SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB
                                AMENDMENT NO. 1
(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, 2003

[ ]      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

              XYNERGY CORPORATION [formerly known as Raquel, Inc].
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


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

    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, $.001 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, 2003 were
$-0-.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant was $708,074 as of December 31, 2003.

         The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of December 31, 2003 was 18,100,697.

         Documents incorporated by reference: None.

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

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PART I

Item 1.  Description of Business.

Business Development.

Xynergy Corporation [formerly known as "Raquel, Inc."] was organized under the
laws of the State of Nevada on August 6, 1993. [Unless the context indicates
otherwise, the term "Company," "XYNY" or "Xynergy" refers to Xynergy
Corporation]. Xynergy Corporation started as "Colecciones de Raquel, Inc." with
its IPO in 1994. In 1998, Colecciones de Raquel became "Raquel, Inc." In
February, 2002, after its acquisitions of Think Blots(TM) greeting cards,
Raquel, Inc. became Xynergy Corporation.

Historical Development. Raquel Zepeda, CEO and founder of Xynergy, started the
Company as "Colecciones de Raquel of Beverly Hills," a full line of cosmetics,
skin care and fragrance. The line was specifically designed for the needs of
olive skinned women, targeting the Hispanic/Latin market.

Ms. Zepeda's inspiration was born from her experience in an attempt to sell
another brand of cosmetics: they were unsuitable for olive and sallow skin
tones. That experience, coupled with her background in modeling, inspired her to
create a cosmetics line for Latina women. In 1983, she introduced Morena
Cosmetics in the San Francisco/Bay Area. Ms. Zepeda had quite an impact in that
area, Raquel needed more capital to continue. While marketing Morena Cosmetics
on a small scale, Raquel dedicated the next 5 years of her life to further
research and development. Raquel developed even more unique and effective color
formulations, along with guidelines for the golden-skinned woman. Of this,
Colecciones de Raquel was created.

In 1989, Raquel founded Colecciones de Raquel, now Raquel of Beverly Hills,
creating a complete line of cosmetics for the Latin/Hispanic woman consisting of
color, skin care and fragrance. The color collection was meticulously designed
to enhance olive skin tones. Raquel personally formulated the foundations colors
which range from very fair tones to deep bronze tones. Her original fragrance,
"Sabor A Mi, Melody of Eternal Passion," contains pheromones and several natural
aphrodisiacs; Raquel calls this potion "the Fragrance of Amor." Raquel's most
recent creation is her music Compact Disc, containing five romantic love songs.
The CD is a give-away with purchase of the fragrance and sold separately at
www.cdbaby.com/cd/raquel. Angela Poscillico, a music critic for `Latin American'
Rhythm Magazine, commented about Raquel's CD, "Sabor A Mi is performed with much
passion, which really portrays this artist's love for music...portrays her
unique style and smooth vocal ability."

Raquel is recognized as "a pioneer in the Latina makeup industry," according to
Latinolink. Raquel has been recognized by publications such as. Latina Magazine,
Tu Mundo, Negocios & Finanzas, Beauty Fashion, the Wall Street Corporate
Reporter, Stock Broker Magazine, Hispanic Business, Nuestro Tiempo, and was
accepted into Strathmore's Who's Who 2000.

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

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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.

The Company utilized substantially all of the net proceeds from the public
offering during the year ended December 31, 1994. In 1995, the Company received
proceeds from the A and B warrants totaling $1,250,000. As a result, the Company
was able to expand its operations. The C Warrants have been canceled.

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. Additionally, the Company
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. Initially, the compact disc contained information on the Company's line of
cosmetics along with a sample fragrance strip and product ordering information.
From 1995 through 2000 the Company operated two retail boutiques. However, the
sales from these operations were not enough to maintain their operations and
eventually closed both boutiques.

Recent Operations. After further market research, the Company's management
changed its distribution tactics to employ direct and network marketing. A sales
and distribution plan has been designed for this particular style of marketing.
The Company has now obtained interim financing and is preparing a convertible
debt finance offering. (See Management's Plan of Operation.)

During the year 2001, the Company expanded its strategy and mission to acquire
companies whose revenues or innovative value would amplify the Company's overall
worth. Several acquisition candidates have been considered in the last two
years.

On September 5, 2001, Xynergy acquired "Think Blots," a greeting card line. The
line is distinctive in that it combines original ink blot art work with humorous
dialogue, and will be available for viewing on the internet at
dementeddiagnosis.com within the next quarter 2004.

On November 5, 2001, the Company filed a lawsuit against Rainmaker Development
Corporation ("Rainmaker") and Mattel, Inc. ("Mattel") for copyright and
trademark infringement. The Complaint was for the use of the trademark, "Think
Blot," for a game produced by Rainmaker which uses the same name and concept as
the Company's greeting card line, "Think Blots" which were created in 1987.
Rainmaker's date of first use is 1997, ten years after Think Blots' registered
copyright. Previously, March 2001, Rainmaker Corporation filed an Opposition to
Raquel Zepeda's original Application for Trademark Registration for the Think
Blots greeting card line. The proceeding was suspended due to the Company's
lawsuit against Rainmaker and Mattel, Inc. Rainmaker Corporation filed a Motion
for Summary Judgment for the lawsuit in Federal District Court. In April, 2002.
their Motion was granted. Due to Xynergy's limited financial resources, an
appeal was not filed. Nonetheless, the Company will continue to assert its
rights to market the greeting card line under the provisions and protection of
copyright laws.

In March, 2002 the Company changed its name to Xynergy Corporation and affected
a 100 to 1 reverse stock-split. A 14C211 was filed to execute these changes. As
Xynergy Corporation, the Company expanded its business strategy to acquire other
companies for asset enhancement.

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On April 22, 2002, by a unanimous vote of the Board of Directors, Xynergy
elected to incorporate Raquel of Beverly Hills in the State of Nevada as a
wholly owned subsidiary. Additionally, Xynergy voted to issue ten million shares
to Raquel of Beverly Hills in exchange for all 10 million shares of Raquel of
Beverly Hills.

In September, 2002 Xynergy filed an S-8 Registration Statement to issue
6,000,000 shares for payment of services to consultants and employees. In
October, 2002, 4,281,154 shares were issued to pay for independent consultants'
services.

Tom Lupo was assigned to Xynergy's Board of Directors in November, 2002. Mr. has
an extensive background in network marketing and specializes in ethnic
marketing. (See Item 9.)

During the period of September 2003 through February, 2004, Xynergy negotiated
the acquisition of Intervest Group, Ltd. After months of negotiations, Intervest
Group, Ltd. breached their agreement with Xynergy Corporation in February, 2004.

In February 2004, the Company engaged consultants Alexander and Wade for
assistance in expansion of operations in exchange for 1,000,000 S-8 shares.
However, the contract was subsequently canceled and the stock is to be returned
to the Company. In the interim, Xynergy has obtained interim financing secured
by the Company stock. Additionally, the Company is preparing a convertible debt
offering for raising capital to promote Raquel of Beverly Hills cosmetics.

Edward A. Rose, Jr. was appointed as Chief Financial Officer, Director and
Corporate Secretary in March of 2004. Mr. Rose has worked for the Company in the
past in the same positions and most recently, worked with Xynergy as Due
Diligence Consultant. He has a formidable background in legal, finance, and
accounting matters.

On March 26, 2004, Xynergy commenced trading on the Berlin Stock Exchange under
the Symbol. This event is expected to expand Xynergy's exposure for European
investors and enhance in the Company's plans for expansion.
(See Management's Discussion, Item 6.)

Business of the Issuer.

         PRINCIPAL PRODUCTS.

Raquel of Beverly Hills

The Company markets premium cosmetics (color), skin care, under the trademark,
"Raquel of Beverly Hills,(TM)" and the fragrances "Sabor A Mi, Melody of Eternal
Passion(R)" and "iPeligro!(R)".

Raquel of Beverly Hills cosmetics are unique in that they are designed for a
niche market: golden-skinned consumers, which include Hispanics, Asians, and
Mediterraneans; specifically targeting the Hispanic/Latin market. The Company's
cosmetic line is intended to appeal to these markets by complementing their
"golden" skin tones.

The fragrance was named after a world-famous Latin love song, "Sabor A Mi". 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


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products, along with purchasing information. The CD is a giveaway with purchase
of the fragrance and will also be available for purchase in select music stores.

Think Blots(TM)  Greeting Card Line

Xynergy markets a greeting card line by the tradename "Think Blots(TM)."
Combining original ink blot art work with humorous and flirtatious dialogue,
they offer an introspective avenue of communication. The line was originally
developed in 1987 by Ms. Zepeda and is protected by a registered copyright. The
line will be available for viewing at dementeddiagnosis.com.

In addition, Xynergy will be introducing Demented Diagnosis(C), a "mental test"
as an advertising campaign. Through the Demented Diagnosis(C) ads, people will
acquaint themselves with the cards. Eventually, these ads will be placed
alongside horoscopes and cross-word puzzles.

Principal Markets and Marketing Strategy.

Raquel of Beverly Hills

The Company's principal market is fastest growing ethnic group in the United
States; the Hispanic/Latin consumer group . It is estimated that Latina women
spend twice as much as anglos on cosmetics, a double-digit billion-dollar,
growing industry. Raquel of Beverly hills further anticipates a market share of
non Hispanic, golden-skinned consumers such as Asians, Mediterraneans and some
Europeans.

U.S. Hispanic consumers are 20.6 million strong, with a spending power of $581
billion which is expected to double to $880 billion by the year 2010. The U.S.
Hispanic cosmetics is estimated to be 1.6 billion some years ago, and the Latin
American market is estimated to be over $5.9 billion, totaling $7.5 billion.

Raquel of Beverly Hills now plans to increase sales through direct marketing via
infomercials, coupled with direct sales representatives. This approach will
entail infomercials for both selling directly and recruiting salespeople for
expansion directly and aggressively through network/multi-level marketing.
According to the Direct Selling Association, in 2002 U.S. Retail Sales were
equivalent to $28.69 billion. Personal care represented 28.2% or $8.09 billion
dollars.

During the near term, the Company intends to concentrate on marketing its
products in areas containing large and growing number of Hispanics such as
California, Texas, Florida, and New York. (See Item 6. Management's Discussion
and Analysis or Plan of Operation.)

Think Blots(TM)  Greeting Card Line

Think Blots(TM) greeting card line's principal market will commence in the Los
Angeles area and electronically via the internet. Eventually the line will be
marketed nationally and internationally.

Today, the industry generates more than $7.5 billion in retail sales from
consumer purchases of more than 7 billion cards. Greeting card retail growth
recently has been driven primarily by sales of cards for everyday-general and
friendship situations versus seasons (holidays) and by individual cards rather
than from packaged or boxed cards. Women purchase approximately 80% of all
greeting cards. These facts are attributed to the projected need for more

<PAGE>

emotion-based me-to-you messages in the form of greeting cards. As such, we now
have cards for every relationship, every occasion, every ethnicity, every age
group, every gender and every special interest group. Additionally, greeting
cards are being sold in more outlets than ever before, as well as being
purchased and sent over the Internet.

To introduce consumers as to how Think Blots concept works, Demented
Diagnosis(C), a "cartoonish" mental test was developed. Demented Diagnosis(C), a
"mental test" using different Think Blots with multiple choice answers. These
answers then provide a humorous conclusion as to the individual's personality.
Through our Demented Diagnosis(C) ads, people will acquaint themselves with
unique concept of self-discovery from ink blot art. Eventually, these ads will
be placed alongside horoscopes and cross-word puzzles.

         Distribution.

Raquel of Beverly Hills

Xynergy has developed a new strategy for distribution of Raquel of Beverly Hills
products. Direct sales through television infomercials and network/multi-level
marketing. Multi-level marketing has several advantages: it is very popular in
the Hispanic/Latina market, advertising costs are minimal, and all product sales
are either pre-paid or C.O.D.

In June, 2004 Raquel of Beverly Hills entered into an agreement with Incredible
Discoveries, Inc. for the production of an infomercial. Terms of the contract
are

Think Blots(TM)  Greeting Card Line

Think Blots greeting card line is currently available on the internet.
Additionally, it will be available in stores and has obtained the interest of a
Los Angeles distributor.

Additionally, the Company is seeking syndication of Demented Diagnosis(C) in
weekly newspapers. (See www.dementeddiagnosis.com.) Xynergy believes obtaining
syndication of these "tests" would prove to be an excellent marketing and
advertising tool for the greeting card line.

         Competition.

Raquel of Beverly Hills

There are numerous other companies that produce and sell cosmetics. Many of
these companies are significantly larger, better financed and more established
than Raquel of Beverly Hills. Competitors include Revlon, Estee Lauder,
Maybelline, Mary Kay and Avon. These companies have established customers and
are continually seeking to obtain additional customers.

Although Raquel of Beverly Hills' competitors are in a better position to
effectively market their products, the Company plans to use its focus in the
Hispanic market as an edge to "carve" out a portion of market share into this
industry.

THINK BLOTS(TM)  GREETING CARD LINE

Estimates indicate that there are nearly 2,000 greeting card publishers in the
U.S. today, ranging from major corporations to small family-run organizations.

<PAGE>

As indicated above, Think Blots faces substantial competition. However, the
Company believes that Think Blots' unique style will give the line a competitive
edge.

         Raw Materials.

Xynergy's products are produced by independent third parties who also obtain the
materials used to produce these products. Xynergy believes that these materials
are available from various sources at competitive prices. Although Xynergy has
not entered into any agreement with any companies, Xynergy has been informed
that suppliers will be able to fulfill Xynergy's expected limited need for
products on a timely basis. Xynergy anticipates that it will be required to
prepay a portion of the price for the products purchased from suppliers upon
placing an order and the balance payable upon delivery of the products.
Accordingly, Xynergy does not expect to receive credit terms from suppliers.
Xynergy also anticipates that, in the future, it may be able to obtain thirty
day credit terms from suppliers if the level of its purchases increase. No
discussions have been held regarding any such credit terms and there is no
assurance that Xynergy will be able to purchase products without paying for them
in advance. Xynergy has not experienced any difficulties in obtaining required
products from producers. However, Xynergy's experience in obtaining products may
not be indicative of its ability to obtain products in the future due to its
minimal operations to date.

Xynergy 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 Xynergy 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.

Xynergy 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.

         Patents and Trademarks.

Xynergy has obtained the trademarks for the following: "iPeligro!", its
fragrance for men, "Sabor A Mi, Melody of Eternal Passion," "Chic'a Beverly
Hills," a cosmetics line for teens and Raquel of Beverly Hills logo.
Additionally, copyrights are held for the following: Color Me Golden, a beauty
guide for golden skin tones; Sound Recording for "Sabor A Mi," along with the
music Compact Disc, Raquel of Beverly Hills' logo, Raquel of Beverly Hills'
product brochure, Think Blots greeting cards, and Demented Diagnosis.

The formulas for the fragrances "Sabor A Mi," and "iPeligro!" were developed by
Ms. Zepeda for Raquel of Beverly Hills and are the proprietary formulas of
Xynergy.

         Government Regulation.

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

<PAGE>

         Employees.

As of December 31, 2003, Xynergy employed one (1) persons full time. Xynergy may
hire additional part-time secretarial and retail sales employees depending on
its level of operations.

RAQUEL ZEPEDA, is President and CEO. Along with her experience in banking (6
yrs), legal (8 yrs.), has worked in the cosmetics industry for over ten years.
Ms. Zepeda has been the driving force of this venture. Ms. Zepeda used her
inventive abilities to create Raquel of Beverly Hills' original fragrances and
design all of Raquel of Beverly Hills' product lines. Additionally, Ms. Zepeda
created the greeting card line, "Think Blots."

EDWARD A. ROSE, JR., CPA, ESQ., as of March, 2004 is Chief Financial Officer and
we previously acting as the Xynergy's due diligence advisor. Mr. Rose has worked
with Xynergy in several capacities since January, 2000. Mr. Rose has held
positions as Internal Auditor, and Contracts Administrator for several Fortune
500 companies, conducting field due diligence reviews of multimillion dollar
operating companies in the U.S. South America, and Europe for corporate
acquisitions. He is a Certified Public Accountant licensed to practice both in
and California and New York. Additionally, he an attorney and member of the
California Bar.

Xynergy 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.

Xynergy maintains its office address at 269 So Beverly Drive, Suite 938, Beverly
Hills, California.

Item 3.  Legal Proceedings.

In March 2001, Rainmaker Corporation filed and Opposition to Xynergy's
Application for trademark for the Think Blots greeting card line. The proceeding
was suspended due Xynergy's lawsuit against Rainmaker and Mattel, Inc.
(See paragraph below.)

The Company filed a lawsuit on November 5, 2001 against Rainmaker Development
Corporation ("Rainmaker") and Mattel, Inc. ("Mattel") for copyright and
trademark infringement. The Complaint was filed in the United States District
Court, Southern District of California, Case No. 01CV2027W (LAB). The Complaint
was for the use of the trademark, "Think Blot," for a game produced by Rainmaker
which uses the same name and concept as the Company's greeting card line, "Think
Blots" which were created in 1987. Rainmaker's date of first use is 1997, ten
years after Think Blots' registered copyright. Rainmaker Corporation filed a
Motion for Summary Judgment. In April, 2002. their Motion was granted. Due to
the Company's limited financial resources, no appeal was filed.

Other than these items, there are no material pending legal proceedings to which
Xynergy or the property of Xynergy are subject. In addition, no proceedings are
known to be contemplated by a governmental authority against Xynergy or any
officer or director of Xynergy.

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.

 Xynergy's common stock may be traded in the over-the-counter market which are
posted by 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
Xynergy's stock is reported under the symbol XYNY (formerly RAQL).

The following table sets forth the quarterly high and low bid prices of the
common stock for the last 3 years.


Year Ended December 31,2001            Closing Bid                 Closing Ask

                                      High       Low              High     Low

         First Quarter                .125       .03              .25      .04
         Second Quarter               .21        .025             .39      .025
         Third Quarter                .21        .031             .29      .06
         Forth Quarter                .062       .021             .075     .025

Year Ended December 31,2002
                                      Open       High             Low      Close

         First Quarter                .117       .31              .01     2.00
         Second Quarter               .214       .53              .04      .30
         Third Quarter                .046       .16              .01      .03
         Forth Quarter                .01        .01              .01      .01

Year Ended December 31,2003
                                      Open       High             Low      Close

         First Quarter                .02        .035             .003     .02
         Second Quarter               .01        .019             .006     .01
         Third Quarter                .01        .025             .005     .01
         Forth Quarter                .07        .145             .01      .07

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, 2003, there were 1,017 record holders of Xynergy's common
stock.

Common Stock. As of January 25, 2002, authorized capital stock of Xynergy is
250,000,000 shares of common stock which has a par value of $.001 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
Xynergy; (b) are entitled to share rateably in all of the assets of Xynergy

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available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of Xynergy; (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 Xynergy also includes
50,000,000 shares of preferred stock, par value $.001 per share. The Board of
Directors of Xynergy has the right to determine the characteristics of any
preferred stock. Such characteristics include voting rights, dividend
requirements, redemption provisions and/or liquidation preferences. In October,
2003 the Company filed a Certificate of Designation of Class A Convertible
Preferred Stock. Maximum number of shares in Series A stock is 10,000,000 shares
with a twenty to one conversion rate and twenty cumulative votes per share.

In May, 2001, the Company issued 4,000,000 shares to individuals for purchase of
stock options. In August, 2001, and December, 2001 the Company issued stock for
exercise of options of 1,000,000 shares, and 500,000 shares, respectively;
500,000 of which were subsequently canceled in December, 2003.

On December 31, 2003 two million (2,000,000) shares of Common Stock issued to
Raquel Zepeda from the exercise of options through the Think Blots acquisition
were canceled. With an exercise price of $.10, Ms. Zepeda had signed a
Promissory Note to the Company for payment. The Note and stock were canceled,
however the options remain in effect.

As of December 31, 2003, there were 31,100,697 shares of common stock
outstanding, with each share entitled to one vote. As the holder of 3,999,200
Common shares, 1,000,000 Preferred shares, and control person for 13,000,000
shares, (an aggregate of 16,999,200 Common shares and 1,000,000 Preferred shares
with twenty to one votes [20,000,000 votes]) Ms. Zepeda will continue to be able
to elect all of Xynergy's directors and continue to control Xynergy. See "Item
11. Security Ownership of Certain Beneficial Owner and Management".

Xynergy 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 Xynergy's business.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The Private Securities Litigation Reform Act of 1995 provides a "safe-harbor"
for forward-looking statements. Certain statements contained in this report that
are not historical fact, including, but not limited to, those concerning its
expectations of future sales revenues, gross profits, research and development,
sales and marketing, and administrative expenses, product introductions and cash
requirements are forward-looking statements. These forward-looking statements
are subject to risks and uncertainties that may cause its actual results to
differ from expectations including variations in the level of orders, general
economic conditions in the markets served by its customers, international
economic and political climates, timing of future product releases, difficulties
or delays in product functionality of performance, its failure to respond
adequately to changes in technology or customer preferences, changes in its
pricing or that of its competitors and its inability to manage growth. All of
the above factors constitute significant risks to its operations. There can be
no assurance that the Company's results of operations will not be adversely
affected by one or more of these factors. As a result, its actual results may
vary materially from its expectations. The words "believe", "expect",
"anticipate", "intend", and "plan" and similar expressions identify

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forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date the statement
was made.

Plan of Operation

In 2004, Xynergy has positioned itself to raise capital for its subsidiaries to
execute and implement sales and distribution plans. On March 26, 2004 Xynergy
was listed on the Berlin Stock Exchange under the symbol UYW, GERMAN CUSIP
NUMBER US9841531067. This new listing on the Berlin Stock Exchange is expected
to improve Xynergy's exposure for European investors and to improve the trading
liquidity of Xynergy shares for all of its shareholders. No new shares have been
issued as part of this listing and the improved visibility for Xynergy and
improved liquidity for Xynergy shareholders could produce an improvement in
shareholder value as the Company continues its growth in 2004.

Xynergy has recently partnered with an investment banker who is able to provide
interim financing prior to executing an offering for convertible debt. The
offering is expected to occur within the next six months. Monies from this
offering would be to finance the expansion of product lines offered by its
subsidiaries:

         RAQUEL OF BEVERLY HILLS will be producing an infomercial for the
Spanish speaking media to re-launch its line of cosmetics, skin care and
fragrance. Additionally, the infomercials will act as a recruiting tool for
those who would like to sell its products directly through catalogues. In 2003,
the U.S. infomercial market was a whopping $154.1 billion. Production details
and contracts for the infomercial are in the negotiation stages as of April
2004.

Additionally, to compound the direct sales approach, a competitive compensation
package has been fashioned for promoting both product sales and recruiting
salespeople for expansion directly and aggressively through network/multi-level
marketing.

According to the Direct Selling Association, in 2002 U.S. Retail Sales were
equivalent to $28.69 billion. Personal care represented 28.2% or $8.09 billion
dollars.. Raquel of Beverly Hills now plans to increase sales through direct
marketing via infomercials, coupled with direct sales representatives. This
approach will entail infomercials for both selling directly and recruiting
Leaders in this industry such as Avon and Jafra reported earnings of $1.343
billion and $76.6 million, respectively for the third quarter of 2000.

U.S. Hispanic consumers are 35 million strong, with a spending power of $581
billion which is expected to double to $880 billion by the year 2010.

During the near term, the Company intends to concentrate on marketing its
products in markets such as California, Texas, Florida, and New York that have a
prominence in the Hispanic market. Eventually, the Company plans to enter the
international markets.

In June, 2004 the company signed a contract with Incredible Discoveries, Inc.

Material Changes in Financial Condition

Although Cash and cash equivalents were minimal $553 at December 31, 2003, the
Company has managed to secure interim financing. Additionally the Company is in
the process of securing additional convertible debt monies for execution

<PAGE>

Xynergy's marketing plan for its products. The proposed financing is expected to
be sufficient to cover Xynergy's operating expenses through the calendar year
2004.

Material Changes in Results of Operations

All expenses for Xynergy have decreased substantially. Xynergy has been
operating in a "hibernative" state. No monies have been spent toward office
rent, or salaries, greatly minimizing selling, general and administrative
expenses.

Management believes that by implementing its current Plan of Operation of
raising working capital and executing its marketing strategies, future revenues
and share value will increase.

Item 7.  Financial Statements.

<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and Audit Committee
XYNERGY CORPORATION

I have audited the  accompanying  balance sheets of XYNERGY  Corporation,  as of
December  31,  2003  and  2002  and  the  related   statements  of   operations,
stockholders'  equity,  and cash flows for the years ended December 31, 2003 and
2002.  These  financial  statements  are  the  responsibility  of the  Company's
management.  My  responsibility  is to express  an  opinion  on these  financial
statements based on my audits.

I  conducted  my audits in  accordance  with  standards  of the  Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial statement presentation.  I believe that my audits provide a reasonable
basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of XYNERGY Corporation, as of December
31, 2003 and 2002 and the results of its  operations and its cash flows for each
of the two years in the period ended December 31, 2003,  are in conformity  with
accounting principles generally accepted in the United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
company will continue as a going  concern.  The Company is ten years old and has
had a net loss in each of those  years  resulting  in a  substantial  deficit in
retained earnings.  This raises substantial doubt about the Company's ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments that might result from this uncertainty.


Shelley International, CPA

October 26, 2004

Mesa, Arizona

<PAGE>

                              XYNERGY CORPORATION
                         (A Development Stage Company)

                          CONSOLIDATED BALANCE SHEETS
                           December 31, 2003 and 2002

                                     ASSETS

                                                    December 31,    December 31,
                                                       2003            2002
                                                    -----------     -----------
CURRENT ASSETS
     Cash                                           $       554     $       428
     Inventory, at Cost
     Prepaid Expenses                                        --          21,475
                                                    -----------     -----------

     Total Current Assets                                   554          21,903
                                                    -----------     -----------

EQUIPMENT NET                                                --              --
                                                    -----------     -----------

TOTAL ASSETS                                        $       554     $    21,903
                                                    ===========     ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Current Liabilities
     Accounts Payable                               $    30,877     $    29,201
     Notes Payable                                       71,939          27,987
                                                    -----------     -----------

TOTAL LIABILITIES                                       102,816          57,188
                                                    -----------     -----------

STOCKHOLDERS' EQUITY/(DEFICIT)

     Preferred Stock authorized
     50,000,000 shares,$0.001 par value
     Issued and outstanding December
     2003: 1,250,000 shares                               1,250              --

     Common Stock, authorized
     250,000,000 shares, $0.001 par value;
     Issued and outstanding December 2003,
     18,100,697 shares; December 2002,
     18,101,851 shares                                   18,101          18,102

     Paid in Capital                                  1,812,109       1,843,569

     Common Stock Subscribed-Receivable                      --        (279,750)

     (Deficit) Accumulated During
     Development Stage                               (1,933,722)     (1,617,206)
                                                    -----------     -----------

     Total Stockholders' Equity/(Deficit)              (102,262)        (35,285)
                                                    -----------     -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                $       554     $    21,903
                                                    ===========     ===========


The accompanying notes are an integral part of these statements

<PAGE>

                              XYNERGY CORPORATION
                         (A Development Stage Company)
                       CONSOLIDATED STATEMENT OF OPERATION

<TABLE>
<CAPTION>
                                                Year            Year        From Inception
                                               Ended            Ended       August 6, 1993
                                            December 31,      December 31,   to December 31,
                                                2003             2002           2003
                                             ------------    ------------    ------------
<S>                                          <C>             <C>             <C>
INCOME
      Sales                                                                  $     48,074
      Other Income                                                                119,148
                                             ------------    ------------    ------------

      Gross Income                                     --              --         167,222

COST OF GOODS SOLD                                                               (24,627)
                                             ------------    ------------    ------------

      Gross Profit / (Loss)                            --              --         142,595
                                             ------------    ------------    ------------

EXPENSES
      General and Administrative                  314,365         193,865       1,969,318
      Interest Expense                              2,151           5,314         100,599
                                             ------------    ------------    ------------

      Total Expense                               316,516         199,179       2,069,917
                                             ------------    ------------    ------------

(LOSS) BEFORE INCOME TAXES                       (316,516)       (199,179)     (1,927,322)

      Provision for Income Taxes                       --              --          (6,400)
                                             ------------    ------------    ------------

NET (LOSS)                                   $   (316,516)   $   (199,179)   $ (1,933,722)
                                             ============    ============    ============

BASIC AND DILUTED
Net (Loss) per Common Share                            a               a
                                             ------------    ------------

Weighted Average Number of
      Common Shares Outstanding                18,966,667      13,983,019
                                             ============    ============
</TABLE>

a = Net (Loss) less than ($0.01) per share

The accompanying notes are an integral part of these statements
<PAGE>

                               XYNERGY CORPORATION
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

               from inception August 6, 1993 to December 31, 2003

<TABLE>
<CAPTION>
                                                               Preferred Stock          Common Stock
                                       Date of   Price Per  -----------------------------------------------  Paid in
                                       Issue     Share      Shares       Amount     Shares       Amount      Capital
                                      -------- ---------- ------------ ----------------------- ---------- -------------
<S>                                     <C>       <C>       <C>         <C>        <C>          <C>        <C>
Net (Loss) from Inception to
   December 31, 1993                                                        $ -                      $ -           $ -
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1993

Common shares issued to Founder        Mar-94    $ 0.184                              200,000        200        36,554
Common shares issued for cash with
   an "A" Warrant attached             Aug-94    $ 9.109                               10,000         10        91,080
Preferred shares issued in exchange
   for common shares                   Aug-94                 100,000       100      (200,000)      (200)          100
Common shares issued in exercise
   of  "A" warrants (see Note 3
   Stockholders' Equity)               Nov-94   $ 25.000                               10,000         10       249,990

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1994                                     100,000       100        20,000         20       377,724

Common shares issued in exercise
   of "B" warrants (see Note 3
   Stockholders' Equity)               Feb-95   $ 50.000                               20,000         20       999,980
Cash Proceeds from MMI

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1995                                     100,000       100        40,000         40     1,377,704

Common shares issued in exchange
   for preferred shares                Apr-96                (100,000)     (100)      200,000        200          (100)
Cash Proceeds from MMI

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1996                                           -         -       240,000        240     1,377,604

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1997                                           -         -       240,000        240     1,377,604

Common shares issued for
   consulting services                 Jun-98    $ 0.010                               33,000         33           297

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1998                                           -         -       273,000        273     1,377,901

Common shares cancelled for
   services not rendered               Aug-99                                         (26,000)       (26)           26

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 1999                                           -         -       247,000        247     1,377,927

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 2000                                           -         -       247,000        247     1,377,927

Common shares issued by exercise
     of options for cash               May-01    $ 1.306                               54,000         54        70,472

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 2001                                                             301,000        301     1,448,399

Common shares issued by exercise
     of options thru subscriptions
      receivable                       Mar-02    $ 2.500                               15,000         15        37,485
Common shares issued for company
     acquisitions                      May-02    $ 0.001                           10,500,000     10,500
Common shares issued by exercise
     of options thru subscriptions
      receivable                       Mar-02    $ 0.100                            2,000,000      2,000       198,000
Common shares issued by exercise
     of options thru subscriptions
      receivable                       Jun-02    $ 0.025                            1,000,000      1,000        24,000
Common shares issued by exercise
     of options thru subscriptions
      receivable                       Jun-02    $ 0.050                              750,000        750        36,750
Common shares issued for services      Sep-02                                      13,035,851     13,036        98,935
Common shares issued to and
   held  by subsidiaries               May-02    $ 0.001                           13,000,000     13,000
Common shares cancelled for
    termination of acquisitions        Aug-02    $ 0.001                           (9,500,000)    (9,500)
Cash received on Subscriptions

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance, December 31, 2002                                          -         -    31,101,851     31,102     1,843,569

Preferred shares Issued for services   Jan-03    $ 0.020    1,250,000     1,250                                 23,750
Common shares issued for services      Nov-03    $ 0.050                            3,398,846      3,399       167,290
Common shares cancelled for
     services not rendered             Nov-03    $ 0.001                             (900,000)      (900)
Common shares cancelled for
     termination of subscriptions      Dec-03    $ 0.090                           (2,500,000)    (2,500)     (222,500)
Write-Off uncollectable subscriptions
      receivable

Net (Loss) for the year
                                      -------- ---------- ------------ --------- ------------- ---------- -------------

Balance December 31, 2003                                   1,250,000   $ 1,250    31,100,697   $ 31,101   $ 1,812,109
                                      ======== ========== ============ ========= ============= ========== =============

<CAPTION>

                                     Subscriptions  Owned by     (Loss) During      Total
                                      Receivable   Subsidiaries Development Stage  Equity
                                     --------------------------------------------------------

<S>                                           <C>         <C>         <C>          <C>
Net (Loss) from Inception to
   December 31, 1993                          $ -         $ -         $ (36,640)   $ (36,640)
                                     ------------------------- ------------------------------

Balance December 31, 1993                                               (36,640)     (36,640)

Common shares issued to Founder                                                       36,754
Common shares issued for cash with
   an "A" Warrant attached                                                            91,090
Preferred shares issued in exchange
   for common shares                                                                       -
Common shares issued in exercise
   of  "A" warrants (see Note 3
   Stockholders' Equity)                 (250,000)                                         -

Net (Loss) for the year                                                 (58,052)     (58,052)
                                     ------------------------- ------------------------------

Balance December 31, 1994                (250,000)                      (94,692)      33,152

Common shares issued in exercise
   of "B" warrants (see Note 3
   Stockholders' Equity)               (1,000,000)                                         -
Cash Proceeds from MMI                    849,875                                    849,875

Net (Loss) for the year                                                (126,518)    (126,518)
                                     ------------------------- ------------------------------

Balance December 31, 1995                (400,125)                     (221,210)     756,509

Common shares issued in exchange
   for preferred shares                                                                    -
Cash Proceeds from MMI                    400,125                                    400,125

Net (Loss) for the year                                                (308,137)    (308,137)
                                     ------------------------- ------------------------------

Balance December 31, 1996                       -                      (529,347)     848,497

Net (Loss) for the year                                                (290,579)    (290,579)
                                     ------------------------- ------------------------------

Balance December 31, 1997                                              (819,926)     557,918

Common shares issued for
   consulting services                                                                   330

Net (Loss) for the year                                                (217,582)    (217,582)
                                     ------------------------- ------------------------------

Balance December 31, 1998                                            (1,037,508)     340,666

Common shares cancelled for
   services not rendered                                                                   -

Net (Loss) for the year                                                (169,677)    (169,677)
                                     ------------------------- ------------------------------

Balance December 31, 1999                                            (1,207,185)     170,989

Net (Loss) for the year                                                 (97,675)     (97,675)
                                     ------------------------- ------------------------------

Balance December 31, 2000                                            (1,304,860)      73,314

Common shares issued by exercise
     of options for cash                                                              70,526

Net (Loss) for the year                                                (113,167)    (113,167)
                                     ------------------------- ------------------------------
                                                                                           -
Balance December 31, 2001                                            (1,418,027)      30,673

Common shares issued by exercise
     of options thru subscriptions
      receivable                          (37,500)                                         -
Common shares issued for company
     acquisitions                                                                     10,500
Common shares issued by exercise
     of options thru subscriptions
      receivable                         (200,000)                                         -
Common shares issued by exercise
     of options thru subscriptions
      receivable                          (25,000)                                         -
Common shares issued by exercise
     of options thru subscriptions
      receivable                          (37,500)                                         -
Common shares issued for services                                                    111,971
Common shares issued to and
   held  by subsidiaries                              (13,000)                             -
Common shares cancelled for
    termination of acquisitions                                                       (9,500)
Cash received on Subscriptions             20,250                                     20,250

Net (Loss) for the year                                                (199,179)    (199,179)
                                     ------------------------- ------------------------------

Balance, December 31, 2002               (279,750)    (13,000)       (1,617,206)     (35,285)

Preferred shares Issued for services                                                  25,000
Common shares issued for services                                                    170,689
Common shares cancelled for
     services not rendered                                                              (900)
Common shares cancelled for
     termination of subscriptions         225,000                                          -
Write-Off uncollectable subscriptions
      receivable                           54,750                                     54,750

Net (Loss) for the year                                                (316,516)    (316,516)
                                     ------------------------- ------------------------------

Balance December 31, 2003                     $ -   $ (13,000)     $ (1,933,722)   $(102,262)
                                     ========================= ==============================

</TABLE>

On January 22, 2002 the Company had a 100:1 reverse stock split and wrote-up par
value from $0.0001 to $0.001. This reverse split and par value write-up has been
retroactively applied to the schedule including the price paid per share. During
2002, 13,000,000 common shares were issued to wholly-owned subsidiaries and have
been consolidated in the balance sheet.
<PAGE>

                               XYNERGY CORPORATION
                          (A Development Stage Company)
                       CONSOLIDATED STATEMENT OF CASH FLOW

<TABLE>
<CAPTION>
                                                                             From Inception
                                               Year Ended       Year Ended    August 6, 1993
                                               December 31,    December 31,   to December 31,
                                                  2003             2002           2003
                                                -----------    -----------    -----------
Operating Activities
<S>                                             <C>            <C>            <C>
     Net (Loss)                                 $  (316,516)   $  (199,179)   $(1,933,722)

     Significant Non-Cash Transactions
          Preferred Stock issued for services        25,000             --         25,000
          Common Stock issued for Acqusitions            --          1,000          1,000
          Common Stock for Services                 169,789        111,971        318,844
          Write-Off Subscriptions Receivable         54,750             --         54,750
          Depreciation Expense                       34,019
     Changes in assets and liabilities
          Decrease in Inventory                          --          8,870             --
          Decrease/(Increase) in  Prepaid
                Expense                              21,475         36,210             --
          Decrease/(Increase) in Accounts
                Payable                               1,676         (3,270)        30,877
                                                -----------    -----------    -----------

Net Cash (Used) by Operating Activities             (43,826)       (44,398)    (1,469,232)
                                                -----------    -----------    -----------

Investing Activities

          Purchase of Equipment                          --             --        (34,019)
                                                -----------    -----------    -----------

Net Cash (Used) by Investing Activities                  --             --        (34,019)
                                                -----------    -----------    -----------

Financing Activities

     Proceeds Received from Stock Subscribed
         Receivable                                      --         20,250         20,250
     Proceeds from loans                             43,952         21,855         71,939
     Proceeds from sale of Common Stock                  --      1,411,616
                                                -----------    -----------    -----------

Cash Provided by Financing Activities                43,952         42,105      1,503,805
                                                -----------    -----------    -----------

Net Increase/(Decrease) in Cash                         126         (2,293)           554

Cash, Beginning of Period                               428          2,721             --
                                                -----------    -----------    -----------

Cash, End of Period                             $       554    $       428    $       554
                                                ===========    ===========    ===========

Significant Non-Cash Transactions
     During 1998 3,300,000 pre-split common shares were issued for consulting
         services valued at $330 of which 2,600,000 shares were cancelled during
         1999 for services not rendered.
     During January 2002 1,500,000 pre-split common shares were issued for
          subscriptions receivable of $37,500.
     On    January 22, 2002 outstanding common shares was reduced by 31,284,000
           in a 100:1 reverse stock split. Par value was increased to $0.001 per
           share resulted in a net increase to paid in capital of $2,844.
     During2002 after the reverse stock split the Company issued a net of
           1,000,000 shares for an acquisition valued at $1,000. It also issued
           13,000,000 common shares to subsidiaries valued at $13,000,
           additionally 3,750,000 shares were issued for subscriptions
           receivable of $262,500 and 13,035,851 common shares were issued for
           services valued at $111,971.
     During 2003 1,250,000 preferred shares were issued for services valued at
          $25,000; 3,398,846 common shares were issued for consulting services
          valued at $170,689; 900,000 common shares were cancelled for services
          not rendered valued at ($900); 2,500,000 common shares were
           cancelled for termination of $225,000 subscriptions receivable; and
          $54,750 of subscriptions receivable were written-off as uncollectable.
Supplemental Information:
     Period Interest                            $     2,151    $     5,314    $   100,599
     Income Taxes Paid                                                              6,400
</TABLE>

The accompanying notes are an integral part of these statements

<PAGE>

                               XYNERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002


NOTE 1.        OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES

NATURE OF BUSINESS

Xynergy Corporation  (formerly know as Raquel, Inc.) the "Company" was organized
under the laws of the state of Nevada on August 6, 1993. On May 9, 2002, Xynergy
became a holding  company  for the  following  subsidiaries:  Raquel of  Beverly
Hills, a cosmetics company, and Machinations,  Inc. a greeting card company. The
subsidiaries  are currently  inactive and all  inter-company  accounts have been
eliminated.

Xynergy started as "Colecciones de Raquel,  Inc." with its IPO in 1994. In 1998,
Colecciones  de  Raquel  became  "Raquel,  Inc." In  February  2002,  after  its
acquisition of Think Blots greeting cards,  Raquel,  Inc.  elected to change its
name to Xynergy  Corporation  and expand its  mission  and  purpose as a holding
company.  The  Company's  stated  mission  is  revenue  enhancement  through  an
integration of companies in growth and emerging markets,  which will protect its
value as markets change and fluctuate.

Founder and Chairman,  Raquel Zepeda  organized the Company as  "Colecciones  de
Raquel of Beverly Hills" creating a full line of color cosmetics, skin care, and
fragrance for olive-skinned  women, with a focus on the  Hispanic/Latin  market.
During  that  period,  the  Company  developed  and  continues  to  own  several
copyrights,  trademarks, and trade secrets.  Initially, the Company operated two
boutiques  one  each in  Beverly  Hills  and Los  Angeles,  with the  intent  of
attaining distribution in department stores. Now Xynergy's subsidiary, Raquel of
Beverly Hills,  plans to market its line of cosmetic  products through direct TV
and network/multilevel marketing.

The Company  acquired  Think Blots  greeting  card line that  combines  original
inkblot artwork with humorous  dialogue.  The card line is promoted  through its
game entitled "Demented  Diagnosis," a "mental test" for potential  customers to
acquaint  themselves with a unique concept of  self-discovery  from inkblot art.
The Company's subsidiary Machinations, Inc markets the Think Blots greeting card
line and game "Demented Diagnosis."

Xynergy  maintains  an  office in the home of  Raquel  Zepeda  and has a mailing
address at 269 South Beverly Drive, Suite 938, Beverly Hills, California.

CASH AND CASH EQUIVALENTS

For  financial  statement  presentation  purposes,  the  Company  considers  all
short-term  investments  with a maturity date of three months or less to be cash
equivalents.


<PAGE>

MERCHANDISE INVENTORY

The  Company's  inventory  was  principally  merchandise  held for sale from the
Raquel of Beverly Hills, Inc. cosmetic line. The inventory is all finished goods
and is  stated  at lower of cost or  market on a FIFO  basis.  The  company  has
written off the entire inventory as obsolete as of December 31, 2002.

PROPERTY AND EQUIPMENT

Property  and  Equipment  is  recorded  at  cost  and   depreciated   using  the
straight-line  method  over the  estimated  useful  lives,  which is five years.
Property and Equipment was fully depreciated as of December 31, 2001 as follows:

                                        12/31/03       12/31/02       12/31/01
                                       ----------     ----------     ----------
    Property and Equipment                $34,019     $   34,019     $   34,019
    Less: Accumulated depreciation        (34,019)       (34,019)       (34,019)
                                       ----------     ----------     ----------
    Net Property and Equipment         $     0.00     $     0.00     $     0.00
                                       ==========     ==========     ==========


USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make  estimates  and  assumptions  that  affect  the  reported  amounts  and the
disclosure of contingent amounts in the Company's  financial  statements and the
accompanying notes. Actual results could differ from those estimates.

LOSS PER SHARE

The basic (loss) per share is  calculated  by dividing the  Company's net income
available to common shareholders by the weighted average number of common shares
during the year.

On  December  31,  2003,  the  Company  has  potentially   dilutive   securities
outstanding in the form of 1,250,000  shares of preferred stock that can each be
exchanged for 20 shares of common stock.  These shares are not considered in the
presentation of loss per share as their inclusion would be antidultive.

INCOME TAXES

The Company  provides for income taxes under  Statement of Financial  Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and  liability  approach in accounting  for income taxes.  Deferred tax
assets  and  liabilities  are  recorded  based on the  differences  between  the
financial statement and tax bases of assets and liabilities and the tax rates in
effect currently.

<PAGE>

STOCK BASED COMPENSATION

The Company accounts for its stock based  compensation  based upon provisions in
SFAS No. 123, Accounting for Stock-Based Compensation.


NOTE 2.           GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
company  will  continue  as a going  concern.  The  Company  has  accumulated  a
$1,933,722 loss during its  development  phase,  has a deficit in  stockholders'
equity and negative working  capital.  This raises  substantial  doubt about the
Company's  ability to  continue as a going  concern.  The  Company's  ability to
continue  as a going  concern  is  dependent  upon  its  success  in  developing
additional capital.

There is no  assurance  that the Company  will be  successful  in its efforts to
raise  additional  proceeds  or achieve  profitable  operations.  The  financial
statements  do  not  include  any  adjustments   that  might  result  from  this
uncertainty.

Management is currently  evaluating  several  proposals that would bring capital
into the company through a convertible debt offering.


NOTE 3.           STOCKHOLDERS' EQUITY

Xynergy  Corporation  (formerly know as Raquel,  Inc.) the Company was organized
under  the laws of the  state of Nevada on  August  6,  1993.  The  Company  had
10,000,000  shares  of  preferred  stock  authorized  at a $0.001  par value and
50,000,000  common shares  authorized at a $0.0001 par value. On January 31,1994
the Company  increased the preferred stock  authorized to 50,000,000  shares and
the authorized common stock to 250,000,000 shares.

In 1993, the Company founder was issued  20,000,000  pre-split  common shares to
cover the $36,754 costs of organization and registration.  Afterward,  1,000,000
pre-split  common  shares were issued in a public  offering  for  $100,000  less
$8,910 offering expenses; 3,000,000 pre-split common shares were issued thru the
exercise of the "A" and "B" Warrants for  $1,250,000  see "Exercise of Warrants"
below;  700,000  pre-split  shares  were  issued  for  services  valued  at $70;
5,400,000  pre-split shares were issued thru the exercise of options for $70,526
and  1,500,000  pre-split  shares were  issued  thru the  exercise of options by
subscriptions receivable of $37,350. The total pre-split common stock issued and
outstanding was 31,600,000 shares.

On January  22,  2002 the  Company  authorized  a reverse  stock split of common
shares at one hundred to one (100:1)  leaving 316,000  post-split  common shares
outstanding as of that date. The Company subsequently increased par value of its
common shares to $0.001 each. The reverse split has been  retroactively  applied
to the Statement of Stockholders Equity.

<PAGE>

Afterward,  the Company issued a net of 1,000,000  post-split  common shares for
company acquisitions valued at $1,000;  13,000,000 post-split common shares were
issued  to and  are  held by the  Company's  subsidiaries  to  assist  in  their
capitalization;    a    net    of    1,250,000    post-split    common    shares
(3,750,000-2,500,000)  were issued thru the exercise of options by subscriptions
receivable with total cash proceeds of $20,250; and 15,534,697 post-split common
shares were issued for services valued at $281,760.

PUBLIC OFFERING

In August  1994,  the  Company  completed  an  initial  public  offering  of its
securities.  The  Company  sold  1,000,000  units  at $0.10  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 $0.25 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.  The  offering  costs must be written off
against  paid  in  capital  and  this  does  not  appear  in  the  statement  of
stockholders'

EXERCISE OF WARRANTS

In November 1994,  all of the "A" Warrants were  exercised in a transaction  the
Company claims was  fraudulent.  The Company's  transfer agent issued  1,000,000
shares of common stock and 2,000,000  "B" Warrants  without the knowledge of the
Company's  officers  or  directors.  At the time the Company did not receive any
portion of the $250,000 exercise price

In February 1995, all of the "B" Warrants were exercised in a transaction  which
the Company also claims was  fraudulent.  The  Company's  transfer  agent issued
2,000,000  shares of  common  stock  and  2,000,000  "C"  Warrants  without  the
knowledge of the Company's  officers or  directors.  At the time the Company did
not receive any portion of the $1,000,000 exercise price.

The  4,000,000  shares of common stock issued in the  Company's  initial  public
offering and upon exercise of the "A" and "B" Warrants have been publicly traded
and the Company has cancelled the all of the "C" Warrants.

In September  1995, the Company  entered into an Agreement with Moore  McKenzie,
Inc., a Philippine  corporation  (MMI),  which  purchased  and resold the shares
following  the  exercise  of the  warrants  by  third  party  entities.  MMI has
expressly denied any involvement in the exercise of the Warrants. Solely for the
purpose  of  protecting  and  preserving  its  investment  in the shares and its
reputation and goodwill, MMI agreed to pay the Company the exercise price of the
"A" Warrants ($250,000) and "B" Warrants ($1,000,000).  As of June 30, 1996, the
Company has received all of the $1,250,000 settlement.

For reporting purposes, we have treated the exercise of the Warrants and the MMI
settlement as stock subscribed.

<PAGE>

EXERCISE OF OPTIONS AND SUBSCRIPTIONS RECEIVABLE

Through various consulting and purchase agreements the company issued 10,650,000
options to purchase common stock at exercise prices ranging from $0.025 to $0.10
per share. Because of the need for capital, the Company accepted the exercise of
5,400,000  options that had an exercise price of $0.025 per share for a total of
$70,526,  instead of $135,000.  Additionally,  2,000,000  options issued for the
acquisition  of Think Blots,  greeting  cards were  exercised at $0.10 per share
through  receipt of a note  recorded as  subscriptions  receivable  of $200,000;
2,500,000  options were exercised at $0.025 through receipt of notes recorded as
subscriptions  receivable of $62,500 and 750,000 options were exercised at $0.05
per share  through  receipt of notes  recorded as  subscriptions  receivable  of
$37,500.  On December 31, 2003 the Company cancelled 2,500,000 common shares and
their  associated  subscriptions  receivable  of $262,500  because of  cancelled
subscriptions.  The Company also expensed $54,750 of subscriptions receivable as
not  collectable.  As of December  31,  2003 the  Company has  received a net of
$20,250 cash for the net of 1,250,000  common shares  issued with  subscriptions
receivable.

PREFERRED STOCK

The Company has 50,000,000 authorized shares of Preferred Stock with a par value
of $0.001 per share. On December 31, 2003 the Company issued 1,250,000 shares of
preferred  stock for  consulting  services  valued  at  $25,000.  Each  share of
preferred  stock can be exchanged for 20 shares of common stock thereby having a
potential dilutive impact to the number of common shares outstanding.

STOCK INCENTIVE PLAN

The Company  adopted a Stock  Incentive  Plan which was revised in its September
2002, S-8 Registration Statement. Under the plan, the Company can issue stock to
consultants, employees, directors and company officers in exchange for services.

ACQUISITIONS BY EXCHANGE OF STOCK

On March 11, 2002 the  Company  issued  1,000,000  common  shares and  2,000,000
options with an exercise  price of $0.10 per share for the  acquisition of Think
Blots,  greeting  cards.  On March 11,  2002 the Company  also issued  6,500,000
shares  per its  January  letter of intent to acquire  an  e-commerce  marketing
company,  Web  Marketing  Network,  Inc.  of Canada.  On May 9, 2002 the Company
issued  3,000,000  shares per its March 26,  2002  letter of intent to acquire a
solar energy  company,  Corporate Space Power  Industries & Electric,  Inc. As a
result of  material  differences  the  Company  terminated  the  agreements  and
cancelled the returned certificates totaling 9,500,000 common shares.

On April 22, 2002 the Board of Directors  authorized the formation of two wholly
owned subsidiaries,  Raquel of Beverly Hills, Inc. and Machinations,  Inc. These
subsidiaries  were  issued  10,000,000  and  3,000,000  shares of  common  stock
respectively in exchange for all the stock in each company.  The stock issue was
for the purpose of raising capital for the  subsidiaries and has been eliminated
in the accompanying consolidated in the balance sheets.

<PAGE>

NOTE 4.           INCOME TAXES:

SFAS No. 109  requires  the  reduction  of  deferred  tax assets by a  valuation
allowance if, based on the weight of available evidence,  it is more likely than
not that some or all of the  deferred  tax assets will not be  realized.  In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred  tax  asset is  $425,419,  which is  calculated  by  multiplying  a 22%
estimated tax rate by the  cumulative  NOL of  $1,933,722.  The total  valuation
allowance is a comparable $425,419. Details for the last two years follow

                                       12/31/03        12/31/02        12/31/01
                                      ---------       ---------        --------
         Deferred Tax Asset             425,419       $ 355,785       $ 311,966
         Valuation Allowance           (425,419)       (355,785)       (311,966)
         Current Taxes Payable             0.00            0.00            0.00
                                      ---------       ---------        --------
         Income Tax Expense           $    0.00       $    0.00       $    0.00
                                      =========       =========       =========

Below is a chart showing the estimated  corporate  federal net operating  losses
(NOL) and the years in which they expire.

         Year                                Amount                Expiration
         ----                                ------                ----------
         1993                               $  36,640                 2008
         1994                                  58,052                 2009
         1995                                 126,518                 2010
         1996                                 308,137                 2011
         1997                                 290,579                 2012
         1998                                 217,582                 2018
         1999                                 169,677                 2019
         2000                                  97,675                 2020
         2001                                 113,167                 2021
         2002                                 196,335                 2022
         2003                                 316,516                 2023
                                           ----------
         Total NOL                         $1,933,722
                                           ==========


NOTE 5.           NOTES PAYABLE

Notes payable consist of the following:

                                                       12/31/03
Demand Note, Related Party                             --------
No Interest                                            $ 61,939

Demand Note
6% Interest, Due August 2, 2003                          10,000
                                                       --------
Total Notes Payable                                    $ 71,939
                                                       ========

<PAGE>

NOTE 6.           THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Below is a listing of the most  recent  accounting  standards  SFAS  145-150 and
their effect on the Company.

SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities

This statement  requires  companies to recognize  costs  associated with exit or
disposal  activities,  other than SFAS 143 costs,  when they are incurred rather
than at the date of a commitment to an exit or disposal plan.  Examples of these
costs are lease  termination  costs,  employee  severance costs  associated with
restructuring,  discontinued operation, plant closing, or other exit or disposal
activity. This statement is effective after December 15, 2002.

SFAS 147 Acquisitions of Certain  Financial  Institutions - an amendment of FASB
Statement No. 72 and 144 and FASB Interpretation No. 9.

This statement  makes the acquisition of financial  institutions  come under the
statements 141 and 142 instead of statement 72, 144 and FASB  Interpretation No.
9. This statement is applicable for acquisition on or after October 1, 2002.

SFAS 148 Accounting for Stock-Based Compensation - Transition and Disclosure

Amends FASB 123 to provide  alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.

SFAS 149    Amendment of Statement 133 on Derivative Instruments and Hedging
Activities

This  Statement  amends and  clarifies  financial  accounting  and reporting for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  (collectively  referred  to as  derivatives)  and for  hedging
activities under FASB Statement No. 133,  Accounting for Derivative  Instruments
and Hedging Activities.

SFAS 150    Financial Instruments with Characteristics of both Liabilities and
Equity

This  statement  requires that such  instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial  instruments entered into
or modified after May 31, 2003.

Interpretation No. 46 (FIN 46)

Effective  January 31, 2003, The Financial  Accounting  Standards Board requires
certain variable interest entities to be consolidated by the primary beneficiary
of  the  entity  if  the  equity  investors  in  the  entity  do  not  have  the
<PAGE>

characteristics  of a continuing  financial  interest or do not have  sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. The Company has not invested
in any such entities, and does not expect to do so in the foreseeable future.

The adoption of these new  Statements is not expected to have a material  effect
on the Company's  current  financial  position,  results or operations,  or cash
flows.


NOTE 7.           POSSIBLE LEGAL ACTIONS

In April of 2003, Xynergy  Corporation  commenced  negotiations with NPOWR for a
possible  merger.  In July of 2003 the  negotiations  broke down and were ended.
During the period of  negotiations  on May 2, 2003 the  Company  executed a note
with  Fernando  Dalmau for $10,000 he loaned to the Company.  Mr.  Dalmau claims
that he  purchased  Xynergy  Corporation  for  the  $10,000  and has  threatened
litigation.  Mr.  Dalmau was not  involved  in the merger  negotiations  and the
promissory  note makes no  reference  to the  purchase  of Xynergy  Corporation.
Should Mr. Dalmau begin legal action  management of the Company believes it will
prevail because the claim is without merit.

During September of 2003 the Company entered  negotiations with Intervest Group,
Ltd.  (IGRP) for a possible  merger/acquisition.  After  what was  considered  a
resolution of  differences an  acquisition  agreement was executed  December 31,
2003  wherein  Xynergy  would  acquire  IGRP. A revised  agreement  was executed
January 23, 2004 and then on February 2, 2004, IGRP withdrew from the agreement.
On March 3, 2004 the Company made a written claim to IGRP for damages  caused by
IGRP's  withdrawal  from the agreement and is  considering  legal action against
IGRP.


NOTE 9.           SUBSEQUENT EVENTS

In March of 2004 the Company  received a loan of $28,875 for operating  expenses
pledging 1,500,000 common shares as collateral.

On August 8, 2004 Xynergy signed an agreement with Indigo Technologies,  Inc., a
Georgia corporation,  to acquire all of Indigo's issued and outstanding stock in
exchange for  36,000,000  shares of Xynergy common stock and $300,000 cash to be
raised by the sale of Xynergy  stock  through a $1,000,000  504D  offering to an
accredited  investor.  Indigo  will  continue  to  operate  as  a  wholly  owned
subsidiary of Xynergy.

Indigo is a multidimensional technology company that provides wireless and wired
internet  service to the  hospitality  industry  through  its  premier  product,
GuestWorx (TM). Additionally,  Indigo is an information technology (IT) provider
whose services  include  training and supplying IT consultants and  programmers,
website development, and installation of IT infrastructure networks.

<PAGE>

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

         In February, 2004, Xynergy Corporation signed an engagement letter with
Weinberg & Co., P.A.CPA. This change was reported in the Company's 8-K filing of
March, 2004 to replace the firm of Henry Schiffer, CPA. The decision to change
independent auditors was approved by the Company's Board of Directors. This
change was not affected as a result of a dispute or disagreement.

         On June 3, 2004, the Company dismissed Weinberg & Company, P.A., CPA
("Weinberg") to perform its audit for the fiscal year ended December 31, 2003
for unreasonable delays by Weinberg. Prior to Weinberg's dismissal, Xynergy had
delivered several correspondences and communications to Weinberg regarding the
consequences of their delays in completing the audit. On May 27, 2004 the
Company's symbol commenced trading with an "E" to signify that Xynergy had not
yet filed its financials for the year ended December 31, 2003. On June 1, 2004,
Xynergy sent a demand letter to Weinberg asking if they would be able to finish
the report prior to June 14, 2004. On June 3, 2004, Xynergy delivered a letter
to Weinberg, dismissing their services. (Exhibit 10.38) The decision to change
independent auditors was approved by the Company's Board of Directors. At this
time, the Company has retained outside legal counsel for potential action
against Weinberg.

         In connection with the audits of the Company's financial statements for
the year ended December 31, 2003 and through the subsequent period ended as of
the date of this report, there were no disagreements ("Disagreements") as
defined in Item 304 (a) (1) (iv) and the instructions to Item 304 of Regulation
S K, as amended, promulgated by the Securities and Exchange Commission
("Regulation S-K") with Weinberg on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope and procedure
which, if not resolved to the satisfaction of Weinberg, would have caused
Weinberg to make reference to the matter in its reports.

         On June 16, 2004, the Company engaged Shelly International CPA as its
independent auditors for the fiscal year ended December 31, 2003. At no time
preceding June 16, 2004 has the Company (or anyone on behalf of the Company)

<PAGE>

consulted with Shelly International CPA, on matters regarding the (i)
application of accounting principles to a specific transaction, either completed
or proposed, or the type of audit opinion that might be rendered on the
Company's financial statements, or (ii) any matter that was the subject of a
disagreement with Weinberg or a Reportable Event.

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 Xynergy are as follows:

         Name                  Age   Position
         ----                  ---   --------
         Raquel Zepeda         52    President & Chairman
         Edward A. Rose, Jr.   53    Chief Fin. Officer, Director & Corp. Secty.
         Thomas Lupo           55    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, is the founder and has served as President and as Chief
Executive Officer of Xynergy since its inception on August 6, 1993. Ms. Zepeda
established Colecciones de Raquel as a sole proprietorship in 1987. She
continues to be the source of product development and has maintained all aspects
of the Company's operations since its inception. (See "Business.")

         EDWARD A. ROSE, JR. is serving as Chief Financial Officer, Director,
and Corporate Secretary. and was previously acting as the Xynergy's due
diligence advisor. He has worked with Xynergy in several capacities since
January, 2000. Mr. Rose has held positions as Internal Auditor, and Contracts
Administrator for several Fortune 500 companies, conducting field due diligence
reviews of multimillion dollar operating companies in the U.S. South America,
Europe and for corporate acquisitions. Mr. Rose is a CPA licensed in both New
York and California and an attorney and a member of the State Bar of California.
Mr. Rose is also the President and General Manager of Border Motor Parts, Inc.,
a wholesale distributor of automobile parts in California, Arizona, and Mexico.

         TOM LUPO is serving as a Director on Xynergy's Board and has a vast
knowledge and experience in the network marketing industry. Mr. Lupo is a Senior
Executive with 30 years' experience in Direct Sales and Network marketing in the
US, Canada and Europe with such major international companies such as Avon,
Shaklee, Twinlab and Japanese-owned Noevir cosmetics. Managed sales, marketing
operations, product development and international sales and marketing efforts.
Considered a "pro" in direct-to consumer marketing with an extensive background
in the Skin Care and Wellness industries. Has worked in large, small and "start
up" business models.

<PAGE>

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 and the rules thereunder
require Xynergy's officers and directors and persons who own more than 10% of
Xynergy's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and to furnish Xynergy with copies.

ITEM 10.  EXECUTIVE COMPENSATION.

Compensation of Officers. No executive officer of Xynergy was paid cash or
non-cash compensation in excess of $100,000 during calendar years 2001, 2002, or
2003 and Xynergy filed a Stock Incentive Plan with its September, 2002 S-8. In
February 2004, the Company filed an S-8 Registration Statement. The following
table sets forth the cash compensation paid by Xynergy to its chief executive
officer for services rendered during calendar years, 2001, 2002, and 2003.

                             Annual Compensation (1)
Name &                                                            OtherAnnual
Principal Position           Year     Salary ($)    Bonus ($)    Compensation

Raquel Zepeda, President     2003        --            --            --
                             2002        --            --            --
                             2001        --            --            --

Incentive Stock Option Plan. Xynergy has adopted an Incentive Stock Option Plan
(the "Plan"). The purpose of the Plan is to secure and retain key employees of
Xynergy. The Plan authorizes the granting of options to key employees of
Xynergy. The Plan is administered by Xynergy'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 Xynergy's common stock exceeds the option price. In the event
that Xynergy grants options pursuant to the Plan, the existence of such options
may have a negative effect on the market price of Xynergy's common stock.

Compensation of Directors. Directors will receive a number of shares of common
stock as compensation for their services in an amount determined by the Board of
Directors.

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 Xynergy to be the beneficial owner
of more than five percent of any class of Xynergy's voting stock as of December
31, 2003:

                                                                   Percent of
                          Name and Address of                   Issued & Outstng
Title of Class             Beneficial Owner      Amt of Shares     of Class
--------------            -------------------    -------------  ----------------
Common Stock              Raquel Zepeda             3,999,200         13%
                          269 S. Beverly Dr.
                          Beverly Hills, CA

                          Raquel of
                          Beverly Hills, Inc.      10,000,000         32%

                          Machinations              3,000,000         10%

Preferred Stock           Raquel Zepeda             1,000,000         80%

                          Edward A. Rose, Jr.         250,000         20%

<PAGE>

As of December 31, 2003, there were 31,100,697 shares of common stock
outstanding, with each share entitled to one vote and 1,250,000 with each share
entitled to twenty votes. Therefore, Xynergy has securities outstanding with an
aggregate of 56,100,697 votes. The audited Consolidated Balance Sheets of
Xynergy Corporation for the year ended December 31, 2003 reflects 18,100,697
shares outstanding since the shares issued to Raquel of Beverly Hills, Inc. and
Machinations have been eliminated. The Consolidated Statements of Stockholders'
Equity, however, reflects 31,100,697 shares outstanding.

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

                                                                     Amount an
                   Name and Address of             Nature of         Percent of
Title of Class     Beneficial Owner             Beneficial Owner       Class
--------------     -------------------          ----------------     ----------
Common Stock       Raquel Zepeda                3,999,200 shares        13%
                   269 So. Beverly Dr.          owned directly
                   Beverly Hills, CA

Common Stock       All executive officers and   3,999,000 shares        13%
                   directors as a group

Changes in Control.. There are no agreements, arrangements, or pledges of
securities of Xynergy, the operation of which may at a subsequent date result in
a change of control of Xynergy.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  Not applicable.

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).

<PAGE>

            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. *

            3.9         Certificate of Amendment to Articles of Incorporation
                        filed with the Company's 8-K, dated May 2, 2002, and
                        incorporated herein by reference.

            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).

            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).


<PAGE>

           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.

           10.11        Distribution Agreement between Raquel, Inc. [formerly
                        known as Colecciones de Raquel] 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] 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.


<PAGE>

           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 "Chic'a Beverly Hills" and
                        "Yoohoo."*

           10.22        Employment agreement with Edward A. Rose, Jr.*

           10.28        Acquisition Agreement between Corporate Space Power
                        Industries and Electric, Inc. and Xynergy Corporation;
                        incorporated herein by reference from Form S-8 filed on
                        May 3, 2002.

           10.29        Letter to Oppenheim & Ostrick incorporated herein by
                        reference from Form S-8 filed on May 3, 2002.

           10.30        Dissolution agreement between Xynergy and CSPIE dated
                        August, 2002.*

           10.31        Cancellation Agreement of acquisition of Web Marketing
                        Network, Inc. dated August 26, 2002,*

           10.32        Acquisition agreement between Voyaware, LLC and Xynergy
                        Corp. dated September, 2002.*

           10.33        Letter from Todd Beutel to SEC re change in accountants
                        to Henry Schiffer, CPA.*

           10.31        Certification.

           10.32        Certification.

         -------------
         * Previously filed

         (b)      REPORTS ON FORM 8-K.
<PAGE>

                  On September 20, 2000 a Form 8-K was filed, reporting the
acquisition of Think Blots greeting card line. The filing included the
Acquisition Agreement as an exhibit and is incorporated herein by reference.

         A Form 8-K was filed dated January 23, 2002 to report the acquisition
of Web Marketing Network,

         8-K filing dated May 2, 2002 reports acquisition of Corporate Space
Power Industries and Electric Corporation, change in auditors, and Amendment to
Articles of Incorporation..

         On May 2, 2002 a Form 8-K was filed reporting the acquisition of CSPIE.

         In June, 2002 a Form 8-K and subsequent 8-KA were filed to report the
change in accountants from Ostrick and Oppenheim to Beutel Accountancy.

         Form 8K and subsequent 8-KA were filed on May 2003, reporting Xynergy's
change in auditor from Todd Beutel to Henry Schiffer, C.P,A.

         Form 8K and subsequent 8-KA were filed in March 2004 reporting
Xynergy's change in auditor from Henry Schiffer, CPA to Weinberg & Co.

         Form 8K and was filed in June 2004 reporting Xynergy's change in
auditor from Weinberg & Company to Shelly International CPA


                                   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: October 29, 2004                     XYNERGY CORPORATION
                                            [formerly known as 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/ Raquel Zepeda                                       October 29,  2004
----------------------------------
RAQUEL ZEPEDA, President,
Chief Executive Officer & Chairman

     The signing officer has reviewed the report;

<PAGE>

      Based on such officer's knowledge, the report does not contain any untrue
statement of material fact or omit a material fact necessary in order to make
statements made, in light of the circumstances under which such statements were
made, not misleading;

      Based on such officer's knowledge, the financial statements and other
financial information included in the report to be filed, fairly present in all
material respects the financial condition and results of operation of the
company as of, and for, the periods presented in the report;

      The signing officers are responsible for establishing and maintaining
internal controls, have designed such internal controls to insure that material
information relating to the company and its consolidated subsidiaries is made
known to such officers, particularly during the period in which the periodic
reports are to be prepared, have evaluated the effectiveness of the controls as
of a date within 90 days prior to the date of the report, and have presented in
the report their conclusions about the effectiveness of the controls based on
their evaluation as of such date;

      The signing officers have disclosed to the company's auditors and the
audit committee all significant deficiencies in the design or operation of
internal controls which could adversely affect the company's ability to record,
process, summarize and report financial data and have identified for the
auditors any material weaknesses in internal controls and any fraud, whether or
not material, that involves management or other employees who have a significant
role in the company's internal controls; and

      The signing officers have indicated in the report whether or not there
were any significant changes in internal controls or other factors that could
significantly affect internal controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.