<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
For the quarterly period ended __________________________
Commission file number: 333-29295
RETROSPETTIVA, INC.
(Exact name of small business issuer as specified in its charter)
California 95-4298051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8825 West Olympic Boulevard
Beverly Hills, CA 90211
(Address of principal executive offices)
(310) 657-1745
(Issuer's telephone number)
Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, No Par Value,
3,177,916 shares as of May 9, 2000.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
<PAGE>
RETROSPETTIVA, INC. AND SUBSIDIARY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------------------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 85,857 $ 20,342
Accounts receivable, net, pledged 1,088,811 1,767,590
Due from factor 742,950 923,074
Note receivable, current portion,pledged 36,000 27,000
Note receivable, stockholder,pledged 300,160 304,156
Inventories, pledged 10,253,949 9,166,861
Income taxes receivable 72,949 85,007
Accrued interest receivable, stockholder 78,551 78,551
Due from vendors 580,882 446,520
Product development costs 179,721 306,573
Other current assets 87,812 87,812
------------------------------------
Total Current Assets 13,507,642 13,213,486
PROPERTY AND EQUIPMENT, at cost, net 1,085,117 1,056,340
NOTES RECEIVABLE, net of current portion 50,851 50,851
DEFERRED TAX ASSETS 47,000 47,000
OTHER ASSETS 18,295 18,295
------------------------------------
$ 14,708,905 $ 14,385,972
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 3,126,098 $ 2,479,481
Line of credit 2,110,817 2,245,988
Vendor Advances - 104,588
Accrued expenses 45,621 37,220
Payroll taxes payable - 12,306
Customer advances - 50,000
------------------------------------
Total Current Liabilities 5,282,536 4,929,583
------------------------------------
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 3,177,916 shares 6,765,480 6,765,480
Subscription receivable (164,790) (164,790)
Additional paid-in capital 230,000 230,000
Retained earnings 2,595,679 2,625,699
------------------------------------
Total Stockholders' Equity 9,426,369 9,456,389
------------------------------------
$ 14,708,905 $ 14,385,972
====================================
</TABLE>
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RETROSPETTIVA, INC. AND SUBSIDIARY
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 2000
-------------------------------
<S> <C> <C>
SALES $ 8,219,114 $ 6,429,651
-------------------------------
Total Sales 8,219,114 6,429,651
COST OF SALES 7,251,725 5,510,954
-------------------------------
GROSS PROFIT 967,389 918,697
OPERATING EXPENSES
Selling expenses 133,380 178,380
General and administrative 492,014 606,446
-------------------------------
Total Operating Expenses 625,394 784,826
-------------------------------
INCOME FROM OPERATIONS 341,995 133,871
OTHER INCOME (EXPENSES)
Interest income 2,573 197
Interest income, related party 7,932 -
Interest expense (41,353) (105,368)
Other income 35,497 1,320
Net Other Income (Expenses) 4,649 (103,851)
-------------------------------
INCOME BEFORE INCOME TAXES 346,644 30,020
PROVISION FOR INCOME TAXES 134,000 -
-------------------------------
NET INCOME $ 212,644 $ 30,020
-------------------------------
NET INCOME PER SHARE, BASIC $ 0.07 $ 0.01
===============================
WEIGHTED AVERAGE NUMBERS OF SHARES
OUTSTANDING, BASIC 2,954,778 3,103,198
===============================
NET INCOME PER SHARE, DILUTED $ 0.06 $ 0.01
===============================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, DILUTED 3,291,457 3,648,157
===============================
</TABLE>
<PAGE>
RETROSPETTIVA, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 2000
-----------------------------------------
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net income $ 212,644 $ 30,020
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 6,870 34,330
Changes in:
Accounts receivable (1,114,619) (678,779)
Prepaid income taxes 82,016 (12,058)
Due from factor (866,485) (180,124)
Accrued interest receivable, shareholder (7,932) -
Product development cost - (126,852)
Advances to vendor (203,220) 134,362
Inventories 2,244,032 1,087,088
Accounts payable and accrued expenses (381,882) (655,018)
Accrued income taxes 8,109 -
Customer advances 50,000
Accrued payroll taxes - 12,306
-----------------------------------------
Cash flows (used) by operating activities (20,467) (304,725)
-----------------------------------------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of fixed assets (8,215) (5,552)
Payments on notes receivable - 9,000
-----------------------------------------
Cash flows provided (used) by investing activities (8,215) 3,448
-----------------------------------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Vendor advance 0 104,588
Loans to stockholder (25,553) (3,996)
Proceeds from line of credit 100,007 135,171
Payments on note payable (26,580) -
Proceeds from issuance of common stock 212,500 -
-----------------------------------------
Cash flows provided by financing activities 260,374 235,763
-----------------------------------------
NET INCREASE (DECREASE) IN CASH 231,692 (65,514)
CASH IN BANK, beginning of period 115,890 85,857
-----------------------------------------
CASH IN BANK, end of period $ 347,582 $ 20,343
=========================================
</TABLE>
<PAGE>
RETROSPETTIVA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying reviewed financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions for Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
In the opinion of management, the financial statements contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations, and cash flows
of the Company for the interim periods presented.
The results for the three months ended March 31, 2000 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's Form
10-KSB filed with the Securities and Exchange Commission for the year ended
December 31, 1999.
NOTE 2 - INVENTORIES
Inventories at March 31, 2000 consisted of the following:
<TABLE>
<S> <C>
Raw Material $2,328,529
Work-in-process 5,639,237
Finished goods 1,199,095
-------------
Total $9,166,861
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company contracts for the manufacture of a variety of garments, primarily
basic women's sportswear which includes suits, skirts, blouses, blazers,
pants, shorts, vests and dresses, using assorted fabrics including rayons,
linens, cotton and wool. The Company arranges for the manufacture of garments
for customers under private labels selected by its customers. It markets its
products exclusively in the United States directly to large wholesalers
directly and indirectly to national retailers and buying organizations, and
directly to women's chain clothing stores and catalogues.
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 Item 1.
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 finished garment. Since the Company manufactures its finished
products only upon receipt of purchase orders from its wholesale and retail
customers, it therefore does not maintain an inventory of finished products.
The Company believes that in this way 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 (primarily located in Macedonia)
where they are manufactured into finished garments under the Company's
management and quality control guidance. The finished products are then
shipped directly to New York City where the Company's customers claim the
goods either at the port in New York City or at a consolidating warehouse in
Astoria, New York.
Except for historical information contained herein, the matters set forth may
include forward-looking statements that are subject to risks and uncertainty
that may cause actual results to differ materially. Such forward-looking
statements that may be contained in this document could include in particular
statements concerning business back-logs, operating efficiencies and
capacities, capital spending, and other expenses. Among other factors that
could cause actual results to differ materially are the following; dependence
upon unaffiliated manufacturers and fabric suppliers, dependence on certain
customers, foreign operations, competition, risks associated with significant
growth, uncertainties in apparel industry, general economic conditions,
seasonality, political instability, concentration of accounts receivable and
possible fluctuations in operating results.
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;
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 2000
---------------------------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of goods sold 88.2% 85.7%
Gross profit 11.8% 14.3%
Selling, General and Administrative 7.6% 12.2%
Operating income 4.2% 2.1%
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 ("2000") COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999 ("1999")
SALES
Sales for 2000 were $6,429,651 which represented a decrease of $1,789,463 or
21.8% from 1999 net sales of $8,219,114. The decrease in sales was primarily
attributable to decreased purchases by existing customers. The Company has a
backlog of orders for approximately $700,000 that it expects to fulfill early
in the second quarter.
COST OF GOODS SOLD
Cost of goods sold in 2000 was $5,510,954 or 85.7% of sales, a decrease of
$1,740,771 from $7,251,725 or 24% of sales in 1999. The decrease in cost of
goods sold was primarily attributable to the decrease in sales. The decrease
in the percentage of cost of goods sold was primarily attributable to
decreases in cost of materials and shipping expenses.
GROSS PROFIT
Gross profit was $918,697 for 2000, a decrease of $48,692 from $967,389 for
1999. The gross profit percentage was 14.3% in 2000, an increase from 11.8%
in 1999. The increase in the gross profit percentage was primarily
attributable to decreased cost of materials and shipping expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses were $784,826 or 12.2%
of sales for 2000, an increase of $159,432 from $625,394 or 7.6% of sales for
1999. The increase in SG&A expense levels was primarily attributable to
payments related to factoring, office salaries, travel and trade shows.
INTEREST EXPENSE
Interest expense for 2000 was $105,368 compared to $41,353 for 1999. The
increase in interest was primarily attributable to the increase in the
utilization of existing financing vehicles.
PROVISION FOR INCOME TAXES
There was no provision for income taxes for 2000 compared to $134,000 for
1999. The decrease in the provision for income taxes for 2000 was primarily
attributable to decreased earnings.
<PAGE>
LIQUIDITY
The Company has 575,000 warrants outstanding with an exercise price of $7.50
per warrant expiring September 23, 2002. The Company has 50,000 underwriter
warrants outstanding with an exercise price of $14.40 per unit. Each unit
consists of two shares of the Company's common stock and one warrant as
described above. The Company does not know whether the warrants will be
exercised in 1999. Without exercise of those warrants, the Company may need
to limit its growth in order to more efficiently manage its available funds
and funds generated by operations.
It is the Company's intention, however, to utilize more fully and possibly
increase its existing line of credit with a major lending institution and its
credit facility arrangement with a New York factoring company. These measures
are required due to the significant cash requirements related to increases in
revenues.
The Company does not expect its historical rate of increase in sales growth
to continue and further expects its rate of growth to be lower in the future
as it begins to reach its full operating capacity constraints and utilization
of its existing capital resources. In the event the Company is able to obtain
additional equity capital through the exercise, if any, of its outstanding
warrants or other increases in potential working capital as mentioned above,
however, the Company believes that this new working capital may allow it to
grow more quickly.
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, bridge loans, a private
placement and its IPO.
The initial use of IPO funds was to repay certain debt and to purchase raw
materials, for working capital and the eventual purchase of wool
manufacturing equipment. The Company's primary need for cash is for working
capital purposes. The Company 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. There can be no
assurance that acceptable financing for future transactions can be obtained.
INFLATION
The Company does not anticipate a significant increase in inflation in the
United States over the short-term. All of the Company's transactions
worldwide are conducted on a dollar-denominated basis which is intended to
mitigate the possible impact of volatile currencies that may arise as a
result of global corporations crowding emerging markets in search of growth.
SEASONALITY
The Company's revenues and operating results have exhibited some degree of
seasonality in past periods.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
CHANGES IN SECURITIES
<PAGE>
Not applicable
USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: May 9, 2000 RETROSPETTIVA, INC.
-------------------
(Registrant)
/s/ Hamid Vaghar
--------------------------------
Hamid Vaghar
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
RETROSPETTIVA, INC. 10QSB FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 20,342
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 9,166,861
<CURRENT-ASSETS> 13,213,486
<PP&E> 1,056,340
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,385,972
<CURRENT-LIABILITIES> 4,929,583
<BONDS> 0
0
0
<COMMON> 6,765,480
<OTHER-SE> 2,690,909
<TOTAL-LIABILITY-AND-EQUITY> 14,385,972
<SALES> 6,429,651
<TOTAL-REVENUES> 6,429,651
<CGS> 5,510,954
<TOTAL-COSTS> 6,295,780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,368
<INCOME-PRETAX> 30,020
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,020
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
