SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB
(Mark One)

|X|   Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the fiscal year ended December 31, 2000

|_|   Transition Report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934 for the transition period from ________ to _______

Commission file number: 0-24798

                                  RAQUEL, INC.
                 (Name of small business issuer in its charter)

        Nevada                                             93-1123005
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

269 S. Beverly Drive, Suite 938
Beverly Hills, CA                                           90212
(Address of principal executive offices)                    (Zip Code)

Issuer's telephone number: (310) 274-0086

Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.0001 Par Value
                                (Title of Class)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the preceding 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 |_|

      Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

      The issuer's revenues for the fiscal year ended December 31, 2000 were
$5,937.

      The aggregate market value of the voting stock held by non-affiliates of
the registrant is incalculable inasmuch as the co,mon stock hasn't traded within
the past 60 days.

      The number of shares of the registrant's Common Stock, $.0001 par value,
outstanding as of December 31, 1999 was 24,700,000.

      Documents incorporated by reference: None.

      Transitional Small Business Issuer Format (check one): Yes |_| No |X|


                                       1
<PAGE>

                                     PART I

Item 1. Description of Business.

Business Development.

      RAQUEL, INC. (the "Company") was organized under the laws of the State of
Nevada on August 6, 1993. As of December 31, 1993, the Company issued 20,000,000
shares of its common stock, $.0001 par value, to Ms. Raquel Zepeda in exchange
for the business known as Raquel, Inc., [formerly known as Colecciones De
Raquel] ("RAQL") which had been operated by Ms. Zepeda as a sole proprietorship
since December 1, 1987. See "Item 12. Certain Relationships and Related
Transactions". Unless the context indicates otherwise, the term "Company"
includes RAQUEL, INC. [formerly known as COLECCIONES DE RAQUEL, INC.] and RAQL.

      Historical Development. Ms. Zepeda decided to develop the Company's
products primarily because, as a first generation Mexican American, she was
dissatisfied with the types of cosmetics available specifically for Hispanics.
In developing the Company's product line, Ms. Zepeda selected those colors that
she believed would complement the skin tones of the targeted market. In
selecting these colors, Ms. Zepeda recognized that the persons to whom these
products would be marketed may be categorized as having light, medium or dark
skin tones. As a result, the shades of colors included in each collection have
been geared to each particular group. See "Products" below.

      From December 1, 1987 until the closing of the Company's initial public
offering, Ms. Zepeda, on a part-time basis, developed the Company's present
product line and conducted minimal marketing activities for these products. Due
to her limited financial resources, Ms. Zepeda was unable to conduct extensive
marketing of these products. From December 1, 1987 to September 30, 1994, total
sales of products aggregated $4,438 and net losses aggregated $70,805.

      During this period, both Ms. Zepeda and her products received publicity in
both English and Spanish media including Avisa magazine, the Hispanic Fashion
Designer's Showcase and Spanish publications Mundo Artistico, Negocios Y
Finanzas, and Noticias Del Mundo. Ms. Zepeda has also been interviewed on both
English and Spanish television stations. This publicity has featured both Ms.
Zepeda and the Company's products. Since the public offering and opening of the
boutique, the Company has received recognition in publications such as Latina
Magazine, Beauty Fashion Magazine, Beverly Hills (213), Mundo Artistico, Nuestro
Tiempo, and Hispanic Business. The Company's products were described as being
designed for people with "golden" complexions and designed for the Hispanic and
similar markets. Although the Company believes that this publicity will assist
it in its future marketing efforts, there is no assurance that it will have any
benefit.

      With proceeds of the Company's public offering it has produced its
proprietary fragrance, "Sabor A Mi," a complete line of colors cosmetics and
skin care and opened two boutiques in Beverly Hills and Los Angeles. All
products are being sold and marketed through these boutiques. Additionally, the
Company has produced a music compact disc which it plans to cross-market with
the sale of the fragrance. "Sabor A Mi" is also the name of a very popular
Spanish love song. The compact disc contains information on the Company's line
of cosmetics along with a sample fragrance strip and product ordering
information. On March 6, 1998 the Company entered into a distribution agreement
with R Town Entertainment for the distribution of both the compact disc and
fragrance. R Town Entertainment has distribution in approximately 1,500 stores
that specialize in Latin artists. The compact disc is either sold separately or
given away as a complimentary gift with the purchase of the fragrance.


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<PAGE>

      Public Offering. As part of an initial public offering in August 1994, the
Company issued 1,000,000 Units of securities for an aggregate offering price of
$100,000. The Company realized net proceeds of $91,090 from the sale of the
Units. Each Unit consisted of one share of common stock and one A Warrant. Each
A Warrant entitled was exercisable at an exercise price of $.25 per A Warrant
for one share of common stock and two B Warrants. Each B Warrant was exercisable
at an exercise price of $.50 per B Warrant for one share of common stock and one
C Warrant. Each C Warrant was to be exercisable at $1.00 per C Warrant for one
share of common stock.

      Utilizing the net proceeds from its initial public offering, the Company
ordered product and packaging and placed print and radio advertisements. The
Company's print advertising, which ran for a single month in the Spanish
language editions of Cosmopolitan, Elle and Marie Claire, resulted in little
customer response. The Company's radio advertisements ran over a three month
period and resulted in numerous requests for product samples from potential
customers but only limited mail order sales.

      The Company utilized substantially all of the net proceeds from the public
offering during the year ended December 31, 1994. The Company's business
operations during the year ended December 31, 1994 resulted in only minimal
revenues and, at year end, the Company had only a small amount of cash available
to finance continuing operations on an extremely limited basis.

      From September 1995 through February 1996, the Company received $1,250,000
in payment for the exercise of the A and B warrants. As a result, the Company
was able to expand its operations.

      Recent Operations. In October 1995, as a part of a test marketing campaign
for the fragrance, "Sabor A Mi, Melody of Eternal Passion", the Company licensed
the right to use a cart in the Montebello Town Center in Montebello, California
on a month to month basis. The Company selected the Montebello Town Center for
its cart location based on the heavy Hispanic traffic in the mall. Base rent for
the cart was $1,500 per month for October 1995 and $3,500 per month for November
and December 1995. The cart license required the Company to pay percentage rent
of fifteen percent (15%) of its net sales in excess of $10,000 per month for
October 1995 and $23,333 per month for November and December 1995. The Company
continued licensing the cart through February 29, 1996 at a rate of $1,500 per
month. Although sales were insufficient to cover the rental and staffing cost of
the cart, the Company considered the test marketing fulfilled and terminated the
cart operation in order to expand to a boutique to sell and market its entire
collection of cosmetics, fragrance and lingerie. The Company warehouses its
inventory at a public warehouse facility in Los Angeles, California which offers
security 24 hours a day.

      In September, 1995, the Company entered into a two (2) year lease for a
700 square foot store front in Beverly Hills, California on little Santa Monica
Boulevard across from the Peninsula Hotel. Monthly rent for the space which the
Company is utilizing for both showroom and offices is $1,100 per month. The
grand opening of the showroom boutique was May 3, 1996.

      At the showroom boutique location, the Company offers its cosmetics line
which includes foundation, concealer, face powder and blush products, eye
shadow, eye liners, mascara, lip liners and lipstick; its Sabor A Mi fragrance
in both perfume and spray cologne; and its skin care products for dry, normal
and oily skin types. The Company also offers a small number of lingerie pieces
at its showroom location.

      In May 1996, the Company entered into a three (3) 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 offers the same
full line of its cosmetics, fragrance, skin care, and lingerie at its downtown
location.


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<PAGE>

      In early 1997 the Company completed its registration of the trademarks for
the Company's logo and "Peligro!". On December 10, 1997 the lease for the
Beverly Hills location was extended for an additional two years, with no changes
in the terms of agreement. The compact disc (see Principal Markets and Marketing
Strategy.) was completed in March 1998.

      In April, 1998, the Company introduced its website for sale and promotion
of products at www.deraquel.com. In addition, the company has obtained
www.raquelinc.com, and plans to introduce www.raquelboutique.com within the near
future.

      In May 31, 1998, the Company entered into a sales agreement with Con
Estilo Latino. Con Estilo Latino is a seasonal catalogue that sells and promotes
various products to Hispanics/Latinos in the United States.

      In June, 1998 the Company entered into agreements with consultants A. R.
Hardy & Associates and John W. Vanover for investor relations services and
promotion of the Company's stock. These agreements facilitated payment to the
consultants via common stock in the Company. Consequently, the Company filed an
S-8 and issued 3.3 million shares for payment of these services. However, both
contracts were terminated some months thereafter for non-performance. Per the
terms of the contract, the Company sought the return of all common stock from
John W. Vanover, along with $10,000 cash through the American Arbitration
Association. The Company prevailed in December, 1999 the 2.6 million shares
issued to John Vanover were canceled.

      A settlement was signed between the Company and A. R. Hardy & Associates
on April 1, 1999 in which the Company will paid $4,000 for services in stead of
the 700,000 shares. In May, 1999 a separate agreement with Ms. Hardy for
investor relations was signed. A dispute over services has occurred, and the
Company believes that litigation is imminent.

      In mid-September, the Company laid off two employees, Elizabeth A. Tovar
and Josephina Vettorazzi, in an effort to decrease the Company's losses. These
cut-backs reduced the Company's costs by $4,300 monthly, or 21%. As of October,
1998, the Company has used contract employees to manage sales at the Downtown
boutique.

      The Company changed its corporate name from Colecciones de Raquel, Inc. To
Raquel, Inc. on October 14, 1999. Additionally, its trading symbol was changed
to "RAQL."

      In November, 1999 the Company appointed four new members to its Board of
Directors. They are: Robert L. Filiatreaux, Michael Holguin, Isabel Lorraine
Rodriguez, and Noah Luzel "Lou" Sumpter.

      In January, 2000 the Company appointed Edward A. Rose, Jr. as vice
president, chief financial officer, general counsel, and director.

Business of the Issuer.

      Principal Products.

      The Company has developed a line of cosmetics that it believes will have
appeal to the Hispanic and Asian markets. These markets also include certain
Mediterranean, European and Pacific Islanders. Persons in these markets are
sometimes referred to as having "golden" skin tones. The Company's cosmetic line
is intended to appeal to these markets by complementing their "golden" skin
tones.


                                       4
<PAGE>

      During the course of developing the Company's cosmetic line, Ms. Zepeda
also designed other products intended to complement its cosmetic line, including
a skin care line. Additionally, Ms. Zepeda is working on the design of
"!Peligro!", a man's fragrance which the Company plans to launch in early 1999.
Ms. Zepeda previously designed the fragrance which the Company is marketing
under the trademarked name, "Sabor A Mi, Melody of Eternal Passion". As a
complement to its cosmetics, skin care and fragrance products, the Company is
also offering a small selection of lingerie at its showroom boutique location.

      The Company's products are intended for use by individuals. As such, there
is a possibility that claims for product liability may be made against the
Company. Although the producers of the Company's products have advised the
Company that they maintain product liability insurance, there is no assurance
that such insurance is adequate or will be applicable if claims are made against
the Company. The Company does not presently plan to obtain product liability
insurance. Accordingly, any claims relating to product liability may have a
negative effect on the Company.

      Principal Markets and Marketing Strategy.

      The Company believes that the principal market for its cosmetic and
fragrance products is among Hispanic women in the U.S. and Latin America. During
the near term, the Company intends to concentrate on marketing its products in
the Los Angeles, California area which contains a large and growing number of
Hispanics. Eventually, the Company plans to extend its distribution nationally
and internationally. Approximately 3.8 million Hispanics reside in the Los
Angeles, California area and comprise approximately 19% of the entire United
States Hispanic population. Simmons Hispanic II Study projected that by the year
2005 the U.S. Hispanic market will comprise the largest minority group in the
United States. According to McGraw-Hill's 1995 Hispanic Consumer Market Report,
Hispanics buying power for 1997 was estimated at $357 billion in the U.S. This
report also estimated that Hispanics spent $6 billion on Personal Care Products
and Services. (This market segment includes cosmetics, fragrance and skin care.)
Latin America`s cosmetic market was $5.9 billion and expected to increase to
$7.6 billion by 1998, according to Euromonitor International.

      Companies such as Avon, Estee Lauder, Mabelline, Pavion Ltd., Proctor &
Gamble, and Revlon have made directional changes in advertising content and
product orientation in an effort to more effectively reach the non-Anglo market.
Estee Lauder introduced it "Prescriptives" line targeting ethnic women in 1991.
According to NPD Beauty Trends, Prescriptives was one of the top selling
prestige lines in 1996; and in fiscal 1997 Estee Lauder reported sales of $124.7
million in "other Americas." In 1994, Avon printed a bilingual brochure targeted
to Hispanic women in a small test-market study. Avon has identified the Hispanic
market as promising because professional appearance is very important to
Hispanics and because Hispanic children are introduced to makeup and jewelry at
an early age. Avon research reflects that its average order for Hispanics is
about $9 higher than for non-Hispanics. Market studies have confirmed that
Hispanics generally spend more on consumer goods per capita than do other market
segments.

      The Company's marketing efforts promote the use of the Company's products
to the "golden" skin tones of Hispanic women. Marketing efforts will also
emphasize that the Company's products have been developed by Ms. Zepeda who, as
a first generation Mexican-American, is familiar with the cosmetic needs of
Hispanic women. The Company's marketing efforts will also take into account the
high levels of service which Hispanic shoppers expect. The Company believes that
Ms. Zepeda's understanding of the Hispanic customer will be a valuable resource
in developing a marketing strategy and directing the Company's marketing
efforts.


                                       5
<PAGE>

      Following the initial public offering, the Company advertised its products
on a limited basis through print advertising in selected Spanish language
magazines and through radio advertising which featured its Sabor A Mi, Melody of
Eternal Passion fragrance. The Company has discontinued all magazine
advertisements, except for advertisements in Latina Magazine and Hispanic
Business. The Company is principally pursuing some radio advertising on Spanish
language stations which has yielded a more positive customer response.
Additionally, a website has been established on the Internet to promote both the
product line and stock (www.deRaquel). All advertisements include the Company's
toll-free number and website address. Also, product samples are available to
potential customers as a part of its promotional efforts.

      The fragrance was named after a world-famous Latin love song, "Sabor A
Mi". Ms. Zepeda has recorded a jazz-style version of the song which is currently
a give-away with the purchase of the cologne or perfume. The Company has also
produced a music CD containing five (5) songs sung by Ms. Zepeda, including
"Sabor A Mi". Additionally, the CD contains a fragrance strip of "Sabor A Mi,
Melody of Eternal Passion", an ad for the complete line of products and
boutiques, along with purchasing information. The CD will be a give-away with
purchase of the fragrance and will also be available for purchase in select
music stores.

      The Company intends to market its products utilizing the services of Ms.
Zepeda and employees, and does not plan to utilize the services of any other
individual or firm spokesperson for these marketing efforts. The Company's
ability to maintain or expand its marketing efforts is directly dependent on the
level of sales and profitability achieved from its marketing of its products.

      Distribution.

      The Company now sells through direct salespeople. See Item 6.

      Competition.

      There are numerous other companies that produce and sell cosmetics.
Substantially all of these companies are significantly larger, better financed
and more established than the Company. These companies have established
customers and are continually seeking to obtain additional customers. The
Company's competitors are in a better position to effectively market their
products and offer various incentives to their customers. The Company will be
directly competing with these companies in marketing its products.

      The Company faces competition from other cosmetic product companies. Major
companies with which the Company competes include Revlon, Estee Lauder,
Maybelline, Mary Kay and Avon. Many of the Company's competitors have extensive
consumer loyalty and awareness which is supplemented by ongoing advertising and
other promotions. The Company's limited financial resources will not enable it
to conduct similar advertising and promotions and will place the Company at an
extreme competitive disadvantage.

Due to the high level of competition and the Company's limited resources, the
Company will face continuing intense competition in all aspects of its business.

      Raw Materials.

      The Company's products are produced by independent third parties who also
obtain the materials used to produce these products. The Company believes that
these materials are available from various sources at competitive prices. The
Company has made arrangements with Your Name Cosmetics, an independent
manufacturer of cosmetic and other related products to be its


                                       6
<PAGE>

initial source of supply for its products. This company produced the limited
amount of products used by the Company in its previous activities. Although the
Company has not entered into any agreement with this company, the Company has
been informed that this supplier will be able to fulfill the Company's expected
limited need for products on a timely basis. The Company anticipates that it
will be required to prepay a portion of the price for the products purchased
from this supplier upon placing an order and the balance payable upon delivery
of the products. Accordingly, the Company does not expect to receive credit
terms from this supplier. The Company also anticipates that, in the future, it
may be able to obtain thirty day credit terms from this supplier if the level of
its purchases increases. No discussions have been held regarding any such credit
terms and there is no assurance that the Company will be able to purchase
products without paying for them in advance. The Company has not experienced any
difficulties in obtaining required products from these producers. However, the
Company's experience in obtaining these products may not be indicative of its
ability to obtain products in the future due to its minimal operations to date.

      The Company has not entered into any contracts for either the materials
used in producing its products or the production of these products. Accordingly,
there can be no assurance that the Company will be able to obtain products in
quantities, at prices, and at required times to meet its needs. These needs
include fulfilling future sales commitments.

      The Company does not plan to carry significant amounts of either materials
or finished products in its inventory. Therefore, it will be relying on third
parties to supply it with products on a continuing basis. The failure of the
Company to obtain products sufficient for its needs would have a substantial
negative effect on its operations.

      Patents and Trademarks.

      In December, 1999, the Company applied for the tradenames "Chi'ca Beverly
Hills" and "Yoohoo." Chi'ca Beverly Hills will be marketed as a mass-market teen
line, along with the fragrance, Yoohoo. (See Exhibit "10.21 " attached hereto.)

      The Company has obtained the trademarks for the following: "-Peligro!"
(extension filed on February of 1998, for future use), its fragrance for men,
"Sabor A Mi, Melody of Eternal Passion," and the Company logo. Additionally,
copyrights are held for the following: Color Me Golden, a beauty guide for
golden skin tones; Sound Recording for "Sabor A Mi," the Company's logo, the
Compact Disc and its product brochure.

      The formulas for the fragrances "Sabor A Mi" and "-Peligro!" were
developed by Ms. Zepeda for the Company and are the proprietary formulas of the
Company. There are no other proprietary rights or information, including
formulas, held by the Company for any of its products.

      Government Regulation.

      The Company does not believe that its products are subject to government
regulations, including those imposed by the United States Food and Drug
Administration. However, the Company has not requested nor has it received any
notification that its products are not subject to such regulations. If the
Company's products are subject to any government regulation, noncompliance with
such regulations, either presently in effect or subsequently enacted, would
adversely effect its ability to market its products and have a substantial
negative effect on its operations.

      Employees.


                                       7
<PAGE>

      As of December 31, 2000, the Company employed one (1) person full time.
The Company may hire additional part-time secretarial and retail sales employees
depending on its level of operations.

      In January, 2000 the Company entered into an employment agreement with
Edward A. Rose, who will be acting as Vice President, General Counsel, and Chief
Financial Office; elected to the Board of Directors. Mr. Rose's extensive
experience encompasses over twenty years in finance and law, including positions
with several Fortune 100 companies. He is a Certified Public Accountant both in
New York and California. Additionally, Mr. Rose is a practicing business
litigation and tax attorney in California and was admitted to the State Bar in
1995. Further, he is an adjunct professor of accounting and taxation at National
University. Mr. Rose holds several degrees, J.D. from Western Sierra Law School;
M.B.A. from Fairleigh Dickinson University; and a B.S. from Ohio State
University. He is also a member of several professional organizations: San Diego
County Bar Association, California Society of Certified Public Accountants,
American Institute of Certified Public Accountants, AICPA Division for CPA
Firms, and American Association of Attorney-CPA's. (See Exhibit "10.22" attached
hereto.)

      The Company may engage consultants to assist it in various aspects of its
business. See "Item 9. Directors, Executive Officers, Promoters and Control
Persons".

Item 2. Description of Property.

      The Company maintains its main offices at 100 So Doheny Drive, Suite 320,
Los Angeles, California. However, its mailing address is 269 So Beverly Drive,
Suite 938, Beverly Hills, California.

Item 3. Legal Proceedings.

      In 1999 the Company filed a lawsuit against Angela Z. Hardy for the return
of S-8 stock issued to her for investor relations services. A judgement was
obtained against Ms. Hardy.

      Other than this item, there are no 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 4. Submission of Matters to a Vote of Security Holders.

      Not applicable


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                                    PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

      Prior to the completion of the Company's initial public offering, there
was no trading activity in the Company's common stock. The Company believes that
certain market makers began quoting prices for the shares of the Company's
common stock following the Company's initial public offering which closed in
August 1994. The Company's common stock may be traded in the over-the-counter
market and quoted in what are commonly referred to as the National Quotation
Bureau's "pink sheets" or the OTC "Electronic Bulletin Board", which reports
quotations by brokers or dealers in particular securities. Because of the lack
of readily available quotations and the limited trading volume frequently
associated with these securities, there is a greater risk of market volatility
of such securities than for securities traded on national exchanges. Trading in
the Company's stock is reported under the symbol RAQL.

      The following table sets forth the quarterly high and low bid prices (to
the nearest $1/8) of the common stock for the last 5 years.

      In December, 1998, Olsen Payne & Company filed a 15c2-11 on behalf of the
Company to restore trading of the Company stock on the OTC. The stock commenced
trading in June of 1999.

Year Ended December 31, 1995           High              Low
                                       ----              ---

      First Quarter                    3                 1/2
      Second Quarter                   3-7/8             3
      Third Quarter                    3-3/4             1-3/4
      Fourth Quarter                   2-7/8             2-1/4

Year Ended December 31, 1996

      First Quarter                    2-1/4             1-3/4
      Second Quarter                   1-3/4             3/4
      Third Quarter                    No Bid            No Bid
      Fourth Quarter                   No Bid            No Bid

Year Ended December 31, 1997           Closing Bid                   Closing Ask

                                        High             Low         High  Low
                                        ----             ---         ----  ---

      First Quarter                    No Bid            No Bid      2      2
      Second Quarter                   No Bid            No Bid      2      2
      Third Quarter                    No Bid            No Bid      2      2
      Fourth Quarter                   No Bid            No Bid      2      2

Year Ended December 31, 1998           Closing Bid                   Closing Ask

                                        High             Low         High  Low
                                        ----             ---         ----  ---

      First Quarter                    No Bid            No Bid      None  None
      Second Quarter                   No Bid            No Bid      None  None
      Third Quarter                    No Bid            No Bid      None  None
      Fourth Quarter                   No Bid            No Bid      None  None


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<PAGE>

Year Ended December 31, 1999           Closing Bid                   Closing Ask

                                        High             Low         High  Low
                                        ----             ---         ----  ---

      First Quarter                    No Bid            No Bid      None  None
      Second Quarter                   No Bid            No Bid      None  None
Third Quarter                          1.63              .125        2     .156
      Forth Quarter                     .08              .015        .125  .025

Year Ended December 31,2000            Closing Bid                   Closing Ask

                                        High             Low         High  Low
                                        ----             ---         ----  ---

      First Quarter                     .07             .017         .153  .025
      Second Quarter                    .07             .055         .153  .10
      Third Quarter                     .08             .025         .125  .03
      Forth Quarter                     .04             .025         .10   .03

      These quotations represent inter-dealer quotations without adjustment for
retail markups, markdowns or commissions and do not necessarily represent actual
transactions.

      As of December 31, 2000, there were 1,014 record holders of the Company's
common stock.

      Common Stock. The authorized capital stock of the Company includes
50,000,000 shares of common stock which has a par value of $.0001 per share. The
holders of common stock (a) have equal rateable rights to dividends from funds
legally available therefor, when and if declared by the Board of Directors of
the Company; (b) are entitled to share rateably in all of the assets of the
Company available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of the Company; (c) does not have
preemptive, subscription or conversion rights and there are no redemption or
sinking fund provisions applicable thereto; and (d) are entitled to one
noncumulative vote per share on all matters on which shareholders may vote at
all meetings.

      Preferred Stock. The authorized capital stock of the Company also includes
10,000,000 shares of preferred stock, par value $.001 per share. The Board of
Directors of the Company has the right to determine the characteristics of any
preferred stock. Such characteristics include voting rights, dividend
requirements, redemption provisions and/or liquidation preferences.

      The Board of Directors of the Company has designated 100,000 shares of
preferred stock as Series A Preferred Stock (the "Preferred Stock").
Concurrently with the completion of the Company's initial public offering, Ms.
Zepeda exchanged the 20,000,000 shares of common stock that she owned for
100,000 shares of Preferred Stock. The rights of the holder of the 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
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. In 1996, the Board of
Directors 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 Preferred
stock held by her, and to retire the Preferred Stock. This brought the total of
issued and outstanding common stock of the Corporation to 24,000,000 shares.
This action was anticipated to have a material dilutive effect on the holders of
the Corporation's outstanding common stock. Further, in June of 1998, the
Company issued 3.3 million shares of common stock through an S-8 filing for
payment of services to two consultants. As of September, 1998 a stop trade order
was placed on the shares issued through the S-8, due to non-performance. A
settlement has been reached with one


                                       10
<PAGE>

consultant for return of 700,000 shares. A settlement for the additional 2.6
million shares are pending a hearing before the American Arbitration
Association.

      As of December 31, 2000, there were 24,700,000 shares of common stock
outstanding, with each share entitled to one vote. As the holder of 19,648,000
shares, Ms. Zepeda will continue to be able to elect all of the Company's
directors and continue to control the Company. See "Item 11. Security Ownership
of Certain Beneficial Owner and Management".

      The Company has not paid any cash dividends since its inception and does
not contemplate paying dividends in the foreseeable future. It is anticipated
that earnings, if any, will be retained for the operation of the Company's
business.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Plan of Operation

      On December 11, 2000, the Company issued a press release announcing that
it was changing its marketing structure to direct sales. The Company's
management believes that this structure would better serve its consumers.
Further, direct sales has been very successful among its target market,
Hispanics. Direct cosmetics companies such as Avon, Mary Kay, and Jaffra have a
strong presence and continue to expand in many Latina American countries.

      According to statistics, direct sales in 1999 in the United States totaled
$24.54 billion, with the personal care category representing 24.9%; an
equivalent of $6.11 billion. Raquel, Inc. expects that this new avenue of sales
and distribution will ultimately increase its revenues.

      The Company's available cash position at December 31, 2001 may not be
sufficient to cover the Company's operating expenses through calendar year 2000.
The Company is currently seeking a second round of financing to obtain working
capital.

      The proceeds for this second round of financing would be to increase the
marketing of its products through direct sales.

Material Changes in Financial Condition

      Cash and cash equivalents were $17,577 at December 31, 2000.

      Revenues from the year 2000 continued to be insufficient to support the
selling, general and administrative expenses of the Company. When the settlement
agreement proceeds are exhausted, the Company's continued existence will be
dependent on its ability to generate significant product sales and ultimately
achieve profitable operations.

Material Changes in Results of Operations

      Selling, general and administrative expenses decreased 69% by $126,015
during the year ended December 31, 2000. The decrease was attributable primarily
to the closing both boutiques, nd the reduction of payroll expense. Since the
Company now plans to sell through direct sellers, these retail locations were no
longer required


                                       11
<PAGE>

      Business operations during the year ended December 31, 2000 resulted in
only minimal revenues. Revenues decreased by 14% due to the closing of the
boutiques. Interest income also decreased, as the Company's cash decreases.
Management does not believe that historical revenues, operating margins or
expenses for the period ended December 31, 2000 were indicative of future
operating results.


                                       12
<PAGE>

Item 7.  Financial Statements.

                                  RAQUEL, INC.
                         (A Development Stage Company)
                         INDEX TO FINANCIAL STATEMENTS

The yearly has not yet been completed. Financials will be published at a later
date.


                                       13
<PAGE>

Item 8.  Changes In and Disagreements with Accountants on Accounting and
         Financial Disclosures.

Not applicable.


                                       14
<PAGE>

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act.

      The directors and executive officers of the Company are as follows:

      Name                    Age               Position
      ----                    ---               --------

      Raquel Zepeda           49                President and Chairman
      Edward A.  Rose, Jr.    49                Corporate Secretary and Director

      Directors serve until the next annual meeting of shareholders and until
their successors have been elected and have been qualified. Officers serve until
the meeting of the Board of Directors following the next annual meeting of
shareholders and until their successors have been elected and have been
qualified.

      RAQUEL ZEPEDA, has served as President and as a director of the Company
since its inception on August 6, 1993 and as the Treasurer of the Company since
August 1995. Ms. Zepeda established RAQL as a sole proprietorship in 1987. See
"Business". From July 1993 to July 1994, Ms. Zepeda was employed as a legal
secretary by the law firm of Rosky, Landau, Stall & Sheehy. From July 1992 to
July 1993 she was employed in a similar capacity by the law firm of Turner,
Gerstenfeld, Wilk, Tigerman & Young. From April 1988 to July 1992, Ms. Zepeda
was employed as a temporary legal secretary by various law firms in the Los
Angeles, California area. None of the law firms that employed Ms. Zepeda has any
relation to the Company.

      EDWARD A. ROSE, JR., has served the Company since January, 2000 when they
entered into an employment agreement. He will be acting as Vice President,
General Counsel, and Chief Financial Office; and member to the Board of
Directors. However, since September Mr. Rose's commitments, he now only acts as
Corporate Secretary and Director. Mr. Rose's extensive experience encompasses
over twenty years in finance and law, including positions with several Fortune
100 companies. He is a Certified Public Accountant both in New York and
California. Additionally, Mr. Rose is a practicing business litigation and tax
attorney in California and was admitted to the State Bar in 1995. Further, he is
an adjunct professor of accounting and taxation at National University. Mr. Rose
holds several degrees, J.D. from Western Sierra Law School; M.B.A. from
Fairleigh Dickinson University; and a B.S. from Ohio State University. He is
also a member of several professional organizations: San Diego County Bar
Association, California Society of Certified Public Accountants, American
Institute of Certified Public Accountants, AICPA Division for CPA Firms, and
American Association of Attorney-CPA's.

Compliance with Section 16(a) of the Exchange Act

      Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and directors and persons who own more
than 10% of the Company's common stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish the
Company with copies. During each of the fiscal years ended December 31, 2000,
and 1996, each of the directors and officers filed the required Form 3.

Item 10. Executive Compensation.

      Compensation of Officers. No executive officer of the Company was paid
cash or non-cash compensation in excess of $100,000 during calendar year 1999,
1997, or 1996 and the Company had and has no compensation plans in place and no
officer has received non-cash


                                       15
<PAGE>

compensation, other than employee benefits made available to all employees of
the Company. The following table sets forth the cash compensation paid by the
Company to its chief executive officer for services rendered during calendar
years 1999, 1998, 1997, 1996, and 1995.

                                              Annual Compensation (1)
                                              -----------------------

     Name and                                                     Other Annual
Principal Position            Year        Salary ($)  Bonus ($)   Compensation
------------------            ----        ----------  ---------   ------------

Raquel Zepeda, President      2000        --             --             --
                              1999        60,000         --             --
                              1998        65,000         --             --
                              1997        65,000         --             --
                              1996        60,000         --             --
                              1995        50,000*        --             --
---------
*$15,149 of Ms. Zepeda's 1995 salary was accrued.

      Incentive Stock Option Plan. The Company has adopted an Incentive Stock
Option Plan (the "Plan"). The purpose of the Plan is to secure and retain key
employees of the Company. The Plan authorizes the granting of options to key
employees of the Company to purchase an aggregate of 500,000 shares of commons
stock, subject to adjustment for various forms of reorganizations that may
occur. No options may be granted after August 6, 2003 and the fair value of an
option to each optionee cannot exceed $100,000 per year. An employee must have
six months of continuous employment with the Company before he or she may
exercise an option granted under the Plan. The option exercise price may not be
less than 100% of the fair market value of the shares at the time of the
granting of such option. In the event an option is granted to a stockholder who
owns 10% or more of the Company's shares at the time of the grant of the option,
the option price must not be less than 110% of the fair market value of the
shares at the time of such grant. Options granted under the Plan are
nonassignable and terminate three months after employment by the optionee
ceases, except if employment terminates due to the disability of the optionee,
in which event the option will expire twelve months from the date employment
ceases. The Plan is administered by the Company's Board of Directors. No options
have been granted under the Plan. It may be expected that any options granted
will be exercised only if it is advantageous to the option holder and when the
market price of the company's common stock exceeds the option price. In the
event that the Company grants options pursuant to the Plan, the existence of
such options may have a negative effect on the market price of the Company's
common stock.

      Compensation of Directors. Directors have received 10,000 shares of common
stock as compensation for their services.

      Employment Agreement.. In January, 1996, the Company and Ms. Zepeda
entered into an Amendment No. 1 to the original Employment Agreement which
provides for her full time employment by the Company. The Amendment provides a
base salary effective January 1, 1995 of $50,000 per annum, increasing to
$60,000 per annum effective January 1, 1996 and thereafter increasing only for
cost of living adjustments. The Amendment provides for incentive compensation as
determined by the Board of Directors of the Company considering as a factor in
such incentive compensation the profitability of the Company. In 1997, Ms.
Zepeda received an 8.33% increase to $65,000 per year.


                                       16
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

      Security Ownership of Certain Beneficial Owners. The following table sets
forth information for each person who is known to the Company to be the
beneficial owner of more than five percent of any class of the Company's voting
stock as of December 31, 2000:

                                       Amount and                     Percent of
                Name and Address of    Nature of          Percent of  all Voting
Title of Class  Beneficial Owner       Beneficial Owner   Class       Classes
--------------  ----------------       ----------------   -----       -------

Common Stock    Raquel Zepeda          18,648,000 shares  75%         75%
                  269 So. Beverly Dr.     owned directly
                  Monica Blvd.
                  Beverly Hills, CA

      As of December 31, 2000, there were 24,700,000 shares of common stock
outstanding, with each share entitled to one vote. Therefore, the Company has
securities outstanding with an aggregate of 24,700,000 votes.

      Security Ownership of Management. The following table sets forth as to
each class of equity securities of the Company beneficially owned by all of the
Company's directors and nominees, each of the named executive officers and by
all of the Company's directors and executive officers as a group:

                                       Amount and
                Name and Address of    Nature of          Percent of
Title of Class  Beneficial Owner       Beneficial Owner   Class
--------------  ----------------       ----------------   -----

Common Stock    Raquel Zepeda          18,648,000 shares  75%
                  269 So. Beverly Dr.     owned directly
                  Monica Blvd.
                  Beverly Hills, CA

Common Stock    All executive          19,648,000 shares  83%
                  officers and
                  directors as a
                  group (2 persons)

      Changes in Control.. Other than the Employment Agreement with Ms. Zepeda,
there are no agreements, arrangements, or pledges of securities of the Company,
the operation of which may at a subsequent date result in a change of control of
the Company.

Item 12. Certain Relationships and Related Transactions.

      Not applicable.


                                       17
<PAGE>

Item 13. Exhibits and Reports on Form 8-K.

      (a) Exhibits and Index of Exhibits.

   Exh.
    No.     Description
    ---     -----------

   3.1      Articles of Incorporation, incorporated by reference from Form SB-2
            Registration Statement No. 33-76464-LA as filed on March 31, 1994,
            Exhibit 3(a).

   3.2      Amendment to Articles of Incorporation, incorporated by reference
            from Form SB-2 Registration Statement No. 33-76464-LA as filed on
            March 31, 1994, Exhibit 3(b).

   3.3      Bylaws, incorporated by reference from Form SB-2 Registration
            Statement No. 33-76464-LA as filed on March 31, 1994, Exhibit 3(c).

   3.4      Amendment to Bylaws, incorporated by reference from Form SB-2
            Registration Statement No. 33-76464-LA as filed on March 31, 1994,
            Exhibit 3(d).

   3.5      Certificate of Determination of Rights and Preferences of Series A
            Preferred Stock, incorporated by reference from Form 10K
            Registration Statement No. 41093.4-LA, as filed on December 31,
            1995, Exhibit 3.5(a).

   3.6      Amended and Restated Bylaws, incorporated by reference from Form 10K
            Registration Statement No. 41093.4-LA, as filed on December 31,
            1995, Exhibit 3.6(a).

   3.7      Amendment to Certificate of Determination of Rights and Preferences
            of Series A Preferred Stock, incorporated by reference from Form 10K
            Registration Statement No. 97WLA13270018 as filed on December 31,
            1996, Exhibit 3.7(a).

   3.8      Certificate amending articles of incorporation changing the
            corporate name from Colecciones de Raquel, Inc. to Raquel, Inc.

   4.1      Specimen Certificate of Common Stock, incorporated by reference from
            Form SB-2 Registration Statement No. 33-76464-LA as filed on March
            31, 1994, Exhibit 4(a).

   4.2      Form of Warrant Agreement, incorporated by reference from Form SB-2
            Registration Statement No. 33-76464-LA as filed on March 31, 1994
            Exhibit 4(b).

   4.3      Specimen A Warrant Certificate, incorporated by reference from Form
            SB-2 Registration Statement No. 33-76464-LA as filed on March 31,
            1994, Exhibit 4(c).

   4.4      Specimen B Warrant Certificate, incorporated by reference from Form
            SB-2 Registration Statement No. 33-76464-LA as filed on March 31,
            1994, Exhibit 4(d).

   4.5      Specimen C Warrant Certificate, incorporated by reference from Form
            SB-2 Registration Statement No. 33-76464-LA as filed on March 31,
            1994, Exhibit 4(e).


                                       18
<PAGE>

   Exh.
    No.     Description
    ---     -----------

   4.6      Specimen Certificate of Series A Preferred Stock, incorporated by
            reference from Form SB-2 Registration Statement No. 33-76464-LA as
            filed on March 31, 1994, Exhibit 4(g).

   10.1     Incentive Stock Option Plan, incorporated by reference from Form
            SB-2 Registration Statement No. 33-76464-LA as filed on March
            31,1994, Exhibit 4(g).

   10.2     Employment Agreement dated January 31, 1994 between the Company and
            Raquel Zepeda, incorporated by reference from Form SB-2 Registration
            Statement No. 33-76464-LA as filed on March 31, 1994, Exhibit 10(b).

   10.3     Trademark Application for "Colecciones de Raquel", incorporated by
            reference from Form SB-2 Registration Statement No. 33-76464-LA as
            filed on March 31, 1994, Exhibit 10(c).

   10.4     Trademark No. 1,709,662 for "Sabor A Mi", incorporated by reference
            from Form SB-2 Registration Statement No. 33-76464-LA as filed on
            March 31, 1994, Exhibit 10(d)

   10.5     Agreement dated December 31, 1993 between the Company and Raquel
            Zepeda, incorporation by reference from Amendment No. 1 to Form SB-2
            Registration Statement No. 33-76464-LA as filed on May 9, 1994,
            Exhibit 10(e),

   10.6     Settlement Agreement and General Mutual Release dated June 20,1995
            between the Raquel Zepeda dba Colecciones de Raquel and Rixima,
            Inc., incorporated by reference from Form 10KSB Registration
            Statement No. 34597.1 as filed on December 31, 1994, Exhibit
            10.6(a).

   10.7     Agreement dated September, 1994 between the Company and Moore
            McKenzie, Inc., incorporated by reference from Form 10KSB
            Registration Statement No.34597.1-LA as filed on December 31, 1994,
            Exhibit 10.7(a).

   10.8     Commercial Lease dated September 29, 1995 between the Company and
            Wallace H. Siegel and Allen Siegel, incorporated by reference from
            Form 10KSB Registration Statement No.34597.1-LA as filed on December
            31, 1994, Exhibit 10.8(a).

   10.9     Amendment No. 1 to Employment Agreement dated January 1, 1996
            between the Company and Raquel Zepeda, incorporated by reference
            from Form 10KSB Registration Statement No.34597.1-LA as filed on
            December 31, 1994, Exhibit 10.9(a).

   10.10    Commercial Lease dated September 29, 1995 between the Company and
            L.A. Pacific Center, Inc., incorporated by reference from Form 10KSB
            Registration Statement No. 97-WLA-13270018 as filed on December 31,
            1996.


                                       19
<PAGE>

   Exh.
    No.     Description
    ---     -----------

   10.11    Distribution Agreement between Raquel, Inc. [formerly known as
            Colecciones de Raquel, Inc.] and R-Town Entertainment incorporated
            by reference from Form 10KSB Registration Statement No.
            98-WLA-123500 as filed March, 1998.

   10.12    Trademark No. 2,050,606 for "Raquel, Inc. [formerly known as
            Colecciones de Raquel, Inc.] Face Logo" incorporated by reference
            from Form 10KSB Registration Statement No. 98-WLA-123500 as filed
            March, 1998..

   10.13    Certificate of Copyright Registration VA 736-099 for "RAQL Mark
            (Logo)" incorporated by reference from Form 10KSB Registration
            Statement No. 98-WLA-123500 as filed March, 1998.

   10.14    Certificate of Copyright Registration SR 190-794 for Sabor A Mi,
            "Melody Of Eternal Passion" incorporated by reference from Form
            10KSB Registration Statement No. 98-WLA-123500 as filed March,
            1998..

   10.15    Certificate of Copyright Registration VA 334-469 for "Colecciones De
            Raquel Color Collection Brochure".

   10.16    Notice of Allowance for Trademark "PELIGRO," SR 75/074408
            incorporated by reference from Form 10KSB Registration Statement No.
            98-WLA-123500 as filed March, 1998.

   10.17    Request For Extension of Time To File A Statement Of Use With
            Declaration for Trademark "PELIGRO", SR 75/074408 incorporated by
            reference from Form 10KSB Registration Statement No. 98-WLA-123500
            as filed March, 1998..

   10.18    Notice of Approval of Extension Request for Trademark "PELIGRO", SR
            75/074408 incorporated by reference from Form 10KSB Registration
            Statement No. 98-WLA-123500 as filed March, 1998.

   10.19    Contract with Con Estilo Latino

   10.20    Contracts with A.R. Hardy & Associates and John W. Vanover
            incorporated herein by reference from Form S-8 filed on June 17,
            1998 (File No. 333-57061)

   10.21    Trademark applications for "Chi'ca Beverly Hills" and "Yoohoo."

   10.22    Employment agreement with Edward A. Rose, Jr.


                                       20
<PAGE>

      (b)   Reports on Form 8-K.

            Not applicable.

SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated: April 20, 2000       RAQUEL, INC.
                            [formerly known as COLECCIONES DE RAQUEL, INC.]


                            By: /s/Raquel Zepeda
                               -------------------------------------------------
                               Raquel Zepeda, President, Chief Executive Officer
                               & Chairman

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signature


/s/ Edward A. Rose           Corporate Secretaryt                April , 2000
------------------           --------------------                ------------
EDWARD A.  ROSE, JR.         and Director)


                                       21