<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 September 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 September 30, 1996 24,000,000 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) - September 30, 1996 . . . . . . . . . . 1
(b) Statements of Operations (Unaudited) - Nine months
ended September 30, 1996 and 1995 and Period from
Inception (December 1, 1987) to September 30, 1996 . . . . . . . . 2
(c) Statements of Operations (Unaudited) - Three months
ended September 30, 1996 and 1995. . . . . . . . . . . . . . . . . 3
(d) Statement of Stockholders' Equity (Unaudited) -
Period from Inception (December 1, 1987) to September 30, 1996 . . 4
(e) Statements of Cash Flows (Unaudited) - Nine months
ended September 30, 1996 and 1995 and Period from
Inception (December 1, 1987) to September 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)
SEPTEMBER 30,
1996
----
ASSETS
Current assets
Cash and equivalents $813,251
Inventory 84,677
Deposit paid and other 14,995
--------
Total current assets 912,923
Equipment, Furniture & Fixtures, net of accumulated
depreciation of $5,549 30,883
--------
Total assets $943,806
--------
--------
Liabiliites and Stockholders Equity
Current liabilities
Taxes payable 1,489
Total current liabilities 1,489
--------
Stockholders equity
Common stock - $.0001 par value, 50,000,000 shares
authorized, 24,000,000 shares issued and outstanding 2,400
Additional paid in capital 1,375,444
Deficit accumulated during the development stage (435,527)
--------
Total stockholders equity 942,317
--------
Total liabilities and stockholders equity $943,806
--------
--------
See accompanying notes to financial statements.
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
PERIOD FROM
INCEPTION
(DEC. 1, 1987)
TO
NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
SALES $ 4,313 $ 926 $ 17,926
Cost of goods sold 1,251 305 5,994
---------- --------- ---------
Gross profit 3,061 621 11,932
Selling, general, and administrative
expenses 242,575 70,220 491,056
---------- --------- ---------
(Loss) from operations (239,514) (69,599) (479,124)
Interest income 25,197 - 25,197
Litigation settlement income - 20,000 20,000
---------- --------- ---------
Loss before provision for income taxes (214,317) (49,599) (433,927)
Provision for income taxes - 800 1,600
---------- --------- ---------
Net loss $ (214,317) $ (50,399) $(435,527)
---------- --------- ---------
---------- --------- ---------
Net loss per common share $ (0.003) $ (0.01)
---------- ---------
Weighted average number of common shares 24,000,000 3,664,233
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
---- ----
Sales $ 1,389 $ 65
Cost of goods sold 403 21
---------- ---------
Gross profit 986 44
Selling, general, and administrative expenses 71,904 35,728
---------- ---------
Loss from operations (70,918) (35,684)
Interest income 10,278 -
Income (loss) before provision for income taxes (60,640) (35,684)
Provision for income taxes - -
---------- ---------
Net income (loss) $ (60,640) $ (35,684)
---------- ---------
---------- ---------
Net loss per common share $ (0.003) $ (0.01)
---------- ---------
---------- ---------
Weighted average number of common shares 24,000,000 3,494,506
---------- ---------
---------- ---------
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 SEPTEMBER 30, 1996
<TABLE>
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 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
Common stock exchanged for
Preferred stock (100,000) (100) 20,000,000 2,000 $ (1,900)
Net loss, nine months -- -- -- -- -- -- (214,317) (214,317)
-------- ----- ---------- ------- ---------- ----------- --------- -----------
Balance, September 30, 1996 -- -- 24,000,000 $ 2,400 $1,375,444 -- $ 435,527 $ 942,317
-------- ----- ---------- ------- ---------- ----------- --------- -----------
-------- ----- ---------- ------- ---------- ----------- --------- -----------
</TABLE>
See accompanying notes to financial statements
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
PERIOD FROM
INCEPTION
NINE MONTHS ENDED (DEC. 1, 1987)
SEPTEMBER 30, TO
----------------------- SEPTEMBER 30,
1996 1995 1996
--------- ---------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(214,317) $ (50,399) $ (435,527)
Adjustments to reconcile net loss
to net cash used in operating
activities
Depreciation 2,826 450 5,549
(Increase) in inventory (42,527) (11,578) (84,677)
Decrease (increase) in prepaid
expenses and other 20,879 (10,000) (8,459)
(Increase) decrease in deposits (3,422) 2,800 (6,536)
Increase (decrease) in accounts
payable, loans payable, and
accrued salary (27,662) 23,696 1,488
--------- ---------- ----------
Net cash used in operating
activities (264,223) (45,031) (528,162)
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, furniture &
fixtures, and leasehold
improvements (28,358) - (36,431)
--------- ---------- ----------
Net cash used in investments (28,358) - (36,431)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from MMI settlement
agreement 400,125 250,000 1,250,000
Net proceeds from initial public
offering - - 91,090
Loans and paid in capital from
preferred stockholder - 1,000 36,754
--------- ---------- ----------
Net cash provided by financing
activities 400,125 251,000 1,377,844
--------- ---------- ----------
Net increase (decrease) in cash and
equivalents 107,544 205,969 813,251
Cash and equivalents at beginning
of period 705,707 12,874 -
--------- ---------- ----------
Cash and equivalents at end of
period $813,251 $ 218,843 $ 813,251
--------- ---------- ----------
--------- ---------- ----------
Supplemental information of non-cash
investing and financing activities:
exercise of warrants and related
settlement agreement $ - $1,000,000 $1,250,000
--------- ---------- ----------
--------- ---------- ----------
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 September 30, 1996 and for the periods ended
September, 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 Releasewith 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 September 30, 1996, revenues exceeded revenues
for the three month period ended September 30, 1995, as a result of sales
from the Company's two boutiques, one in operation since May of 1996 and
one in operation since September 1996. For the nine month period ended
September 30, 1996, revenues exceeded revenues for the nine month period
ended September 30, 1995, due to both sales from the boutiques 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 and from the
downtown Los Angeles 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, expenses in
conjunction with the refurbishment and opening of the downtown boutique,
and also due to increased payroll expenses.
Due to the Company's limited operations, management does not believe that
historical revenues, margins, or expenses for the period ended September
30, 1996, are indicative of future operating results.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the three month period ended September 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
September 30, 1996, as the Company produced and purchased products for
sale. Interest income increased during the three month period ended
September 30, 1996.
The Company's available cash at September 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
The rights of the holder of the Series A Preferred stock (the entire issue
of 100,000 shares being held by the President, Raquel Zepeda) have been
amended by the Board of Directors to allow the conversion of said Series A
Preferred stock into common stock at the rate of one share of Series A
Preferred stock for 200 shares of Common stock at any time.
The Board of Directors has further directed the Corporation to issue
20,000,000 shares of common stock to the President, Raquel Zepeda, in
exchange for the 100,000 shares of Series A Preferred stock held by her,
and to retire the said Series A Preferred stock. This brings the total of
issued and outstanding common stock of the Corporation to 24,000,000
shares. This action is anticipated to have a material dilutive effect on
the holders of the Corporation's outstanding common stock.
<PAGE>
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
Item 5. OTHER INFORMATION
The Corporation mailed a Proxy and Information Statement and 1995 Annual
Report to its' stockholders of record (as of August 15, 1996) commencing on
September 26, 1996 in preparation for the Annual Meeting of Stockholders on
October 12, 1996.
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: November 9, 1996 By: /s/ RAQUEL ZEPEDA
--------------------------------------
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 SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 813,251
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 84,677
<CURRENT-ASSETS> 912,923
<PP&E> 30,883
<DEPRECIATION> 5,549
<TOTAL-ASSETS> 943,806
<CURRENT-LIABILITIES> 1,489
<BONDS> 0
0
0
<COMMON> 2,400
<OTHER-SE> 939,917
<TOTAL-LIABILITY-AND-EQUITY> 943,806
<SALES> 1,389
<TOTAL-REVENUES> 11,667
<CGS> 403
<TOTAL-COSTS> 403
<OTHER-EXPENSES> 71,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (60,640)
<INCOME-TAX> 0
<INCOME-CONTINUING> (60,640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60,640)
<EPS-PRIMARY> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
