<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 March 31, 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 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 March 31, 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) -March 31, 1997 . . . . . . . . . . . 1
(b) Statements of Operations (Unaudited) - Three Months
ended March 31, 1997 and 1996 Period from
Inception (December 1, 1987) to March 31, 1997. . . . . . . . . 2
(c) Statement of Stockholder's Equity (Unaudited) -
Period from Inception (December 1, 1987) to March 31, 1997. . . 3
(d) Statements of Cash Flows (Unaudited) - Three Months
ended March 31, 1997 and 1996 and Period from
Inception (December 1, 1987) to March 31, 1997. . . . . . . . . 4
(e) Notes to Unaudited Financial Statements . . . . . . . . . . . . 5
ITEM 2. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . 7
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ii
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 30, 1997
--------------
<S> <C>
ASSETS
Current Assets
Cash and equivalents $665,484
Inventory 75,057
Deposits paid and other assets 8,054
--------
Total Current Assets $745,606
Equipment, Furniture & Fixtures, net of accum. depr. $10,185 29,474
--------
Total Assets $783,133
--------
--------
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $4,914
Taxes payable 365
--------
Total current liabilities $5,279
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 (599,989)
--------
Total stockholder's equity 777,854
--------
Total liabilities and stockholder's equity $783,133
--------
--------
</TABLE>
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
Three Months Ended March 31, to
------------------------------- March 31,
1997 1996 1997
------------ ----------- ------------
<S> <C> <C> <C>
Sales 1,827 2,317 21,004
Cost of Goods Sold 642 763 7,250
--------- ---------- -----------
Gross Profit 1,185 1,554 13,754
Selling, general, and administrative expenses 79,945 104,133 674,511
--------- ---------- -----------
(Loss) from operations (78,760) (102,579) (660,757)
Interest Income 8,118 43,168
Litigation settlement income 20,000
Loss before provision for income taxes (70,642) (102,579) (597,589)
Provision for income taxes 800 2,400
Net Loss (70,642) ($103,379) ($599,989)
--------- ---------- -----------
--------- ---------- -----------
Net Loss per share ($.0025) ($.003)
--------- ----------
--------- ----------
Weighted average number of common shares 24,000,000 4,000,000
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 1, 1987 (INCEPTION) TO MARCH 31, 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 settelement 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 - - - - - - (103,379) (103,379)
---------- ----------- ---------- ---------- ------------ ---------- --------- ---------
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
Balance March 31, 1997 - $ - 24,000,000 $ 2,400 $1,375,444 $ - $(599,989) $ 77,855
---------- ----------- ---------- ---------- ------------ ---------- --------- ---------
---------- ----------- ---------- ---------- ------------ ---------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Years Ended Period from
March 31, Inception to Current
------------------------------ December 31, 1987 -
1996 1996 March 31, 1997
------------ ------------ ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (70,642) $ (103,379) $ (599,989)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 2,087 680 12,272
(Increase) decrease in
Inventory 618 (16,330) (75,057)
Prepaid expenses & other assets 93 6,000 (9,466)
Deposits 0 17,377 (3,651)
(Increase) decrease in
Accounts Payable & accrued expenses (7,990) 3,075 5,279
-------- ---------- ----------
Net cash used in operating activities $(75,834) $ (92,577) $ (670,612)
-------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (2,747) (5,966) (41,748)
-------- -------- ----------
Net cash used in investing activities $(2,747) $(5,966) $ (41,748)
-------- -------- ----------
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 - $ 301,582 $665,484
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD $744,065 $ 705,707 -
-------- ---------- ----------
CASH & CASH EQUIVALENTS, END OF PERIOD $665,484 $1,007,289 $ 665,484
-------- ---------- ----------
-------- ---------- ----------
INTEREST RECEIVED $ 8,118 $ $ 35,050
-------- ---------- ----------
-------- ---------- ----------
TAXES PAID $ $ 800 $ 2,400
-------- ---------- ----------
-------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION OF
NON-CASH INVESTING & FINANCING ACTIVITIES
EXERCISE OF WARRANTS & RELATED SETTLEMENT AGMT $ $ $1,250,000
-------- ---------- ----------
-------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
4
<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 March 31, 1997 and for the periods ended
March, 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.
5
<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.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
While the Company continues to sell through its two boutiques in Beverly
Hills and Los Angeles, it plans to increase distribution through department
stores. On March 17, 1997 the Company entered into a two year employment
agreement Delia Vasquez, who has also been a director since September,
1996. Ms. Vasquez has taken a position as Vice President of Sales, in an
effort to increase distribution through department stores in the United
States and Latin America. It is the Company's belief that the current
trend in marketing to Hispanic consumers will be beneficial to its efforts
to enter into the department store distribution.
The Company's available capital is adequate to continue operations through
the calendar year 1997. However, it may seek additional capital to
support any marketing and merchandising expenditures required as a result
of distribution through department stores.
The Company plans to complete the formulation of its men's fragrance,
"Peligro" within the next year. Nevertheless, it may not go into
production until 1998. Production of a compact disc for the purpose of
cross-marketing the fragrance, "Sabor A Mi," is expected to be complete
before year-end 1997.
Except for historical information contained herein, this Form 10-QSB
contains forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 and the Company intends that such forward looking statements be
subject to the safe harbors created thereby. Such forward looking
statements involve risks and uncertainties and include, but are not limited
to statements regarding future events and the Company's plans and
expectations. The Company's actual results may differ materially from such
statements. Factors that cause or contribute to such differences include,
but are not limited to: fluctuations in revenues and operating results due
to seasonality, the budgeting and purchasing practices of its customers,
the length of the Company's sales cycle and its sale commission practices,
the lack of any backlog; risks associated with international operations;
the Company's ability to manage rapid change in its business and industry;
the Company's ability to enhance existing products and develop or acquire
new products to respond to changes in customer needs; intense competition
in the Company's markets; the Company's dependence on key management;
potential product liability claims and general economic and business
conditions, as well as those discussed elsewhere in this Form 10-QSB and
the Company's filings with the Securities and Exchange Commission.
Although the Company believes that the assumptions underlying its forward
looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward looking statements will be realized. In
addition, the business and operations of the Company are subject to
substantial risks which increase the uncertainties inherent in the forward
looking statements included in this Form 10QSB
7
<PAGE>
and other risks detailed from time to time in the Company's Securities
and Exchange Commission filings. The inclusion of such forward looking
information should not be regarded as a representation by the Company or
any other person that the future events, plans or expectations
contemplated by the Company will be achieved.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
The 1996 First Quarter revenues slightly exceeded those of 1997. The
slight drop in sales is largely attributed to the Company's move from the
mall site to private boutiques in Downtown Los Angeles and Beverly Hills.
Selling, general, and administrative expenses for the 1997 First Quarter
period were 25% lower than the First Quarter of 1996. The substantial
decrease in expenses is mostly due to the Company's efforts to reduce legal
and accounting fees through services performed in-house.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the three month period ended March 31, 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 First Quarter 1996, Inventory levels were much
higher due to production of cosmetics and stocking of lingerie.
The Company's available cash at March 31, 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
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.
9
<PAGE>
Item 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
Item 5. OTHER INFORMATION
Inapplicable.
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: May 12, 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
THE QUARTERLY PERIOD ENDING MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 665,484
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 75,057
<CURRENT-ASSETS> 745,606
<PP&E> 29,474
<DEPRECIATION> 10,185
<TOTAL-ASSETS> 783,133
<CURRENT-LIABILITIES> 5,279
<BONDS> 0
0
0
<COMMON> 2,400
<OTHER-SE> 777,854
<TOTAL-LIABILITY-AND-EQUITY> 783,133
<SALES> 1,827
<TOTAL-REVENUES> 9,945
<CGS> 642
<TOTAL-COSTS> 642
<OTHER-EXPENSES> 79,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (70,642)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,642)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,642)
<EPS-PRIMARY> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
