<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 AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] 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 (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, 1997, 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, 1997 . . . . . . . . . . . 1
(b) Statements of Operations (Unaudited) - Nine Months
ended September 30, 1997 and 1996 Period from
Inception (December 1, 1987) to September 30, 1997. . . . . . . . . 2
(c) Statements of Cash Flows (Unaudited) -Third Quarters
ended September 30, 1997 and 1996 and Prior 1997 Second Quarter . . 3
(d) Statement of Stockholder's Equity (Unaudited) -
Period from Inception (December 1, 1987) to September 30, 1997. . . 4
(e) Statements of Cash Flows (Unaudited) - Nine Months
ended September 30, 1997 and 1996 and Period from
Inception (December 1, 1987) to September 30, 1997. . . . . . . . . 5
(f) Notes to Unaudited Financial Statements . . . . . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 9
ii
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
SEPTEMBER 30, 1997
-------------------
ASSETS
Current Assets
Cash and equivalents $518,772
Inventory 73,090
Deposits paid and other assets 20,655
--------
Total Current Assets $612,517
Equipment, Furniture & Fixtures, net of accum. depr. $16,607 26,953
--------
Total Assets $639,470
--------
--------
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $5,554
Taxes payable 650
Total current liabilities $6,204
Stockholder's 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 (744,578)
Total stockholder's equity 633,266
Total liabilities and stockholder's equity $639,470
--------
--------
See accompanying notes to financial statements
1
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION(DEC.1, 1987)
TO
NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997
---------- --------- ------------
<S> <C> <C> <C>
Sales 5,787 4,313 24,965
Cost of Goods Sold 2,293 1,251 8,961
---------- ---------- ---------
Gross Profit 3,494 3,061 16,004
Selling, general, and administrative expenses 241,837 242,575 836,403
---------- ---------- ---------
(Loss) from operations (238,342) (239,514) (820,339)
Interest Income 23,111 25,197 58,162
Litigation settlement income 20,000
Loss before provision for income taxes (215,231) (214,317) (742,177)
Provision for income taxes 2,400
Net Loss ($215,231) ($214,317) ($744,578)
---------- ---------- ---------
---------- ---------- ---------
Net Loss per share ($.001) ($.003)
---------- ---------- ---------
---------- ---------- ---------
Weighted average number of common shares 24,000,000 24,000,000
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THIRD QUARTER SECOND QUARTER
ENDED SEPTEMBER, ENDED JUNE,
1997 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Sales 1,166 1,390 2,794
Cost of Goods Sold 552 404 1,098
---------- ---------- ---------
Gross Profit 614 986 1,696
Selling, general, and administrative expenses 72,382 71,904 89,510
---------- ---------- ---------
(Loss) from operations (71,768) (70,918) (87,814)
Interest Income 7,173 10,279 7,820
Litigation settlement income
Loss before provision for income taxes (64,595) (60,639) (79,994)
Provision for income taxes
Net Loss ($64,595) ($60,639) (79,994)
---------- ---------- ----------
---------- ---------- ----------
Net Loss per share ($.001) ($.001) ($.001)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares 24,000,000 24,000,000 24,000,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 1, 1987 (INCEPTION) TO SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK DEFICIT
-------------------- ------------------ ADDITIONAL MMI DURING THE TOTAL
NUMBER NUMBER PAID-IN SETTLEMENT DEVELOPMENT SHAREHOLDER'S
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL AGREEMENT STAGE EQUITY
--------- -------- ----------- -------- -------- ---------- --------- --=---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net loss from the
inception through
December 31, 1992 - $ - - $ - $ - $ - ($29,178) ($29,178)
Net Loss, 1993 - - - - - - (7,462) (7,462)
-------- ------- ------------ ------- ---------- --------- --------- --------
Balance, Dec. 31, 1993 - - - - - - (36,640) (36,640)
Common Stock Issued
In reorganization - - 20,000,000 2,000 34,754 - - 36,754
Common Stock Issued in IPO - - 1,000,000 100 90,990 - - 91,090
Preferred Stock exchanged for
Common Stock per IPO 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, Dec. 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, Dec. 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 - - - - - - ( -) ( -)
-------- ------- ------------ ------- ---------- --------- --------- --------
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 (308,137) (308,137)
-------- ------- ------------ ------- ---------- --------- --------- --------
Balance Dec. 31, 1996 - $ - 24,000,000 $2,400 $1,375,444 $ - ($529,347) $848,497
Net Loss 9 months ($215,231)
Balance September 30, 1997 - $ - 24,000,000 $2,400 $1,375,444 $ - ($744,578) $633,266
-------- ------- ------------ ------- ---------- --------- --------- --------
-------- ------- ------------ ------- ---------- --------- --------- --------
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
FOR THE PERIOD ENDED INCEPTION TO CURRENT
SEPTEMBER 30, DECEMBER 31, 1987 -
1997 1996 SEPTEMBER 30, 1997
---------- ---------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(64,594) $(214,317) $(744,577)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 2,181 2,826 16,607
(Increase) decrease in
Inventory 304 (45,527) (73,090)
Prepaid expenses & other assets (3,099) 20,879 (16,977)
Deposits 0 (3,422) (3,581)
(Increase) decrease in
Accounts Payable & accrued expenses 644 (27,622) 6,108
-------- -------- --------
Net cash used in operating activities $(64,564) $(264,223) $(815,510)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment 98 (28,358) (43,433)
Leasehold Improvements 0 0 (129)
-------- -------- --------
Net cash used in investing activities 98 (28,358) (43,562)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from MMI settlement agreement - $400,125 $1,250,000
Proceeds from sale of common stock - - 91,090
Payments for offering costs - - -
Loans & paid-in capital from preferred stockholder - - 36,754
-------- -------- --------
Net cash provided by financing activities - $400,125 $1,377,844
-------- -------- --------
Net increase in cash and cash equivalents (64,466) $107,544 $518,772
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD $583,238 $705,707 $583,238
-------- -------- --------
CASH & CASH EQUIVALENTS, END OF PERIOD $518,772 $813,251 $518,772
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to financial statements
5
<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 such as sallow and olive
complexions.
2. UNAUDITED FINANCIAL STATEMENTS
The financial statements as of September 30, 1997 and for the periods ended
September, 1997 and 1996 included herein 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 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 $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 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 February 29, 1996, the
Company had received all of the settlement.
6
<PAGE>
3. WARRANTS AND RELATED SETTLEMENT AGREEMENT (CONTINUED)
Further, the Company agreed 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 canceled C Warrants. The
option to purchase the additional 1,000,000 shares at $1.00 per share
expired in September, 1996. MMI did not purchase the additional 1,000,000
and no additional shares were issued. As part of the Agreement with MMI,
the Company agreed to assist and cooperate with MMI in any action against
third parties to recover MMI's damages suffered as a result of or in
connection with MMI's purchase of the Shares.
4. 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" 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.
On December 17, 1996, the United States District Court, Central District of
California, denied a motion by Rixima for an order declaring that
Colecciones de Raquel, Inc. is a party to the covenant not to sue.
There are no other material pending legal proceedings to which the Company
or the property of the Company are subject. In addition, no proceedings
are known to be contemplated by a governmental authority against the
Company or any officer or director of the Company.
5. LEASES
On October 1, 1995, the Company entered into a two year lease for a store
front located in Beverly Hills, California. The space is approximately 700
square feet, and the monthly rent is $1,100. 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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MATERIAL CHANGES IN RESULTS OF OPERATIONS
The 1996 Third Quarter revenues slightly exceeded those of 1997. Although
1997 sales were higher in 1997, 1996 interest income was higher. Selling,
general, and administrative expenses for the 1997 Second Quarter year to
date period were slightly lower than 1996's Second Quarter year to date.
However, 1997 Third Quarter General and Administrative expenses were 19.1%
lower than the prior quarter (2nd 1997). This decrease in General and
Administrative expenses is largely attributed to a decrease in personnel.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the nine month period ended September 30, 1997 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 were slightly lower from year-end 1996 due to
sales. In comparison to Second Quarter 1996, Inventory levels were much
higher due to production of cosmetics and stocking of lingerie.
The Company's available cash at September 30, 1997 is expected to be
sufficient to defray the Company's operating expenses through calendar year
1997. The Company's continued existence will be dependent on its ability
to generate significant product sales and ultimately to achieve profitable
operations.
8
<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" 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.
On December 17, 1996, the United States District Court, Central District of
California, denied a motion by Rixima for an order declaring that
Colecciones de Raquel, Inc. is a party to the covenant not to sue.
There are no other material pending legal proceedings to which the Company
or the property of the Company are subject. In addition, no proceedings
are known to be contemplated by a governmental authority against the
Company or any officer or director of the Company.
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.
9
<PAGE>
Item 5. OTHER INFORMATION
As of July, 1997 Ms. Vasquez, who was acting as Vice President of Sales is
no longer with the company.
Item 6. EXHIBITS AND REPORTS ON FORM 8K
(a) EXHIBITS
Inapplicable.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period covered by this
report.
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 10, 1997 By: /s/ Raquel Zepeda
---------------------------------------
Raquel Zepeda, Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-QSB FOR
QUARTERLY PERIOD ENDING SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 518,772
<SECURITIES> 0
<RECEIVABLES> 20,655
<ALLOWANCES> 0
<INVENTORY> 73,090
<CURRENT-ASSETS> 612,517
<PP&E> 26,953
<DEPRECIATION> 2,181
<TOTAL-ASSETS> 639,470
<CURRENT-LIABILITIES> 6,204
<BONDS> 0
0
2,400
<COMMON> 2,400
<OTHER-SE> 633,266
<TOTAL-LIABILITY-AND-EQUITY> 639,470
<SALES> 5,787
<TOTAL-REVENUES> 3,494
<CGS> 2,293
<TOTAL-COSTS> 2,293
<OTHER-EXPENSES> 241,837
<LOSS-PROVISION> 1,082
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (238,342)
<INCOME-TAX> 9,561
<INCOME-CONTINUING> (238,342)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,231)
<EPS-PRIMARY> (0.001)
<EPS-DILUTED> (0.001)
</TABLE>
