-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NKv8XsL9baMGNOjZF/mc5MYscsXYNEwTiCXWh6DcB+yYTtfb5BhqbxYZXBpIzXFp YRbOBaf16Wh84KJHI29EOg== 0001047469-98-042047.txt : 19981124 0001047469-98-042047.hdr.sgml : 19981124 ACCESSION NUMBER: 0001047469-98-042047 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19981123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RETROSPETTIVA INC CENTRAL INDEX KEY: 0001015383 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 954298051 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 001-13101 FILM NUMBER: 98757811 BUSINESS ADDRESS: STREET 1: 8825 WEST OLYMPIC BLVD CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10QSB/A 1 FORM 10-QSB/A U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A (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, 1998 [ ] 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, 2,900,000 shares as May 11, 1998 Transitional Small Business Disclosure Format: Yes [ ] No [ X ] RETROSPETTIVA, INC. BALANCE SHEETS (UNAUDITED) ASSETS
MARCH 31, DECEMBER 31, 1998 1997 ---------------------------------- CURRENT ASSETS Cash $ 2,582,870 $ 1,569,905 Accounts receivable, net, pledged 1,936,537 2,958,770 Due from factor 533,670 - Note receivable 94,622 115,210 Note receivable, stockholder 349,290 288,496 Inventories, pledged 7,181,666 6,389,896 Advances to vendor 13,392 - Advances for sales commissions 55,000 - Accrued interest receivable, stockholder 32,685 21,042 Other 56,293 79,999 ---------------------------------- Total Current Assets 12,836,024 11,423,318 PROPERTY AND EQUIPMENT, at cost, net 330,431 183,293 DEFERRED TAX ASSETS 34,000 34,000 OTHER ASSETS 4,850 4,610 ---------------------------------- $ 13,205,305 $ 11,645,221 ---------------------------------- ---------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable, trade $ 3,156,618 $ 2,881,620 Line of credit 755,843 95,610 Note payable 131,124 131,124 Accrued expenses 52,392 66,140 Due to factor 354,530 - Accrued income taxes 249,795 160,966 Customer advances - 137,385 ---------------------------------- Total Current Liabilities 4,700,301 3,472,845 ---------------------------------- 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 2,900,000 and 2,900,000 shares, respectively 6,258,190 6,258,190 Additional paid-in capital 230,000 230,000 Retained earnings 2,016,814 1,684,186 ---------------------------------- Total Stockholders Equity 8,505,004 8,172,376 ---------------------------------- $ 13,205,305 $ 11,645,221 ---------------------------------- ----------------------------------
RETROSPETTIVA, INC. STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1998 ---------------------------- SALES $ 4,787,083 $ 8,186,856 SALES, related party 306,774 ---------------------------- Total Sales 5,093,857 8,186,856 COST OF SALES 4,345,060 7,048,883 ---------------------------- GROSS PROFIT 748,797 1,137,973 OPERATING EXPENSES Selling expenses 47,788 98,918 General and administrative 140,264 505,646 ---------------------------- Total Operating Expenses 188,052 604,564 ---------------------------- INCOME FROM OPERATIONS 560,745 533,409 OTHER INCOME (EXPENSES) Interest income 17,739 Interest income, related party 11,642 Interest expense (13,264) (10,162) ---------------------------- Net Other Income (Expenses) (13,264) 19,220 ---------------------------- INCOME BEFORE INCOME TAXES 547,481 552,629 PROVISION FOR INCOME TAXES 219,870 220,000 ---------------------------- NET INCOME $ 327,611 $ 332,629 ---------------------------- NET INCOME PER SHARE, BASIC $ 0.19 $ 0.11 ---------------------------- ---------------------------- WEIGHTED AVERAGE NUMBERS OF SHARES OUTSTANDING, BASIC 1,750,000 2,900,000 ---------------------------- ---------------------------- NET INCOME PER SHARE, DILUTED $ 0.19 $ 0.10 ---------------------------- ---------------------------- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, DILUTED 1,750,000 3,242,528 ---------------------------- ----------------------------
RETROSPETTIVA, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1998 ------------------------------------ CASH FLOWS FROM (TO) OPERATING ACTIVITIES Net income $ 327,611 $ 332,629 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 4,407 11,985 Services provided to reduce note receivable 10,286 Changes in: Accounts receivable 291,083 1,022,233 Accounts receivable, related party 584,707 Due from factor - (533,670) Accrued interest receivable, shareholder - (11,643) Advances to vendor - (13,392) Advances for sales commissiosn - (55,000) Inventories 708,407 (791,770) Other (16,738) 23,466 Accounts payable and accrued expenses (1,054,769) 261,249 Accrued income taxes 181,630 88,830 Customer advances (767,410) (137,385) ------------------------------------ Cash flows provided (used) by operating activities 269,214 197,531 ------------------------------------ CASH FLOWS FROM (TO) INVESTING ACTIVITIES: Purchase of fixed assets - (159,124) Payments on notes receivable 44,593 20,588 ------------------------------------ Cash flows provided (used) by investing activities 44,593 (138,536) ------------------------------------ CASH FLOWS FROM (TO) FINANCING ACTIVITIES: Loans to stockholder (116,027) (81,841) Payments from stockholder - 21,047 Collections on note receivable, stockholder 10,250 Proceeds from line of credit - 660,234 Due to factor - 354,530 Payments on note payable (32,580) Payments for deferred offering costs 72,399 Proceeds from issuance of common stock 382,630 ------------------------------------ Cash flows provided (used) by financing activities 316,672 953,970 ------------------------------------ NET INCREASE (DECREASE) IN CASH 630,479 1,012,965 CASH IN BANK, beginning of period 110,777 1,569,905 ------------------------------------ CASH IN BANK, end of period $ 741,256 $ 2,582,870 ------------------------------------ ------------------------------------
RETROSPETTIVA, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited 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, 1998 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, 1997. 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 (e.g.; V.S. Sports, David N., Synari, Koret of California, Inc., Arenzano Trading Co. aka Oleg Cassini, Nash International Group aka Herman Geist and Prime Time International aka Focus 2000), directly and indirectly to national retailers and buying organizations (e.g.; J.C. Penney, Belk, Casual Corner, Steinmart, Dillards, Seiferts, Parisian, Atkins et al, Mercantile, Loehmanns) and directly to women's chain clothing stores and catalogues (e.g.; Chadwicks, Marshalls, TJ Maxx, Dunlaps Co et al (MMCohn, Paul Steketee, Clarks, Heironimus, Porteous, Schreiners, The White House), Hollidays, Syms, Winners). 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 completed 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 completed 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;
THREE MONTHS ENDED MARCH 31, 1997 1998 --------------------------- Revenues 100.0% 100.0% Cost of goods sold 85.3% 86.1% Gross profit 14.7% 13.9% Selling, General and Administrative 3.7% 6.9% Operating income 11.0% 7.0%
THREE MONTHS ENDED MARCH 31, 1998 ("1998") COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 ("1997") "During the three months ended March 31, 1998, the Company erroneously duplicated recording certain inventory in the amount of $144,000, acquired via letter of credit. The Company used the gross profit method for determining quarterly ending inventory balances. Inventory balances are not adjusted during the month; only purchases and the corresponding payable are adjusted to record the acquisitions of materials. The amended Form 10-QSB reflects an adjustment to reduce accounts payable and inventory by $144,000. There was no effect on net income as a result of this adjustment. The inaccuracy originally reported in Form 10-QSB, was the result of the Company not having formal procedures for accounting for letter of credit activity. The Company began to use letters of credit to finance inventory purchases during the three months ended March 31, 1998. To insure that this problem will not recur, the Company has adopted formal procedures for accounting for letters of credit and related inventory, and has assigned the responsibility for this accounting function to a member of senior management. Additionally, the Company reclassified advances to vendors of $108,000 against certain outstanding payables, upon obtaining information subsequent to March 31, 1998. SALES Sales for 1998 were $8,186,856 which represented an increase of $3,092,999 or 60.7% over 1997 net sales of $5,093,857. Sales of the Company's own labeled products and private label products were $0 and $8,186,856 respectively, in 1998 compared to $306,774 and $4,787,083, respectively, in 1997. The growth in sales was primarily attributable to increased purchases by existing customers and from new 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. COST OF GOODS SOLD Cost of goods sold in 1998 was $7,048,883 or 86.1% of sales, an increase of $2,703,823 from $4,345,060 or 85.3% of sales in 1997. The increase in cost of goods sold was primarily attributable to the increase in sales. The increase in the percentage of cost of goods sold was primarily attributable to increases in freight costs. GROSS PROFIT Gross profit was $1,137,973 for 1998, an increase of $389,176 from $748,797 for 1997. The gross profit percentage was 13.9% in 1998, a decrease from 14.7% in 1997. The decrease in the gross profit percentage was primarily attributable to increased cost of materials and freight costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative ("SG&A") expenses were $604,564 or 7.4% of sales for 1998, an increase of $416,512 from $188,052 or 3.7% of sales for 1997. The increase in SG&A expense levels was primarily attributable to payments related to professional fees, officers salaries, travel expenses, license fees and dues (consisting primarily of the Company's NASDAQ membership fees). INTEREST EXPENSE Interest expense for 1998 was $10,162 compared to $13,264 for 1997. The decrease in interest was primarily attributable to the reduction in the utilization of existing financing vehicles. PROVISION FOR INCOME TAXES The provision for income taxes was $220,000 and $219,870 for 1998 and 1997, respectively. The increase in the provision for income taxes for the 1998 was primarily attributable to increased earnings. 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 1998. 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. Typically, the Company experiences its highest sales in the first and fourth quarters and its lowest sales in the second and third quarters. YEAR 2000 ISSUES Many computer systems in use today were designed and developed using two digits, rather than four, to specify the year. As a result, such systems will recognize the year 2000 as "00". This could cause many computer applications to fail completely or to create erroneous results unless corrective measures are taken. The Company currently uses software and related computer technologies essential to its operations that the Company believes will not be affected by the year 2000 issue. The Company, however, can not determine the extent to which its vendors and customers may or may not be affected by the year 2000 issue. The Company intends over the next 2 years to establish relationships with customers that may require the use of EDI (electronic data interchange) whereby all invoicing and payments will take place electronically over the internet through computers. The Company believes that since these prospective customers already utilize EDI, that they either have in place now, or will have successfully taken whatever steps are necessary to solve the year 2000 issue. 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
USE OF PROCEEDS % of proceeds Sub-Totals Totals ------------- ---------- ------ GROSS PROCEEDS $6,900,000 Less: Underwriters discounts, commissions 10.0% 690,000 Finders' fees - Underwriters expenses 3.0% 207,000 Payments to directors and officers 0.7% 49,376 ------------------------------ Total expenses 13.7% 946,376 ------------------ Net proceeds 5,953,624 USE OF PROCEEDS Construction of plan, building and facilities - Purchase and installation of 4.1% 280,000 machinery and equipment Purchases of real estate - Acquisition of other business(es) - Repayment of indebtedness 8.4% 578,532 Working capital 7.0% 483,104 Temporary investments - Purchases of raw materials 60.7% 4,191,988 ------------------------------ Total use of proceeds 80.2% 5,533,624 ------------------ REMAINING PROCEEDS $ 420,000 ------------------ ------------------
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: November 16, 1998 RETROSPETTIVA, INC. ------------------- (Registrant) ------------------------------ Hamid Vaghar Chief Financial Officer (Principal Accounting Officer) EX-27.03-1 2 EXHIBIT 27.03-1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RETROSPETTIVA'S 10-QSB/A FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 2,582,870 0 2,616,104 145,897 7,181,666 12,836,024 408,823 78,392 13,205,305 4,700,300 0 0 0 6,258,190 2,246,814 13,205,305 8,186,856 8,186,856 7,048,883 7,611,835 0 0 10,161 552,629 220,000 0 0 0 0 332,629 0.11 0.10
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