10QSB 1 a2057642z10qsb.txt FORM 10-QSB 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 JUNE 30, 2001 [ ] 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, 3,479,916 shares as of August 1, 2001. Transitional Small Business Disclosure Format: Yes [ ] No [ X ] RETROSPETTIVA, INC. AND SUBSIDIARY FORM 10-QSB INDEX
Part I Financial Information Page Item 1. Financial Statements: Balance Sheets as of June 30, 2001 and December 31, 2000 1 Statements of Operations for the Three Months and Six Months Ended June 30, 2001 and 2000 2 Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 3 Notes to Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II Other Information and Signatures 6
RETROSPETTIVA, INC. AND SUBSIDIARY BALANCE SHEETS ASSETS
DECEMBER 31, JUNE 30, 2000 2001 ------------ ------------ (UNAUDITED) CURRENT ASSETS Cash $ 26,069 $ 43,713 Accounts receivable, net, pledged 247,084 366,940 Due from factor 164,471 87,058 Note receivable, stockholder, pledged 156,997 1,030 Inventories, pledged 8,368,237 -- Income taxes receivable 955,714 406,243 Other current assets 112,537 112,537 ------------ ------------ Total Current Assets 10,031,109 1,017,521 PROPERTY AND EQUIPMENT, at cost, net 1,030,565 2,250 Restricted investment, pledged 300,000 -- OTHER ASSETS 18,845 18,845 ------------ ------------ $ 11,380,519 $ 1,038,616 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable, trade $ 2,530,447 $ 1,335,004 Line of credit 2,274,376 1,049,528 Accrued expenses 101,859 -- Payroll taxes payable -- 10,906 ------------ ------------ Total Current Liabilities 4,906,682 2,395,438 ------------ ------------ 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; 3,479,916 issued and outstanding 6,892,820 6,892,820 Subscription receivable (164,790) -- Additional paid-in capital 230,000 230,000 Retained earnings (484,193) (8,479,642) ------------ ------------ Total Stockholders' Equity 6,473,837 (1,356,822) ------------ ------------ $ 11,380,519 $ 1,038,616 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 1 RETROSPETTIVA, INC. AND SUBSIDIARY STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ DISCONTINUED OPERATIONS Income (Loss) from operations (7,702,090) (410,542) (7,813,783) (390,521) ------------ ------------ ------------ ------------ NET (LOSS) $ (7,702,090) $ (410,542) $ (7,813,783) $ (390,521) ------------ ------------ ------------ ------------ NET (LOSS) PER SHARE, BASIC $ (2.21) $ (0.13) $ (2.25) $ (0.12) ============ ============ ============ ============ WEIGHTED AVERAGE NUMBERS OF SHARES OUTSTANDING, BASIC AND DILUTED 3,479,916 3,177,916 3,479,916 3,177,916 ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 2 RETROSPETTIVA, INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 2001 ------------ ------------ CASH FLOWS FROM (TO) OPERATING ACTIVITIES Net (loss) $ (390,521) $ (7,813,783) Adjustments to reconcile net (loss) to net cash provided (used) by operating activities: Bad debt expense -- 164,790 Depreciation and amortization 68,660 72,738 Loss on product development costs 349,457 -- Loss on factory equipment -- 963,777 Subscription receivable deemed uncollectible -- (164,790) Changes in: Accounts receivable (266,978) (119,856) Prepaid income taxes (12,058) 549,470 Due from factor 439,854 77,413 Product development cost (169,736) -- Advances to vendor 124,362 -- Inventories 1,582,088 8,368,238 Other (550) -- Deferred tax assets (201,000) -- Accounts payable and accrued expenses (1,757,334) (1,283,939) Accrued payroll taxes 8,091 (2,455) ------------ ------------ Cash flows provided (used) by operating activities (225,665) 811,603 ------------ ------------ CASH FLOWS FROM (TO) INVESTING ACTIVITIES: Purchase of fixed assets (36,307) (8,200) Stockholder loan repayments 193,913 155,967 Restricted investment -- 300,000 Payments on notes receivable 18,000 -- ------------ ------------ Cash flows provided by investing activities 175,606 447,767 ------------ ------------ CASH FLOWS FROM (TO) FINANCING ACTIVITIES: (Payments) proceeds from line of credit 188,193 (1,224,848) Due to vendor 104,588 -- Other -- (16,878) ------------ ------------ Cash flows provided (used) by financing activities 292,781 (1,241,726) ------------ ------------ NET INCREASE IN CASH 242,722 17,644 CASH IN BANK, beginning of period 85,857 26,069 ------------ ------------ CASH IN BANK, end of period $ 328,579 $ 43,713 ============ ============ Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 93,755 $ 92,156 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 3 RETROSPETTIVA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying consolidated 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 consolidated 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 and six months ended June 30, 2001 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, 2000. NOTE 3 - RECENT DEVELOPMENTS On July 2, 2001, the Company announced that recent events, primarily the war in Macedonia, has forced the company to cease operations and attempt to liquidate its assets. The current civil war in Macedonia has prevented the Company from producing goods there. The Company's day-to-day business has been interrupted by a lack of electric power, shortages of water and fighting between Albanian rebels and Macedonian forces that have reached the cities. This is preventing employees from coming to work and making it practically impossible to produce goods. As a result, the Company had lost most of its orders for goods, was unable to ship completed goods and is unable to access its inventory in Macedonia. As a result of these events, the Company has suspended further operations and is attempting to liquidate its assets in order to pay creditors. It is unlikely that the Company will generate sufficient cash resources to continue in business following the end of hostilities in Macedonia. NOTE 2 - INVENTORIES The Company did not have any inventory at June 30, 2001 The factories that housed a majority of the inventory and equipment owned by the Company were recently destroyed. Attempts to locate usable inventory or equipment was unsuccessful; therefore, these assets were reduced to a net realizable value of zero. 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company contracted for the manufacturing 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 arranged for the manufacturing of garments for customers under private labels selected by its customers. It marketed 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. Since early 2001, when hostilities commenced in Macedonia, the Company has experienced a significant reduction in new purchase orders for its products. This reduction in new purchase orders, together with a substantial loss incurred by the Company for the three and six months ended June 30, 2001 and for the year ended December 31, 2000, has required the Company to reduce its operations and overhead expenses. Such overhead reductions have included the layoff of nine employees and the reduction of general and administrative expenses in the amount of approximately $500,000 on an annualized basis. The Company is in default on its credit facility with the Imperial Bank. The current amount outstanding on the credit facility is $1,049,528. The Company anticipates paying the majority of the amount due under the credit facility from its existing cash flow, during the third quarter of 2001. Due to continuing hostilities in Macedonia continue, new purchase orders have decreased significantly or were canceled and the Company has decided to cease it's manufacturing operations. The Company intends to negotiate settlement of its liablities. 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 Company's main center for production is in Macedonia, which has been the unfortunate victim to armed conflict for most of 2001. The President of the Company visited Macedonia recently to evaluate possibilities of moving the inventory and equipment to another location in another country. At the time of his visit, most of the factories were closed and suspicions of looting were considered. Many parts of the country were unreachable without exposing personnel to serious harm and it was feared the roads were mined by terrorists. On June 30, 2001 the Company decided to cease it's manufacturing operations. The Company is unable to determine if a gain or loss is expected from the final liquidation. The financial statements reflect the discontinued operations for all periods presented. 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 expect the warrants to be exercised in 2001. The Company is dilligently working to collect on its receivables to further reduce the line of credit. 5 The Company is utilizing its line of credit and its credit facility arrangement with a New York factoring company. As of May 11, 2001 the Company was not in compliance with the covenants of the loan and is negotiating repayment terms. CAPITAL RESOURCES Since its formation, the Company has financed its operations and met its capital requirements primarily through its public offering, cash flows from operations, customer advances, exercise of Stock Options and credit facilities. As a result of the Macedonian hostilities, the Company's revenue stream has been discontinued causing it to significantly cut all operations in order to reduce overhead. 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. Typically, the Company experiences its highest sales in the first and fourth quarters and its lowest sales in the second and third quarters. In 2000 the Company experienced its highest sales in the first and third quarters. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS CHANGES IN SECURITIES Not applicable USE OF PROCEEDS Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES 6 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: 8-20-2001 RETROSPETTIVA, INC. ------------------- (Registrant) /s/ Hamid Vaghar ------------------------------- Hamid Vaghar Chief Financial Officer (Principal Accounting Officer) 7