share of Common Stock included in the Units...... $ 6.00
Net tangible book value per share of Common Stock before Offering........ $ .96
Increase in net tangible book value per share of Common Stock
attributable to new investors purchasing in the Offering............... $ 1.49
Net tangible book value per share of Common Stock after the Offering....... $ 2.45
Dilution of net tangible book value per share of Common Stock to new
investors................................................................ $ 3.55
Percent reduction of net tangible book value per share to new investors.... 59%
</TABLE>

The following table sets forth the number of shares of Common Stock
purchased as a part of the Units, the total consideration paid and the average
price per share paid by existing shareholders as of June 30, 1997 and new
investors purchasing Common Stock in the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- --------------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
New investors............................ 1,000,000 36.4% $ 6,000,000 95.7% $ 6.00
Existing shareholders.................... 1,750,000 63.6% $ 272,054 4.3% $ .16
---------- ----- ------------ -----
Totals................................... 2,750,000 100.0% $ 6,272,054 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>

The preceding discussion and the accompanying tables assume no exercise of
(i) the Warrants; (ii) the Overallotment Option; (iii) the Representatives'
Warrants; or (iv) outstanding stock options to purchase up to 1,761,633 shares
of Common Stock issued under the Company's 1996 Stock Option Plan. See
"Capitalization," "Management--1996 Stock Option Plan," "Description of
Securities" and "Underwriting."

13
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at June 30,
1997 and as adjusted to give effect to the sale by the Company of 500,000 Units
offered hereby, without giving effect to the exercise of the Warrants, the
Overallotment Option, the Representatives' Warrants or other outstanding stock
options.

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED(1)
------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Current Liabilities $ 4,034,165 $ 3,554,165
Long-term liabilities............................................................... -- --
Shareholders' equity
Preferred Stock, 1,000,000 no par value shares authorized, none issued
Common Stock, 15,000,000 no par value shares authorized, 1,750,000 shares
outstanding, and 2,750,000 shares outstanding, as adjusted...................... 536,630 5,481,630
Additional paid-in capital........................................................ 230,000 230,000
Retained earnings................................................................. 1,043,025 1,043,025
------------ --------------
Total shareholders' equity...................................................... 1,809,655 6,754,655
------------ --------------
Total capitalization.......................................................... $ 5,843,820 $ 10,308,820
------------ --------------
------------ --------------
</TABLE>

- ------------------------

(1) As adjusted to give effect to the receipt and application of the estimated
net proceeds of the Offering. See "Use of Proceeds."

14
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the Offering are
estimated to be $4,945,000 ($5,728,000 if the Overallotment Option is
exercised). The Company intends to use the net proceeds of the Offering to
purchase fabric ($3,365,000 or 68.0% of the net proceeds), to purchase apparel
manufacturing equipment ($700,000 or 14.2% of the net proceeds), for repayment
of debt ($480,000 or 9.7% of the net proceeds) and for working capital ($400,000
or 8.1% of the net proceeds). Debt repayment consists of repayment of (i)
principal and interest due on bridge loans advanced in June 1996 aggregating
approximately $280,000 evidenced by promissory notes bearing interest at 8% per
annum through June 30, 1997 and 18% per annum until paid, and due the earlier of
September 30, 1997 or the closing date of the Offering, and (ii) a commercial
bank line of credit, of which $200,000 will be repaid, bearing interest at 3.15%
over the thirty day commercial paper rate per annum due August 31, 1998. The
bridge loans and bank line of credit were used for working capital.

The Company estimates, but cannot assure, that the net proceeds of the
Offering, together with anticipated operating revenues, will be sufficient to
fund the Company's estimated cash requirements for at least 12 months following
this Offering. Any additional funds received by the Company from exercise of the
Warrants, the Overallotment Option and the Representatives' Warrants will be
added to working capital.

While the above use of proceeds indicates the Company's current plans, there
may be changes due to the availability of other business opportunities and/or
changes in the Company's plan of operation. Management is not currently aware of
any such business opportunities or planned changes in operations. Pending
application, the net proceeds may be invested in short-term interest bearing
obligations.

15
<PAGE>
SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
1996 1995 1997 1996
------------- ------------- ------------ -------------

<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................................. $ 12,902,195 $ 11,379,826 $ 7,921,299 $ 5,680,696
Gross profit.......................................... 1,896,142 1,402,893 1,162,968 762,355
Operating income...................................... 1,168,766 856,766 849,459 255,152
Interest expense...................................... 61,457 21,241 23,784 18,024
Net income............................................ 656,056 666,495 497,282 140,902
Weighted average shares outstanding................... 1,750,000 1,750,000 1,750,000 1,750,000
Net income per share.................................. .37 .38 .28 .08
<CAPTION>

AT JUNE 30, 1997 AS ADJUSTED(1)
---------------------------- ---------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $1,666,715 $ 6,026,715
Total assets.......................................... 5,843,820 10,423,820
Long-term debt........................................ -- --
Total liabilities..................................... 4,034,165 3,554,165
Shareholders' equity.................................. 1,809,655 6,754,655
</TABLE>

- ------------------------

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of
operations of the Company for the years ended December 31, 1995 and 1996 and the
six months ended June 30, 1996 and 1997. This discussion should be read in
conjunction with the Company's financial statements, the notes related thereto,
and the other financial data included elsewhere in this Prospectus. All
information with respect to the six month period ended June 30, 1996 and June
30, 1997 is unaudited. The matters discussed in this section that are not
historical or current facts deal with potential future circumstances and
developments. Such forward-looking statements include, but are not limited to,
the development and market acceptance for products, trends in the results of the
Company's operations and the Company's anticipated capital requirements and
capital resources. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below as well as those
discussed under the caption "Risk Factors" and elsewhere in this Prospectus.

OVERVIEW

The Company contracts for the manufacture of a variety of garments,
primarily basic women's activewear, sportswear and businesswear which include
skirts, blouses, blazers, pants, shorts, vests and dresses, using assorted
fabrics including rayons, linens, cotton and wool. Substantially all of the
Company's garments are sold on a "package" basis pursuant to which the Company
markets at fixed prices finished garments to the customer's specifications and
quantity requirements, arranges for production of the garments and delivers the
garments directly to the customer at the port of entry. Since the Company
manufactures its finished products only upon receipt of purchase orders from its
retail customers, and therefore does not maintain an inventory of finished
products, the Company believes that it minimizes the market and fashion risk
generally associated with the apparel industry.

The Company purchases fabrics and trim (such as buttons, zippers, shoulder
pads and the like) on behalf of its customers from suppliers in a number of
countries, including Australia, China, India, Russia, Romania, Italy and the
United States. After dying the fabric, if necessary, the fabric and trim are
shipped by the suppliers directly to factories under contract to the Company in
Macedonia where they are manufactured into finished garments for delivery to the
Company's customers in the United States.

In its marketing, the Company emphasizes its package arrangements and what
it believes to be the better quality and lower prices of garments produced by
skilled Macedonian workers as compared to lower paid workers in certain other
regions. The Company offers garments for customers under its own labels,
"Magellan" and "Retrospettiva" and under private labels selected by its
customers and markets its products exclusively in the United States to (i) large
wholesalers such as Giorgio Sant' Angelo, Jeans Collectibles, V.S. Sports,
Positive Influence, David N., Synari and Wild Life, (ii) national retailers
including department stores such as Dayton Hudson, J.C. Penney, Casual Corner,
and Newton's and (iii) women's chain clothing stores such as Marshalls, TJ Maxx,
Chadwicks, Hit or Miss, Fred Mayer and Cato. See "Business--Marketing."

17
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship to net revenues of certain items in the Company's statements of
operations data:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- ----------- SIX MONTHS ENDED
JUNE 30,
----------------------------
1996 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................... 87.4 87.7 85.3 86.6 85.3
Gross profit......................................... 12.6 12.3 14.7 13.4 14.7
Selling, general and administrative expenses......... 10.9 4.8 5.6 8.9 4.0
Interest expense..................................... .04 .2 .5 .3 .3
Operating income..................................... 1.7% 7.5% 9.1% 4.5% 10.7%
</TABLE>

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

SALES

Sales for the six months ended June 30, 1997 (the "1997 Six Month Period")
were $7,921,299 which represented an increase of $2,240,603 or 39.4% over the
six months ended June 30, 1996 (the "1996 Six Month Period") net sales of
$5,680,696. The growth in sales was primarily attributable to increased
purchases by existing customers. Generally, the Company receives relatively
small initial orders from new customers. As the relationship with the customer
continues, the purchase orders often increase substantially. Net sales increases
during the period reflected these increased customer orders. Sales of the
Company's own labeled products and private label products were $399,700 and
$7,521,599, respectively, in the 1997 Six Month Period compared to $1,615,804
and $4,064,892, respectively, in the 1996 Six Month Period. The reduction in
sales of the Company's own labeled products reflects the Company's current
market emphasis upon sale of private label products.

COST OF GOODS SOLD

Cost of goods sold in the 1997 Six Month Period was $6,758,331 or 85.3% of
sales, an increase of $1,839,990 from $4,918,341 or 86.6% of sales for the 1996
Six Month Period. The increase in cost of goods sold was attributable primarily
to an increase in sales, while the decrease in percentage of cost of goods sold
reflected the Company's continuing efforts to more efficiently use raw materials
used in the production of garments.

GROSS PROFIT

Gross profit was $1,162,968 for the 1997 Six Month Period, an increase of
$400,613. The gross profit percentage was 14.7% for the 1997 Six Month Period
and 13.4% for the 1996 Six Month Period. Reduced consumption of raw materials
reduced the cost of goods sold and increased the gross profit.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses were $313,509 or 4.0%
of net revenues for the 1997 Six Month Period, a decrease of $(193,694) from
$507,203 or 8.9% of sales for the 1996 Six Month Period. The decrease in SG&A
expense levels was primarily the result of decreases in commissions paid for a
bridge loan and the basis of the Common Stock issued thereunder.

18
<PAGE>
INTEREST EXPENSE

Interest expense for the 1997 Six Month Period was $23,784 as compared to
$18,024 for the 1996 Six Month Period. The increase in interest expense was
primarily attributable to the accrual of interest on bridge loan debt.

PROVISION (BENEFIT) FOR INCOME TAXES

The provision for income taxes was $332,870 and $96,226 for the 1997 Six
Month Period and the 1996 Six Month Period, respectively. The increase in the
provision for income taxes was due to the increase in income before income taxes
which was $830,152 for the 1997 Six Month Period, an increase of $593,024 or
250.1% from $237,128 from the 1996 Six Month Period.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

SALES

Sales for the year ended December 31, 1996 ("1996") were $12,902,195, which
represented an increase of $1,522,369 or 13.4% over 1995 ("1995") sales of
$11,379,826. The growth in sales was primarily attributable to increased
purchases by existing customers. Generally the Company receives relatively small
initial orders from new customers. As the relationship with the customer
continues, the purchase orders often increase substantially. Net sales increases
during the period reflected these increased customer orders. Sales of the
Company's own labeled products and private label products were $3,381,524 and
$9,520,671, respectively, in 1996 compared to $2,214,378 and $9,165,448,
respectively, in 1995. Increased sales of the Company's own labeled products
were attributable to promotion of the Company's Easy Concepts brand during the
period.

COST OF GOODS SOLD

Cost of goods sold was $11,006,053 or 85.3% of sales in 1996, an increase of
$1,029,120 from $9,976,933 or 87.7% of sales in 1995. The decrease in the
percentage of cost of goods sold was a result of increased sales and
implementation of a system to more tightly control consumption of raw materials
used in production of finished goods.

GROSS PROFIT

Gross profit was $1,896,142 for 1996, an increase of $493,249. The gross
profit percentage was 14.7% in 1996, an increase from 12.3% in 1995. Tighter
control of consumption of raw materials used in the production of finished goods
enabled the Company to produce more units using less raw materials.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses were $727,376 or 5.6%
of sales in 1996, an increase of $181,259 from $546,117 or 4.8% of sales in
1995. The increase in SG&A expense levels was primarily the result of increased
costs of insurance to cover the exposure associated with increased production
and import volume and costs related to the completion of a bridge loan financing
of $150,000 and accounting fees. The increase in SG&A expense also reflects the
growth in the Company's management and the expense associated with building the
infrastructure necessary to support the growth strategies of the Company. Such
infrastructure expenses included costs associated with upgrading computer
hardware and software systems, furniture and fixture purchases and adding
accounting personnel. Marketing expenses were $170,179 or 1.3% of sales in 1996,
a decrease of $60,122 from $230,301 or 2.0% of sales in 1995. The decrease was
primarily due to the reduction of sales commissions as the Company's executive
officers called directly on more customers.

19
<PAGE>
INTEREST EXPENSE

Interest expense in 1996 was $61,457 as compared to $21,241 in 1995. The
increase in interest expense was the result of financing obtained through bridge
loans and the increased utilization of the Company's line of credit.

PROVISION (BENEFIT) FOR INCOME TAXES

The provision for income taxes was $462,455 and $174,000 in 1996 and 1995,
respectively. The increase in the provision for income taxes in 1996 was
primarily attributable to increased earnings. The level of increase was also due
to the tax benefits employed by the Company in 1995. The Company's effective tax
rate increased to 41.3% in 1996 from 20.7% in 1995, principally due to the loss
carry forwards used in 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

SALES

Sales for the year ended December 31, 1995 ("1995") were $11,379,826, which
represented an increase of $5,858,024 or 106% over 1994 ("1994") sales of
$5,521,802. The growth in sales was primarily attributable to increased
purchases by existing customers. Generally, the Company receives relatively
small initial orders from new customers. As the relationship with the customer
continues, the purchase orders often increase substantially. Net sales increases
during the period reflected these increased customer orders. Sales of the
Company's own labeled products and private label products were $2,214,378 and
$9,165,448, respectively, in 1995 compared to $0 and $5,521,802, respectively,
in 1994. The Company did not begin marketing and production of its own labeled
products until 1995.

COST OF GOODS SOLD

Cost of goods sold was $9,976,933 or 87.7% of sales in 1995, an increase of
$5,152,222 from $4,824,711 or 87.4% of net sales in 1994. The increase in cost
of goods sold was attributable primarily to increased sales.

GROSS PROFIT

Gross profit was $1,402,893 for 1995, an increase of $705,802. The gross
profit percentage was 12.3% in 1995, a decrease from 12.6% in 1994. The slight
decrease in gross profit was due primarily to an increase in air freight expense
versus transporting goods by ship.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses were $546,117 or 4.8%
of sales in 1995, a decrease of $57,374 from $603,491 or 10.9% of net revenues
in 1994. The decrease in SG&A expense levels was primarily the result of a
decrease in officer's salary.

INTEREST EXPENSE

Interest expense in 1995 was $21,241 as compared to $2,430 in 1994. The
increase in interest expense was the result of increase utilization of the
Company's line of credit.

PROVISION (BENEFIT) FOR INCOME TAXES

The provision (benefit) for income taxes was $174,000 and ($179,500) in 1995
and 1994, respectively. The increase in the provision for income taxes in 1995
was primarily attributable to increased earnings and

20
<PAGE>

reduced tax benefits available from prior years. The Company's effective tax
rate increased to 20.7% in 1995 from (200.3%) in 1994, principally due to the
loss carry forwards used in 1994.

LIQUIDITY AND CAPITAL RESOURCES

Since its formation, the Company has financed its operations and met its
capital requirements primarily through cash flows from operations, customer
advances, from principals, credit facilities, a bridge loan and a private
placement of Common Stock. The Company received gross proceeds of $562,000 from
the private placement in 1997, which were used to pay expenses related to the
Offering, for working capital and for other corporate purposes. The Company's
capital requirements primarily consist of working capital needs.

YEAR ENDED DECEMBER 31, 1996

CASH FLOWS FROM (TO) OPERATING ACTIVITIES

Operating activities used net cash of $367,339 in 1995 compared to providing
net cash of $133,704 in 1996. The principal use of operating cash is to purchase
fabric, manufacture the Company's products and import finished goods. Cash
increased as a result of increased sales, profits, favorable turnover in
accounts receivable and customer advances and the issuance of Common Stock in a
bridge loan.

CASH FLOWS PROVIDED (USED) FOR INVESTING ACTIVITIES

The Company's cash flow used by investing activities totalled $16,172 and
$6,825 in 1995 and 1996. The Company's capital expenditures related to the
purchase of fixed assets totalled $16,172 and $6,825 in 1995 and 1996. These
capital expenditures were for office equipment, computer and improvements to
leased premises. Certain budgeted capital expenditures over the next year are
described in the "Use of Proceeds."

CASH FLOWS FROM (TO) FINANCING ACTIVITIES

Cash flows from financing activities totalled $353,651 in 1995 and cash
flows to financing activities totalled $54,399 in 1996. The majority of the
financing costs incurred in 1996 arose primarily from deferred costs associated
with the Offering in the amount of $101,354 and payments to the Company's Chief
Executive Officer of $354,176 to pay down the Company's loan payable to him.
Cash flows from financing activities in 1995 came primarily from the utilization
of a bank line of credit of $247,403 and loans from the Company's Chief
Executive Officer.

The Company's ability to fund its working capital and capital expenditure
requirements, make interest payments and meet its other cash requirements
depends, among other things, on internally generated funds and proceeds from the
Offering. Thereafter, if cash generated from operations is insufficient to
satisfy the Company's capital requirements, the Company may have to sell
additional equity or debt securities or obtain credit facilities. In the event
such financing is needed in the future, there is no assurance that it will be
available to the Company in an amount and on terms acceptable to the Company.

SIX MONTHS ENDED JUNE 30, 1997

CASH FLOWS FROM (TO) OPERATING ACTIVITIES. Operating activities used net
cash of $71,251 for the 1997 Six Month Period compared to providing net cash of
$20,374 for the 1996 Six Month Period. The principal use of operating cash is to
purchase fabric, manufacture the Company's products and import finished goods.
The decrease in cash flows from operating activities was primarily attributable
to an increase in net income, turnover of accounts receivable and utilization of
existing inventories net of reductions in accounts payable and customer advances
and utilization of deferred offering costs.

21
<PAGE>

CASH FLOWS PROVIDED (USED) FOR INVESTING ACTIVITIES. The Company's
investing activities used $(4,609) cash for the 1997 Six Month Period and used
$(4,837) for the 1996 Six Month Period. The decrease in cash flows used by
investing activities is primarily attributable to reductions in purchases of
property and equipment.

CASH FLOWS FROM (TO) FINANCING ACTIVITIES. Cash flows from financing
activities totalled $254,988 and $156,576 for the 1997 Six Month Period and the
1996 Six Month Period, respectively. The increase in cash flows from financing
activities was primarily attributable to proceeds from the issuance of Common
Stock in a private placement. See "Certain Transactions."

SEASONALITY

The Company's revenues and operating results have exhibited some degree of
seasonality in past periods. Typically, the Company experiences its highest
sales in the first and fourth quarters and its lowest sales in the second and
third quarters. The Company expects this trend to continue in the future.

The Company believes that the net proceeds of the Offering, together with
its sales, existing cash resources and available credit facilities, will be
sufficient to meet the Company's anticipated working capital needs for the next
12 months. The Company, however, may raise capital through the issuance of
long-term or short-term debt, or the issuance of securities in private or public
transactions to fund future expansion of its business, either before or after
the end of the 12 month period. There can be no assurance that acceptable
financing for future transactions can be obtained.

22
<PAGE>
BUSINESS

INTRODUCTION

The Company contracts for the manufacture of a variety of garments,
primarily basic women's activewear, sportswear and businesswear which include
skirts, blouses, blazers, pants, shorts, vests and dresses, using assorted
fabrics including rayons, linens, cotton and wool. The Company offers such
garments to customers under its own labels, "Magellan" and "Retrospettiva" and
under private labels selected by its customers and markets its products
exclusively in the United States to (i) large wholesalers such as Giorgio Sant'
Angelo, Jeans Collectibles, V.S. Sports, Positive Influence, David N., Synari
and Wild Life, (ii) national retailers including department stores such as
Dayton Hudson, J.C. Penney, Casual Corner, and Newton's, and (iii) women's chain
clothing stores such as Marshalls, TJ Maxx, Chadwicks, Hit or Miss, Fred Mayer
and Cato.

STRATEGY

The Company intends to continue to offer better quality, popular priced
women's apparel in a wide variety of styles, patterns, colors and fabrics. The
Company's business strategy emphasizes the following elements:

MAINTAIN FOCUS ON THE COMPANY'S CORE BUSINESS. The Company intends to
continue to contract for the manufacture and market basic women's activewear,
sportswear and businesswear on a package basis while avoiding the production of
trendier fashion apparel which, if not purchased by the customer who ordered
such goods, might contribute to inventory write-offs for out of style garments.
Consistent with this strategy, the Company will continue to deemphasize sale of
its own labeled products and focus on the sale of its private label products.

INCREASE PENETRATION OF CURRENT MARKETS. The Company seeks to further
penetrate its current markets by offering lower product prices while maintaining
a high degree of quality control. The Company's relationships with its
Macedonian manufacturers, lower transportation costs compared to other parts of

23
<PAGE>
the world (such as the Pacific Rim) and current quota-free United States
importation rules for garments imported from Macedonia contribute to its ability
to offer competitive prices.

VERTICAL INTEGRATION. The Company intends to invest in wool manufacturing
equipment which will be placed in one nonaffiliated manufacturing facility in
Macedonia with which the Company currently maintains a manufacturing
relationship. The equipment is expected to provide the Company with improved
quality control, reduced costs and increased production. The equipment will be
operated and maintained by the manufacturer who is expected to lease the
equipment on a minimum five year lease. Lease payments will be in the form of a
per unit reduction in the garment manufacturing costs charged to the Company,
although the Company has not yet acquired the equipment or entered into a lease
agreement covering such equipment. See "Use of Proceeds."

EXPAND DISTRIBUTION CHANNELS AND PRODUCT LINES. The Company will continue
to explore new geographic markets within the United States for its existing
products while expanding its existing product lines within the basic women's
activewear, sportswear and businesswear market.

PRODUCTS

The Company offers to its customers a variety of women's activewear,
sportswear and businesswear including 26 women's garment styles manufactured in
rayon, 33 styles manufactured in rayon and linen mixes, 30 styles manufactured
in linen and cotton mixes, 25 styles manufactured in all cotton, 23 styles
manufactured in wool and two styles manufactured in rayon faille. The Company's
garments are moderately priced ranging at retail from $12.99 to $49.99 and are
marketed by the Company's customers primarily to college students and working
women.

MARKETING

The apparel industry in general and the women's apparel industry in
particular are mature markets. According to the United States Department of
Commerce, United States apparel sales increased from approximately $75 billion
in 1986 to approximately $113 billion in 1996, however, sales increased only
approximately $3 billion between 1995 and 1996. Similarly, women's apparel sales
increased from approximately $28 billion in 1986 to approximately $33 billion in
1996 but decreased approximately $2 billion from 1995 to 1996. Accordingly, a
substantial portion of any growth by individual apparel companies such as the
Company must come at the expense of competitors.

The Company arranges for the manufacture of garments for customers under its
own labels, "Magellan" and "Retrospettiva" and under private labels selected by
its customers, and markets its products exclusively in the United States to (i)
large wholesalers such as Giorgio Sant' Angelo, Jeans Collectibles, V.S. Sport,
Positive Influence, David N., Synari and Wild Life, (ii) national retailers
including department stores such as Dayton Hudson, J.C. Penney, Casual Corner,
and Newton's and (iii) women's chain clothing stores such as Marshalls, TJ Maxx,
Chadwicks, Hit or Miss, Fred Mayer and Cato. Sales of the Company's own labeled
products and private label products were $3,381,524 and $9,520,671,
respectively, for the year ended December 31, 1996 and -0- and $7,921,299,
respectively, for the six months ended June 30, 1997. The Company elected not to
market its own labeled products in the first half of 1997 in order to focus upon
the marketing and sale of its private label products. See "Strategy."

Marketing is conducted through three in-house salespersons who call directly
upon customers, through customer referrals and through the efforts of the
Company's executive officers. The Company maintains a buying office in New York,
attends trade shows and advertises by direct mail in trade journals.

The Company's customers include large United States retailers and
wholesalers as described above. Three of the Company's customers (Jeans
Collectibles, David N. and Easy Concepts) each accounted for 10% or more of
sales (and 87% of sales in the aggregate) for the year ended December 31, 1996
including 26.2% of such sales which were attributable to Easy Concepts, a
company which was at the time 22.5%

24
<PAGE>

owned by Borivoje Vukadinovic, the Company's Chief Executive Officer. See
"Certain Transactions" Easy Concepts if no longer a customer of the Company. Two
customers (David N. and V.S. Sports) each accounted for 10% or more of sales
(and 91% of sales in the aggregate) for the six months ended June 30, 1997. A
loss of any of these customers would have a material adverse effect on the
Company's results of operations.

MANUFACTURING AND SUPPLIERS

The Company arranges for the manufacture of garments based on the fabric,
design, styling and quality specifications of individual customer orders. The
Company does not own or operate any manufacturing facilities and obtains its
products from manufacturers in Macedonia who contract with the Company to
manufacture specific items of apparel in predetermined amounts and for agreed
upon unit prices. The Company contracts for the purchase of fabric and the
manufacture and sewing of its products with approximately 15 overseas factories.
The Company believes that outsourcing allows it to enhance production
flexibility and capacity while reducing capital expenditures and avoiding the
costs of managing a large production work force. In addition, the Company
believes that outsourcing allows the Company to utilize the expertise of its
suppliers and manufacturers in fabric selection and manufacturing processes.

The Company arranges for the production of its products based on orders
received. The Company obtains substantially all of its customers' orders prior
to placement of its contract manufacturing orders. The Company's customer orders
may change with respect to colors, sizes, allotments or assortments prior to
commencement of production of the garments, and any costs associated with such a
change will be borne by the Company. Accordingly, there is some risk associated
with the Company's practice of allowing change orders after fabric is purchased.
However, costs associated with change orders have not been material in the past
and are not expected to be material in the future.

The Company purchases fabric and trim from the manufacturers of these
garment components who ship their products directly to the Company's contract
manufacturer or to fabric dyers (currently in Slovenia) who in turn ship the
fabric to the contract manufacturer. The Company does not have written contracts
with any of its fabric or trim suppliers or contractors; however, the Company
believes that its relationships with its suppliers and contractors are good.

For the year ended December 31, 1996 Newbel, Inc. and Farnet Trading Co.
accounted for 37% and 11%, respectively, of the Company's total fabric purchases
and Newbel, Inc., Elvana Trading Limited and One Four Four accounted for 41%,
15% and 31%, respectively, of the Company's fabric purchases for the six months
ended June 30, 1997.

The Company has retained Yucan Trade International ("Yucan") as its
manufacturing agent in Macedonia. Yucan is responsible to select the factories
which will manufacture all of the Company's finished goods, to oversee this
production and to warehouse and arrange for shipping the finished goods to the
Company in the United States. Yucan is paid a fee which ranges from $.15 to $.50
per garment manufactured. Although Yucan is currently responsible for the
manufacture, warehousing and shipping of all of the Company's finished goods,
the Company believes that there are other manufacturing agents in Macedonia
which the Company could retain for the same purpose on substantially similar
terms. The Company does not have written contracts with Yucan or any of its
suppliers or contractors. Although the loss of certain suppliers or contractors
(including Yucan) could have a significant adverse effect on the Company's
operating results, the Company believes it would be able to replace such
suppliers and contractors within a reasonable amount of time if required to do
so.

The Company delivers finished goods directly from its contract manufacturers
to its customers at the port of entry in New York City or at the Company's
consolidating warehouse in Astoria, New York. Since the Company assumes the risk
of loss when the finished goods leave its manufacturer, the goods are insured
until delivery is made to the customer.

25
<PAGE>
QUALITY CONTROL

The Company's quality control program is designed to provide that all of the
Company's products meet the Company's and its customers' standards. The Company
maintains a staff of four quality control employees in the United States and
seven such employees in Macedonia. The Company develops and inspects prototypes
of each product prior to production, establishes fittings based on the prototype
and inspects sample fabric prior to cutting and several times during the
production process. The Company, Yucan and (in the case of private label
products) representatives of the Company's customers inspect final products
prior to shipment.

COMPETITION

The apparel industry is highly competitive and consists of numerous
manufacturers, importers and distributors. Many of the Company's competitors are
significantly larger, more diversified and have significantly greater financial,
distribution, marketing, name recognition and other resources than the Company.
The Company believes it has certain competitive advantages resulting from its
contractual relationships with Macedonian manufacturers including (i) the
availability in Macedonian factories of highly skilled workers at relatively
lower costs than in more economically developed regions, (ii) a lack of quotas
and lower tariffs in the importation into the United States of finished goods
from Macedonia, and (iii) lower shipping costs as a result of the closer
geographical proximity to the United States of the Company's Macedonian contract
manufacturers compared to manufacturers in the Pacific Rim nations.

The Company also encounters competition from department stores and mass
merchandisers, including some of the Company's own retail customers who sell
apparel under their own private labels. Recently, department stores and mass
merchandisers have increased the amount of sportswear and activewear
manufactured specifically by them or their contract manufacturers (including the
Company), and sold under their own labels.

TRADE NAMES

The Company has developed two apparel trade names, "Magellan" and
"Retrospettiva" in connection with the marketing of its apparel. The Company
regards its trade names as assets although no trade name registrations have been
filed in the United States or in foreign countries. While the use of a trade
name may provide certain common law rights of further usage, there can be no
assurance the Company could prohibit the use of its trade names by others.

CREDIT POLICY AND CREDIT CONTROL

Prior to accepting a purchase order and purchasing fabric and components,
the Company investigates the customer's credit history through traditional
credit reporting services, through asset-based lenders of the customer and
through other contract partners of the customer. The Company also generally
obtains a deposit or advance payment equal to approximately 10% of the total
amount of the order before purchasing fabric or commencing garment production
for the customer.

The Company manages its own credit and collection functions. The Company
does not factor its accounts receivables or maintain credit insurance to manage
the risks of bad debts. The Company's bad debt write-offs were less than 1% of
sales for the year ended December 31, 1996 and the six months ended June 30,
1997.

GOVERNMENT REGULATION

26
<PAGE>
Trade in Textiles, known as the Multifiber Agreement, or other applicable
statutes, impose quotas on the amounts and types of merchandise which may be
imported into the United States from these countries. However, apparel imported
from Macedonia is not subject to such quotas. These agreements also allow the
signatories to adjust the quantity of imports for categories of merchandise
that, under the terms of the agreements, are not currently subject to specific
limits. The Company's imported products are also subject to United States
customs' duties which may comprise a material portion of the cost of the
merchandise.

Apparel products are subject to regulation by the Federal Trade Commission
in the United States. Regulations relate principally to the labelling of the
Company's products. The Company believes that it is in substantial compliance
with such regulations, as well as applicable federal, state, local, and foreign
rules and regulations governing the discharge of materials hazardous to the
environment. There are no significant capital expenditures for environmental
control matters either estimated in the current year or expected in the near
future.

PROPERTIES

The Company leases approximately 2,200 square feet for its executive and
administrative offices at 8825 West Olympic Boulevard, Beverly Hills, California
90211, pursuant to a lease expiring January 31, 2000 for $2,300 per month
subject to annual cost of living increases.

The Company subleases 2,000 square feet of office and showroom facilities at
1359 Broadway, Suite 2102, New York, New York 10018, through October 1, 1998 for
$2,600 per month which includes maintenance expenses. The Company maintains two
small New York apartments for use by its employees traveling from Los Angeles,
California and Macedonia to New York City. Both apartments are subleased to the
Company on a monthly basis with monthly rent aggregating approximately $3,500.

The Company uses a portion of a consolidating warehouse in Astoria, New York
for short term storage and for consolidating services in connection with
finished goods imported from Macedonia pending pick up by the Company's
customers. Positive Influences, Inc. ("PII"), the owner of the warehouse and the
provider of the consolidating services, is a non-affiliated former customer of
the Company which was indebted to the Company in the amount of $130,496 at June
30, 1997 for goods previously purchased from the Company. The Company is charged
an average of approximately $10,000 per month for use of the warehouse and for
consolidating services provided by PII which amount is deducted from the amount
owed by PII to the Company. PII also provides Easy Concepts, Inc. ("ECI"), a
former affiliate of the Company, with warehouse space and consolidating
services. Charges due from ECI to PII are also deducted from the amount owed by
PII to the Company and ECI pays such amounts directly to the Company.
Consolidating services involve accepting finished goods shipments, combining the
goods into larger quantities for pickup by, or delivery to, customers and
storage of the goods prior to customer acceptance.

EMPLOYEES

As of June 30, 1997, the Company employed 15 individuals in Los Angeles,
California, New York, New York and Macedonia including its two executive
officers, three inventory management and order control personnel, three
administrative personnel and four quality control workers.

27
<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The name, age, position and term of office of each of the Company's
executive officers and directors are set forth below:

<TABLE>
<CAPTION>
OFFICER OR
NAME AGE POSITION DIRECTOR SINCE
- ------------------------------------------ --- ------------------------------------------------ ---------------
<S> <C> <C> <C>

Borivoje Vukadinovic...................... 38 Chief Executive Officer, President and Director 1991

Michael D. Silberman...................... 41 Chief Financial Officer, Secretary and Director 1996

Ivan Zogovic.............................. 37 Manager--Export/Import and Director 1996

Mojgan Keywanfar.......................... 34 Accounting Manager and Director 1996

S. William Yost........................... 68 Director 1996

Donald E. Tormey.......................... 65 Director 1996

Philip E. Graham.......................... 41 Director 1996
</TABLE>

The name, age and position of each of the Company's key employees are set
forth below:

<TABLE>
<S> <C> <C> <C>
Natasha Vukadinovic............... 33 General Manager--Foreign
Operations--Macedonia

Jovica Kecman..................... 32 General Manager--International
Quality Control

Milisav Vicanovic................. 48 General Manager--Quality
Control--Macedonia
</TABLE>

Directors hold office for a period of one year from their election at the
annual meeting of shareholders or until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. Upon completion of the Offering, the Company intends
to establish an audit and compensation committee, each of which will be composed
of a majority of individuals not employed by the Company.

BACKGROUND

The following is a summary of the business experience, for at least the last
five years, of the individuals named below:

DIRECTORS AND EXECUTIVE OFFICERS

BORIVOJE VUKADINOVIC has been a director and executive officer of the
Company since January 1991, and its Chief Executive Officer since January 1993.
From June 1990 to August 1993, he was Vice President and a principal stockholder
of Celtex ENT, a Los Angeles, California based company which established and
administered production of yarns and raw textiles in Yugoslavia, Turkey and
Macedonia. From May 1988 to June 1990, he was the founder, owner and President
of DUTY OFF, Inc., a Los Angeles, California based company which produced young
men's apparel. He earned a Bachelor of Arts degree in Business from the
University of Banja Luka in Yugoslavia and a Bachelor of Arts degree in Art from
Bern University in Switzerland.

MICHAEL D. SILBERMAN has served as Chief Financial Officer and as a Director
of the Company since April 1996. From May 1994 until he joined the Company in
April 1996, Mr. Silberman was a financial advisor with Prudential Securities
Inc. From April 1992 to February 1994, he was a portfolio manager for

28
<PAGE>
Private Investment Fund, a privately-held and managed investment fund, and from
September 1991 to April 1992, Mr. Silberman was president of UMB Commercial
Capital, a division of United Mercantile Bank of Pasadena, California where he
administered the division's accounts' receivable finance department. From 1983
to 1991, Mr. Silberman served as the Executive Vice President of Allied Business
Capital, a privately-held Los Angeles, California based commercial finance
company. Mr. Silberman received his Bachelor of Arts degree from the University
of California, Los Angeles ("UCLA") and his MBA degree from the Anderson
Graduate School of Management at UCLA.

IVAN B. ZOGOVIC has been employed by the Company as its
Manager-Export/Import since January 1994 and was appointed a director in May
1996. Mr. Zogovic is responsible for the export and import of raw materials and
finished goods including customs clearing, scheduling and freight forwarding,
between the United States and the Company's contract manufacturers in Eastern
Europe. He earned a law degree from the University of Belgrade Law School and
practiced law in Yugoslavia from 1984 until 1992.

MOJGAN KEYWANFAR has been employed by the Company as its accounting manager
since February 1991 and was appointed a director in December 1996. Ms. Keywanfar
manages the Company's bookkeeping and management information systems. She holds
a B.A. degree in Economics from California State University, Northridge.

S. WILLIAM YOST became a director of the Company in May 1996. He has been an
adjunct professor of Operations and Technology Management at the Anderson
Graduate School of Management of the University of California, Los Angeles,
since 1986. During his tenure at Anderson, Dr. Yost has developed two new
graduate courses, Managing Service and Managing Entrepreneurial Operations. In
addition, he has over 20 years experience in industrial positions together with
four years as a presidential appointee in the executive branch of the federal
government and three years in Management Consulting. Dr. Yost holds a doctorate
in Business Administration (DBA) from the Harvard Business School, an MBA from
the Anderson Graduate School of Management at the University of California, Los
Angeles, and a B.A. from the University of California, Berkeley. He serves on
the Board of Directors of a number of small privately-held companies and is a
consultant to a variety of public and private clients.

DONALD E. TORMEY became a director of the Company in May 1996. From 1958
until he retired in 1995, he was employed by Chevron Corporation in a number of
positions culminating as the Refinery General Manager in El Segundo, California
from 1994 until his retirement. He holds a BSCE degree in engineering from the
University of Wisconsin School of Engineering.

PHILIP E. GRAHAM became a director of the Company in May 1996. Since
February 1997, he has been the Information Technology Executive at the Avionics
and Communications Finance and Information Technology department of Rockwell
Avionics and Communications, Inc. From 1989 until February 1997, he was employed
by AirTouch Cellular in a number of positions, culminating as its director of
Information Technology from July 1989 to February 1997. Mr. Graham holds an MBA
degree from the Anderson Graduate School of Management at the University of
California, Los Angeles, an M.S. degree from California State University at
Fullerton and a B.S. degree from the University of California at Irvine.

KEY EMPLOYEES

NATASHA VUKADINOVIC has been employed by the Company since 1990 initially as
a designer and subsequently as a manager responsible for quality control and
organization of the Company's offshore production. In 1986, Ms. Vukadinovic, who
is Borivoje Vukadinovic's sister, earned an advanced degree in textile design
from the Textile Design School in Prague, Czechoslovakia.

JOVICA KECMAN has been employed by the Company as general manager of
international quality control since 1990. Mr. Kecman earned a degree in
economics from the University of Banja Luka. He is Mr. Vukadinovic's
brother-in-law.

29
<PAGE>
MILISAV VICANOVIC joined the Company in 1993 and is responsible for quality
control of all of the Company's lightweight garments, such as dresses and
two-piece women's suits. From 1975 to 1993, he was Director of Textile
Manufacturing, Chief Executive Officer and General Manager for Macedonia Sport,
a Yugoslavian company involved in the manufacture of garments in factories
employing in the aggregate more than 3,500 workers. He earned an advanced degree
in textile manufacturing from the University of Belgrade in 1971.

EXECUTIVE COMPENSATION

The following table discloses all compensation awarded to, received by, and
paid to the Chief Executive Officer of the Company for the year ended December
31, 1996. No other executive officer's annual compensation exceeded $100,000 in
1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION
-------------------------------------------------- AWARDS PAYOUTS
(E) ------------------------------ -----------
OTHER
ANNUAL COM- (F) (G) (H)
(A) (B) (C) (D) PENSA- RESTRICTED STOCK OPTIONS/ LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) TION($) AWARD(S)($) SARS(#) PAYOUTS($)
- --------------------------- --------- ----------- ------------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Borivoje Vukadinovic
Chief Exec. Officer...... 1996 $ 40,928 -0- -0- -0- 1,358,067(1) -0-
1995 $ 26,500 -0- $ 34,258(2) -0- -0- -0-
1994 $ 46,576 -0- $ 25,886(2) -0- -0- -0-

(I)
ALL OTHER
(A) COMPENSA-
NAME AND PRINCIPAL POSITION TION($)
- --------------------------- -------------
<S> <C>
Borivoje Vukadinovic
Chief Exec. Officer...... -0-
-0-
-0-
</TABLE>

- ------------------------

(1) See "1996 Stock Option Plan" for description of the options and certain
repricing information.

(2) Represents sales commission paid to Mr. Vukadinovic.

EMPLOYMENT AGREEMENTS

In April 1996, the Company entered into a three-year employment agreement
with Mr. Vukadinovic to serve as the Company's Chief Executive Officer and
President. Mr. Vukadinovic's employment agreement provides for an annual salary
of $95,000 per year for the term of the agreement, subject to increase at the
discretion of the Board of Directors, such salary to become effective following
the earlier of the closing of the Offering or the merger of the Company with a
public company. Mr. Vukadinovic is not permitted to vote on proposals to
increase his own salary. Pursuant to his employment agreement, Mr. Vukadinovic
also received stock options to purchase up to 1,191,300 shares of the Company's
Common Stock at an exercise price of $6.75 per share through April 2006 and
agreed not to compete with the Company for a period of two years following the
termination of his employment agreement. In August 1996 the length of Mr.
Vukadinovic's agreement not to compete was extended to three years at the
request of a prospective investor with whom the Company was negotiating an
equity investment. When the Company and the prospective investor failed to reach
an agreement (in October 1997) the non-compete agreement was reinstated to two
years.

In April 1996, the Company entered into an employment agreement with Mr.
Silberman to serve as the Company's Chief Financial Officer. Mr. Silberman's
agreement provides for an annual salary of $60,000 per year for the term of the
agreement, subject to increase at the discretion of the Board of Directors, such
salary to become effective following the earlier of the closing of the Offering
or the merger of the Company with a public company. In 1996, pursuant to the
agreement, Mr. Silberman's was issued 81,007 shares of the Company's Common
Stock, valued at $.0042 per share as of the date of grant, of which 25,000
shares have been registered by the Prospectus. In addition, Mr. Silberman also
received stock

30
<PAGE>
options pursuant to the agreement to purchase up to 119,128 shares of the
Company's Common Stock at an exercise price of $6.75 per share through April
2006.

DIRECTOR COMPENSATION

The Company's directors do not receive any cash compensation for their
services as directors, although they are reimbursed for out-of-pocket expenses
in attending Board of Directors' meetings. In addition, in 1996, non-employee
directors were granted stock options to purchase an aggregate of 71,478 shares
of the Company's Common Stock at prices ranging from $1.68 per share to $2.94
per share under the Company's 1996 Stock Option Plan.

1996 STOCK OPTION PLAN

In May 1996, the Company adopted a stock option plan for officers,
directors, employees and consultants (the "Plan") which provides for the grant
of options intended to qualify as "incentive stock options" and "nonqualified
stock options" within the meaning of Section 422 of the United States Internal
Revenue Code of 1986 (the "Code"). Incentive stock options are issuable only to
eligible officers and key employees of the Company, and nonqualified options may
be granted to officers, employees, directors and consultants.

The Plan is administered by at least three members of the Board, at least
two of whom are not executive officers or salaried employees of the Company. As
of May 1996, the Company had reserved 1,786,930 shares of Common Stock for
issuance under the Plan. Under the Plan, the Board of Directors determines which
individuals shall receive options, the time period during which the options may
be partially or fully exercised, the number of shares of Common Stock that may
be purchased under each option and the option price. Each option granted under
the Plan shall be evidenced by a stock option agreement.

The per share exercise price of options granted under the Plan may not be
less than the fair market value of the Common Stock on the date the options are
granted. No person who owns, directly or indirectly, at the time of the granting
of an incentive stock option, more than 10% of the total combined voting power
of all classes of stock of the Company is eligible to receive incentive stock
options under the Plan unless the option price is at least 110% of the fair
market value of the Common Stock subject to the option on the date of grant.

No options may be transferred by an optionee other than by will or the laws
of descent and distribution, and during the lifetime of an optionee, the option
may only be exercisable by the optionee. Options under the Plan must be granted
within 10 years from the effective date of the Plan and the exercise date of an
option cannot be later than 10 years from the date of grant. Any options that
expire unexercised or that terminate upon an optionee's ceasing to be employed
by the Company become available once again for issuance. Shares issued upon
exercise of an option will rank equally with other shares then outstanding.

As of the date of this Prospectus, 1,761,633 options have been granted under
the Plan to officers, directors, employees and consultants including 1,477,198
options granted to Messrs. Vukadinovic and Silberman, an aggregate of 71,478
options granted to the Company's three non-employee directors and 212,961
options granted to other employees and consultants. The per share exercise
prices range from $0.63 to $9.90, which prices represent at least the fair
market value of Company's Common Stock on the respective dates the options were
granted, based on prior sales of the Company's Common Stock. The table below
sets forth the total number of options issued to each executive officer and
director of the Company and the exercise price. Messrs. Vukadinovic's and
Silberman's options are exercisable until April 2006. The remaining options
expire at various times in 2006. All options were granted in 1996 and no options
were exercised in 1996.

31
<PAGE>
In May 1996, the Board granted Mr. Silberman (i) a stock option to purchase
238,440 shares of Common Stock at an exercise price of $3.04 per share, (ii) a
stock option to puchase 59,610 shares of Common Stock at an exercise price of
$2.91 per share, and (iii) a stock option to purchase 59,610 shares of Common
Stock at an exercise price of $3.88 per share.

In November 1996, the Board amended Mr. Silberman's option grant to reduce
the number of stock options granted to Mr. Silberman from 357,657 to 119,128
options. 59,564 of these options were re-priced to the exercise price of $3.15
per share. The remaining 59,564 options were repriced to the exercise price of
$3.78 per share. In December 1996, the Company amended Mr. Silberman's stock
option grants to provide for an adjustment of the exercise price of both of his
stock option grants in the event of an initial public offering of the Company's
securities ("IPO"), a merger or acquisition. In June 1997, the Board re-priced
all 119,128 of Mr. Silberman's options to the current exercise price of $6.75
per share.

In June 1997, the exercise price of 1,191,290 of Mr. Vukadinovic's options
were re-priced from $2.83 per share to $6.75 per share.

OPTION GRANTS IN 1996

<TABLE>
<CAPTION>
PERCENT OF
TOTAL OPTIONS
GRANTED TO
TOTAL NUMBER OF EMPLOYEES IN EXERCISE EXPIRATION
NAME OF EXECUTIVE OFFICER OR DIRECTOR OPTIONS ISSUED FISCAL YEAR PRICE DATE
- ------------------------------------------------------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Borivoje Vukadinovic................................... 1,358,070(1) 77.1 (1)(2) 2006
Michael D. Silberman................................... 119,128 6.8 $ 6.75 2006
Ivan Zogovic........................................... 66,712 3.8 (3) 2006
Mojgan Keywanfar....................................... 66,712 3.8 (3) 2006
S. William Yost........................................ 23,826 1.4 $ 2.94 2006
Donald E. Tormey....................................... 23,826 1.4 $ 2.94 2006
Philip E. Graham....................................... 23,826 1.4 $ 2.94 2006
---------------- ---
TOTALS................................................. 1,682,100 95.7
</TABLE>

- ------------------------

(1) Consists of 166,777 options exercisable at $.63 per share and the remaining
1,191,290 options exercisable at $6.75 per share. A total of 595,643 of the
options will be cancelled by the Company if the Company's after tax net
income for the year ended December 31, 1997 does not exceed $750,000.

(2) In the event the per share price of the Company's Common Stock in an initial
public offering or other public offering of such Common Stock is less than
$6.50 per share, the per share exercise price of any unexercised options
granted to Mr. Vukadinovic with a current exercise price of $6.75 per share
will be readjusted one time to the per share price of the Common Stock in
the public offering.

(3) Consists of 35,739 options exercisable at $2.94 per share and 30,973 options
exercisable at $1.68 per share as to each individual.

32
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the
ownership of the Company's Common Stock as of June 30, 1997, by (i) each person
who is known by the Company to own of record or beneficially more than 5% of the
Company's Common Stock, (ii) the Company's Chief Executive Officer and each of
the Company's directors and (iii) all directors and officers of the Company as a
group. The persons listed in the table have sole voting and investment powers
with respect to the shares of Common Stock and the address of each person is in
care of the Company at 8825 West Olympic Blvd., Beverly Hills, California 90211.

<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AMOUNT OF CLASS PRIOR CLASS AFTER
NAME OWNERSHIP TO OFFERING OFFERING
- --------------------------------------------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Borivoje Vukadinovic(1).................................................... 2,454,051 79.0% 59.7%
Michael D. Silberman(2).................................................... 200,136 10.7 7.0
Ivan Zogovic(3)............................................................ 66,712 3.7 2.4
Mojgan Keywanfar(5)........................................................ 66,712 3.7 2.4
S. William Yost(4)......................................................... 23,826 1.3 *
Donald E. Tormey(4)........................................................ 23,826 1.3 *
Philip E. Graham(4)........................................................ 23,826 1.3 *
All officers and directors as a group (7 persons).......................... 2,859,089 83.3% 64.5%
</TABLE>

- ------------------------

* Less than 1%.

(1) Includes stock options to purchase up to 1,191,300 shares of Common Stock at
$6.75 per share and 166,777 shares at $.63 per share exercisable until April
2006. See "Management--1996 Stock Option Plan."

(2) Includes stock options to purchase up to 119,128 shares of Common Stock at
$6.75 per share exercisable until April 2006. See "Management--1996 Stock
Option Plan."

(3) Represents stock options to purchase up to 30,973 shares at $1.68 per share
exercisable until April 2001, 11,913 shares at $2.94 per share exercisable
until May 2001, and 23,826 shares at $2.94 per share exercisable until April
2006. See "Management--1996 Stock Option Plan."

(4) Represents stock options to purchase up to 23,826 shares of Common Stock at
$2.94 per share exercisable until May 2001. See "Management--1996 Stock
Option Plan."

(5) Represents stock options to purchase up to 11,913 shares at $2.94 per share
exercisable until May 2001, 30,973 shares at $1.68 per share exercisable
until April 2006, and 23,826 shares at $2.94 per share exercisable until
April 2006. See "Management--1996 Stock Option Plan."

33
<PAGE>
SELLING SHAREHOLDERS

The Company is registering by this Prospectus and at its expense 50,000
shares of Common Stock held by Mr. Vukadinovic and 25,000 shares of Common Stock
held by Mr. Silberman, the Company's Chief Executive Officer and Chief Financial
Officer, respectively. The Common Stock may be sold from time to time after the
date hereof in public or private open market transactions directly to purchasers
or through brokerage firms at prevailing market prices less customary
commissions. The Underwriters and Selling Shareholders have no plans, proposals,
arrangements or understandings with respect to any transactions involving the
Selling Shareholders' securities. If there are changes to the stated plan of
distribution, including any plans, proposals, arrangements or understandings
involving the Underwriters or the distribution of the Common Stock, a
post-effective amendment with current information will first be filed with and
declared effective by the Commission. Information concerning the Selling
Shareholders is set forth below. The Selling Shareholders may be deemed to be
"underwriters" within the meaning of the 1933 Act. All registration expenses
associated with the sale of the Selling Shareholders' shares (excluding sales
commissions) will be paid by the Company.

<TABLE>
<CAPTION>
PERCENT OF CLASS TO
BE OWNED AFTER
OFFERING AND SALE
PERCENT OF CLASS NUMBER OF OF SELLING
NUMBER OF OWNED PRIOR TO SHARES OFFERED SHAREHOLDERS'
NAME OF SELLING SHAREHOLDER SHARES OWNED OFFERING FOR SALE SHARES
- ------------------------------------------- ------------- ----------------- --------------- -------------------
<S> <C> <C> <C> <C>
Borivoje Vukadinovic....................... 2,454,051(1) 79.0% 50,000 59.7%
Michael D. Silberman....................... 200,136(2) 10.7% 25,000 7.0%
</TABLE>

- ------------------------

(1) Includes stock options to purchase up to 1,191,300 shares of Common Stock at
$6.75 per share and 166,777 shares at $.63 per share exercisable until April
2006. Also includes the 50,000 shares of Common Stock registered for sale
hereby.

(2) Includes stock options to purchase up to 119,128 shares of Common Stock at
$6.75 per share exercisable until April 2006. Also includes the 25,000
shares of Common Stock registered for sale hereby.

CERTAIN TRANSACTIONS

In April 1996, the Company executed three-year employment agreements with
Mr. Vukadinovic, its Chief Executive Officer, and Mr. Silberman, its Chief
Financial Officer, providing for annual salaries of $95,000 and $60,000
respectively, upon an IPO or merger of the Company with a publicly-traded
company. In connection with their employment, Messrs. Vukadinovic and Silberman
received options under the Plan to purchase 1,191,300 shares and 119,128 shares,
respectively, of the Company's Common Stock. Mr. Silberman also received 81,007
shares of Common Stock for services rendered valued at $.0042 per share on the
date of grant, or an aggregate value on such date of $34,023. See
"Management--Executive Compensation--Employment Agreements."

At June 30, 1997, Mr. Vukadinovic was indebted to the Company in the amount
of $203,094 advanced by the Company under a credit facility granted to Mr.
Vukadinovic in the maximum amount of $250,000 and evidenced by two promissory
notes. The two promissory notes are unsecured, bear interest at 10% per annum
and are due on demand. The sums advanced to Mr. Vukadinovic were primarily used
by him to pay certain medical and related expenses of a family member.

Until December 31, 1996, Mr. Vukadinovic was a 22.5% stockholder in Easy
Concepts, Inc. ("ECI"), an apparel customer of the Company. At December 31, 1996
and June 30, 1997, ECI was indebted to the Company for apparel purchases on open
account in the amounts of $1,182,202 and $232,704, respectively. On January 1,
1997 Mr. Vukadinovic returned all of his ECI stock to ECI for no consideration.
He elected to do so because he had received his ECI stock for nominal
consideration in the form of services rendered

34
<PAGE>

and he wanted to eliminate any potential for a conflict of interest caused by
his ECI stockholdings. He was never an officer or director of ECI and ECI is no
longer a customer of the Company.

In July 1997 Mr. Vukadinovic personally guaranteed the Company's line of
credit loan with Merrill Lynch Business Financial Services, Inc. in the amount
of up to $500,000. Approximately $200,000 of the line of credit will be repaid
with proceeds of the Offering. See "Use of Proceeds."

At August 31, 1997 ECI's indebtedness to the Company had been reduced to
$221,704. Although this amount relates to apparel purchased through February
1997 and is therefore more than 180 days past due, ECI continues to make
payments to the Company. As the indebtedness was incurred on open account for
apparel purchases, the amount is not evidenced by a promissory note, no interest
has been charged and there is no maturity date for full payment. However, the
Company believes that ECI will pay off the remaining amount due by December 1997
and if it fails to do so, the Company will take such legal action as is
necessary to enforce its claim against ECI. The amounts the Company collects
from ECI on behalf of PII (as described above) have not and will not be offset
against amounts owed by ECI to the Company.

The Company believes that the transactions described above were fair,
reasonable and consistent with the terms of transactions which the Company could
have entered into with non-affiliated third parties. All future transactions
with affiliates will be approved by a majority of the Company's disinterested
directors.

DESCRIPTION OF SECURITIES

UNITS

Each Unit being offered hereby consists of two shares of Common Stock and
one Warrant to purchase one share of Common Stock. The Common Stock and Warrants
have been approved for listing on the National Market and are each separately
transferable immediately upon issuance.

COMMON STOCK

The Company is authorized to issue 15,000,000 shares of no par value Common
Stock. Upon issuance, the shares of Common Stock are not subject to further
assessment or call. The holders of Common Stock are entitled to one vote for
each share held of record on each matter submitted to a vote of shareholders.
Cumulative voting for election of directors is permitted; provided, however,
that the By-laws provide cumulative voting will no longer be permitted following
this Offering, when the Common Stock will be listed on the National Market.
Subject to the prior rights of any series of Preferred Stock which may be issued
by the Company in the future, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor, and, in the event of the liquidation, dissolution or
winding up of the Company, are entitled to share ratably in all assets remaining
after payment of liabilities. Holders of Common Stock have no preemptive rights
and

35
<PAGE>
have no rights to convert their Common Stock into any other securities. The
outstanding Common Stock is, and the Common Stock to be outstanding upon
completion of the Offering will be, validly issued, fully paid and
nonassessable.

PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of no par value
preferred stock (the "Preferred Stock"). The Preferred Stock may, without action
by the shareholders of the Company, be issued by the Board of Directors
("Board") from time to time in one or more series for such consideration and
with such relative rights, privileges and preferences as the Board may
determine. Accordingly, the Board has the power to fix the dividend rate and to
establish the provisions, if any, relating to voting rights, redemption rates,
sinking funds, liquidation preferences and conversion rights for any series of
Preferred Stock issued in the future.

It is not possible to state the actual effect of authorization of any series
of Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of such series of Preferred Stock.
The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the shareholders of the Company, and may adversely affect the
holders of the Common Stock. See "Risk Factors--Control by Management;
Authorization and Issuance of Preferred Stock; Prevention of Changes in
Control."

WARRANTS

Each Warrant represents the right to purchase one share of Common Stock at
an initial exercise price of $7.50 per share for a period of five years from the
date hereof. The exercise price and the number of shares issuable upon exercise
of the Warrants will be adjusted upon the occurrence of certain events,
including the issuance of Common Stock as a dividend on shares of Common Stock,
subdivisions, reclassifications or combinations of the Common Stock or similar
events. The Warrants do not contain provisions protecting against dilution
resulting from the sale of additional shares of Common Stock for less than the
exercise price of the Warrants or the current market price of the Company's
securities and do not entitle Warrant holders to any voting or other rights as a
shareholder until such Warrants are exercised and Common Stock issued.

Warrants may be redeemed in whole or in part, at the option of the Company
after six months from the date hereof, upon 30 days' notice, at a redemption
price equal to $.01 per Warrant if the closing price of the Company's Common
Stock on the National Market is at least $8.50 per share for 20 consecutive
trading days, ending not earlier than five days before the Warrants are called
for redemption.

Holders of Warrants may exercise their Warrants for the purchase of shares
of Common Stock only if a current prospectus relating to such shares is then in
effect and only if such shares are qualified for sale, or deemed to be exempt
from qualification under applicable state securities laws. The Company is
required to use its best efforts to maintain a current prospectus relating to
such shares of Common Stock at all times when the market price of the Common
Stock exceeds the exercise price of the Warrants until the expiration date of
the Warrants, although there can be no assurance that the Company will be able
to do so.

The shares of Common Stock issuable on exercise of the Warrants will be,
when issued in accordance with the Warrants, duly and validly issued, fully paid
and non-assessable. At all times that the Warrants are outstanding, the Company
will authorize and reserve at least that number of shares of Common Stock equal
to the number of shares of Common Stock issuable upon exercise of all
outstanding Warrants.

36
<PAGE>
For the term of the Warrants, the holders thereof are given the opportunity
to profit from an increase in the per share market price of the Company's Common
Stock, with a resulting dilution in the interest of all other shareholders. So
long as the Warrants are outstanding, the terms on which the Company could
obtain additional capital may be adversely affected. The holders of the Warrants
might be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain additional capital by a new offering of securities
on terms more favorable than those provided by the Warrants.

COMMON STOCK ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, there will be 2,750,000 shares of Common
Stock outstanding, of which 1,000,000 shares included in the Units have been
registered in the Offering on behalf of the Company, 75,000 shares have been
registered on behalf of the Selling Shareholders, and the remaining 1,675,000
shares have not been registered in the Offering and are "restricted securities"
under Rule 144 of the 1933 Act.

RULE 144

In general, under Rule 144, a person (or persons whose shares are
aggregated) who has held securities acquired in a non-public offering for at
least one year may, under certain circumstances, sell, within any three-month
period, that number of shares which does not exceed the greater of one percent
of the then outstanding shares of Common Stock (approximately 27,500 shares
immediately after the Offering, assuming no exercise of the Warrants, the
Representatives' Warrants, the Overallotment Option, or other outstanding stock
options), or the average weekly trading volume during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the sale
of shares by a person without any quantity limitation after the securities have
been held for two years. Of the 1,675,000 shares of Common Stock that are
restricted securities, 1,340,241 are currently eligible for immediate sale under
Rule 144 and the remaining 334,759 shares may be sold in March 1998 without
further restriction. The Company is unable to predict what effect, if any, such
sale of shares of Common Stock, under Rule 144 or otherwise, may have on the
then prevailing per share market price of the Common Stock. The Company's
officers, directors and 5% or greater shareholders (holding an aggregate of
1,101,991 shares after deducting the 75,000 shares to be registered hereby which
are excluded from the following restriction on resale) have agreed not to sell,
transfer, or otherwise dispose of any of their shares of Common Stock for a
period of two years from the date of this Prospectus, without the prior written
consent of the Representatives, provided however, that 50% of such shares
(550,996 shares) may be sold after one year from the date of this Prospectus if
the Company reports at least $1,000,000 of after-tax net income for the year
ending December 31, 1997. In addition, the holders of the remaining 573,009
shares described above have agreed not to sell or otherwise dispose of their
shares without the prior written consent of the Representatives for a period of
one year from the date of this Prospectus. The Company has granted certain
demand and piggy-back registration rights to the Representatives with respect to
the Representatives' Warrants, as well as the 50,000 shares of Common Stock
issuable upon exercise of the Representatives' Warrants.

TRANSFER AGENT AND WARRANT AGENT

The Company has appointed Corporate Stock Transfer, Inc., 370 17th Street,
Suite 2350, Denver, Colorado 80202, as its transfer agent and warrant agent.

DIVIDENDS

The Company has not paid any dividends on its Common Stock since inception
and does not plan to pay dividends in the foreseeable future. The Company
anticipates that any future earnings will be retained to finance growth.

37
<PAGE>
LIMITATION ON LIABILITIES

The Company's Articles of Incorporation provide that liability of directors
to the Company for monetary damages is eliminated to the full extent provided by
California law. Under California law, a director is not personally liable to the
Company or its shareholders for monetary damages for breach of fiduciary duty as
a director except for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders; (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law;
(iii) for authorizing the unlawful payment of a dividend or other distribution
on the Company's capital stock or the unlawful purchases of its capital stock;
or (iv) for any transaction from which the director derived any improper
personal benefit.

The effect of this provision in the Articles of Incorporation is to
eliminate the rights of the Company and its shareholders (through shareholders'
derivative suits on behalf of the Company) to recover monetary damages from a
director for breach of the fiduciary duty of care as a director (including any
breach resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any securityholder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of a director's duty of care or any liability for violation of the
federal securities laws.

Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable.

38
<PAGE>
UNDERWRITING

The Underwriters named below have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company the
number of Units set forth opposite their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS UNITS
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
Kensington Securities, Inc.
Gunn Allen Financial, Inc.

-----------
Total................................................................................................. 500,000
-----------
-----------
</TABLE>

The Company has been advised by Kensington Securities, Inc. and Gunn Allen
Financial, Inc. as the Representatives of the Underwriters that the Underwriters
propose to offer the Units purchased by them directly to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at a price that represents a concession of $ per Unit. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ within the discretion of the Representatives. The Underwriters are
committed to purchase and pay for all of the Units if any Units are taken. After
the initial public offering of the Units, the offering price and the selling
terms may be changed in the sole discretion of the Underwriters.

The Company has also granted the Underwriters an Overallotment Option,
exercisable within 30 days from the date of this Prospectus, to purchase from
the Company up to 75,000 Units solely to cover overallotments. The Underwriters
are under no obligation to exercise their Overallotment Option or purchase any
Units subject to the Overallotment Option.

The Underwriters will purchase the Units (including Units subject to the
Overallotment Option) from the Company at a price of $10.80 per Unit. In
addition, the Company has agreed to pay to Kensington Securities, Inc. a 3%
nonaccountable expense allowance on the aggregate initial public offering price
of the Units, including Units subject to the Overallotment Option, of which
$30,000 has already been paid. Kensington Securities, Inc. also received a sales
commission of $8,000 in connection with the March 1997 private placement of the
Company's Common Stock. The Representatives have agreed to pay a finder's fee of
up to $45,000 to a person not affiliated with the Company or the Representatives
for introducing the Company to the Representatives.

The Company has agreed to issue the Representatives' Warrants to the
Representatives for a consideration of $100. The Representatives' Warrants are
exercisable at any time in the four-year period commencing one year from the
date of this Prospectus to purchase up to an aggregate of 50,000 Units for
$14.40 per Unit. The Representatives' Warrants are not transferable for one year
from the date of this Prospectus except (i) to an Underwriter or a partner or
officer of an Underwriter or (ii) by will or operation of law. During the term
of the Representatives' Warrants, the holder thereof is given the opportunity to
profit from an increase in the per share market price of the Company's
securities. As long as the Representatives' Warrants are outstanding, the
Company may find it more difficult to raise additional equity capital. At any
time at which the Representatives' Warrants are likely to be exercised, the
Company would probably be able to obtain additional equity capital on more
favorable terms. If the Company files a registration statement relating to an
equity offering under the provisions of the 1933 Act at any time during the
five-year period following the date of this Prospectus, the holders of the
Representatives' Warrants or underlying Units will have the right, subject to
certain conditions, to include

39
<PAGE>
in such registration statement, at the Company's expense, all or part of the
underlying Units at the request of the holders. Additionally, the Company has
agreed, for a period of five years commencing on the date of this Prospectus, on
demand of the holders of a majority of the Representatives' Warrants or the
Units issued or issuable thereunder, to register the Units underlying the
Representatives' Warrants one time at the Company's expense. The registration of
securities pursuant to the Representatives' Warrants may result in substantial
expense to the Company at a time when it may not be able to afford such expense
and may impede future financing. The number of Units covered by the
Representatives' Warrants and the exercise price are subject to adjustment under
certain events to prevent dilution. In the event of any demand registration, the
Company has the right to redeem the Representatives' Warrants by committing to
pay, within ten days of the date of such demand registration, the difference
between the exercise price of the Representatives' Warrants and the average bid
price of the Units (or the component securities) over the prior ten business
days.

In connection with the Offering, the Representatives and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock and
Warrants. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may bid
for or purchase Common Stock or Warrants for the purpose of stabilizing their
market prices. The Representatives may also create a short position for the
account of the Representatives by selling more securities in connection with the
Offering than they are committed to purchase from the Company and in such case
may purchase securities in the open market following completion of the Offering
to cover all or a portion of such short position. The Representatives may also
cover all or a portion of such short position by exercising the Overallotment
Option. Any of the transactions described in this paragraph may result in the
maintenance of the securities at a level above that which might otherwise
prevail in the open market. None of the transactions described in this paragraph
is required, and, if they are undertaken, they may be discontinued at any time.

The Company's officers, directors and 5% or greater shareholders (holding an
aggregate of 1,101,991 shares) have entered into a lock-up agreement with the
Representatives pursuant to which they have agreed not to sell or otherwise
dispose of any of their shares of Common Stock (including shares issuable upon
exercise of stock options) for a period of two years from the date of this
Prospectus without the prior written consent of the Representatives; provided,
however, that 50% of such shares (550,996 shares) may be sold after one year
from the date of the Prospectus if the Company reports at least $1,000,000 of
after tax net income for the year ending December 31, 1997. This lock-up
agreement does not apply to the 75,000 Selling Shareholders' shares. In
addition, the holders of an additional 573,009 shares have agreed not to sell or
otherwise dispose of their shares without the prior written consent of the
Representatives for a period of one year from the date of this Prospectus. The
Company has also granted certain demand and piggy-back registration rights to
the Representatives with respect to the Representatives' Warrants as well as the
50,000 shares of Common Stock issuable upon exercise of the Representatives'
Warrants.

The Company has agreed with the Representatives that, for a period of 36
months from the effective date of the Offering, the Company will allow an
observer designated by the Representatives and acceptable to the Company to
attend all meetings of the Board of Directors. The observer will have no voting
rights, will be reimbursed for out-of-pocket expenses incurred in attending
meetings and will be indemnified against any claims arising out of participation
at the meetings, including claims based on liabilities arising under the
securities laws.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock and Warrants in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purposes of preventing
or retarding a decline in the market price of the Common Stock and Warrants; and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Common Stock or of Warrants than they are required to

40
<PAGE>
purchase from the Company in the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Stock and Warrants sold in the Offering
for their account may be reclaimed by the syndicate if such securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock and Warrants, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the National
Market in the over-the-counter market or otherwise.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the 1933 Act, or to contribute to
payments that any Underwriter may be required to make in respect thereof.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Gary A. Agron Esq., Englewood, Colorado. Certain legal
matters in connection with the Offering will be passed upon for the
Representatives by Pezzola & Reinke, a Professional Corporation, Oakland,
California.

EXPERTS

The financial statements of the Company for the years ended December 31,
1995 and 1996, appearing in this Prospectus, have been audited by AJ. Robbins,
P.C., independent certified public accountants. The financial statements, as
stated in their report and appearing herein, have been included herein in
reliance upon the authority of that firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the 1933 Act with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain items of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered by this Prospectus, reference
is made to such Registration Statement and the exhibits thereto which may be
inspected without charge at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington, DC 20549; Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661; 7 World Trade
Center, New York, NY 10048; and 5670 Wilshire Boulevard, Los Angeles, CA 90036.

The Company will be subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
will file reports, proxy and information statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected at public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street N.W., Washington, DC 20549; Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, IL 60661; 7 World Trade Center, New York,
NY 10048; and 5670 Wilshire Boulevard, Los Angeles, CA 90036. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington, DC 20549 at prescribed
rates. The Commission maintains a Web site that will contain such reports, proxy
and information statements and other information regarding the Company at
http://www.sec.gov.

41
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report............................................................................... F-2

Balance Sheets............................................................................................. F-3

Statements of Income....................................................................................... F-4

Statement of Changes in Stockholders' Equity............................................................... F-5

Statements of Cash Flows................................................................................... F-6

Notes to Financial Statements.............................................................................. F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Retrospettiva, Inc.
Beverly Hills, California

We have audited the accompanying balance sheet of Retrospettiva, Inc. as of
December 31, 1996 and the related statements of income, changes in stockholders'
equity and cash flows for the two years ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Retrospettiva, Inc. as of
December 31, 1996 and the results of its operations and its cash flows for the
two years ended December 31, 1996 in conformity with generally accepted
accounting principles.

AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS AND
CONSULTANTS

Denver, Colorado
March 15, 1997
Except for Note 14 as to which
the date is July 18, 1997

F-2
<PAGE>
RETROSPETTIVA, INC.
BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
JUNE 30,
1997
DECEMBER 31, ------------
1996
------------ (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................................... $ 110,777 $ 289,905
Accounts receivable, net, pledged.................................................. 760,495 1,192,553
Accounts receivable, related party, pledged........................................ 1,182,202 --
Note receivable, current portion................................................... 140,000 130,496
Note receivable, stockholder....................................................... -- 203,094
Inventories, pledged............................................................... 3,112,678 3,725,044
Deferred tax assets, current portion............................................... 11,000 11,000
Deferred offering costs............................................................ 101,354 114,505
Other.............................................................................. 14,825 34,283
------------ ------------
Total Current Assets........................................................... 5,433,331 5,700,880
PROPERTY AND EQUIPMENT, at cost, net................................................. 61,386 57,164
NOTE RECEIVABLE, net of current portion.............................................. 47,583 --
DEFERRED TAX ASSETS, net of current portion.......................................... 5,000 5,000
OTHER ASSETS......................................................................... 80,666 80,776
------------ ------------
$5,627,966 $ 5,843,820
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade............................................................ $2,806,812 $ 2,356,572
Note payable....................................................................... 237,580 145,000
Notes payable, bridge loans........................................................ 250,000 250,000
Accrued expenses................................................................... 51,070 25,496
Accrued income taxes............................................................... 443,080 739,844
Customer advances.................................................................. 909,681 517,253
------------ ------------
Total Current Liabilities...................................................... 4,698,223 4,034,165
------------ ------------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock--authorized 1,000,000 shares--none issued or outstanding............. -- --
Common stock--authorized 15,000,000 shares, no par value; issued and outstanding
1,415,241 and 1,750,000 shares, respectively....................................... 154,000 536,630
Additional paid-in capital........................................................... 230,000 230,000
Retained earnings.................................................................... 545,743 1,043,025
------------ ------------
Total Stockholders' Equity..................................................... 929,743 1,809,655
------------ ------------
$5,627,966 $ 5,843,820
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to financial statements

F-3
<PAGE>
RETROSPETTIVA, INC.
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------- --------------------------
1995 1996 1996 1997
------------- ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
SALES.................................................. $ 9,165,448 $ 9,520,671 $ 4,128,978 $ 7,921,299
SALES, related party................................... 2,214,378 3,381,524 1,551,718 --
------------- ------------- ------------ ------------
Total Sales.......................................... 11,379,826 12,902,195 5,680,696 7,921,299
COST OF SALES.......................................... 9,976,933 11,006,053 4,918,341 6,758,331
------------- ------------- ------------ ------------
GROSS PROFIT........................................... 1,402,893 1,896,142 762,355 1,162,968
------------- ------------- ------------ ------------
OPERATING EXPENSES:
Selling expenses..................................... 230,301 170,179 146,261 94,568
General and administrative........................... 315,816 557,197 360,942 218,941
------------- ------------- ------------ ------------
Total Operating Expenses............................. 546,117 727,376 507,203 313,509
------------- ------------- ------------ ------------
INCOME FROM OPERATIONS................................. 856,776 1,168,766 255,152 849,459
OTHER INCOME (EXPENSES):
Other income......................................... 4,960 11,202 -- 4,477
Interest expense..................................... (21,241) (61,457) (18,024) (23,784)
------------- ------------- ------------ ------------
Net Other Income (Expenses)............................ (16,281) (50,255) (18,024) (19,307)
------------- ------------- ------------ ------------
INCOME BEFORE INCOME TAXES............................. 840,495 1,118,511 237,128 830,152
PROVISION FOR INCOME TAXES............................. 174,000 462,455 96,226 332,870
------------- ------------- ------------ ------------
NET INCOME............................................. $ 666,495 $ 656,056 $ 140,902 $ 497,282
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
NET INCOME PER COMMON SHARE............................ $ .38 $ .37 $ .08 $ .28
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
WEIGHTED AVERAGE NUMBERS OF SHARES OUTSTANDING......... 1,750,000 1,750,000 1,750,000 1,750,000
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>

See accompanying notes to financial statements

F-4
<PAGE>
RETROSPETTIVA, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
---------------------- PAID IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994..................... 1,095,984 $ 20,000 $ 230,000 $ (776,808) $ (526,808)
Net income for the year......................... -- -- -- 666,495 666,495
---------- ---------- ---------- ------------ ------------
Balances, December 31, 1995..................... 1,095,984 20,000 230,000 (110,313) 139,687
Stock issued for compensation................... 81,007 34,000 -- -- 34,000
Stock issued for bridge loans................... 238,250 100,000 -- -- 100,000
Net income for the year......................... -- -- -- 656,056 656,056
---------- ---------- ---------- ------------ ------------
Balances, December 31, 1996..................... 1,415,241 154,000 230,000 545,743 929,743
Stock issued in private offering net of offering
costs (unaudited)............................. 334,759 382,630 -- -- 382,630
Net income for the period (unaudited)........... -- -- -- 497,282 497,282
---------- ---------- ---------- ------------ ------------
Balances, June 30, 1997 (unaudited)............. 1,750,000 $ 536,630 $ 230,000 $ 1,043,025 $ 1,809,655
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
</TABLE>

See accompanying notes to financial statements

F-5
<PAGE>
RETROSPETTIVA, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1995 1996 1996 1997
------------- ----------- ------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net income............................................... $ 666,495 $ 656,056 $ 140,902 $ 497,282
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization........................ 17,792 17,491 8,580 8,831
Stock issued for compensation........................ -- 34,000 -- --
Deferred income taxes................................ 160,000 7,000 -- --
Services provided to reduce note receivable.......... -- 8,417 -- 57,087
Stock issued for loan................................ -- 100,000 100,000 --
Utilization of deferred offering costs............... -- -- -- (181,183)
Changes in:
Accounts receivable................................ 274,471 (572,917) (22,191) 750,144
Accounts receivable, related party................. (441,830) (740,372) (215,566) --
Accounts receivable, others........................ (76,166) -- -- --
Inventories........................................ (1,257,515) (592,610) 921,443 (612,366)
Other.............................................. (3,600) (11,225) -- (19,568)
Accounts payable and accrued expenses.............. 300,682 (138,765) (1,207,358) (475,814)
Accrued income taxes............................... (7,668) 456,948 94,564 296,764
Customer advances.................................. -- 909,681 200,000 (392,428)
------------- ----------- ------------- -----------
Cash flows provided (used) by operating
activities..................................... (367,339) 133,704 20,374 (71,251)
------------- ----------- ------------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of property and equipment..................... (16,172) (6,825) (4,837) (4,609)
------------- ----------- ------------- -----------
Cash flows provided (used) by investing
activities..................................... (16,172) (6,825) (4,837) (4,609)
------------- ----------- ------------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Loans to stockholder................................... -- -- -- (230,500)
Collections on note receivable, stockholder............ -- -- -- 27,406
Proceeds from note payable, stockholder................ 351,263 170,856 2,199 --
Payments on note payable, stockholder.................. (245,015) (354,176) (36,973) --
Proceeds from notes payable, bridge loans.............. -- 250,000 250,000 --
Proceeds from note payable............................. 247,403 -- -- --
Payments on note payable............................... -- (19,725) (594) (92,580)
Payments for deferred offering costs................... -- (101,354) (58,056) (13,151)
Proceeds from issuance of common stock................. -- -- -- 563,813
------------- ----------- ------------- -----------
Cash flows provided (used) by financing
activities..................................... 353,651 (54,399) 156,576 254,988
------------- ----------- ------------- -----------
NET INCREASE (DECREASE) IN CASH.......................... (29,860) 72,480 172,113 179,128
CASH IN BANK, beginning of period........................ 68,157 38,297 38,297 110,777
------------- ----------- ------------- -----------
CASH IN BANK, end of period.............................. $ 38,297 $ 110,777 $ 210,410 $ 289,905
------------- ----------- ------------- -----------
------------- ----------- ------------- -----------
</TABLE>

See Note 13

See accompanying notes to financial statements

F-6
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACTIVITY

Retrospettiva, Inc. (the Company) located in Beverly Hills, California was
organized in November 1990 to manufacture and import textile products from Italy
including finished garments and fabrics. By 1993, the Company was purchasing
fabrics from firms and factories around the world and contracting for the
manufacture of the fabrics in Eastern Europe (primarily Macedonia) for
importation into the United States.

The Company designs, contracts to manufacture and markets a variety of
garments. Fabrics are purchased from suppliers worldwide including firms in
China, India, Russia, Romania, Italy and the United States. The fabrics are
shipped to contractor factories primarily in Macedonia to be manufactured into
finished garments for shipment to the Company's customers in the United States.

UNAUDITED INTERIM FINANCIAL STATEMENTS

In the opinion of management, the unaudited interim financial statements for
the six month periods ending June 30, 1996 and 1997 are presented on a basis
consistent with the audited annual financial statements and reflect all
adjustments, consisting only of normal recurring accruals, necessary for fair
presentation of the results of such periods. The results of operations for the
interim period ending June 30, 1997 are not necessarily indicative of the
results to be expected for the year ended December 31, 1997.

STOCK SPLITS

In May 1996, the Company's Board of Directors authorized a 46 for one stock
split. In May 1997, the Company's Board of Directors authorized a 2.3826 for one
stock split to be approved by the Company's stockholders in June 1997. The
financial statements have been presented as if the splits had occurred at the
beginning of each period presented.

CASH AND CASH EQUIVALENT

Cash and cash equivalents include cash on hand and investments with original
maturities of three months or less.

ACCOUNTS RECEIVABLE

The Company provides an allowance for doubtful accounts, as needed, for
accounts deemed uncollectible. Allowance for uncollectible accounts was recorded
at $17,196 for December 31, 1996 and June 30, 1997 (unaudited), respectively.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation and amortization
expense is generally provided on a straight-line basis using estimated useful
lives of 5-10 years for equipment. Leasehold improvements are amortized over the
lesser of the estimated useful life of the asset or the term of the lease.
Depreciation and amortization expense of property and equipment was $17,792,
$17,491, $8,580, and

F-7
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$8,831 for the years ended December 31, 1995, 1996 and for the six months ended
June 30, 1996 (unaudited) and 1997 (unaudited), respectively.

DEFERRED OFFERING COSTS

Costs incurred in connection with the Company's current anticipated public
offering are deferred and will be charged against stockholders equity upon the
successful completion of the offering or charged to expense if the offering is
not consummated.

REVENUE RECOGNITION

Revenue is recognized when sold merchandise has cleared customs in the
United States and is available to be shipped to customers from a port of entry.

INCOME TAXES

The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), Accounting for Income Taxes. Under this method, deferred income
taxes are recorded to reflect the tax consequences in future years of temporary
differences between the tax basis of the assets and liabilities and their
financial statement amounts at the end of each reporting period. Valuation
allowances will be established when necessary to reduce deferred tax assets to
the amount expected to be realized. Income tax expense is the tax payable for
the current period and the change during the period in deferred tax assets and
liabilities. The deferred tax assets and liabilities have been netted to reflect
the tax impact of temporary differences. The adoption of SFAS 109 did not have a
material effect on the Company's financial statements.

EARNINGS PER COMMON SHARE

Earnings per common share is computed based upon the weighted average number
of common and dilutive common equivalent shares outstanding during the period.
Fully diluted and primary earnings per common share are the same amounts for
each of the periods presented.

Common shares issued by the Company in the twelve months immediately
preceding a proposed public offering plus the number of common equivalent shares
which became issuable during the same period pursuant to the grant of warrants
and stock options (using the treasury stock method) at prices substantially less
than the initial public offering price have been included in the calculation of
common stock and common stock equivalent shares as if they were outstanding for
all periods presented.

Dilutive common equivalent shares consist of stock options and warrants
(calculated using the treasury stock method). In loss periods, dilutive common
equivalent shares are excluded as the effect would be anti-dilutive.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and

F-8
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
revenues and expenses during the reporting periods. Actual results could differ
from those estimates and assumptions.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments, which
principally include cash, trade receivables, note receivable, accounts payable
and accrued expenses, approximates fair value due to the relatively short
maturity of such instruments.

The fair value of the Company's debt instruments are based on the amount of
future cash flows associated with each instrument discounted using the Company's
borrowing rate. At December 31, 1996 and June 30, 1997 (unaudited), the carrying
value of all financial instruments was not materially different from fair value.

CREDIT RISK

The Company sells its merchandise principally to customers throughout the
United States. Management performs regular evaluations concerning the ability of
its customers to satisfy their obligations and records a provision for doubtful
accounts based upon these evaluations. The Company's credit losses for the
periods presented have not exceeded management's estimates.

There are two customers that make up 93% and 73% of the accounts receivable
balance at December 31, 1996 and June 30, 1997 (unaudited), respectively.

The Company maintains all cash in bank deposit accounts, which at times may
exceed federally insured limits. The Company has not experienced a loss in such
accounts.

SIGNIFICANT CUSTOMERS

Individual customers aggregating in excess of 10% of net sales are as
follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------------
1995 1996
------------ ------------ SIX MONTHS ENDED
JUNE 30,
--------------------------
1996 1997
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
SALES
Customer A........................... $ 5,413,771 $ 4,102,545 $ 3,214,633 $ --
Customer B........................... $ 2,325,851 $ 3,745,836 $ 880,089 $ 4,791,915
Customer C, related party............ $ 2,214,378 $ 3,381,524 $ 1,551,718 $ 306,774
Customer D........................... $ -- $ -- $ 95,354 $ 2,429,139
</TABLE>

RELATED PARTY TRANSACTIONS

The Company has sales to a related party customer. The Company's
officer/stockholder was part owner of Customer C. Effective January 1, 1997, the
Company's officer/stockholder relinquished his

F-9
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ownership in Customer C. Accounts receivable at December 31, 1996 for Customer C
was $1,182,202 as follows:

<TABLE>
<CAPTION>
GREATER THAN
30 DAYS PAST 60 DAYS PAST
CURRENT DUE DUE TOTAL
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
December 31, 1996.......................................... $ 534,816 $ 381,164 $ 266,222 $ 1,182,202
June 30, 1997 (Unaudited).................................. $ -- $ -- $ 232,704 $ 232,704
</TABLE>

Principal ownership and control of the Company rests with the Chief
Executive Officer.

ADOPTION OF NEW STANDARDS

Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128), was issued in February 1997 (effective for financial statements
ending after December 15, 1997). This Statement simplifies the standards for
computing earnings per share (EPS) previously found in APB Opinion No. 15,
Earnings Per Share, and makes them more comparable to international EPS
standards. SFAS 128 replaces the presentation of primary EPS with a presentation
of basic EPS. In addition, the Statement requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. The Company has not yet assessed the impact of SFAS 128
on its financial statements.

NOTE 2--INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
JUNE 30,
1997
DECEMBER 31, ------------
1996
------------ (UNAUDITED)
<S> <C> <C>
Finished goods................................................... $ 923,373 $ 780,596
Work-in-process.................................................. 908,752 1,289,669
Raw materials.................................................... 1,280,553 1,654,779
------------ ------------
$3,112,678 $ 3,725,044
------------ ------------
------------ ------------
</TABLE>

The Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries. These agreements impose quotas on the amount and type of goods which
can be imported into the United States from these countries and can limit or
prohibit importation of products on very short notice. The Company's imported
products are also subject to United States customs duties which are a material
portion of the Company's cost of imported goods. A substantial increase in
customs duties or a substantial reduction in quota limits applicable to the
Company's imports could have a material adverse effect on the Company's
financial condition and results of operations.

F-10
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------ JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Insurance claim, receivable....................................... $ 76,166 $ 76,166
Deposits.......................................................... 4,500 4,610
------------ -----------
$ 80,666 $ 80,776
------------ -----------
------------ -----------
</TABLE>

The insurance claim receivable is due to inventory lost in a fire in a
consolidating warehouse.

NOTE 4--PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------ JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Automobile........................................................ $ 20,568 $ 20,568
Furniture and fixtures............................................ 35,494 40,103
Leasehold improvements............................................ 50,514 50,514
------------ -----------
Total....................................................... 106,576 111,185
Less accumulated depreciation and amortization.................... (45,190) (54,021)
------------ -----------
$ 61,386 $ 57,164
------------ -----------
------------ -----------
</TABLE>

NOTE 5--NOTE RECEIVABLE

During 1994, the Company was owed an outstanding trade receivable of
$266,000. Approximately $70,000 was written off as uncollectible in 1994. On
October 15, 1996, $196,000 was converted to a note receivable, bearing interest
at 10%, and requiring 24 monthly payments of $10,000 in consolidation services.
Services are valued at the market value of comparative consolidation services in
the area. The Company realized $8,417 in services during 1996.

The Company negotiated with a customer (former related party) to also use
the consolidation services. The customer reimburses the Company for the services
and the note receivable is reduced accordingly. During the six months June 30,
1997 the note receivable was reduced by $57,087 (unaudited), by use of the
consolidation services by the Company and its customer. The customer is making
payments to the Company.

NOTE 6--NOTE RECEIVABLE FROM STOCKHOLDER (UNAUDITED)

The Company's note receivable ($250,000 maximum) due from an
officer/stockholder is unsecured, due on demand and bears interest at 10% per
annum.

F-11
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--NOTE PAYABLE

On September 27, 1995, the Company obtained a line of credit of $250,000
with a bank due October 10, 1996. The loan was collateralized by accounts
receivable inventory and personal guarantee of an officer/stockholder. Interest
was payable monthly at 3% over the financial institutions variable prime rate.
During March 1997 the line of credit was refinanced with a variable rate (4%
over prime rate, initial rate of 12.25%). Payments were due in four monthly
installments of $20,000 principal plus interest beginning April 15, 1997, with
one final principal and interest payment due August 15, 1997. (See Note 14)

NOTE 8--NOTES PAYABLE, BRIDGE LOANS

During June 1996 the Company completed an offering of 25 units in a Private
Placement. Each unit consisted of one $10,000 promissory note (totaling
$250,000) bearing interest at 8% per annum and 9,530 shares of the Company's
Common Stock. The notes were payable the earlier of June 30, 1997 or on the
closing date of an initial public offering of the Company's stock. The
underwriter was paid a commission of $50,000.

Effective July 1, 1997, (unaudited) notes were amended to be payable
September 30, 1997 and bear interest at 18% per annum.

NOTE 9--STOCK OPTION PLAN

STOCK OPTION PLAN

On May 1, 1996 the Company adopted the Stock Option Plan (the Plan) which
provides for the granting of options to officers, directors, employees and
consultants. 1,786,930 shares of common stock have been reserved under the plan
for the granting of options. The Plan will be in effect until April 30, 2006,
unless extended by the Company's shareholders. The options are exercisable to
purchase stock for a period of ten years from the date of grant.

Incentive Stock Options granted pursuant to this Plan may not have an option
price that is less than the fair market value of the stock on the date the
option is granted. Incentive stock options granted to significant stockholders
shall have an option price of not less than 110% of the fair market value of the
stock on the date of the grant.

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------
RESERVED PRICE PER
SHARES SHARES SHARES
---------- ---------- -----------
<S> <C> <C> <C>
Initial reserved shares................................ 1,786,930 -- $ --
Granted................................................ 1,701,635 1,701,635 $ .63-.675
---------- ---------- -----------
Balance, December 31, 1996............................. 85,295 1,701,635 $ .63-6.75
Granted (unaudited).................................... 60,000 60,000 $ 9.90
---------- ---------- -----------
Balance, June 30, 1997 (unaudited)..................... 25,295 1,761,635 $ .63-9.90
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

Under an employment agreement a total of 595,645 options will be cancelled
if net income for the year ended December 31, 1997 does not exceed $750,000.

At December 31, 1996, 1,105,990 options granted under the plan were
exercisable.

F-12
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company signed a 61 month lease agreement for its offices commencing
December 1, 1995. The monthly lease payment is $2,300.

The Company signed a ten-month sublease agreement in New York commencing
December 1, 1996. The terms of the sublease agreement require monthly payments
of $1,250 plus 50% of the maintenance costs.

The Company has another sublease in New York, with a two year term through
April 1, 1998. The terms require monthly payments of $2,175 through January 31,
1997 and monthly payments of $2,285 for the remainder of the agreement.

Future minimum rental payments under non-cancelable operating leases are as
follows:

<TABLE>
<CAPTION>
JUNE 30,
1997
DECEMBER 31, -----------
1996
------------ (UNAUDITED)
<S> <C> <C>
1997.............................................................. $ 66,160 $ 36,600
1998.............................................................. 34,455 34,455
1999.............................................................. 27,600 27,600
2000.............................................................. 2,300 2,300
------------ -----------
Total........................................................... $ 130,515 $ 100,955
------------ -----------
------------ -----------
</TABLE>

The Company rents office and showroom space from a major supplier in New
York on a month to month basis.

Rent expense for the years ended December 31, 1995 and 1996 was $37,900 and
$62,920, and for the six months ended June 30, 1996 and 1997 was $24,883
(unaudited) and $41,680 (unaudited), respectively.

EMPLOYMENT AGREEMENTS

In May 1996 the Company entered into a three year employment agreement with
an officer/ stockholder which provides for annual salary of $95,000, commencing
the first month subsequent to the earlier of the closing of an initial public
offering or the closing of a merger or acquisition by a public company, a
non-competition clause for two years following termination of the employment
agreement and stock options to purchase up to 1,191,300 shares of Common Stock
at $6.75 per share exercisable for a period of 10 years.

In April 1996, the Company entered into a three year employment agreement
with the chief financial officer which provides for annual salary of $60,000
commencing the first month after the completion of its planned initial public
offering. As signing compensation he received 81,007 shares of Common Stock and
stock options to purchase up to 119,128 shares of Common Stock at $6.75 per
share exercisable for a period of 10 years.

LITIGATION

The Company is a party to various claims, complaints, and other legal
actions that have arisen in the ordinary course of business. The Company
believes that the outcome of all pending legal proceedings, in

F-13
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
the aggregate, will not have a material adverse effect on the Company's
financial condition or the results of its operations.

NOTE 11--INCOME TAXES

The components of deferred tax assets and (liabilities) are as follows:

<TABLE>
<CAPTION>
JUNE 30,
1997
DECEMBER 31, -----------
1996
------------ (UNAUDITED)
<S> <C> <C>
Total deferred tax assets......................................... $ 16,000 $ 16,000
Total deferred tax (liabilities).................................. -- --
------------ -----------
Net deferred tax assets........................................... $ 16,000 $ 16,000
------------ -----------
------------ -----------
</TABLE>

There are no significant differences between financial statement and taxable
income.

The tax effects of temporary differences that give rise to deferred tax
assets and (liabilities) are as follows:

<TABLE>
<CAPTION>
JUNE 30,
1997
DECEMBER 31, -----------
1996
------------ (UNAUDITED)
<S> <C> <C>
Temporary differences:
Allowance for bad debts......................................... $ 7,000 $ 7,000
Property and equipment.......................................... 5,000 5,000
Other........................................................... 4,000 4,000
------------ -----------
$ 16,000 $ 16,000
------------ -----------
------------ -----------
</TABLE>

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1995 1996
---------- ---------- SIX MONTHS ENDED JUNE
30,
------------------------
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current................................... $ 14,000 $ 455,455 $ 96,226 $ 332,870
Deferred.................................. 160,000 7,000 -- --
---------- ---------- ----------- -----------
Provision................................. $ 174,000 $ 462,455 $ 96,226 $ 332,870
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>

F-14
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--INCOME TAXES (CONTINUED)
Following is a reconciliation of the amount of income tax (benefit) expense
that would result from applying the statutory federal income tax rates to
pre-tax income and the reported amount of income tax expense for the periods:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1995 1996
---------- ---------- SIX MONTHS ENDED
JUNE 30,
------------------------
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Tax expense at federal statutory rates.... $ 285,000 $ 375,000 $ 74,000 $ 255,000
State tax, net of federal benefit......... 11,000 104,170 22,226 77,870
Alternative minimum tax (credit).......... 3,000 (3,000) -- --
Depreciation.............................. -- 3,000 -- --
Other..................................... -- 3,285 -- --
(Benefit) of net operating loss
carryforward............................ (285,000) (27,000) -- --
---------- ---------- ----------- -----------
$ 14,000 $ 455,455 $ 96,226 $ 332,870
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>

The components of deferred income tax (benefit) expense are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1995 1996
----------- --------- SIX MONTHS ENDED JUNE
30,
------------------------
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Bad debts.................................. $ 7,000 $ -- $ -- $ --
Depreciation............................... 2,000 (3,000) -- --
Other...................................... 4,000 (4,000) -- --
Net operating loss carryover............... 364,000 14,000 -- --
Valuation allowance........................ (217,000) -- -- --
----------- --------- ----------- -----------
$ 160,000 $ 7,000 $ -- $ --
----------- --------- ----------- -----------
----------- --------- ----------- -----------
</TABLE>

NOTE 12--STOCK-BASED COMPENSATION

During 1996 the Company adopted Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation (SFAS 123). The new standard
requires the Company to adopt the fair value method with respect to stock-based
compensation of consultants and other non-employees.

The Company did not change its method of accounting with respect to employee
stock options; the Company continues to account for these under the intrinsic
value method. Had the Company adopted the fair value method with respect to
options issued to employees as well, an additional charge to income of $52,300
would have been required in 1996; proforma net income would have been $319,000
and earnings per share would have been $.18 on both a primary and fully diluted
basis.

In June 1997, the Company has granted stock options to purchase 60,000 share
of common stock at $9.90 per share to a consultant. The amount of compensation
to be recognized under SFAS 123 is approximately $39,000, commencing subsequent
to the closing of an initial public offering of the Company's common stock.

F-15
<PAGE>
RETROSPETTIVA, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--STOCK-BASED COMPENSATION (CONTINUED)
In estimating the above expense, the Company used the Modified Black-Scholes
European pricing model. The average risk-free interest rate used was 6.2%,
volatility was estimated at 31%; the expected life was less than three years.

NOTE 13--SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS FOR NONCASH
INVESTING AND FINANCING ACTIVITIES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1995 1996
--------- --------- SIX MONTHS ENDED JUNE
30,
------------------------
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash paid for interest....................... $ 8,180 $ 26,820 $ 17,414 $ 16,271
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Cash paid for income taxes................... 26,113 $ 2,196 $ -- $ --
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

NOTE 14--SUBSEQUENT EVENTS

PROPOSED PUBLIC OFFERING

The Company has entered into a letter of intent with an underwriter to sell
Company securities in a public offering. Upon a registration statement being
declared effective, 500,000 units (each unit consisting of two shares of common
stock and one warrant) are anticipated to be sold and 75,000 shares to be agreed
upon by certain security holders.

NOTE PAYABLE

On July 18, 1997 the Company refinanced its existing line of credit (see
Note 7) by obtaining a new line of credit with Merrill Lynch Business Financial
Services, Inc. for $500,000 due August 31, 1998. The new debt is collateralized
by accounts receivable, inventory, property and equipment, notes receivable and
the personal guarantee of an officer/stockholder. Interest is payable at 3.15%
over the 30 day commercial paper rate (8.75% at July 18, 1997).

F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Dilution.................................................................. 13
Capitalization............................................................ 14
Use of Proceeds........................................................... 15
Selected Financial Data................................................... 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 17
Business.................................................................. 23
Management................................................................ 28
Principal Shareholders.................................................... 33
Selling Shareholders...................................................... 34
Certain Transactions...................................................... 34
Description of Securities................................................. 35
Underwriting.............................................................. 39
Legal Matters............................................................. 41
Experts................................................................... 41
Available Information..................................................... 41
Index to Financial Statements............................................. F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

500,000 UNITS

RETROSPETTIVA, INC.

------------------

PROSPECTUS

------------------

KENSINGTON SECURITIES, INC.
GUNN ALLEN FINANCIAL, INC.

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 317 of the California Corporations Code authorizes a court to award,
or a corporation's Board of Directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article V of the
Registrant's Restated Articles of Incorporation (Exhibit 3.01 hereto) provides
for indemnification of its directors, officers, employees and other agents
through the Corporation's bylaws, agreements with agents, vote of shareholders
or disinterested directors or otherwise, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code, subject
only to the applicable limits set forth in Section 204 of the California
Corporations Code with respect to actions for breach of duty to the corporation
and its shareholders.

In addition, Article VI of the Registrant's Bylaws provides as follows:

ARTICLE VI
INDEMNIFICATION OF CERTAIN PERSONS

Section 1. INDEMNIFICATION. For purposes of Article VI, a "Proper Person"
means any person (including the estate or personal representative of a director)
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal, by reason of
the fact that he is or was a director, officer, employee, fiduciary or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any foreign
or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's best interests, or (ii) in all other cases
(except criminal cases), that his conduct was at least not opposed to the
corporation's best interests, or (iii) in the case of any criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. Official
capacity means, when used with respect to a director, the office of director
and, when used with respect to any other Proper Person, the office in a
corporation held by the officer or the employment, fiduciary or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.

A director's conduct with respect to an employee benefit plan for a purpose
the director reasonably believed to be in the interests of the participants in
or beneficiaries of the plan is conduct that satisfies the requirement in (ii)
of this Section 1. A director's conduct with respect to an employee benefit plan
for a purpose that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan shall be deemed
not to satisfy the requirement of this section that he conduct himself in good
faith.

No indemnification shall be made under this Article VI to a Proper Person
with respect to any claim, issue or matter in connection with a proceeding by or
in the right of a corporation in which the Proper Person was adjudged liable to
the corporation or in connection with any proceeding charging that the

II-1
<PAGE>
Proper Person derived an improper personal benefit, whether or not involving
action in an official capacity, in which he was adjudged liable on the basis
that he derived an improper personal benefit. Further, indemnification under
this section in connection with a proceeding brought by or in the right of the
corporation shall be limited to reasonable expenses, including attorneys' fees,
incurred in connection with the proceeding.

Section 2. RIGHT TO INDEMNIFICATION. The corporation shall indemnify any
Proper Person who was wholly successful, on the merits or otherwise, in defense
of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.

Section 3. EFFECT OF TERMINATION OF ACTION. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent shall not of itself create a presumption
that the person seeking indemnification did not meet the standards of conduct
described in Section 1 of this Article VI. Entry of a judgment by consent as
part of a settlement shall not be deemed an adjudication of liability, as
described in Section 2 of this Article VI.

Section 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION. Except
where there is a right to indemnification as set forth in Sections 1 or 2 of
this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
of conduct set forth in Section 1 of this Article. This determination shall be
made by the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors not
parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and the
committee cannot be established, or even if a Quorum is obtained or the
committee is designated and a majority of the directors constituting such Quorum
or committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the committee in
the manner specified in this Section 4 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of the
shareholders.

Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of expenses
is permissible except that, if the determination that indemnification or advance
of expenses is permissible is made by independent legal counsel, authorization
of indemnification and advance of expenses shall be made by the body that
selected such counsel.

Section 5. COURT-ORDERED INDEMNIFICATION. Any Proper Person may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article, the court shall
order indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines that
such Proper Person is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred

II-2
<PAGE>
in connection with the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.

Section 6. ADVANCE OF EXPENSES. Reasonable expenses (including attorneys'
fees) incurred in defending an action, suit or proceeding as described in
Section 1 may be paid by the corporation to any Proper Person in advance of the
final disposition of such action, suit or proceeding upon receipt of (i) a
written affirmation of such Proper Person's good faith belief that he has met
the standards of conduct prescribed by Section 1 of this Article VI, (ii) a
written undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined that he did not meet the
prescribed standards of conduct (the undertaking shall be an unlimited general
obligation of the Proper Person but need not be secured and may be accepted
without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.

Section 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN
DIRECTORS. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance expenses to them if they
are not directors of the corporation to a greater extent than is provided in
these bylaws, if not inconsistent with public policy, and if provided for by
general or specific action of its board of directors or shareholders or by
contract.

Section 8. WITNESS EXPENSES. The sections of this Article VI do not limit
the corporation's authority to pay or reimburse expenses incurred by a director
in connection with an appearance as a witness in a proceeding at a time when he
has not been made or named as a defendant or respondent in the proceeding.

Section 9. REPORT TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to officers, directors or
persons controlling the Company, the Company has been advised that, in the
opinion of the Securities and Exchange Commission, Washington, D.C. 20549, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the officer, director or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such officer, director or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)(2)(3)

<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 3,776
NASD Filing Fee........................................................... 1,776
Blue Sky Filing Fees...................................................... 1,000
Blue Sky Legal Fee........................................................ 2,000
Printing Expense.......................................................... 50,000
Legal Fees and Expense.................................................... 80,000
Accounting Fee............................................................ 65,000
Transfer Agent............................................................ 3,000
Nasdaq NMS Application Fee................................................ 25,000
Miscellaneous Expenses.................................................... 43,448
---------
Total................................................................. $ 275,000(1)
---------
---------
</TABLE>

- ------------------------

(1) Does not include the Representatives' commission and expenses of $780,000
($897,000 if the Overallotment Option is exercised).

(2) All expenses, except the SEC registration fee and NASD filing fee, are
estimated.

(3) The Registrant will pay all registration expenses associated with the sale
of the Selling Shareholders' shares excluding sales commissions.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

During the last three years, the Registrant sold the following shares of its
Common Stock which were not registered under the Securities Act of 1933, as
amended (the "1933 Act"):

(i) In April 1996, the Registrant sold 81,007 shares of its Common Stock
to Michael D. Silberman for services rendered valued at $.0042 per share.

(ii) In June 1996, the Registrant sold 25 Units of its securities, each
Unit consisting of a $10,000 promissory note and 9,530 shares of Common
Stock for $10,000 per Unit to the following persons:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING
NAME THE UNITS
- ------------------------------------------------------------------------------ -------------------------
<S> <C>
Daniel Nordstrom.............................................................. 19,060
Michael Nordstrom............................................................. 9,530
Michael N. Poli............................................................... 9,530
Larry Heimann................................................................. 9,530
Richard Yanez................................................................. 9,530
John Wrobel................................................................... 9,530
Kendall Oltrogge.............................................................. 9,530
Duane Eisenbeiss.............................................................. 9,530
Billie Jolson................................................................. 9,530
Howard K. O'Neil.............................................................. 9,530
Richard J. Weiler and Mary Jo Weiler.......................................... 19,060
Donald L. Moen and Barbara A. Moen............................................ 9,530
James W. O'Neil............................................................... 9,530
Startrust Co. as trustee for Patricia Bandawat................................ 38,120
John Jensen................................................................... 9,530
Jeffrey B. Rosenfeld.......................................................... 9,530
Steven Bandawat............................................................... 9,530
Patricia Bandawat............................................................. 28,590
</TABLE>

II-4
<PAGE>
(iii) In March 1997, the Registrant sold 334,759 shares of its Common
Stock at $1.68 per share to the following individuals.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
Gary Dendo and Masako Dendo.......................................................... 5,957
James. W. O'Neil..................................................................... 11,912
Rae Saltzman and Marjorie M. Saltzman................................................ 5,957
David H. Welch....................................................................... 17,870
Gary Oswald.......................................................................... 8,936
Josephine C.H. Tinimbang............................................................. 5,957
William A. Traxel and Ruth A. Miller................................................. 14,891
Robert L. Mapes and Peggy G. Mapes................................................... 595
James Mapes.......................................................................... 3,872
John Mapes........................................................................... 2,383
Kurt Kobel........................................................................... 3,574
John C. Gudgel, Jr................................................................... 23,826
Milton Lamansky...................................................................... 2,979
Scott Huddleston and Judith Huddleston............................................... 5,957
Shung Sen Choong and Tu C. Choong.................................................... 5,957
Marta Joan Butler and David T. Butler................................................ 23,826
Joanie L. Militich................................................................... 3,872
Samuel Wong and Linda Wong........................................................... 11,912
Russell J. Mello and Maxine F. Fuller................................................ 2,979
Clemence Tokarz...................................................................... 5,957
Jasvir S. Mattu...................................................................... 5,957
Eliot G. Ellefson.................................................................... 2,979
Frances M. Ellefson.................................................................. 5,957
Frank Hlvaka......................................................................... 2,979
Jeffery Silverman.................................................................... 5,957
William B. Silverman................................................................. 11,912
Steve Singer......................................................................... 9,530
Alan C. Andalman..................................................................... 9,530
Francene A. Kaefer................................................................... 5,957
Frederick S. Kaefer.................................................................. 11,912
James W.T. Hu and Grace T.Y. Hu...................................................... 11,912
Catherine Chen....................................................................... 5,957
Felicia Choi......................................................................... 11,912
Chuck Brown and Yvonne Brown......................................................... 5,957
Jesse Roggens........................................................................ 5,957
Gary L. Boster....................................................................... 9,530
Rabbi Yaakov Bender.................................................................. 35,738
Kevin S. McGovern.................................................................... 5,957
</TABLE>

(iv) In June 1997 the Registrant issued stock options to purchase up to
60,000 shares at $9.90 per share to Kevin Dieball for consulting services.

(v) From time to time, the Registrant has issued stock options
(currently aggregating 1,761,633 stock options) to employees, officers and
directors under its 1996 Stock Option Plan.

With respect to the sales made, the Registrant relied on Section 4(2) of the
1933 Act, and/or Regulation D promulgated under the 1933 Act. No advertising or
general solicitation was employed in offering the securities. The securities
were offered to a limited number of individuals all of whom were

II-5
<PAGE>
experienced and sophisticated investors capable of analyzing the merits and
risks of their investment. All such investors acknowledged in writing that they
were acquiring the securities for investment and not with a view toward
distribution or resale and that they understood the speculative nature of their
investment. The transfer of the securities was appropriately restricted from
sale by the Registrant.

ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ------------------------------------------------------------------------------------------------
<C> <S>

1.01 Form of Underwriting Agreement(1)

1.02 Form of Agreement Among Underwriters(1)

1.03 Form of Selected Dealer Agreement(1)

1.04 Form of Representatives' Warrant(1)

1.05 Form of Amended Underwriting Agreement(1)

3.01 Restated Articles of Incorporation of the Registrant(1)

3.02 Bylaws of the Registrant(1)

4.01 Form of Warrant(1)

4.02 Form of Common Stock Certificate(1)

5.01 Opinion of Gary A. Agron, regarding legality of the Units (includes Consent)(1)

10.01 1996 Employee Stock Option Plan(1)

10.02 Office Lease and Amendments thereto (Beverly Hills, California)(1)

10.03 Employment Agreement with Mr. Vukadinovic, as amended(1)

10.04 Employment Agreement with Mr. Silberman, as amended(1)

10.05 Promissory Note issued by Mr. Vukadinovic(1)

11.01 Computation of Earnings Per Share(1)

11.02 Computation of Earnings Per Share(1)

11.03 Amended Computation of Earnings Per Share

23.01 Consent of AJ. Robbins, P.C.(1)

23.02 Consent of Gary A. Agron (See 5.01, above)(1)

23.03 Consent of AJ. Robbins, P.C.(1)

23.04 Consent of AJ. Robbins, P.C.

27.01 Financial Data Schedule(1)

27.02 Financial Date Schedule(1)

27.03 Amended Financial Data Schedule
</TABLE>

- ------------------------

(1) Previously filed

ITEM 28. UNDERTAKINGS.

The Registrant hereby undertakes:

(a) That insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer

II-6
<PAGE>
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and Exchange
Commission such supplementary and periodic information, documents and reports as
may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.

(c) That any post-effective amendment filed will comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.

(d) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the 1933
Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(e) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(f) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.

(g) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.

II-7
<PAGE>
SIGNATURES

Pursuant to the requirements of the 1933 Act, as amended, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and has caused this Amendment No. 1
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Beverly Hills, California, on September 8, 1997.

<TABLE>
<S> <C> <C>
RETROSPETTIVA, INC.

By: /s/ BORIVOJE VUKADINOVIC
-----------------------------------------
Borivoje Vukadinovic
CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the 1933 Act, as amended, this Registration
Statement has been signed below by the following persons on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ BORIVOJE
VUKADINOVIC Chief Executive Officer,
- ------------------------------ President and Director September 8, 1997
Borivoje Vukadinovic

/s/ MICHAEL D. Chief Financial Officer,
SILBERMAN Principal Accounting
- ------------------------------ Officer, Secretary and September 8, 1997
Michael D. Silberman Director

/s/ IVAN ZOGOVIC
- ------------------------------ Manager - Export/Import September 8, 1997
Ivan Zogovic

/s/ MOJGAN KEYWANFAR
- ------------------------------ Accounting Manager and September 8, 1997
Mojgan Keywanfar Director

/s/ S. WILLIAM YOST
- ------------------------------ Director September 8, 1997
S. William Yost

/s/ DONALD E. TORMEY
- ------------------------------ Director September 8, 1997
Donald E. Tormey

/s/ PHILIP E. GRAHAM
- ------------------------------ Director September 8, 1997
Philip E. Graham

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
11.03 Amended Computation of Earnings Per Share
23.04 Consent of AJ. Robbins, P.C.
27.03 Amended Financial Data Schedule
</TABLE>

<PAGE>

COMPUTATION OF EARNINGS PER COMMON SHARE

<TABLE>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ --------------------------
1995 1996 1996 1997
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS
Net income 666,495 656,056 140,902 497,282

Shares
Weighted average number of
common shares outstanding 1,750,000 1,750,000 1,750,000 1,750,000

Primary earnings per common share:
Net income 0.38 0.37 0.08 0.28
--------- --------- --------- ---------
--------- --------- --------- ---------

FULLY DILUTED EARNINGS
Net income 666,495 656,056 140,902 497,282

Shares
Weighted average number of
common shares outstanding 1,750,000 1,750,000 1,750,000 1,750,000

Fully diluted earnings per common share:
Net income 0.38 0.37 0.08 0.28
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

<PAGE>

[Letterhead]

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the use of our
report dated March 15, 1997 on the financial statements of Retrospettiva, Inc.,
and to the reference made to our firm under the caption "Experts" included in or
made part of this Registration Statement, Amendment 2.

AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS

DENVER, COLORADO
SEPTEMBER 9, 1997

<PAGE>
<ARTICLE> 5

<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 JUN-30-1996 JUN-30-1997
<CASH> 0 110,777 0 289,905
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 2,099,893 0 1,543,339
<ALLOWANCES> 0 17,196 0 17,196
<INVENTORY> 0 3,112,678 0 3,725,044
<CURRENT-ASSETS> 0 5,433,331 0 5,700,880
<PP&E> 0 106,576 0 111,185
<DEPRECIATION> 0 45,190 0 54,021
<TOTAL-ASSETS> 0 5,627,966 0 5,843,820
<CURRENT-LIABILITIES> 0 4,698,223 0 4,034,165
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 154,000 0 536,630
<OTHER-SE> 0 775,743 0 1,426,465
<TOTAL-LIABILITY-AND-EQUITY> 0 5,627,966 0 5,843,820
<SALES> 11,379,826 12,902,195 5,680,696 7,921,299
<TOTAL-REVENUES> 11,379,826 12,902,195 5,680,696 7,921,299
<CGS> 9,979,933 11,006,053 4,918,341 6,758,331
<TOTAL-COSTS> 230,301 170,179 146,261 94,568
<OTHER-EXPENSES> 315,816 557,197 360,942 218,941
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 21,241 61,457 18,024 23,784
<INCOME-PRETAX> 840,495 1,118,511 237,128 830,152
<INCOME-TAX> 174,000 462,445 96,226 332,870
<INCOME-CONTINUING> 666,495 656,056 140,902 497,282
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 666,495 656,056 140,902 497,282
<EPS-PRIMARY> 0.38 0.37 0.08 0.28
<EPS-DILUTED> 0.38 0.37 0.08 0.28

</TABLE>