<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 June 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 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, 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) -June 30, 1997.......................... 1
(b) Statements of Operations (Unaudited) - Six Months
ended June 30, 1997 and 1996 Period from
Inception (December 1, 1987) to June 30, 1997..................... 2
(c) Statement of Stockholder's Equity (Unaudited) -
Period from Inception (December 1, 1987) to June 30, 1997......... 3
(d) Statements of Cash Flows (Unaudited) - Six Months
ended June 30, 1997 and 1996 and Period from
Inception (December 1, 1987) to June 30, 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................................................ 8
ii
<PAGE>
COLECCIONES DE RAQUEL, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
June 30, 1997
-------------
ASSETS
Current Assets
Cash and equivalents $583,238
Inventory 73,394
Deposits paid and other assets 17,460
Total Current Assets $674,092
Equipment, Furniture & Fixtures, net of accum. depr. $14,427 29,233
---------
Total Assets $703,325
---------
---------
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $4,912
Taxes payable 553
Total current liabilities $5,465
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 (679,984)
Total stockholder's equity 697,860
Total liabilities and stockholder's equity $703,325
---------
---------
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
Six Months Ended June 30, June 30,
1997 1996 1997
---------- --------- ---------
<S> <C> <C> <C>
Sales 4,622 2,923 25,626
Cost of Goods Sold 1,740 848 8,990
---------- --------- ---------
Gross Profit 2,882 2,075 16,636
Selling, general, and administrative expenses 169,455 170,671 843,966
---------- --------- ---------
(Loss) from operations (166,573) (168,596) (827,330)
Interest Income 15,937 14,919 59,105
Litigation settlement income 20,000
Loss before provision for income taxes (150,636) (153,677) (748,225)
Provision for income taxes 2,400
Net Loss ($150,636) ($153,677) ($750,625)
---------- --------- ---------
---------- --------- ---------
Net Loss per share ($.006) ($.04)
---------- ---------
---------- ---------
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 JUNE 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 6 MONTHS ($150,637)
BALANCE JUNE 30, 1997 - $ - 24,000,000 $2,400 $1,375,444 $ - ($679,984) $ 697,860
-------- ------ ---------- ------ ---------- ---------- --------- ----------
-------- ------ ---------- ------ ---------- ---------- --------- ----------
</TABLE>
<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
June 30, December 31, 1987 -
1997 1996 JUNE 30, 1997
--------- ---------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (79,994) $ (153,677) $(679,983)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 2154 1,686 14,426
(Increase) decrease in
Inventory 1,663 (36,053) (73,394)
Prepaid expenses & other assets (4,412) 22,902 (13,878)
Deposits 70 (5,670) (3,581)
(Increase) decrease in
Accounts Payable & accrued expenses 185 (28,478) 5,464
-------- --------- ---------
Net cash used in operating activities $(80,334) $(199,290) $(750,946)
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (1,783) (6,805) (43,531)
Leasehold Improvements (129) (9,716) (129)
-------- --------- ---------
Net cash used in investing activities (1,912) (16,521) (43,660)
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 (82,246) $184,314 $583,238
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD $665,484 $705,707 $665,484
-------- --------- ---------
CASH & CASH EQUIVALENTS, END OF PERIOD $583,238 $890,021 $583,238
-------- --------- ---------
-------- --------- ---------
</TABLE>
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 June 30, 1997 and for the periods ended
June, 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
MATERIAL CHANGES IN RESULTS OF OPERATIONS
The 1997 Second Quarter revenues slightly exceeded those of 1996. The
increase in sales is largely attributed to the Company's efforts to promote
product sales. Selling, general, and administrative expenses for the 1997
Second Quarter period were approximately the same as the Second Quarter of
1996.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the six month period ended June 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 June 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.
7
<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.
8
<PAGE>
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: August 11, 1997 By: /s/ Raquel Zepeda
------------------------------
Raquel Zepeda, Chief Financial
Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-QSB FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 1997. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 583,238
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 73,394
<CURRENT-ASSETS> 674,092
<PP&E> 29,233
<DEPRECIATION> 2,154
<TOTAL-ASSETS> 703,325
<CURRENT-LIABILITIES> 5,465
<BONDS> 0
0
0
<COMMON> 2,400
<OTHER-SE> 697,860
<TOTAL-LIABILITY-AND-EQUITY> 703,325
<SALES> 4,622
<TOTAL-REVENUES> 29,344
<CGS> 1,740
<TOTAL-COSTS> 1,740
<OTHER-EXPENSES> 169,455
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (150,636)
<INCOME-TAX> 0
<INCOME-CONTINUING> (150,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,636)
<EPS-PRIMARY> (.006)
<EPS-DILUTED> (.006)
</TABLE>
