<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to _______
Commission File Number 0-24798
COLECCIONES DE RAQUEL, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 93-1123005
- ------------------------------------ -----------------------------
(State or other jurisdiction of (IRS Employer
of Incorporation) Identification Number)
9873 S. Santa Monica Blvd., Beverly Hills, California 90212
-------------------------------------------------------------------
(Address of principal executive offices)
(310) 203-9240
---------------------------
(Issuer's telephone number)
---------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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
----- -----
At June 30, 1996, 4,000,000 shares of the Company's $.0001 par value common
stock were outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements PAGE
----
(a) Balance Sheet (Unaudited) - June 30, 1996 ...................... 1
(b) Statements of Operations (Unaudited) - Six months
ended June 30, 1996 and 1995 and Period from
Inception (December 1, 1987) to June 30, 1996 .................. 2
(c) Statements of Operations (Unaudited) - Three months
ended June 30, 1996 and 1995.................................... 3
(d) Statement of Stockholders' Equity (Unaudited) -
Period from Inception (December 1, 1987) to June 30, 1996 ...... 4
(e) Statements of Cash Flows (Unaudited) - Six months
ended June 30, 1996 and 1995 and Period from
Inception (December 1, 1987) to June 30, 1996................... 5
(e) Notes to Unaudited Financial Statements ........................ 6
ITEM 2. Management's Discussion and Analysis or
Plan of Operation .............................................. 8
PART II - OTHER INFORMATION .............................................. 9
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1996
----
<S> <C>
ASSETS
Current assets
Cash and equivalents $890,021
Accounts receivable 5,000
Inventory 78,204
Prepaid expenses and other 10,219
----------
Total current assets 983,444
Equipment, net of accumulated depreciation of $4,409 23,833
----------
Total assets $1,007,277
----------
----------
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Accounts payable $2,947
Taxes payable 1,373
----------
Total current liabilities 4,320
----------
Stockholders equity
Preferred stock - $ .001 par value, 10,000,000 shares authorized,
100,000 shares issued and outstanding 100
Common stock - $ .0001 par value, 50,000,000 shares authorized,
4,000,000 shares issued and outstanding 400
Additional paid in capital 1,377,344
Deficit accumulated during the development stage (374,887)
----------
Total stockholders equity 1,002,957
----------
Total liabilities and stockholders equity $1,007,277
----------
----------
</TABLE>
See accompanying notes to financial statements
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period from
Inception
(Dec. 1, 1987)
Six Months Ended June 30, to
------------------------- June 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Sales $2,923 $861 $16,537
Cost of goods sold 848 284 5,591
--------- -------- ---------
Gross profit 2,075 577 10,946
Selling, general, and administrative expenses 170,671 34,492 419,152
--------- -------- ---------
(Loss) from operations (168,596) (33,915) (408,206)
Interest income 14,919 -- 14,919
Litigation settlement income -- 20,000 20,000
--------- -------- ---------
Loss before provision for income taxes (153,677) (13,915) (373,287)
Provision for income taxes -- 800 1,600
-------- ---------
Net loss ($153,677) ($14,715) ($374,887)
--------- -------- ---------
--------- -------- ---------
Net loss per common share ($0.04) ($ -- )
--------- --------
--------- --------
Weighted average number of common shares 4,000,000 3,494,506
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to financial statements
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------
1996 1995
---- ----
<S> <C> <C>
Sales $554 $122
Cost of goods sold 85 40
--------- ---------
Gross profit 469 82
Selling, general, and administrative expenses 86,188 18,403
--------- ---------
Loss from operations (85,719) (18,321)
Interest income 10,097 --
Litigation settlement income -- 20,000
--------- ---------
Income (loss) before provision for income taxes (75,622) 1,679
Provision for income taxes -- --
--------- ---------
Net income (loss) ($75,622) $1,679
--------- ---------
--------- ---------
Net loss per common share ($0.02) $ --
--------- ---------
--------- ---------
Weighted average number of common shares 4,000,000 3,494,506
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to financial statements
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period from December 1, 1987 (inception) to June 30, 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------- ------------------- Additional MMI Deficit During Net
Number of Number of Paid-in Settlement Development Shareholders'
Shares Amount Shares Amount Capital Agreement Stage Equity
--------- ------ --------- ------ ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net loss from inception
through December 31, 1993 -- $ -- -- $ -- $ -- $ -- ($36,640) ($36,640)
------- ---- ---------- ---- ---------- ---------- --------- ----------
Balance, December 31, 1993 -- -- -- -- -- -- (36,640) (36,640)
Common stock issued in
reorganization -- -- 20,000,000 2,000 34,754 -- -- 36,754
Common stock issued in
initial public offering -- -- 1,000,000 100 90,990 -- -- 91,090
Preferred stock exchanged for
common stock in connection
with initial public offering 100,000 100 (20,000,000) (2,000) 1,900 -- -- --
Exercise of A Warrants -- -- 1,000,000 100 249,900 -- -- 250,000
MMI settlement Agreement -- -- -- -- -- (250,000) -- (250,000)
Net loss, 1994 -- -- -- -- -- -- (58,052) (58,052)
------- ---- ---------- ---- ---------- ---------- --------- ----------
Balance, December 31, 1994 100,000 $100 2,000,000 $200 $377,544 ($250,000) ($94,692) $33,152
Exercise of B Warrants -- -- 2,000,000 200 999,800 -- -- 1,000,000
MMI settlement Agreement -- -- -- -- -- (1,000,000) -- (1,000,000)
Cash received from MMI -- -- -- -- -- 849,875 -- 849,875
Net loss, 1995 -- -- -- -- -- -- (126,518) (126,518)
------- ---- ---------- ---- ---------- ---------- --------- ----------
Balance, December 31, 1995 100,000 $100 4,000,000 $400 $1,377,344 ($400,125) ($221,210) $756,509
Cash received from MMI -- -- -- -- -- 400,125 -- 400,125
Net loss, six months -- -- -- -- -- -- (153,677) (153,677)
------- ---- ---------- ---- ---------- ---------- --------- ----------
Balance, June 30,1996 100,000 $100 4,000,000 $400 $1,377,344 -- ($374,887) $1,002,957
------- ---- ---------- ---- ---------- ---------- --------- ----------
------- ---- ---------- ---- ---------- ---------- --------- ----------
</TABLE>
See accompanying notes to financial statements
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Period from
Inception
(Dec. 1, 1987)
Six Months Ended June 30, to
--------------------------- June 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($153,677) ($14,715) ($374,887)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 1,686 300 4,449
(Increase) in inventory (36,053) (2,589) (78,204)
Decrease (increase) in prepaid expenses
and other 22,902 (20,000) (6,435)
(Increase) decrease in deposits (5,670) 5,000 (8,784)
Increase (decrease) in accounts payable
and loans payable (13,329) 3,947 632
Increase (decrease) accrued salary (15,149) 15,676 --
--------- ---------- ----------
Net cash used in operating activities (199,290) (12,381) (463,229)
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (6,805) -- (18,526)
Leasehold improvements (9,716) -- (9,716)
--------- ---------- ----------
Net cash used in investments (16,521) -- (28,242)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from MMI settlement agreement 400,125 -- 1,250,000
Net proceeds from initial public offering -- -- 91,090
Loans and paid in capital from preferred
stockholder -- 1,000 40,402
--------- ---------- ----------
Net cash provided by financing activities 400,125 1,000 1,381,492
--------- ---------- ----------
Net increase (decrease) in cash and equivalents 184,314 (11,381) 890,021
Cash and equivalents at beginning of period 705,707 12,874 --
--------- ---------- ----------
Cash and equivalents at end of period $890,021 $1,493 $890,021
--------- ---------- ----------
--------- ---------- ----------
Supplemental information of non-cash
investing and financing activities: exercise
of warrants and related settlement agreement $ -- $1,000,000 $1,250,000
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See accompanying notes to financial statements
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BUSINESS
COLECCIONES DE RAQUEL, INC. (the "Company") designs and markets cosmetics,
skin care, fragrance, and lingerie. The Company's cosmetics line is
specifically designed for golden skin tones and olive complexions.
2. UNAUDITED FINANCIAL STATEMENTS
The financial statements as of June 30, 1996 and for the periods ended
June 30, 1996 and 1995 included heron are unaudited; however, such
information reflects all adjustments consisting of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
presentation of the information for such periods. In addition, the results
of operation for the interim periods are not necessarily indicative of
results for the entire year. The accompanying financial statements
should be read in conjunction with the Company's annual report filed on
Form 10-KSB.
3. WARRANTS AND RELATED SETTLEMENT AGREEMENT
In August 1994, the Company completed an initial public offering of its
securities. The Company sold 1,000,000 units at $.10 per unit for
gross proceeds of $100,000 on a self-underwritten basis. Expenses
of the offering were $8,910. Each unit consists of one share of common
stock and one Class A Warrant. The Class A Warrants were exercisable for
one share of common stock and two Class B Warrants at a price of $.25
each. The Class B Warrants were exercisable for one share of common stock
and one Class C Warrant at a price of $.50 each. The Class C Warrants
were to be exercisable for one share of common stock at a price of $1.00
each.
In November 1994, all of the A Warrants were exercised in a transaction
which the Company claims was fraudulent. Although the Company received no
portion of the $250,000 exercise price, Units consisting of one share of
common stock and two B Warrants were issued by the Company's transfer
agent without the knowledge of the Company's officers or directors to
persons purportedly exercising the A Warrants.
In February 1995, all of the B Warrants were exercised in a transaction
which the Company claims was fraudulent. Although the Company received no
portion of the $1,000,000 exercise price, Units consisting of one
share of common stock and one C Warrant were issued by the Company's
transfer agent without the knowledge of the Company's officers or directors
to persons purportedly exercising the B Warrants.
The shares of common stock issued in the Company's initial public offering
and upon exercise of the A Warrants and B Warrants (collectively, "Shares")
have been publicly traded. Although the C Warrants were also purportedly
exercised without the receipt by the Company of the exercise price, the
Company believes that the shares issued upon exercise of the C Warrants
were not traded and the Company has canceled the C Warrants and the shares
issued upon their exercise.
In September 1995, the Company entered into an Agreement with Moore
McKenzie, Inc., a Philippine corporation ("MMI"), which purchased and
resold the shares following their
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. WARRANTS AND RELATED SETTLEMENT AGREEMENT (CONTINUED)
exercise by third party entities. MMI has expressly denied any involvement
in the exercise of the A Warrants, B Warrants, and C Warrants. Solely for
the purpose of protecting and preserving its investment in the Shares and
its reputation and goodwill, MMI agreed to pay the Company the exercise
price of the A Warrants ($250,000) and B Warrants ($1,000,000). As of
June 30, 1996, the Company had received all of the settlement.
The Company has agreed within one year of the Agreement to sell MMI an
additional 1,000,000 shares of common stock at a price of $1.00 per share
in place of the shares which could have been purchased upon exercise of the
C Warrants which were issued upon exercise of the B Warrants and
subsequently canceled by the Company. As part of the Agreement with MMI,
the Company has consented to MMI commencing legal proceedings in the name
of MMI or the Company against third parties to recover MMI's damages
suffered as a result of or in connection with MMI's purchase of the Shares
and has agreed to assist and cooperate with MMI in any such action.
4. LEGAL PROCEEDING
On December 8, 1993, Raquel Zepeda dba Colecciones de Raquel, a California
sole proprietorship, filed a civil action in the State of California
Superior Court, Los Angeles County, against Rixima, Inc. ("Rixima") and
J.C. Penny, Inc., alleging violation of the Lanham Act, trade name
infringement, unfair competition, invasion of privacy and conspiracy,
claiming that Rixima had used Ms. Zepeda's likeness in connection with the
marketing of cosmetic products using its "Raquel" and "Raquelle"
trademarks. Ms. Zepeda also filed an objection to the trademark
applications filed by Rixima. Rixima removed the action to the United
States District Court, Central District of California.
On June 20, 1995, Ms. Zepeda entered into a Settlement Agreement and
General Mutual Release with Rixima pursuant to which Ms. Zepeda agreed to
dismiss the action brought against Rixima and the objection to Rixima's
pending trademark applications for "Raquel" and "Raquelle" in consideration
of payment by Rixima of the sum of $20,000. The parties also agreed to a
covenant not to sue which obligates Rixima not to sue Ms. Zepeda or the
Company for trademark infringement or unfair competition in connection with
the sale of its line of cosmetic products to Hispanic women. The Company
and Rixima are negotiating an Amended Covenant Not to Sue for the purpose
of clarifying that the Company is bound by the covenant and permitting the
Company to use "Colecciones de Raquel" in connection with any product.
5. LEASE
In May 1996, the Company entered into a three year lease for a 900 square
foot store front in downtown Los Angeles, California. Monthly rent for
the space, which the Company is utilizing for its second showroom/boutique
location, is $1,451 per month.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Although the Company continued to have limited operations and sales during
the three month period ended June 30, 1996, revenues exceeded revenues for
the three month period ended June 30, 1995, as a result of sales from the
Company's boutique, in operation since May of 1996. For the six month period
ended June 30, 1996, revenues exceeded revenues for the six month period
ended June 30, 1995, due to both sales from the boutique and from the
test-marketing of the Company's fragrance "Sabor A Mi, Melody of Eternal
Passion" during January and February of 1996. The test marketing was
terminated and the Company's full line of cosmetics, skincare, fragrance, and
lingerie is now sold from the Beverly Hills boutique.
Selling, general, and administrative expenses increased substantially over
those for the three month period for the prior year. The increase was
largely due to accounting and legal expenses in conjunction with the filing
of reports under the Securities Exchange Act of 1934, and also due to
increased payroll expenses. The Company has also entered into a three year
lease for a second boutique location.
Due to the Company's limited operations, management does not believe that
historical revenues, margins, or expenses for the period ended June 30, 1996,
are indicative of future operating results.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the three month period ended June 30, 1996, the Company's cash
position decreased due to the continued low level of sales relative to its
cost of operations, without any offsetting inflows from financing activities.
Inventory levels increased for the three month period ended June 30, 1996,
as the Company produced and purchased products for sale. Interest income
increased during the three month period ended June 30, 1996.
During the three month period ended June 30, 1996, the Company entered into a
three-year lease for a second boutique location in the financial district of
downtown Los Angeles. Monthly rent for the 900 square foot storefront is
$1,451.
The Company's available cash at June 30, 1996, is expected to be sufficient
to defray the Company's operating expenses through calendar year 1996, and
possibly for some time thereafter. At such time as the cash is exhausted,
the Company's continued existence will be dependent on its ability to
generate significant product sales and ultimately to achieve profitable
operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
On December 8, 1993, Raquel Zepeda dba Colecciones de Raquel, a California
sole proprietorship, filed a civil action in the State of California
Superior Court, Los Angeles County, against Rixima, Inc. ("Rixima") and J.C.
Penny, Inc., alleging violation of the Lanham Act, trade name infringement,
unfair competition, invasion of privacy and conspiracy, claiming that
Rixima had used Ms. Zepeda's likeness in connection with the marketing of
cosmetic products using its "Raquel" and "Raquelle" trademarks. Ms. Zepeda
also filed an objection to the trademark applications filed by Rixima.
Rixima removed the action to the United States District Court, Central
District of California.
On June 20, 1995, Ms. Zepeda entered into a Settlement Agreement and General
Mutual Release with Rixima pursuant to which Ms. Zepeda agreed to dismiss the
action brought against Rixima and the objection to Rixima's pending trademark
applications for "Raquel" and "Raquelle" in consideration of payment by
Rixima of the sum of $20,000. The parties also agreed to a covenant not to
sue which obligates Rixima not to sue Ms. Zepeda or the Company for trademark
infringement or unfair competition in connection with the sale of its line of
cosmetic products to Hispanic women. The Company and Rixima are negotiating
an Amended Covenant Not to Sue for the purpose of clarifying that the Company
is bound by the covenant and permitting the Company to use "Colecciones de
Raquel" in connection with any product.
Item 2. CHANGES IN SECURITIES
Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
Item 5. OTHER INFORMATION
Inapplicable.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Inapplicable.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period covered by this
report.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
COLECCIONES DE RAQUEL, INC.
(Registrant)
Dated: August 9, 1996 By:
--------------------------------------
Raquel Zepeda, Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
10-QSB FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 890,021
<SECURITIES> 0
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 78,204
<CURRENT-ASSETS> 983,444
<PP&E> 23,833
<DEPRECIATION> 4,409
<TOTAL-ASSETS> 1,007,277
<CURRENT-LIABILITIES> 4,320
<BONDS> 0
0
100
<COMMON> 400
<OTHER-SE> 1,002,457
<TOTAL-LIABILITY-AND-EQUITY> 1,007,277
<SALES> 554
<TOTAL-REVENUES> 10,651
<CGS> 85
<TOTAL-COSTS> 85
<OTHER-EXPENSES> 86,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (75,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (75,622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,622)
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
