<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended JUNE 30, 2005

                        Commission File Number 001-04026

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

            NEVADA                                      82-6008727
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                    4700 Lakeshore Ct., Colleyville, TX 76034
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (817) 291-4000

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

           Securities 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 Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] .

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not 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. [ ]

State issuer's revenues for its most recent fiscal year - None.

As of October 18, 2005, the registrant had outstanding 29,162,349 shares of its
common stock, par value $.001, its only class of voting securities outstanding.
The aggregate market value of the shares of common stock of the registrant held
by non-affiliates on October 18, 2005, was approximately $94,653 based on its
closing price on the OTC: Bulletin Board on that date. (See Item 5).

                       DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit index.

Transitional Small Business Disclosure Format (Check one):  Yes [   ]; No [ X ].

<PAGE>


                           LIFESTYLE INNOVATIONS, INC.

                                TABLE OF CONTENTS

                                   FORM 10-KSB

                                     Part I

                                                                            Page
Item 1     Description of Business                                            3
Item 2     Description of Property                                            7
Item 3     Legal Proceedings                                                  8
Item 4     Submission of Matters to a Vote of Security Holders                8

                              Part II

Item 5     Market for Common Equity and Related Stockholder Matters           9
Item 6     Management's Discussion and Analysis or Plan of Operation         11
Item 7     Financial Statements                                              16
Item 8     Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure                                          42
Item 8A    Controls and Procedures                                           43
Item 8B    Other Information                                                 43

                             Part III

Item 9     Directors and Executive Officers of the Registrant                44
Item 10    Executive Compensation                                            46
Item 11    Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters                        49
Item 12    Certain Relationships and Related Transactions                    50
Item 13    Exhibits                                                          52
Item 14    Principal Accountant Fees and Services                            52


                                       2
<PAGE>

                                     PART I

ITEM 1   DESCRIPTION OF BUSINESS

         (a)      Business Development

Lifestyle Innovations, Inc. ("LFSI or Lifestyle") was incorporated under the
laws of Idaho on September 1, 1950. Princeton Mining Company, an Idaho
corporation, merged into its wholly owned subsidiary, Princeton Mining Company,
a Nevada corporation on May 6, 2002. Princeton Mining Company, a Nevada
corporation was the survivor. On July 15, 2002, Princeton Mining Company changed
its name to Lifestyle Innovations, Inc. OneTravel Holdings, Inc. (formerly RCG
Companies Incorporated and formerly eResource Capital Group, Inc.) ("OTV") owns
approximately 39.7% of the LFSI's outstanding common stock at June 30, 2005.

The consolidated financial statements include the accounts of LFSI and its
wholly owned subsidiaries: Lifestyle Technologies Franchising Corp.
("Franchising") which was incorporated in Nevada on July 5, 2001; Brittany
Enterprises, Inc. ("Brittany") which was incorporated in Nevada on October 29,
1998; SYSLYNC - COLORADO, Inc. ("Colorado") which was incorporated in Colorado
on March 14, 2003; and FutureSmart Systems, Inc. ("FutureSmart") which was
incorporated in Delaware on December 17, 2002 (collectively the "Company"). The
Company sold LST of Baltimore, Inc. ("LBI") effective June 30, 2005.
Accordingly, all operations of LBI are included in discontinued operations.

LST Integrators, Inc. ("Integrators") which was incorporated in Nevada on
November 9, 1998, and its wholly owned subsidiaries: LST, Inc., d/b/a Lifestyle
Technologies ("LST") which was incorporated in Delaware on July 17, 2000;
Lifestyle Technologies Atlanta, Inc. ("LSTA") which was incorporated June 7,
2001 in Georgia; Lifestyle Technologies Charlotte, Inc. ("LS-Charlotte") which
was incorporated February 24, 2003 in North Carolina; and Lifestyle Security,
Inc. ("LS-Security") which was incorporated in Delaware on June 1, 2001 were all
sold to Lauraan Corp., formerly Sports Management & Recreation, Inc.
("Lauraan"), a Nevada corporation, on May 24, 2004, for 250,000 (25,000
pre-split) shares of Lauraan's common stock. Integrators and its subsidiaries
are included in discontinued operations.

SYSLYNC-GEORGIA, Inc. ("Georgia") was incorporated in Georgia on December 1,
2003, and commenced operations on February 6, 2004. Georgia was formed to
provide builders, homeowners and commercial customers with complete installation
and equipment for audio, video, home theater, security, computer networking,
central vacuum and accent lighting in the Georgia market. Georgia was also sold
to Lauraan on May 24, 2004, in exchange for 500,000 (50,000 pre-split) shares of
Lauraan's common stock and is included in discontinued operations.

Acquisition/Disposition of LST of Baltimore, Inc.
-------------------------------------------------

On May 5, 2004, the Company, LFSI Acquisition, Inc. (a wholly-owned subsidiary),
and LBI entered into an Agreement and Plan of Merger (the "Merger Agreement").
The merger contemplated by the Merger Agreement (the "Merger") was also
completed on May 5, 2004. As a result of the Merger, LBI became a wholly-owned
subsidiary of the Company and all outstanding shares of LBI's capital stock were
exchanged for 1,900,000 shares of the Company's common stock. The Company also
assumed an obligation to issue an additional 800,000 shares of its common stock
as a fee for facilitating the acquisition. LBI was a private company which
provided builders, homeowners and commercial customers with complete
installation and equipment for structured wiring, security, personal computer
networking, audio, video, home theater, central vacuum and accent lighting. LBI
was a franchisee of Franchising until Franchising discontinued operations
effective April 1, 2004.

                                       3
<PAGE>

Immediately prior to the Merger, LBI entered into a Convertible Debenture
Purchase Agreement (the "Purchase Agreement"), dated as of May 5, 2004, with HEM
Mutual Assurance LLC (HEM), pursuant to which it sold and issued convertible
debentures to HEM in an aggregate principal amount of up to $1,000,000 in a
private placement pursuant to Rule 504 of Regulation D under the Securities Act
of 1933, as amended. Two debentures in the aggregate principal amount of
$999,200 were issued for gross proceeds of $249,200 in cash ( "First Debenture
A") and an additional debenture in the aggregate principal amount of $750,000
(the "Contingent Debenture" or "First Debenture B") was issued in exchange for a
promissory note from HEM in the principal amount of $750,000 (the "Note"). The
Contingent Debenture does not become an obligation until the Note is funded. In
addition, as a fee for facilitating the LBI acquisition, a debenture of $800
("Second Debenture") was issued for gross proceeds of $800 in cash and the right
to exchange the debenture for 800,000 shares of the Company's common stock. Each
of the debentures has a maturity date of May 4, 2009, subject to earlier
conversion or redemption pursuant to its terms, and bears interest at the rate
of 1% per year, payable in cash or shares of common stock at the option of the
holder of the debentures. As a result of the Merger, the Company has assumed the
rights and obligations of LBI in the private placement, including the gross
proceeds raised through the sale of the debentures, the Note issued by HEM to
LBI, and LBI's obligations under the debentures and the Purchase Agreement.

As a result of the Merger at May 5, 2004, $249,200 and $800 in principal amount
of the initial debentures are convertible into unrestricted shares of the
Company's common stock at a conversion price that is the lower of $0.42 or the
average of the three lowest closing per share bid prices for the common stock
during the 40 trading days prior to conversion and $0.001 per share,
respectively. The $750,000 Contingent Debenture will become convertible and
subject to repayment if and when the related Note from HEM is paid in full to
the Company in cash. The Contingent Debenture would be convertible into
unrestricted shares of the Company's common stock at a conversion price that is
based upon the trading prices of the Company's common stock at the time the Note
is funded.

Since the $250,000 in convertible debentures bear interest at 1%, the Company
discounted this amount by 6% to arrive at an effective cost of 7%. The discount
of $64,687 was recorded as additional paid-in capital. The additional 6%
interest will accrue monthly and be added to the convertible debenture balance.
The discount associated with any principal conversion is immediately recorded as
interest expense.

The merger was accounted for as an acquisition of assets. The assets acquired
and liabilities assumed included: cash, accounts receivable, inventory,
promissory note(s), fixed assets, goodwill, convertible debentures, accounts and
notes payable. The acquisition of LBI was accounted for as a purchase in
accordance with SFAS No. 141, and the Company allocated the purchase price of
LBI based upon the fair values of the net assets acquired and liabilities
assumed. The allocation of the purchase price resulted in the Company recording
goodwill in the amount of $253,049.

                                       4
<PAGE>

The First Debenture A conversion price of $0.42 per share was higher than the
per share price of the Company's common stock on the issuance date of May 5,
2004. The Second Debenture conversion price of $0.001 per share was lower than
the per share price of the Company's common stock on the issuance date of May 4,
2004. In accordance with the provisions of EITF 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios to Certain Convertible Instruments," and EITF
00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments," the
Company should record a beneficial conversion feature related to the debentures.
However, since the debenture was converted prior to June 30, 2004, no beneficial
conversion was recorded as it would have been fully amortized at June 30, 2004.
In connection with the convertible debt financing, the Company capitalized
$58,400 of debt issuance costs, which are included in other assets. These costs
are being amortized over the life of the convertible debentures. As of June 30,
2005, $33,540 of the debt financing costs remains and $24,860 has been
amortized.

During fiscal 2004, $27,772 in debenture principal plus the related accrued
interest was converted into 1,800,468 shares of common stock, which were issued
from the 4,000,000 shares of treasury stock contributed by OTV. During fiscal
2005, $35,596 in debenture principal plus the related accrued interest was
converted into 3,588,402 shares of common stock. The 3,588,402 shares included
2,199,532 shares which were issued from the remainder of the treasury stock
contributed by OTV and 1,388,870 newly issued shares.

The conversion price and number of shares of common stock issuable upon
conversion of the debentures is subject to adjustment for stock splits and
combinations and other dilutive events. To satisfy its conversion obligations
under the debentures, the Company placed 50,000,000 shares of its common stock
into escrow for potential issuance to HEM upon conversion of the debentures. As
of June 30, 2005, 44,611,130 shares of common stock remain in escrow. Unless and
until the debentures are converted, HEM has no voting or other ownership rights
in any of the shares of the Company's common stock held in escrow and the shares
in escrow are not treated by the Company as being issued and outstanding.

The debentures may never be converted into an aggregate of more than 50,000,000
shares of the Company's common stock unless the Company elects to increase the
number of shares held in escrow in accordance with and subject to any applicable
rules or regulations of the exchange, market or system on which the Company's
common stock is then listed requiring stockholder approval prior to such
additional issuance. In the event that the conversion rate of the debentures
would require the Company to issue more than an aggregate of 50,000,000 shares
of the Company's common stock upon conversion of the debentures, and the Company
elects not to increase the number of shares held in escrow (or the Company fails
to obtain any required stockholder approval for such proposed increase), the
Company will be required to redeem the unconverted amount of the debentures for
125% of the principal amount thereof, plus accrued and unpaid interest.

In addition to the foregoing, the debentures may not be converted if and to the
extent that after such conversion the holder would beneficially own more than 5%
of the Company's then outstanding common stock, unless the holder waives this
limitation by providing the Company 75 days prior notice of the waiver.

The Company has the right to redeem the debentures, in whole or in part, at any
time on 30 days advance notice for 125% of the principal amount of the
outstanding debentures being redeemed, plus accrued and unpaid interest. In
addition, if at any time any of the debentures are outstanding, the Company
receives debt or equity financing in an amount equal to or exceeding five


                                       5
<PAGE>

million dollars ($5,000,000) in a single transaction or series of related
transactions (excluding any portion of such financing consisting of forgiveness
of debt or other obligations), the Company is required to redeem the debentures
for 125% of the amount of the then outstanding debentures. If trading in the
Company's common stock is suspended (other than suspensions of trading on such
market or exchange generally or temporary suspensions pending the release of
material information) for more than 10 trading days, or if the Company's common
stock is delisted from the exchange, market or system on which it is then traded
and not relisted on another exchange, market or the Over the Counter Bulletin
Board within 10 trading days, HEM may elect to require the Company to redeem all
then outstanding debentures in the manner set forth in the Purchase Agreement.

Until such time as it no longer holds any debentures, neither HEM nor its
affiliates may engage in any short sales of the Company's common stock if there
is no offsetting long position in the Company's common stock then held by HEM or
such affiliates.

Effective June 30, 2005, the Company sold LBI and recognized a loss of $204,252.
As a part of this transaction, the Company retained the remaining liability for
the debentures discussed above. The Company retained the unamortized loan cost
balance of $33,540 and assumed the discounted balance of the debentures in the
amount of $148,229 plus the related accrued interest of $2,154.

Acquisition/Disposition of FutureSmart Systems, Inc.
----------------------------------------------------

On May 28, 2003, the Board of Directors of the Company approved a plan to
dispose of FutureSmart. Accordingly, its operations since March 7, 2003, the
date acquired, have been included in discontinued operations. The purchase price
for FutureSmart of $876,910 consisted of the issuance of 1,000,000 shares of
LFSI's $.10 par value preferred stock, a bridge loan by LFSI to FutureSmart of
$224,830 and $552,080 in direct transaction costs.

The acquisition of FutureSmart was accounted for as a purchase in accordance
with SFAS No. 141, and the Company allocated the purchase price of FutureSmart
based upon the fair values of the net assets acquired and liabilities assumed.
The allocation of the purchase price resulted in the Company recording goodwill
in the amount of $2,939,072.

FutureSmart is a manufacturer of "structured wiring" and home networking
systems. FutureSmart develops and distributes home technology products designed
to meet the current and future needs of homeowners for computer networking,
audio/video distribution and home automation.

On October 17, 2003, the Company completed its sale of all of the assets of
FutureSmart for an "Initial Purchase Price" of $1,500,000, which is subject to
adjustment as provided in the Asset Purchase Agreement to the "Final Purchase
Price." The Initial Purchase Price is allocated to the secured creditors of
FutureSmart; $200,000 to the Company and $1,300,000 to the other secured
creditors. Thirty percent ($450,000) of the Initial Purchase Price was paid at
closing pro rata to the secured creditors ($60,000 to the Company) and the
remainder of $1,050,000 was placed in escrow. The escrowed amount is subject to
various adjustments, including determination of the final net assets as of the
closing date and settlement of certain other obligations. The remaining balance
was scheduled to be disbursed by the escrow agent no later than one year and one
day after the closing date. There have been a number of offsets against the
Company's share, as well as, certain third party claims against the amount. The
Company does not expect to receive any additional amount from the escrow.

                                       6
<PAGE>

Acquisition of LST, Inc.
------------------------

On September 5, 2002, LFSI acquired LST, a Delaware corporation, and its wholly
owned subsidiaries, Franchising, LS-Security and LSTA, all organized in July
2001. LFSI issued 16,000,000 shares of its common stock to OTV to acquire 100%
interest in LST. On February 20, 2003, LFSI reorganized its corporate structure.
Integrators became a wholly owned subsidiary of LFSI and the company-store
operations located in Charlotte, NC and Atlanta, GA were transferred to
Integrators. Simultaneously Franchising became a subsidiary of LFSI and LST and
LS-Security became inactive. LFSI had only nominal operations prior to the
merger, leasing two condominium units. Accordingly for accounting purposes the
transaction was treated as the issuance of stock by LST for the net monetary
assets of LFSI, accompanied by a recapitalization of LST. The accounting
treatment was identical to accounting for a reverse acquisition, except that no
goodwill or other intangible asset was recorded. The historical financial
statements prior to September 5, 2002, are those of LST.

Acquisition of Brittany Enterprises, Inc.
-----------------------------------------

On April 24, 2001, LFSI acquired Brittany, a Nevada corporation organized on
October 29, 1998. For accounting purposes, the acquisition was treated as the
acquisition of Brittany by LFSI with Brittany as the purchaser (reverse
acquisition). Brittany did not have operations until March 30, 2001, when it
acquired two condominium units that it leased. The operations of Brittany were
discontinued in fiscal 2005 after the two condominium units were sold.

         (b)      Business of Issuer

The Company has a royalty agreement with LBI which calls for monthly payment of
royalties equal to 1% of LBI's sales after June 30, 2005. This would have
amounted to $7,561 for fiscal 2005 had the Company not owned LBI.

Employees
---------

As of June 30, 2005, we employed one person on a part-time basis at LFSI while
we seek other business opportunities.

Our employee is not represented by a labor union. We have experienced no work
stoppages and believe that our employee relationships are good.


ITEM 2   DESCRIPTION OF PROPERTY

The office space occupied by LFSI is provided at no cost by the President of the
Company. It is expected that this arrangement will continue until operations
improve.

                                       7
<PAGE>

ITEM 3   LEGAL PROCEEDINGS

On April 6, 2004, Mercator Momentum Fund LP ("Mercator") filed a complaint (case
number BC313358, Superior Court of California, County of Los Angeles, Stanley
Mosk Central District) against Lifestyle Innovations, Inc. as an alter ego and
RichMark Capital Corp. relating to a past due loan obligation of Lifestyle
Integrators, Inc., a wholly owned subsidiary of Lifestyle, in the amount of
$295,000. The loan amount is included in current liabilities of discontinued
operations. Integrators was sold in May 2004. On September 3, 2004, Mercator
received a default judgment against Integrators and RichMark in the amount of
$295,000. In addition, Mercator has pursued its alter ego claim against LFSI and
due to LFSI's inability to pay legal counsel LFSI will most likely not prevail.

On April 23, 2004, Meyer Saltzman etal ("Saltzman") filed a complaint (Case No.
2004-CV-2440, State District Court of Denver, Colorado) against
SYSLYNC-COLORADO, Inc. and Lifestyle Innovations, Inc. for their part in the
acquisition of the assets of Homesync. Saltzman's claim against LFSI is for
fraud and breach of contract under an alter-ego theory. Both sides have agreed
to transfer the dispute to arbitration. Prior to a decision by the arbitrator,
SYSLYNC-COLORADO filed for bankruptcy protection. LFSI believes the bankruptcy
filing stayed all of the proceedings; however, Saltzman is attempting to enforce
a $500,000 judgment against LFSI. The judgment is included in current
liabilities of discontinued operations.

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECUTIY HOLDERS

There were no shareholders' meetings or submission of matters to a vote of
security holders during the fiscal year ended June 30, 2005.

                                       8
<PAGE>

                                     PART II

ITEM 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our $.001 par value common stock is traded in the over-the-counter market and is
quoted on the NASD Over The Counter Bulletin Board ("OTCBB") under the symbol
"LFSI." The following tables set forth the quarterly high and low daily bids of
our common stock as reported by the OTCBB for the two years ended June 30, 2005.
The bids represent quotations by dealers without adjustments for retail
mark-ups, mark-downs or commissions and may not represent actual transactions.

                                                   High             Low
                                                   ----             ---
FYE June 30, 2005
-----------------
Fourth Quarter                                 $     .01      $      .01
Third Quarter                                  $     .02      $      .01
Second Quarter                                 $     .05      $      .01
First Quarter                                  $     .09      $      .01


FYE June 30, 2004
-----------------
Fourth Quarter                                 $    1.01      $      .03
Third Quarter                                  $    2.25      $      .35
Second Quarter                                 $    4.00      $     1.55
First Quarter                                  $    4.90      $     2.50


The OTCBB is a quotation service sponsored by the NASD that displays real-time
quotes and volume information in over-the-counter (OTC) equity securities. The
OTCBB does not impose listing standards or requirements, does not provide
automatic trade executions and does not maintain relationships with quoted
issuers. Stocks traded on the OTCBB may face a loss of market makers, lack of
readily available bid and ask prices, experience a greater spread between the
bid and ask prices and a general loss of liquidity. In addition, certain
investors have policies against purchasing or holding OTC securities. Both
trading volume and the market value of our securities have been, and will
continue to be, materially affected by the trading on the OTCBB.

Holders
-------

At June 30, 2005, there were approximately 1,600 holders of record of the
Company's common stock, including shares held in "nominee" or "street" name, an
undetermined number of which represent more than one individual participant in
securities positions with the Company.

                                       9
<PAGE>

Dividends
---------

The Company has never paid cash dividends on its common stock, and intends to
utilize current resources to expand its operations. Therefore, it is not
anticipated that cash dividends will be paid on the Company's common stock in
the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------

The following table summarizes certain information as of June 30, 2005, with
respect to compensation plans (including individual compensation arrangements)
under which common stock of the Company is authorized for issuance:

<TABLE>
                                               Number of Securities to be       Weighted Average
                                                 Issued Upon Exercise of        Exercise Price of        Number of Securities
                                                  Outstanding Options,         Outstanding Options        Remaining Available
           Plan Category                           Warrants and Rights         Warrants and Rights        for Future Issuance
           -------------                           -------------------         -------------------        -------------------
<S>                                                        <C>                      <C>                           <C>
Equity compensation plans approved
  by security holders                                      680,461                  $       2.78                  1,319,539
Equity compensation plans not
  approved by security holders                             166,666                  $       2.50                         -
                                                        -----------                 -------------               ------------
Total                                                      847,127                  $       2.73                  1,319,539
                                                        ===========                 =============               ============
</TABLE>

The material features of the Company's stock option plan, the data for which is
summarized under the equity compensation plans approved by security holders in
the table above, and its warrant arrangements are summarized in Note 7 to the
consolidated financial statements that appear in Item 7.

Recent Sales of Unregistered Securities
---------------------------------------

Effective April 1, 2005, the Company recorded the conversion of the remaining
577,389 shares of outstanding preferred stock into common stock and recorded the
issuance of 1,270,256 additional common shares. When 51% or more of the
preferred shareholders request conversion to common stock; any remaining
preferred shareholders are also required to convert their preferred stock into
common stock. The shares were issued pursuant to an exemption from registration
under Section 4(2) promulgated under the Securities Act of 1933, as amended.

                                       10
<PAGE>

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

>From time to time, the Company may publish forward-looking statements relative
to such matters as anticipated financial performance, business prospects,
technological developments and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. All statements other than statements of historical fact included in
this section or elsewhere in this report are, or may be deemed to be,
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Important
factors that could cause actual results to differ materially from those
discussed in such forward-looking statements include, but are not limited to,
the following: changes in the economy or in specific customer industry sectors;
changes in customer procurement policies and practices; changes in product
manufacturer sales policies and practices; the availability of product and
labor; changes in operating expenses; the effect of price increases or
decreases; the variability and timing of business opportunities including
acquisitions, alliances, customer agreements and supplier authorizations; the
Company's ability to realize the anticipated benefits of acquisitions and other
business strategies; the incurrence of debt and contingent liabilities in
connection with acquisitions; changes in accounting policies and practices; the
effect of organizational changes within the Company; the emergence of new
competitors, including firms with greater financial resources than the Company;
adverse state and federal regulation and legislation; and the occurrence of
extraordinary events, including natural events and acts of God, fires, floods
and accidents.

Effective June 30, 2005, the Company sold LBI and recognized a loss of $204,252.
LBI was acquired on May 5, 2004, for 1,900,000 shares of the Company's common
stock. The Company also assumed an obligation to issue an additional 800,000
shares of its common stock as a fee for facilitating the acquisition.

Georgia and Integrators and its subsidiaries were sold to Lauraan in exchange
for 750,000 (75,000 pre-split) shares of Lauraan common stock on May 24, 2004.

The Company has a royalty agreement with LBI which calls for monthly payment of
royalties equal to 1% of LBI's sales after June 30, 2005. This would have
amounted to $7,561 for fiscal 2005 had the Company not owned LBI.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2005, the Company has a significant working capital deficit of
$5,883,493. The major components of the working capital deficit include:
$1,190,904 due to affiliates, including OTV and its subsidiaries, $1,096,340 in
accounts payable and accrued expenses, current portion of long-term debt and
notes payable in the amount of $1,954,186 and net current liabilities of
discontinued operations of $1,647,158. The Company does not have sufficient cash
flows to meet its obligations currently due within the next 12 months. The
Company is currently exploring additional sources of liquidity, including debt
and equity financing alternatives, acquisitions and potential sales of its
common stock in private placement transactions. Additionally, the Company is
negotiating with its debt holders to extend or convert some or all of the debt
currently due. If the Company is (i) unable to develop or acquire a business to
improve its operating cash flows, (ii) unsuccessful in extending a substantial
portion of the scheduled debt repayments, or (iii) unable to raise additional
funds through private placement sales of its common stock, then the Company will


                                       11
<PAGE>

need to secure alternative debt or equity financing to provide it with
additional working capital. There can be no assurance that additional financing
will be available when needed or, if available, that it will be on terms
favorable to the Company and its stockholders. If the Company is not successful
in generating sufficient cash flow from operations, or in raising additional
capital when required in sufficient amounts and on terms acceptable to the
Company, these failures would have a material adverse effect on the Company's
business, results of operations and financial condition. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
the Company's current shareholders would be diluted.

The Company's working capital deficit increased from a deficit of $5,042,621 at
June 30, 2004, to a deficit of $5,883,493 at June 30, 2005. The increase in
working capital deficit of $840,872 consists primarily of the accrual of a
judgment in the amount of $500,000 relating to Colorado and an increase in
accrued interest of $226,434.

The Company's ability to continue as a going concern will rely on its ability to
continue to raise additional capital and develop or acquire a business capable
of generating positive cash flow.

SALES AND COST OF SALES

The Company had no sales from continuing operations during the years ended June
30, 2005 and 2004.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses from continuing operations for the
years ended June 30, 2005 and 2004 are as follows:

<TABLE>
                                                                               2005                  2004
                                                                               ----                  ----
<S>                                                                   <C>                   <C>
         Compensation expense                                         $          12,500     $          87,500
         Legal and professional expense                                         153,886               246,392
         Bad debts                                                               66,000                    -
         Insurance                                                                   -                 41,034
         Office and other expenses                                               15,362                42,241
         Travel and entertainment                                                 7,061                21,148
                                                                      ------------------    ------------------
              Total selling, general and administrative expenses      $         254,809     $         438,315
                                                                      ==================    ==================
</TABLE>

Selling, general and administrative expenses are $183,506 (42%) lower in 2005
than in 2004. The decrease consists in reductions in all costs except bad debts
as detailed above. The reductions are a result of the decline in operations.

COMPENSATION RELATED TO ISSUANCE OF STOCK OPTIONS AND WARRANTS

On March 7, 2003, pursuant to her employment agreement, Jacqueline E. Soechtig,
Chief Executive Officer from March 7, 2003 to October 9, 2003, was granted a
non-qualified stock option to purchase 500,000 shares of the Company's common
stock at an exercise price equal to $2.50, with options for 166,666 shares to
vest and become exercisable on the effective date of the agreement and options
for 166,667 shares to vest and become exercisable on each of the first and
second anniversaries of the effective date, subject to her continued employment.


                                       12
<PAGE>

Included in fiscal 2003 operations was $568,749 in compensation for the period
from March 7, 2003, through June 30, 2003, relating to this below market option.
This amount includes $433,335 in compensation expense for the portion of the
option that vested immediately and a monthly accrual of $36,111 which would have
continued to accrue until the remaining options vested. Ms. Soechtig resigned
effective October 9, 2003. Accordingly, the compensation accrued in fiscal 2003
of $135,414 for unvested options was reversed in fiscal 2004.

MANAGEMENT FEE TO OTV

OTV provided various services to the Company, including accounting and finance
assistance, capital and debt raising, human resources and other general and
administrative services until November 2003. For the year ended June 30, 2004,
OTV charged the Company $25,000.

INTEREST EXPENSE

Interest expense increased from $201,163 in fiscal 2004 to $227,856 in fiscal
2005. The increase of $26,693 includes an increase in related party interest
expense of $38,389 and a reduction in interest for unrelated parties of $11,696.
The increase in related party interest includes a rate increase of $22,500 on
$500,000 in debt on which the interest rate increased from 6% to 12% during
fiscal 2005 and an increase of $15,889 due to higher average balances being
outstanding during fiscal 2005 as compared to fiscal 2004. (Loans from related
parties increased $321,827 during fiscal 2004).

DISCONTINUED OPERATIONS

Discontinued operations include the results of operations for Integrators and
its subsidiaries, LBI, Brittany, FutureSmart, Georgia, Franchising and Colorado
during the periods they were owned by the Company. The Company accrued $500,000
relating to the Saltzman judgment discussed in Item 3 in fiscal 2005.

NEW ACCOUNTING STANDARDS

In May 2005, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards ("SFAS") No. 154, "Accounting Changes and Error
Corrections," effective for the first fiscal period in the fiscal year beginning
after December 15, 2005. This statement replaces APB Opinion No. 20, "Accounting
Changes" and FASB Statement No. 3, "Reporting Accounting Changes in Interim
Financial Statements". This statement applies to all voluntary changes in
accounting principle and requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable. The Company would only be impacted by this statement if it made a
voluntary change in accounting principle after the effective date.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets," (SFAS 153) an amendment of APB Opinion No. 29, "Accounting for
Non-monetary Transactions" (APB 29). The amendments made by SFAS 153 are based
on the principle that exchanges of non-monetary assets should be measured based
on the fair value of the assets exchanged. Further, the amendments eliminate the
narrow exception for non-monetary exchanges of similar productive assets and
replace it with a broader exception for exchanges of non-monetary assets that do
not have commercial substance. Previously, APB 29 required that the accounting
for an exchange of a productive asset for a similar productive asset or an
equivalent interest in the same or similar productive asset should be based on
the recorded amount of the asset relinquished. APB 29 provided an exception to


                                       13
<PAGE>

its basic measurement principle (fair value) for exchanges of similar productive
assets. The FASB believed that exception required that some non-monetary
exchanges, although commercially substantive, be recorded on a carryover basis.
By focusing the exception on exchanges that lack commercial substance, the FASB
believes SFAS 153 produces financial reporting that more faithfully represents
the economics of the transactions. SFAS 153 is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
application is permitted for non-monetary asset exchanges occurring in fiscal
periods beginning after the date of issuance. The provisions of SFAS 153 shall
be applied prospectively. We have evaluated the impact of the adoption of SFAS
153 and do not believe it will be significant to our overall results of
operations or financial position.

In December 2004, the FASB issued a revision to Statement of Financial
Accounting Standards No. 123, "Share-Based Payment" (SFAS No. 123(R)). The
revision requires all entities to recognize compensation expense in an amount
equal to the fair value of share-based payments granted to employees. The
statement eliminates the alternative method of accounting for employee
share-based payments previously available under APB Opinion No. 25. The
statement will be effective for public companies that file as small business
issuers as of the beginning of the first interim or annual reporting period that
begins after December 15, 2005. We have not completed the process of evaluating
the full financial statement impact that will result from the adoption of SFAS
No. 123(R).

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs," (SFAS 151) an
amendment to ARB 43, Chapter 4, "Inventory Pricing," to clarify the accounting
for abnormal amounts of idle facility expense, freight, handling costs, and
wasted material (spoilage). ARB 43 previously stated that "under some
circumstances, items such as idle facility expense, excess spoilage, double
freight, and re-handling costs may be so abnormal as to require treatment as
current period charges." SFAS 151 requires that these items be recognized as
current-period charges, regardless of whether they meet the criterion of "so
abnormal." SFAS 151 is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005. We do not expect the adoption of SFAS No.
151 to have a significant impact on our financial statements.


CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. For example, unexpected changes in
market conditions or a downturn in the economy could adversely affect actual
results. Estimates are used in accounting for, among other things, allowance for
bad debts, inventory obsolescence, goodwill valuation, legal liability, product
warranty, depreciation, employee benefits, taxes and contingencies. Estimates
and assumptions are reviewed periodically and the effects of revisions are
reflected in the consolidated financial statements in the period they are
determined to be necessary.

Management believes the following critical accounting policies affect its
significant judgments and estimates used in the preparation of its consolidated
financial statements.

                                       14
<PAGE>

Allowance for Bad Debts - Management reviews its accounts receivable balances
and aging and determines based upon collection history, current financial
condition of its customers and other related factors, an estimate of
collectability for all major customers. The determination of the amount of the
allowance for bad debts is based upon an estimate of a number of factors, which,
if incorrect, could yield a markedly different result. If the estimate is too
low, bad debt expense in the future could be much higher than originally
expected, or if the estimate is too high, bad debt expense in the future could
be lower than originally expected.

Income taxes - Income taxes are estimated for each jurisdiction in which the
Company operates. This involves assessing the current tax exposure together with
temporary differences resulting from differing treatment of items for tax and
accounting purposes. Any resulting deferred tax assets are evaluated for
recoverability based on estimated future taxable income. To the extent that
recovery is deemed not likely, a valuation allowance is recorded. The Company
believes that as of June 30, 2005, the realization of the deferred tax assets
might be limited. Accordingly, the Company recorded a valuation allowance for
the full amount of the deferred tax asset.

                                       15
<PAGE>

ITEM 7   FINANCIAL STATEMENTS

                  LIFESTYLE INNOVATIONS, INC. AND SUBSIDIARIES

                           Financial Statements Index

                                                                           Page

Report of Independent Registered Public Accounting Firm:
  Creason & Associates, P.L.L.C.                                            17

Independent Auditors' Report
  Guest & Company, P.C.                                                     18

Consolidated Balance Sheet as of June 30, 2005                              19

Consolidated Statements of Operations for the Years Ended
June 30, 2005 and 2004                                                      20

Consolidated Statements of Stockholders' Deficit for the Years
Ended June 30, 2005 and 2004                                                21

Consolidated Statements of Cash Flows for the Years Ended
June 30, 2005 and 2004                                                     22-23

Notes to the Consolidated Financial Statements                             24-41

                                       16
<PAGE>

                         CREASON & ASSOCIATES, P.L.L.C.
                         7170 S. BRADEN AVE., SUITE 100
                           TULSA, OKLAHOMA 74136-6333

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Lifestyle Innovations, Inc. and Subsidiaries
Colleyville, Texas

We have audited the accompanying consolidated balance sheet of Lifestyle
Innovations, Inc. and Subsidiaries (the Company), as of June 30, 2005, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the year ended June 30, 2005. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with the 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
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Lifestyle Innovations, Inc. and Subsidiaries as of June 30, 2005, and the
consolidated results of their operations and their consolidated cash flows for
the year ended June 30, 2005, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1(e) to the
consolidated financial statements, the Company has a significant working capital
deficit as of June 30, 2005, and does not have sufficient cash flows to meet its
obligations currently due. In addition, the Company suffered a significant loss
in fiscal year 2005, as well as the prior two years, and has a significant
deficit in its equity section of the consolidated balance sheet. At June 30,
2005, the Company has sold or discontinued a majority of its operations during
fiscal years 2005 and 2004, and the Company has only nominal operations that
remain. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1(e). The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.

/s/ CREASON & ASSOCIATES, P.L.L.C.
----------------------------------
Tulsa, Oklahoma
November 9, 2005

                                       17
<PAGE>

                              GUEST & COMPANY, P.C.
                         7170 S. BRADEN AVE., SUITE 100
                           TULSA, OKLAHOMA 74136-6333


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Lifestyle Innovations, Inc. and Subsidiaries
Colleyville, Texas

We have audited the accompanying consolidated balance sheet of Lifestyle
Innovations, Inc. and Subsidiaries (the Company), as of June 30, 2004, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years ended June 30, 2004 and 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Lifestyle Innovations, Inc. and Subsidiaries as of June 30, 2004, and the
consolidated results of their operations and their consolidated cash flows for
the years ended June 30, 2004 and 2003, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1(e) to the
consolidated financial statements, the Company has a significant working capital
deficit as of June 30, 2004, and does not have sufficient cash flows to meet its
obligations currently due. In addition, the Company suffered a significant loss
in fiscal year 2004, as well as the prior two years, and has a significant
deficit in its equity section of the consolidated balance sheet. At June 30,
2004, the Company has only one operating subsidiary with continuing operations,
and all other subsidiaries of the Company have been discontinued or were sold in
fiscal year 2004. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1(e). The consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.

/s/ GUEST & COMPANY, P.C.
-------------------------
Tulsa, Oklahoma
October 5, 2004

                                       18
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Balance Sheet
June 30, 2005

                                     ASSETS
<S>                                                                            <C>
Cash and cash equivalents                                                      $        595
Marketable securities                                                                 4,500
                                                                               -------------
     Total current assets                                                             5,095
Loan costs, less amortization of $24,860                                             33,540
                                                                               -------------
     Total assets                                                              $     38,635
                                                                               =============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
Notes payable                                                                  $    829,919
Notes payable to related parties                                                  1,124,267
Accounts payable                                                                    276,585
Accrued expenses                                                                    819,755
Amounts due to affiliates                                                         1,190,904
Net current liabilities of discontinued operations                                1,647,158
                                                                               -------------
     Total current liabilities                                                    5,888,588
Long-term debt and accrued interest                                                 150,383
                                                                               -------------
     Total liabilities                                                            6,038,971
                                                                               -------------

Commitments and contingencies

Stockholders' deficit:
  Series A Convertible Preferred stock; $0.10 par value; 1,719,854 shares
    authorized; none issued and outstanding; voting; convertible into
    1,000,000 common shares                                                               --
  Common stock; $0.001 par value; 250,000,000 shares authorized;
    29,162,349 shares issued and outstanding                                         29,162
  Additional paid-in capital                                                     14,067,734
  Accumulated deficit                                                           (20,097,232)
                                                                               -------------
     Total stockholders' deficit                                                 (6,000,336)
                                                                               -------------
     Total liabilities and stockholders' deficit                               $     38,635
                                                                               =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                            19
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended June 30, 2005 and 2004

                                                                        2005                2004
                                                                        ----                ----
<S>                                                                 <C>                <C>
Revenues from product sales                                         $         --       $         --
Cost of sales                                                                 --                 --
                                                                    -------------      -------------
Gross profit                                                                  --                 --

Selling, general and administrative expense                              254,809            438,315
Compensation related to issuance of stock options and warrants                --           (135,414)
Depreciation and amortization                                                 --              1,687
Management fee to OTV                                                         --             25,000
                                                                    -------------      -------------
     Total operating expenses                                            254,809            329,588
                                                                    -------------      -------------
     Loss from operations                                               (254,809)          (329,588)
Other income (expense):
  Interest and other income                                                  288             10,416
  Unrealized gain on marketable securities                                 4,500                 --
  Interest expense                                                      (102,818)          (114,514)
  Interest expense - related party                                      (125,038)           (86,649)
                                                                    -------------      -------------
                                                                        (223,068)          (190,747)
                                                                    -------------      -------------
     Loss from continuing operations before income taxes                (477,877)          (520,335)
Income tax expense                                                            --                 --
                                                                    -------------      -------------
     Loss from continuing operations                                    (477,877)          (520,335)
Discontinued operations:
     Loss from discontinued operations                                  (706,489)        (6,474,162)
     Income tax expense                                                       --                 --
                                                                    -------------      -------------
     Loss on discontinued operations                                    (706,489)        (6,474,162)
                                                                    -------------      -------------
     Net loss                                                       $ (1,184,366)      $ (6,994,497)
                                                                    =============      =============
Basic and diluted net loss per share:
  Continuing operations                                             $      (0.02)      $      (0.03)
  Discontinued operations                                                  (0.02)             (0.31)
                                                                    -------------      -------------
                                                                    $      (0.04)      $      (0.34)
                                                                    =============      =============
Weighted average shares outstanding                                   26,690,391         20,870,259
                                                                    =============      =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                 20
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
For the Years Ended June 30, 2005 and 2004

                                                                                                  Additional      Unissued
                                              Preferred Stock             Common Stock              Paid-in        Common
                                           Shares       Amount        Shares         Amount         Capital         Stock
                                        ------------- ------------ ------------- --------------- -------------- --------------
<S>                                        <C>        <C>            <C>         <C>             <C>            <C>
Balance at July 1, 2003                    1,000,000  $   100,000    20,469,325  $       20,469  $  12,639,673  $     731,265
 Issue shares                                      -            -       325,000             325        730,940       (731,265)
 Shares issued for services                        -            -        54,813              55         94,254              -
 Conversion of preferred stock              (223,476)     (22,348)      444,487             445         21,903              -
 Asset transfer to discontinued operations         -            -             -               -              -              -
 Issue preferred shares                        5,228          523             -               -              -              -
 Treasury stock received from RCG                  -            -             -               -        140,000              -
 Acquire LST of Baltimore, Inc.                    -            -     1,900,000           1,900         74,100              -
 Discount on convertible debentures                -            -             -               -         64,687              -
 Convert debentures                                -            -             -               -        (35,215)             -
 Stockholder settlements                           -            -     2,860,000           2,860         97,240              -
 Net loss for year ended June 30, 2004             -            -             -               -              -              -
                                        ------------- ------------ ------------- --------------- -------------- --------------
Balance at June 30, 2004                     781,752       78,175    26,053,625          26,054     13,827,582              -
Conversion of preferred stock               (781,752)     (78,175)    1,719,854           1,720         76,455              -
Convert debentures                                 -            -     1,388,870           1,388        (42,598)             -
Expired warrants                                   -            -             -               -        206,295              -
Bad debt                                           -            -             -               -              -              -
Net loss                                           -            -             -               -              -              -
                                        ------------- ------------ ------------- --------------- -------------- --------------
Balance at June 30, 2005                           -  $         -    29,162,349  $       29,162  $  14,067,734  $           -
                                        ============= ============ ============= =============== ============== ==============


                                           Common                     Stock
                                            Stock       Deferred   Subscription   Accumulated      Treasury
                                          Warrants      Expenses    Receivable       Deficit         Stock          Total
                                        ------------- ------------ ------------- --------------- -------------- --------------

Balance at June 30, 2003                $    206,295  $  (303,488) $     (4,000) $  (11,918,369) $           -  $   1,471,845
 Issue shares                                      -            -             -               -              -              -
 Shares issued for services                        -       37,500             -               -              -        131,809
 Asset transfer to discontinued operations         -      265,988             -               -              -        265,988
 Conversion of preferred stock                     -            -             -               -              -              -
 Issue preferred shares                            -            -             -               -              -            523
 Treasury stock received from RCG                  -            -             -               -       (140,000)             -
 Acquire LST of Baltimore, Inc.                    -            -             -               -              -         76,000
 Discount on convertible debentures                -            -             -               -              -         64,687
 Convert debentures                                -            -             -               -         63,016         27,801
 Stockholder settlements                           -            -             -               -              -        100,100
 Net loss for year ended June 30, 2004             -            -             -      (6,994,497)             -     (6,994,497)
                                        ------------- ------------ ------------- --------------- -------------- --------------
Balance at June 30, 2004                     206,295            -        (4,000)    (18,912,866)       (76,984)    (4,855,744)
Conversion of preferred stock                      -            -             -               -              -              -
Convert debentures                                 -            -             -               -         76,984         35,774
Expired warrants                            (206,295)           -             -               -              -              -
Bad debt                                           -            -         4,000               -              -          4,000
Net loss                                           -            -             -      (1,184,366)             -     (1,184,366)
                                        ------------- ------------ ------------- --------------- -------------- --------------
Balance at June 30, 2005                $          -  $         -  $          -  $  (20,097,232) $           -  $  (6,000,336)
                                        ============= ============ ============= =============== ============== ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                                                21
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2005 and 2004

                                                                            2005             2004
                                                                            ----             ----
<S>                                                                    <C>               <C>
Cash flows from operating activities:
  Net loss                                                             $(1,184,366)      $(6,994,497)
    Loss from discontinued operations                                     (706,489)       (6,474,162)
                                                                       ------------      ------------
      Loss from continuing operations                                     (477,877)         (520,335)
  Adjustments to reconcile net loss to net cash used in
    operations:
      Depreciation and amortization                                             --             1,687
      Other                                                                     --               523
      Stock option compensation                                                 --          (135,414)
      Stock based compensation                                                  --           131,809
      Stock based settlements                                                   --           100,100
      Bad debts                                                             66,000                --
      Unrealized gain on marketable securities                              (4,500)               --
      Changes in operating assets and liabilities, net of effects
        of acquisitions and divestitures:
        Accounts and notes receivable                                           --            56,605
        Prepaid expenses                                                        --            14,147
        Deferred costs and other assets                                         --             8,080
        Accounts payable and accrued expenses                              249,581           (34,207)
                                                                       ------------      ------------
          Net cash used in continuing operations                          (166,796)         (377,005)
          Net cash provided by (used in) discontinued operations            51,755          (166,549)
                                                                       ------------      ------------
            Net cash used in operations                                   (115,041)         (543,554)
                                                                       ------------      ------------
Cash flows from investing activities:
          Net cash used in discontinued operations                              --              (523)
                                                                       ------------      ------------
            Net cash used in investing activities                               --              (523)
                                                                       ------------      ------------
Cash flows from financing activities:
     Loan proceeds                                                              --           191,600
     Loan proceeds from related parties                                    125,038           221,827
     Repayment of notes payable and long-term debt                              --           (80,000)
     Loan made                                                              (6,500)          (55,500)
     Due to affiliates                                                          --           (71,519)
                                                                       ------------      ------------
          Net cash provided by continuing operations                       118,538           206,408
          Net cash provided by discontinued operations                     (14,987)          346,675
                                                                       ------------      ------------
            Net cash provided by financing activities                      103,551           553,083
                                                                       ------------      ------------
Net increase in cash and cash equivalents                                  (11,490)            9,006
Cash and cash equivalents at beginning of year                              12,085             3,079
                                                                       ------------      ------------
Cash and cash equivalents at end of year                               $       595       $    12,085
                                                                       ============      ============

                                                                                            Continued

See accompanying notes to consolidated financial statements.

                                                      22
<PAGE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
For the Years Ended June 30, 2005 and 2004

                                                                    2005          2004
                                                                    ----          ----

Supplemental Cash Flow Information - Continuing Operations
  Cash paid for interest                                         $     --      $ 10,500
  Cash paid for income taxes                                           --            --

Non-cash investing and financing activities are as follows:
  Conversion of accrued interest for accounts receivable         $     --      $197,431
  Common stock issued for services                                     --       131,809
  Common stock issued to acquire LST of Baltimore, Inc.                --        76,000
  Conversion of debentures into common stock                       35,744        27,801
  Common stock issued for settlements with stockholders                --       100,100
  Exchange of subsidiaries for investments                             --            --
  Conversion of preferred stock for common stock                   78,175        22,348
  Expired warrants                                                206,295            --

</TABLE>

See accompanying notes to consolidated financial statements.

                                            23
<PAGE>

LIFESTYLE INNOVATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


1.       BASIS OF PRESENTATION AND BUSINESS ORGANIZATION

              (a) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION - The
              consolidated financial statements include the accounts of
              Lifestyle Innovations, Inc. ("LFSI") and its wholly owned
              subsidiaries: Lifestyle Technologies Franchising Corp.
              ("Franchising"); Brittany Enterprises, Inc. ("Brittany"); SYSLYNC
              - COLORADO, Inc. ("Colorado") and FutureSmart Systems, Inc.
              ("FutureSmart") (collectively the "Company"). Franchising,
              Colorado, Brittany and FutureSmart are included in discontinued
              operations. All material intercompany accounts and transactions
              have been eliminated.

              (b) ORGANIZATION - LFSI was organized in September 1950, under the
              laws of the State of Idaho.

              On May 5, 2004, the Company, LFSI Acquisition, Inc. (a
              wholly-owned subsidiary), and LST of Baltimore, Inc. ("LBI")
              entered into an Agreement and Plan of Merger (the "Merger
              Agreement"). The merger contemplated by the Merger Agreement (the
              "Merger") was also completed on May 5, 2004. As a result of the
              Merger, LBI became a wholly-owned subsidiary of the Company and
              all outstanding shares of LBI's capital stock were exchanged for
              1,900,000 shares of the Company's common stock. The Company also
              assumed an obligation to issue an additional 800,000 shares of its
              common stock as a fee for facilitating the acquisition. LBI was a
              private company which provided builders, homeowners and commercial
              customers with complete installation and equipment for structured
              wiring, security, personal computer networking, audio, video, home
              theater, central vacuum and accent lighting. Effective June 30,
              2005, the Company sold LBI and recognized a loss of $204,252. The
              operations of LBI are included in discontinued operations during
              the period owned by LFSI.

              LST Integrators, Inc. ("Integrators") and its wholly owned
              subsidiaries: LST, Inc., d/b/a Lifestyle Technologies ("LST");
              Lifestyle Technologies Atlanta, Inc. ("LSTA"); Lifestyle
              Technologies Charlotte, Inc. ("LS-Charlotte); and Lifestyle
              Security, Inc. ("LS-Security") were all sold to Lauraan Corp.,
              formerly Sports Management & Recreation, Inc. ("Lauraan"), a
              Nevada corporation, on May 24, 2004, in exchange for 250,000
              (25,000 pre-split) shares of Lauraan's common stock. Integrators
              and its subsidiaries are included in discontinued operations
              during the period owned by LFSI.

              SYSLYNC-GEORGIA, Inc. ("Georgia") was incorporated by the Company
              on December 1, 2003, and commenced operations on February 6, 2004.
              Georgia was formed to provide builders, homeowners and commercial
              customers with complete installation and equipment for audio,
              video, home theater, security, computer networking, central vacuum
              and accent lighting in the Georgia market. Georgia was also sold
              to Lauraan on May 24, 2004, in exchange for 500,000 (50,000
              pre-split) shares of Lauraan's common stock and is included in
              discontinued operations.

                                       24
<PAGE>

              LFSI completed its acquisition of FutureSmart effective March 7,
              2003. On May 28, 2003, the Board of Directors approved a plan to
              dispose of FutureSmart. Accordingly, its operations since March 7,
              2003, have been included in discontinued operations.

              On September 5, 2002, LFSI acquired LST, a Delaware corporation,
              and its wholly owned subsidiaries, Franchising, LS-Security and
              LSTA, all organized in July 2001. LFSI issued 16,000,000 shares of
              its common stock to OneTravel Holdings, Inc., formerly RCG
              Companies Incorporated and formerly eResource Capital Group, Inc.
              ("OTV"), to acquire 100% interest in LST. On February 20, 2003,
              LFSI reorganized its corporate structure. Integrators became a
              wholly owned subsidiary of LFSI and the company-store operations
              located in Charlotte, NC and Atlanta, GA were transferred to
              Integrators. Simultaneously, Franchising became a subsidiary of
              LFSI, while LST and LS-Security became inactive. LFSI had only
              nominal operations prior to the merger, leasing two condominium
              units. For accounting purposes the transaction was treated as the
              issuance of stock by LST for the net monetary assets of LFSI,
              accompanied by a recapitalization of LST. The accounting treatment
              was identical to accounting for a reverse acquisition, except that
              no goodwill or other intangible asset was recorded. The historical
              financial statements prior to September 5, 2002, are those of LST.
              At June 30, 2005, OTV owns 39.7% of the outstanding common stock
              of LFSI.

              On April 24, 2001, LFSI acquired Brittany, a Nevada corporation
              organized on October 29, 1998. For accounting purposes, the
              acquisition was treated as the acquisition of Brittany by LFSI
              with Brittany as the purchaser (reverse acquisition). Brittany did
              not have operations until March 30, 2001. The operations of
              Brittany were discontinued in fiscal 2005 after its two
              condominium units were sold.

              Princeton Mining Company, an Idaho corporation, merged into its
              wholly owned subsidiary, Princeton Mining Company, a Nevada
              corporation on May 6, 2002. Princeton Mining Company, a Nevada
              corporation, was the survivor. Effective July 15, 2002, Princeton
              Mining Company changed its name to Lifestyle Innovations, Inc.


              (c) NATURE OF BUSINESS - The Company has a royalty agreement with
              LBI which calls for monthly payment of royalties equal to 1% of
              LBI's sales after June 30, 2005.


              (d) FISCAL YEARS - As used herein, fiscal 2005 refers to the
              periods included in the fiscal year ended June 30, 2005, and
              fiscal 2004 refers to the periods included in the fiscal year
              ended June 30, 2004.


              (e) GOING CONCERN - At June 30, 2005, the Company has a
              significant working capital deficit of $5,883,493. The major
              components of the working capital deficit include: $1,190,904 due
              to affiliates, $1,096,340 in accounts payable and accrued
              expenses, current portion of long-term debt and notes payable in
              the amount of $829,919, notes payable due related parties of
              $1,124,267 and net current liabilities of discontinued operations
              in the amount of $1,647,158. The Company does not have sufficient
              cash flows to meet its obligations currently due within the next
              12 months. These conditions raise substantial doubt about the
              Company's ability to continue as a going concern. The Company
              plans on negotiating with its debt holders to continue to extend
              or convert some or all of the debt. If the Company is (i) unable


                                       25
<PAGE>

              to develop or acquire a business or improve its operating cash
              flows, (ii) unsuccessful in extending a substantial portion of the
              debt repayments currently past due, or (iii) unable to raise
              additional funds through private placement sales of its common
              stock, then the Company may be unable to continue as a going
              concern. There can be no assurance that additional financing will
              be available when needed or, if available, that it will be on
              terms favorable to the Company and its stockholders. If the
              Company is not successful in generating sufficient cash flows from
              operations, or in raising additional capital when required in
              sufficient amounts and on terms acceptable to the Company, these
              failures would have a material adverse effect on the Company's
              business, results of operations and financial condition. If
              additional funds are raised through the issuance of equity
              securities, the percentage ownership of the Company's current
              shareholders would be diluted. These consolidated financial
              statements do not include any adjustments that may result from the
              outcome of these uncertainties.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

         The Company classifies as cash equivalents any investments which can be
         readily converted to cash and have an original maturity of less than
         three months. At times cash and cash equivalent balances at a limited
         number of banks and financial institutions may exceed insurable
         amounts. The Company believes it mitigates its risks by depositing cash
         or investing in cash equivalents in major financial institutions.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Company in
         estimating its fair value disclosures for financial instruments:

         o        Cash and cash equivalents: The carrying amount reported in the
                  consolidated balance sheet for cash approximates its fair
                  value.
         o        Accounts payable: Due to their short term nature, the carrying
                  amounts reported in the consolidated balance sheet for
                  accounts payable approximate their fair value.
         o        Notes payable: The carrying amount of the Company's notes
                  payable approximate their fair value.

MARKETABLE INVESTMENT SECURITIES

         Marketable investment securities are classified into the following
         categories:

         o        Trading securities reported at fair value with unrealized
                  gains and losses included in earnings;
         o        Available-for-sale securities reported at fair value with
                  unrealized gains and losses, net of deferred income taxes,
                  reported in other comprehensive income; and
         o        Held-to-maturity securities reported at amortized cost.

                                       26
<PAGE>

         Fair value is determined from quoted market price.

PROPERTY AND EQUIPMENT

         Property and equipment are recorded at cost, net of accumulated
         depreciation. Depreciation is calculated by using the straight-line
         method over the estimated useful lives of the assets, which is five to
         seven years for all categories except for computer software, which is
         depreciated over three years. Leasehold improvements are amortized over
         the life of the lease if it is shorter than the estimated useful life.
         Residential real estate is depreciated over twenty-seven and one-half
         years. Repairs and maintenance are charged to expense as incurred.
         Expenditures for betterments and renewals are capitalized. The cost of
         property and equipment and the related accumulated depreciation are
         removed from the accounts upon retirement or disposal with any
         resulting gain or loss being recorded as other income or expenses.

GOODWILL, INTANGIBLE ASSETS AND IMPAIRMENT

         The Company records goodwill and intangible assets arising from
         business combinations in accordance with SFAS No. 141 "Business
         Combinations" ("SFAS 141") which requires that the purchase method of
         accounting be used for all business combinations initiated after June
         30, 2001. SFAS 141 also specifies the criteria applicable to intangible
         assets acquired in a purchase method business combination to be
         recognized and reported apart from goodwill.

         The Company accounts for goodwill and intangible assets in accordance
         with SFAS 142. The Company adopted SFAS 142 effective July 1, 2001. In
         completing the adoption of SFAS 142, the Company allocated its
         previously existing goodwill as of July 1, 2001 to its reporting units,
         as defined in SFAS 142, and performed an initial test for impairment as
         of that date.

         In accordance with SFAS 142, the Company no longer amortizes goodwill.
         SFAS 142 requires that goodwill and intangible assets with indefinite
         useful lives no longer be amortized, but instead be tested at least
         annually for impairment. SFAS 142 also requires that intangible assets
         with definite useful lives be amortized over their respective estimated
         useful lives to their estimated residual values, and be reviewed for
         impairment.

STOCK OPTIONS AND WARRANTS

         The Company accounts for stock-based awards to employees using the
         intrinsic value method described in Accounting Principles Board Opinion
         (APB) No. 25, "Accounting for Stock Issued to Employees" and its
         related interpretations. Accordingly, no compensation expense has been
         recognized in the accompanying consolidated financial statements for
         stock-based awards to employees when the exercise price of the award is
         equal to or greater than the quoted market price of the stock on the
         date of the grant.

                                       27
<PAGE>

         On March 7, 2003, pursuant to her employment agreement, Jacqueline E.
         Soechtig, Chief Executive Officer from March 7, 2003 to October 9,
         2003, was granted (1) an incentive stock option to purchase 500,000
         shares of common stock at an exercise price equal to the trading price
         of such stock on the last trading day prior to Board approval ($5.10),
         with options for 166,666 shares to vest and become exercisable on the
         effective date of the agreement and options for 166,667 shares to vest
         and become exercisable on each of the first and second anniversaries of
         the effective date, subject to her continued employment and (2) a
         non-qualified stock option to purchase 500,000 shares at an exercise
         price equal to $2.50, with options for 166,666 shares to vest and
         become exercisable on the effective date of this agreement and options
         for 166,667 shares to vest and become exercisable on each of the first
         and second anniversaries of the effective date, subject to her
         continued employment. Both options will expire ten years from the
         effective date. Ms. Soechtig resigned effective October 9, 2003.
         Accordingly, her unvested options were forfeited.

         On September 5, 2002, Paul Johnson, Chief Executive Officer of the
         Company until March 7, 2003 and since January 1, 2004, was granted an
         option to acquire 400,000 shares of common stock at an exercise price
         of $2.20, the trading price on that day. The option vested on September
         5, 2002, and will expire three years from the effective date.

         On February 13, 2004, the manager of Georgia was granted an option to
         acquire 113,795 shares of common stock at an exercise price of $1.45,
         the trading price on that day. The option vested on February 13, 2004
         and will expire three years from the effective date.

         SFAS 123, "Accounting for Stock-Based Compensation" and SFAS 148,
         "Accounting for Stock-Based Compensation - Transition and Disclosure -
         an amendment of SFAS 123" require disclosures as if the Company had
         applied the fair value method to employee awards rather than the
         intrinsic value method. The fair value of stock-based awards to
         employees is calculated through the use of option pricing models, which
         were developed for use in estimating the fair value of traded options,
         which have no vesting restrictions and are fully transferable. These
         models also require subjective assumptions, including future stock
         price volatility and expected time to exercise, which greatly affect
         the calculated values. The Company's fair value calculations for awards
         from stock option plans during fiscal 2004 were made using the
         Black-Scholes option pricing model with the following weighted average
         assumptions: expected term, three years from the date of grants; stock
         price volatility, 126%; risk free interest rate, 4.67%; and no
         dividends during the expected term as the Company does not have a
         history of paying cash dividends. The Company's fair value calculations
         for awards from stock option plans were made using the Black-Scholes
         option pricing model with the following weighted average assumptions:
         expected term, three and ten years from the date of grants in fiscal
         2003; stock price volatility, 104% to 122%; risk free interest rate,
         4.5% to 4.67%; and no dividends during the expected term as the Company
         does not have a history of paying cash dividends.

                                       28
<PAGE>

         If the computed fair values of the stock-based awards had been
         amortized to expense over the vesting period of the awards, proforma
         net loss and proforma net loss per share, basic and diluted, would have
         been as follows:
<TABLE>
                                                                 Years Ended June 30,
                                                               2005              2004
                                                               ----              ----
<S>                                                      <C>                 <C>
Net loss, as reported                                    $  (1,184,366)      $(6,994,497)

Add:  Stock-based employee compensation included in
reported net loss                                                   --          (135,414)

Deduct:  Total stock-based compensation expense
determined under fair value method for all awards                   --           433,023
                                                         --------------      ------------
Net loss, proforma                                       $  (1,184,366)      $(6,696,888)
                                                         ==============      ============
Net proforma loss per share, basic and diluted           $        (.04)      $      (.32)
                                                         ==============      ============
Net loss per share, basic and diluted, as reported       $        (.04)      $      (.34)
                                                         ==============      ============
</TABLE>

         Options and warrants issued to non-employees are accounted for under
         SFAS 123, "Accounting for Stock Based Compensation". For the options
         and warrants issued to non-employees, the fair value of each award is
         calculated using the Black-Scholes Model in accordance with SFAS 123.

         On May 7, 2002, the Board of Directors adopted and the shareholders
         approved by majority consent the Princeton Mining Company 2002 Stock
         Option Plan (the Plan). The Plan provides for the issuance of up to 2
         million shares of the Company's $.001 par value common stock in
         connection with stock options and other awards under the Plan. The Plan
         authorizes the grant of incentive stock options and non-statutory stock
         options. At June 30, 2005, there were options granted under the Plan
         for 680,461 shares (all shares are vested) and 1,319,539 shares
         available for grant. In addition, there are non-qualified options to
         purchase 166,666 shares (all shares are vested) outstanding at June 30,
         2005, which are not granted under the Plan.

REVENUE RECOGNITION

         The Company will accrue royalty revenue when earned.

NET LOSS PER COMMON SHARE

         The Company has adopted SFAS No. 128, "Earnings Per Share," which
         establishes standards for computing and presenting earnings per share
         (EPS) for entities with publicly held common stock. The standard
         requires presentation of two categories of EPS - basic EPS and diluted
         EPS. Basic EPS excludes dilution and is computed by dividing income
         available to common stockholders by the weighted-average number of
         common shares outstanding for the year. Diluted EPS reflects the
         potential dilution that could occur if securities or other contracts to


                                       29
<PAGE>

         issue common stock were exercised or converted into common stock or
         resulted in the issuance of common stock that then shared in the
         earnings of the Company. All potential dilutive securities are
         antidilutive as a result of the Company's net loss for the years ended
         June 30, 2005 and 2004. Accordingly, basic and diluted EPS are the same
         for each year.

INCOME TAXES

         Income taxes are accounted for in accordance with SFAS 109, "Accounting
         for Income Taxes," which prescribes the use of the asset/liability
         method. Deferred taxes represent the expected future tax consequences
         when the reported amounts of assets and liabilities are recovered or
         paid. They arise from differences between the financial reporting and
         tax basis of assets and liabilities and are adjusted for changes in tax
         laws and tax rates when those changes are enacted. The provision for
         income taxes represents the total of income taxes paid or payable for
         the current year, plus the change in deferred taxes during the year.
         Management of the Company elected to provide a reserve against the
         potential future income tax benefits from its current net operating
         loss, due to the uncertainty of its realization.

USE OF ESTIMATES

         The preparation of consolidated financial statements in conformity with
         accounting principles generally accepted in the United States requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities, the disclosure of contingent assets
         and liabilities at the date of the consolidated financial statements
         and the reported amounts of revenues and expenses during the reporting
         period. Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 2004, the Financial Accounting Standards Board (FASB)
         issued a revision to Statement of Financial Accounting Standards No.
         123, "Share-Based Payment" (SFAS No. 123(R)). The revision requires all
         entities to recognize compensation expense in an amount equal to the
         fair value of share-based payments granted to employees. The statement
         eliminates the alternative method of accounting for employee
         share-based payments previously available under APB Opinion No. 25. The
         statement will be effective for public companies that file as small
         business issuers as of the beginning of the first interim or annual
         reporting period that begins after December 15, 2005. The Company has
         not completed the process of evaluating the full financial statement
         impact that will result from the adoption of SFAS No. 123(R).

         In December 2004, the FASB issued SFAS No. 153, "Exchange of
         Nonmonetary Assets," an amendment of APB Opinion No. 29. SFAS No. 153
         requires all nonmonetary exchanges to be recorded at fair value, unless
         the assets exchanged do not have commercial substance. A nonmonetary
         exchange has commercial substance under SFAS No. 153 if future cash
         flows are expected to change significantly as a result of the exchange.
         SFAS No. 153 will be effective for all nonmonetary asset exchanges
         occurring in fiscal periods beginning after June 15, 2005. The Company
         does not expect the adoption of SFAS No. 153 to have a significant
         impact on its financial statements.

                                       30
<PAGE>

RECLASSIFICATIONS

          Certain prior year amounts have been reclassified to conform with
current year presentation.


3.       ACQUISITIONS AND DISPOSITIONS

LST INTEGRATORS, INC. AND SYSLYNC-GEORGIA, INC.
-----------------------------------------------
Integrators and its wholly owned subsidiaries: LST, LSTA, LS-Charlotte and
LS-Security were all sold to Lauraan on May 24, 2004, in exchange for 250,000
(25,000 pre-split) shares of Lauraan common stock. Integrators and its
subsidiaries are included in discontinued operations during the period owned by
LFSI.

Georgia was incorporated by the Company on December 1, 2003, and commenced
operations on February 6, 2004. Georgia was also sold to Lauraan in exchange for
500,000 (50,000 pre-split) shares of Lauraan common stock on May 24, 2004, and
is included in discontinued operations.

Lauraan common stock was not trading at the time of the sale, and the companies
that were sold had liabilities which exceeded their assets. Based on this
information, the Company's management believes the value of the Lauraan common
stock owned had no value on the date of the exchange and at June 30, 2004.
Accordingly, the Company recorded a zero value for the stock received in the
above transactions.

LST OF BALTIMORE, INC.
----------------------
On May 5, 2004, the Company, LFSI Acquisition, Inc. (a wholly-owned subsidiary),
and LST of Baltimore, Inc. entered into a Merger Agreement. The merger
contemplated by the Merger Agreement was also completed on May 5, 2004. As a
result of the Merger, LBI became a wholly-owned subsidiary of the Company and
all outstanding shares of LBI's capital stock were exchanged for 1,900,000
shares of the Company's common stock, which was valued at $76,000, based upon
the trading price of the stock on the date of the transaction. The Company also
assumed an obligation to issue an additional 800,000 shares of its common stock
as a fee for facilitating the acquisition. LBI was a private company which
provided builders, homeowners and commercial customers with complete
installation and equipment for structured wiring, security, personal computer
networking, audio, video, home theater, central vacuum and accent lighting. The
Company was not in a position to provide additional working capital to LBI.
Accordingly, effective June 30, 2005, the Company sold LBI, received no proceeds
and recognized a loss of $204,252. The operations of LBI are included in
discontinued operations during the period owned by LFSI.

FUTURESMART SYSTEMS, INC.
-------------------------
On March 7, 2003, LFSI completed its acquisition of FutureSmart Systems, Inc., a
manufacturer and distributor of structured wiring and home networking
distribution panels. On May 28, 2003, the Board of Directors approved a plan to
dispose of FutureSmart. Accordingly, its operations since March 7, 2003, have
been included in discontinued operations.

The purchase price of $876,910 consisted of the issuance of 1,000,000 shares of
LFSI's $.10 par value convertible preferred stock, a bridge loan by LFSI to
FutureSmart of $224,830 and $552,080 in direct transaction costs.

                                       31
<PAGE>

The acquisition of FutureSmart was accounted for as a purchase in accordance
with SFAS 141, and the Company allocated the purchase price of FutureSmart based
upon the fair values of the net assets acquired and liabilities assumed.

On October 17, 2003, the Company completed its sale of all of the assets of
FutureSmart for an "Initial Purchase Price" of $1,500,000, which is subject to
adjustment as provided in the Asset Purchase Agreement to the "Final Purchase
Price." The Initial Purchase Price is allocated to the secured creditors of
FutureSmart; $200,000 to the Company, and $1,300,000 to the other secured
creditors. Thirty percent ($450,000) of the Initial Purchase Price was paid at
closing pro rata to the secured creditors ($60,000 to the Company) and the
remainder of $1,050,000 was placed in escrow. The escrowed amount is subject to
various adjustments, including determination of the final net assets as of the
closing date and settlement of certain other obligations. The remaining balance
was scheduled to be disbursed by the escrow agent no later than one year and one
day after the closing date. There have been a number of offsets against the
Company's share, as well as, certain third party claims against the amount. The
Company does not expect to receive any additional amount from the escrow.

DISCONTINUED OPERATIONS
-----------------------
Discontinued operations include the results of operations for LBI, Brittany,
Georgia, Franchising, FutureSmart, Colorado and Integrators and its wholly owned
subsidiaries during the periods owned by the Company and may be summarized as
follows:

                                                  Fiscal 2005       Fiscal 2004
                                                  -----------       -----------

Revenues                                          $   756,054       $ 2,426,307
                                                  ============      ============
Net earnings (loss) from operations               $  (495,313)      $(8,675,687)
Gain (loss) on sale of discontinued operations       (211,176)        2,201,525
                                                  ------------      ------------
  Net loss                                        $  (706,489)      $(6,474,162)
                                                  ============      ============
Net loss per share                                $      (.02)      $      (.31)
                                                  ============      ============

The net loss from discontinued operations includes goodwill impairment in the
amount of $6,899,054 in fiscal 2004.

Net current liabilities of discontinued operations includes: accounts receivable
(fully reserved); $130,681 in accounts payable; $232,023 due to OTV and
subsidiaries; $295,000 in notes payable; and $989,454 in accrued expenses as of
June 30, 2005.

                                       32
<PAGE>
<TABLE>

4.       LONG-TERM DEBT AND NOTES PAYABLE

Long-term debt and notes payable at June 30, 2005, consists of the following:

<S>                                                                                 <C>
Unsecured note payable - due in monthly installments of $1,450, commencing
   November 1, 2004 with interest at 12% until the principal is paid in full;
   convertible into the Company's common stock at $2.50 per share; past due         $145,000
Unsecured note payable - due June 30, 2005; with interest at 12%                      34,919
Convertible debentures - due May 4, 2009; with interest at 1% (1)                    148,229
Note payable - due in August 2003 with interest at 12% and collateralized by
   certain home technology accounts receivable and inventory; past due (2)           650,000
                                                                                    ---------
     Total notes payable and long-term debt                                          978,148
     Less current portion of long-term debt                                          829,919
                                                                                    ---------
       Long-term debt less current portion                                           148,229
       Non-current accrued interest                                                    2,154
                                                                                    ---------
            Total long-term debt and accrued interest                               $150,383
                                                                                    =========
</TABLE>

(1) Immediately prior to the Merger, LBI entered into a Convertible Debenture
Purchase Agreement (the "Purchase Agreement"), dated as of May 5, 2004, with HEM
Mutual Assurance LLC (HEM), pursuant to which it sold and issued convertible
debentures to HEM in an aggregate principal amount of up to $1,000,000 in a
private placement pursuant to Rule 504 of Regulation D under the Securities Act
of 1933, as amended. Two debentures in the aggregate principal amount of
$999,200 were issued for gross proceeds of $249,200 in cash ( "First Debenture
A") and an additional debenture in the aggregate principal amount of $750,000
(the "Contingent Debenture" or "First Debenture B") was issued in exchange for a
promissory note from HEM in the principal amount of $750,000 (the "Note"). The
Contingent Debenture does not become an obligation until the Note is funded. In
addition, as a fee for facilitating the LBI acquisition, a debenture of $800
("Second Debenture") was issued for gross proceeds of $800 in cash and the right
to exchange the debenture for 800,000 shares of the Company's common stock. Each
of the debentures has a maturity date of May 4, 2009, subject to earlier
conversion or redemption pursuant to its terms, and bears interest at the rate
of 1% per year, payable in cash or shares of common stock at the option of the
holder of the debentures. As a result of the Merger, the Company has assumed the
rights and obligations of LBI in the private placement, including the gross
proceeds raised through the sale of the debentures, the Note issued by HEM to
LBI, and LBI's obligations under the debentures and the Purchase Agreement.

As a result of the Merger at May 5, 2004, $249,200 and $800 in principal amount
of the initial debentures are convertible into unrestricted shares of the
Company's common stock at a conversion price that is the lower of $0.42 or the
average of the three lowest closing per share bid prices for the common stock
during the 40 trading days prior to conversion and $0.001 per share,
respectively. The $750,000 Contingent Debenture will become convertible and
subject to repayment if and when the related Note from HEM is paid in full to
the Company in cash. The Contingent Debenture would be convertible into
unrestricted shares of the Company's common stock at a conversion price that is
based upon the trading prices of the Company's common stock at the time the Note
is funded.

                                       33
<PAGE>

Since the $250,000 in convertible debentures bear interest at 1%, the Company
discounted this amount by 6% to arrive at an effective cost of 7%. The discount
of $64,687 was recorded as additional paid-in capital. The additional 6%
interest will accrue monthly and be added to the convertible debenture balance.
The discount associated with any principal conversion is immediately recorded as
interest expense.

The First Debenture A conversion price of $0.42 per share was higher than the
per share price of the Company's common stock on the issuance date of May 5,
2004. The Second Debenture conversion price of $0.001 per share was lower than
the per share price of the Company's common stock on the issuance date of May 4,
2004. In accordance with the provisions of EITF 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios to Certain Convertible Instruments," and EITF
00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments," the
Company should record a beneficial conversion feature related to the debentures.
However, since the debenture was converted prior to June 30, 2004, no beneficial
conversion was recorded as it would have been fully amortized at June 30, 2004.
In connection with the convertible debt financing, the Company capitalized
$58,400 of debt issuance costs, which are included in other assets. These costs
are being amortized over the life of the convertible debentures. As of June 30,
2005, $33,540 of the debt financing costs remain and $24,860 has been amortized.

During fiscal 2004, $27,772 in debenture principal plus the related accrued
interest was converted into 1,800,468 shares of common stock, which were issued
from the 4,000,000 shares of treasury stock contributed by OTV. During fiscal
2005, $35,596 in debenture principal plus the related accrued interest was
converted into 3,588,402 shares of common stock. The 3,588,402 shares included
2,199,532 shares which were issued from the remainder of the treasury stock
contributed by OTV and 1,388,870 newly issued shares.

The conversion price and number of shares of common stock issuable upon
conversion of the debentures is subject to adjustment for stock splits and
combinations and other dilutive events. To satisfy its conversion obligations
under the debentures, the Company placed 50,000,000 shares of its common stock
into escrow for potential issuance to HEM upon conversion of the debentures. As
of June 30, 2005, 44,611,130 shares of common stock remain in escrow. Unless and
until the debentures are converted, HEM has no voting or other ownership rights
in any of the shares of the Company's common stock held in escrow and the shares
in escrow are not treated by the Company as being issued and outstanding.

The debentures may never be converted into an aggregate of more than 50,000,000
shares of the Company's common stock unless the Company elects to increase the
number of shares held in escrow in accordance with and subject to any applicable
rules or regulations of the exchange, market or system on which the Company's
common stock is then listed requiring stockholder approval prior to such
additional issuance. In the event that the conversion rate of the debentures
would require the Company to issue more than an aggregate of 50,000,000 shares
of the Company's common stock upon conversion of the debentures and the Company
elects not to increase the number of shares held in escrow (or the Company fails
to obtain any required stockholder approval for such proposed increase), the
Company will be required to redeem the unconverted amount of the debentures for
125% of the principal amount thereof, plus accrued and unpaid interest.

                                       34
<PAGE>

In addition to the foregoing, the debentures may not be converted if and to the
extent that after such conversion the holder would beneficially own more than 5%
of the Company's then outstanding common stock, unless the holder waives this
limitation by providing the Company 75 days prior notice of the waiver.

The Company has the right to redeem the debentures, in whole or in part, at any
time on 30 days advance notice for 125% of the principal amount of the
outstanding debentures being redeemed, plus accrued and unpaid interest. In
addition, if at any time any of the debentures are outstanding, the Company
receives debt or equity financing in an amount equal to or exceeding five
million dollars ($5,000,000) in a single transaction or series of related
transactions (excluding any portion of such financing consisting of forgiveness
of debt or other obligations), the Company is required to redeem the debentures
for 125% of the amount of the then outstanding debentures. If trading in the
Company's common stock is suspended (other than suspensions of trading on such
market or exchange generally or temporary suspensions pending the release of
material information) for more than 10 trading days, or if the Company's common
stock is delisted from the exchange, market or system on which it is then traded
and not relisted on another exchange, market or the Over the Counter Bulletin
Board within 10 trading days, HEM may elect to require us to redeem all then
outstanding debentures in the manner set forth in the Purchase Agreement.

Until such time as it no longer holds any debentures, neither HEM nor its
affiliates may engage in any short sales of the Company's common stock if there
is no offsetting long position in the Company's common stock then held by HEM or
such affiliates.

(2) At the option of the note holder, this note can be converted into OTV's
common stock at a ratio of one pre-split share of common stock for each $4.55 of
outstanding principal and interest. OTV's common stock closed at $.60
(pre-split) on June 30, 2005. On July 7, 2005 OTV had a 1:10 stock split.

Future maturities of long-term debt and notes payable are as follows at June 30,
2005:

             Fiscal Year                        Amount
             -----------                        ------

                2006                         $   829,919
                2007                                  -
                2008                             148,229
                                             -----------
                Total                        $   978,148
                                             ===========

                                       35
<PAGE>

5.       NOTES PAYABLE TO RELATED PARTIES
<TABLE>
<S>                                                                                  <C>
Notes payable to related parties at June 30, 2005, consist of the following:
Unsecured note payable - due on April 1, 2005; interest payable monthly from
November 1, 2004, at 12%; convertible into the Company's common stock at $2.50
per share after January 1, 2005; past due                                            $   500,000
Unsecured notes payable - due in monthly installments of $5,056 with interest
at 12% until paid in full; convertible into the Company's common stock at $2.50
per share; past due                                                                       505,558
Unsecured notes payable - due in monthly installments of $791 with
   interest at 8% until the principal is paid in full; convertible
   into the Company's common stock at $2.50 per share; past due                           118,709
                                                                                     -------------
     Total                                                                           $  1,124,267
                                                                                     =============

6.       INCOME TAXES

Deferred income tax assets consist of the following as of June 30, 2005:

Net operating loss and capital loss carryforwards                                    $  7,314,900
Deferred income tax asset valuation allowance                                          (7,314,900)
                                                                                     -------------
     Net deferred income tax assets                                                  $          -
                                                                                     =============
</TABLE>

A reconciliation of the Company's effective income tax rate to the statutory
income tax rate is as follows:


                                                     Years ending June 30,
                                                    2005               2004
                                                    ----               ----

Federal tax benefit at statutory rate           $  (402,700)      $(2,378,100)
State tax benefit, net of federal                   (53,300)         (314,800)
Goodwill impairment                                      --          (992,200)
Permanent differences                                   600            10,000
Change in deferred tax valuation allowance          455,400         3,675,100
                                                ------------      ------------
     Income tax expense                         $        --       $        --
                                                ============      ============

As of June 30, 2005, the Company had approximately $20,678,000 of net operating
loss and capital loss carry forwards for federal income tax purposes, which
expire between 2020 and 2025. A deferred income tax asset valuation has been
established against all deferred income tax assets as management is not certain
that the deferred income tax assets will be realized. In addition, due to
substantial limitations placed on the utilization of net operating losses
following a change in control, utilization of such net operating losses could be
limited.

                                       36
<PAGE>

7.       NON-EMPLOYEE STOCK OPTIONS AND WARRANTS

During the year ended June 30, 2003, the Company sold 31 units of a private
placement and realized net proceeds of $693,765. Each unit consists of 10,000
shares of common stock, $.001 par value and a Series A Warrant to purchase 3,000
shares of common stock for $3.33 per share. Legend Merchant Group, Inc. acted as
the placement agent for the offering and received a commission of 10%.

As a part of a private placement offering which was closed in December 2002, the
Company sold 99.6 Units. Each Unit consisted of 4,000 shares of its common
stock, 4,000 Series A Warrants and 4,000 Series B Warrants. The Series A Warrant
entitles the holder to acquire the Company's common stock for $4.00 per share
until its expiration on August 1, 2004. The Series B Warrant expires on August
1, 2005, and entitles the holder to acquire the Company's common stock for $6.00
per share.

Both of these private placements required that a registration statement be filed
to register the shares. Since the Company was unable to complete a registration
statement it issued 2,860,000 shares to cancel the warrants and the registration
rights due to the investors.

Following is a summary of outstanding warrants which have been granted by the
Company:

<TABLE>
                                             Fiscal 2005            Fiscal 2004
                                     -----------------------  ------------------------
                                                    Weighted                 Weighted
                                                    Average                  Average
                                       Number       Exercise   Number        Exercise
                                     of Shares       Price    of Shares        Price
                                     ---------       -----    ---------        -----
<S>                                   <C>          <C>         <C>           <C>
Outstanding, beginning of year        50,000       $   2.75    939,800       $   4.72

Cancelled                            (50,000)          2.75   (889,800)          4.83
                                     --------                 ---------
Outstanding, end of year                  --          --        50,000       $   2.75
                                     ========      ========   =========      ========
Vested, end of year                       --          --        50,000       $   2.75
                                     ========      ========   =========      ========
</TABLE>

The weighted average contractual life for all outstanding warrants as of June
30, 2004, was approximately 12 months, with the exercise price of $2.75. These
warrants expired in fiscal 2005.

On May 7, 2002, the Company established the Princeton Mining Company 2002 Stock
Option Plan ("Plan") to grant options to acquire up to 2,000,000 shares of its
$.001 par value common stock to officers, employees, directors and consultants
and advisors of the Company. Pursuant to the Plan, the Company may grant
incentive stock options (intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended) and non-qualified stock options.

Incentive and non-qualified options may not be granted at an exercise price of
less than the market value of the common stock on the date of grant (except for
holders of more than 10% of common stock, whereby the exercise price must be at
least 110% of the fair market value at the date of grant for incentive stock
options). The term of the options may not exceed 10 years.

                                       37
<PAGE>
<TABLE>

Following is a summary of activity of the Plan:

                                             Fiscal 2005              Fiscal 2004
                                      -----------------------  -------------------------
                                                    Weighted                   Weighted
                                                     Average                    Average
                                       Number       Exercise    Number         Exercise
                                       of Shares      Price     of Shares        Price
                                       ---------      -----     ---------        -----
<S>                                    <C>          <C>         <C>             <C>
Outstanding, beginning of year         680,461      $   2.78    1,050,000       $   2.73

Granted                                     --         --         113,795           1.45
Forfeited                                   --         --        (483,334)          3.98
Expired                                     --         --              --          --
                                    ----------      --------   ----------       --------
Outstanding, end of year               680,461      $   2.78      680,461       $   2.78
                                    ==========      ========   ==========       ========
Vested, end of year                    680,461      $   2.78      680,461       $   2.78
                                    ==========      ========   ==========       ========
</TABLE>

The weighted average contractual life for all options under the Plan as of June
30, 2005, was approximately 2.44 years with exercise prices ranging from $2.20
to $5.10. If not previously exercised, all Plan options outstanding at June 30,
2005, will expire as follows:

                                                                 Weighted
                                                                  Average
                                              Number             Exercise
                                            of Shares              Price
                                            ---------              -----

         Fiscal 2006                          400,000             $  2.20
         Fiscal 2007                          113,795             $  1.45
         Fiscal 2013                          166,666             $  5.10
                                              680,461             $  2.78

The Company granted options outside of the Plan to acquire 642,858 shares of its
common stock at an average exercise price of $2.80, which were outstanding on
July 1, 2003. Options to acquire 476,192 shares were forfeited during fiscal
2004 and the remaining options to acquire 166,666 shares at an exercise price of
$2.50 expire in March 2013.


8.       CONVERTIBLE SERIES A PREFERRED STOCK

Effective March 3, 2003, the Company amended its Articles of Incorporation to
authorize the issue of 1,000,000 shares of Series A Convertible Preferred Stock,
par value $.10 per share. The principal preferences and rights of the Series A
Preferred Stock are: (i) entitled to receive dividends when and if declared;
(ii) liquidation value of $2.75 per share plus an amount equal to 5% per annum
on the original issue price; (iii) each holder of shares shall be entitled to
the number of votes equal to the number of shares of common stock into which
each share of Series A Preferred Stock could be converted; (iv) conversion is at
the option of the holder until 51% of the then outstanding shares elect to
convert, at which time all remaining outstanding Series A Preferred Stock shall
automatically be converted into common stock; (v) and the initial conversion
price of $2.75 per share is subject to adjustment in the event of certain
occurrences.

                                       38
<PAGE>

During fiscal 2004, 223,476 shares of preferred stock were converted into
444,487 shares of common stock of the Company. During fiscal 2005, the remaining
outstanding shares of preferred stock of 781,752 were converted into 1,719,854
shares of common stock of the Company.


9.       DEFERRED EXPENSES

Deferred expenses included $265,988 in prepaid interest on the $1,900,000 in
debentures which were included in the long-term debt of FutureSmart. The Company
issued 106,395 shares of its common stock to prepay the interest until March 7,
2005, the due date of the debentures. This asset was transferred to discontinued
operations during fiscal 2004 upon the sale of FutureSmart.

Deferred expenses also included $37,500 for shares issued for services in fiscal
2003, which were recognized in fiscal 2004 when the services were performed.


10.      TRANSACTIONS WITH RELATED PARTIES

At June 30, 2005, notes and advances due to affiliates from continuing
operations consisted of the following:

Due to OTV and its subsidiaries                                       $  945,372
Advance from and accrued interest payable to Michael Pruitt, former
   CEO of OTV                                                             17,811
Advances from and accrued interest payable to G. David Gordon, a
   shareholder and creditor of LFSI and OTV                              227,721
                                                                      ----------
                                                                      $1,190,904
                                                                      ==========

The amount due to OTV and its subsidiaries represents net advances to and from
OTV and its subsidiaries. OTV also has provided various services to the Company,
including accounting and finance assistance, capital and debt raising, human
resources and other general and administrative services, until November 2003.
For the year ended June 30, 2004, OTV charged the Company $25,000.

During fiscal 2004, OTV returned 4,000,000 shares of the Company's common stock,
which was recorded as treasury stock. This transaction was related to an
indemnification agreement between OTV and the Company, where OTV is indemnified
against potential liabilities as a shareholder of the Company.

At June 30, 2005, total debt outstanding to G. David Gordon, his wife and a
company in which he is the principal shareholder, was $1,005,558 which is
included in notes payable to related parties. Mr. Gordon acts as special legal
counsel to OTV and the Company from time to time and is a shareholder of both.
Paul B. Johnson, President and acting Chief Executive Officer of the Company, is
owed $28,544 in accrued compensation at June 30, 2005, which is included in
accrued expenses.

                                       39
<PAGE>

TRANSACTIONS WITH RELATED PARTIES IN DISCONTINUED OPERATIONS

Mr. Pruitt, Mr. Gordon, Mr. Johnson, and Glenn Barrett, former President of LST,
had transactions with the discontinued operations of the Company.

Net current liabilities of discontinued operations include $232,023 due to OTV
and its subsidiaries.

Mr. Pruitt is also a minority investor in a company that has purchased franchise
licenses and business operations of LST's home technology business in three
markets in South Carolina and in another company that has purchased franchise
licenses in three locations in Maryland. At June 30, 2004, the franchise
locations in South Carolina were closed. The amounts due to the Company and its
subsidiaries were paid by the shareholders of these franchisees. The franchise
location in Maryland, LBI, was purchased by the Company in May 2004 and sold to
Mr. Pruitt in June 2005.

Mr. Johnson is an investor in a company, which in November 2001 became a
franchisee of the Company's home technology business in the Dallas, Texas market
and purchased two additional locations in that market during the quarter ended
March 31, 2003. The Dallas franchise locations were closed during fiscal 2004
and all amounts due the Company and its subsidiaries were paid by the
shareholders.

During fiscal 2002, Mr. Barrett resigned as President of Lifestyle and began LVA
Technologies LLC ("LVA"), a low voltage wiring business that operates as a
Lifestyle franchisee headquartered in Charlotte, NC to service the commercial
market. The Company waived LVA's initial franchise fee for the commercial
franchise. LVA also owns the Greenville and Columbia, SC franchises. LVA's low
voltage wiring business was charged royalties on products purchased from the
Company at the same rate as the Company's other franchisees, however, it does
not pay royalties on revenue generated from products purchased elsewhere as
required of the Company's other franchisees, including the Greenville and
Columbia, SC franchises. All amounts due by LVA and its subsidiaries to the
Company and its subsidiaries have been fully reserved.

Mr. Gordon has an ownership interest in the three markets in South Carolina
along with Mr. Pruitt, as discussed above; three locations in the Dallas market
along with Mr. Johnson; and four additional markets in Houston, Texas; Raleigh,
North Carolina; Wilmington, North Carolina; and Greensboro, North Carolina.
These four markets had paid the Company and its subsidiaries all amounts owed at
June 30, 2004.

Revenues from these franchisees for the year ended June 30, 2004 is as follows
(none in fiscal 2005):

Houston and three North Carolina markets                    $         93,000
Three South Carolina markets                                          84,000
Three Maryland markets                                                17,000
LVA and subsidiaries                                                  30,000
Dallas                                                                25,000
                                                            ----------------
                                                            $        249,000
                                                            ================

                                       40
<PAGE>

11.      COMMITMENTS AND CONTINGENCIES

The Company had no rent expense from continuing operations for the years ended
June 30, 2005 and 2004. The office space occupied by LFSI is provided at no cost
by the President of the Company. It is expected that this arrangement will
continue until operations improve.

On April 6, 2004, Mercator Momentum Fund LP ("Mercator") filed a complaint (case
number BC313358, Superior Court of California, County of Los Angeles, Stanley
Mosk Central District) against Lifestyle Innovations, Inc. as an alter ego and
RichMark Capital Corp. relating to a past due loan obligation of Lifestyle
Integrators, Inc., a wholly owned subsidiary of Lifestyle, in the amount of
$295,000. The loan amount is included in current liabilities of discontinued
operations. Integrators was sold in May 2004. On September 3, 2004, Mercator
received a default judgment against Integrators and RichMark in the amount of
$295,000. In addition, Mercator has pursued its alter ego claim against LFSI and
due to LFSI's inability to pay for legal counsel LFSI will most likely not
prevail.

On April 23, 2004, Meyer Saltzman etal ("Saltzman") filed a complaint (Case No.
2004-CV-2440, State District Court of Denver, Colorado) against
SYSLYNC-COLORADO, Inc. and Lifestyle Innovations, Inc. for their part in the
acquisition of the assets of Homesync. Saltzman's claim against LFSI is for
fraud and breach of contract under an alter-ego theory. Both sides have agreed
to transfer the dispute to arbitration. Prior to a decision by the arbitrator,
SYSLYNC-COLORADO filed for bankruptcy protection. LFSI believes the bankruptcy
filing stayed all of the proceedings; however, Saltzman is attempting to enforce
a $500,000 judgment against LFSI. The $500,000 judgment is included in current
liabilities of discontinued operations.


12.      FOURTH QUARTER ADJUSTMENTS

The Company recorded the $500,000 judgment in the Saltzman matter discussed in
note 11 during the fourth quarter.

The Company was billed and recorded $88,860 in legal expenses during the fourth
quarter, which covered services rendered throughout the fiscal year.

                                       41
<PAGE>

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

On May 10, 2005, the Company dismissed its former principal accountant, Guest &
Company, P.C., ("Guest") Certified Public Accountants, of Tulsa, Oklahoma and
engaged Creason & Associates, P.L.L.C., ("Creason") Certified Public
Accountants, of Tulsa, Oklahoma, as its principal accountants. The decision to
change accountants was approved by the Board of Directors of the Company and was
required due to the purchase of Guest by Creason.

During the fiscal year ended June 30, 2004, and the subsequent interim periods,
there were no disagreements with the former accountant on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
the former accountant would have caused him to make reference in connection with
his report to the subject matter of the disagreement, and Guest & Company, P.C.
has not advised the Company of any reportable events as defined in paragraph (A)
through (D) of Regulation S-K Item 304(a)(1)(v).

Guest's audit report for the fiscal year ended June 30, 2004, and note 1 to the
corresponding financial statements, contained a modification regarding the
Company's ability to continue as a going concern due to the Company's net total
liabilities and commitments exceeding current assets available to fund
operations and such audit report stated these factors raised "substantial doubt"
about the Company's ability to continue as a going concern. The audited
financial statements of the Company for the fiscal year ended June 30, 2004, did
not include any adjustments in respect of the going concern modification. Other
than the going concern modification, the audit report of Guest on the financial
statements of the Company for the fiscal year ended June 30, 2004, and any
subsequent interim period, did not contain an adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.

During the year ended June 30, 2004, and through May 10, 2005, the Company did
not consult with Creason regarding any of the matters or events set forth in
Item 304(a)(2)(i) and (ii) of Regulation S-K.

                                       42
<PAGE>

ITEM 8A  CONTROLS AND PROCDEURES


(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in the reports that
are filed or submitted under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports that are filed under the Exchange Act is
accumulated and communicated to management, including the principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure. Under the supervision of and with the
participation of the principal executive officer the Company has evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures as of June 30, 2005, and, based on its evaluation, our principal
executive officer has concluded that these controls and procedures are
effective. The Company ceased a majority of its operations during fiscal 2004.

(b) Changes in Internal Controls

There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation described above, including any corrective actions with regard to
significant deficiencies and material weaknesses.


ITEM 8B  OTHER INFORMATION

None

                                       43
<PAGE>

                                    PART III

ITEM 9   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages and current positions with the
Company held by the Directors, Executive Officers and Significant Employees;
together with the year such positions were assumed. There is no immediate family
relationship between or among any of the Directors, Executive Officers or
Significant Employees, and the Company is not aware of any arrangement or
understanding between any Director or Executive Officer and any other person
pursuant to which he was elected to his current position.

                                                                      Date First
                                    Position of Office                Elected/
     Name          Age               With the Company                 Appointed
     ----          ---               ----------------                 ---------

Paul Johnson       57         President since                           2002
                              September 5, 2002; CEO and
                              Director from September 5,
                              2002 until March 7, 2003 and
                              since January 1, 2004


PAUL JOHNSON
------------
Mr. Johnson has been President of Lifestyle since September 5, 2002, and was CEO
and a Director of Lifestyle from September 5, 2002 until March 7, 2003 and since
January 1, 2004.

Mr. Johnson serves on the Board of Directors for Sinffex, Inc. and USN
Corporation. Mr. Johnson is an active participant in strategic planning and
business development in each of these companies.

In September 2000 Mr. Johnson founded MLI Solutions, Inc., which owned the
Dallas, Texas franchise for Lifestyle Technologies. From its inception until May
2002, Mr. Johnson served as CEO and General Manager of the franchise. The
franchise closed during fiscal 2004.

Mr. Johnson is an innovator in the field of interactive media and
technology-based business development. Throughout his career, he has founded
seven technology-related companies, the largest of which was Multimedia
Learning, Inc. (ranked 154th on the "Inc. 500" in 1996). From 1991-1998 Mr.
Johnson served as CEO of Multimedia Learning, Inc. Under his leadership, the
company gained national attention for its innovations in CE and Web-based
learning technologies.

Mr. Johnson specializes in designing and directing the implementation of new and
innovative business strategies and recruiting the best talent to develop and
grow the business. Over the past 20 years, his companies have created major
innovations in web usage, multimedia, knowledge management and software
interface design. His companies have received awards for their rapid growth and
technical innovations.

Mr. Johnson is a graduate of City College of New York and is a veteran of the
Vietnam War.

                                       44
<PAGE>

                                 AUDIT COMMITTEE

The Board of Directors currently has only one member, Mr. Johnson. Accordingly,
the Board of Directors is currently acting as the audit committee.


                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Mr. Johnson filed Form 5 late to complete his filing obligation.

Randy Howell directly owns 8.8% of the outstanding common stock of the Company
and as such is required to comply with Section 16(a) of the Exchange Act. In
addition, the SEC has alleged that Mark White and Mr. Howell constitute a group
and that their shares should be aggregated. Mr. White has denied that he has any
claim, agreement or control over the 2,571,428 shares owned by Mr. Howell, nor
is he a member of any other group of shareholders of the Company. As a result of
Mr. White's disclaimer, the Company has not aggregated any of Mr. White's shares
with Mr. Howell. Mr. Howell has not fulfilled his filing obligation for fiscal
2005, nor for any past years.

If the SEC is successful in proving their allegation that Mr. White and Mr.
Howell constitute a group then the Company's previous disclosures in its
securities filing could be held to be deficient.


                                 CODE OF ETHICS

The Company has not adopted a code of ethics that applies to the principal
executive officer, since the Company is currently operating with only one
officer due to the reduced volume of operations.

                                       45
<PAGE>

ITEM 10  EXECUTIVE COMPENSATION

The following table shows the compensation of the Company's Chief Executive
Officer and each officer whose total cash compensation exceeded $100,000 for the
three years ended June 30, 2005, 2004 and 2003.

                           SUMMARY COMPENSATION TABLE

     Name and                                                      Other Annual
Principal Position           Year       Salary         Bonus       Compensation
------------------           ----       ------         -----       ------------

Paul Johnson                 2005         $12,500         -                 -
(CEO from 9/5/02             2004        $150,000         -                 -
to 3/7/03 and since          2003        $126,500         -                 -
1/1/04)

Ron Pitcock                  2005             N/A       N/A               N/A
(CEO from 10/9/03            2004              -          -                 -
to 1/1/04)                   2003             N/A       N/A               N/A

Jacqueline E. Soechtig       2004             N/A       N/A               N/A
(CEO from 3/7/03             2004         $72,916         -                 -
to 10/9/03)                  2003         $83,333         -          $433,332

Randy Howell                 2005             N/A       N/A               N/A
(CEO from 4/24/01            2004             N/A       N/A               N/A
to 9/5/02)                   2003          $5,000         -                 -


Other annual compensation for Jacqueline E. Soechtig is the value of options to
acquire 166,666 shares of the Company's common stock which were granted and
vested on March 7, 2003. The value is determined by subtracting the exercise
price of $2.50 from the closing price of the stock on that date of $5.10 and
multiplying the result by the 166,666 shares which can be purchased at that
price.

                                       46
<PAGE>
<TABLE>

                                            LONG-TERM COMPENSATION

                                                       Awards                                 Payout
                                          ---------------------------------        ----------------------------
                                                                Securities
                                            Restricted          Underlying                            All Other
              Name and                         Stock             Options/             LTIP             Compen-
         Principal Position                  Award(s)            SARs (#)          Payouts ($)       sation ($)
         ------------------                  --------            --------          -----------       ----------
<S>                                              <C>              <C>                   <C>               <C>
Paul Johnson                                     -                400,000               -                 -
(CEO from 9/5/02 to
3/7/03 and since 1/1/04)

Ron Pitcock                                      -                   -                  -                 -
(CEO from 10/9/03 until 1/1/04)

Jacqueline E. Soechtig                           -                333,332               -                 -
(CEO from 3/7/03 to 10/9/03)

Randy Howell                                     -                   -                  -                 -
(CEO from 4/24/01 to 9/5/02)
</TABLE>

On March 7, 2003, pursuant to her employment agreement, Jacqueline E. Soechtig,
Chief Executive Officer from March 7, 2003 until October 9, 2003, was granted
(1) an incentive stock option to purchase 500,000 shares of common stock at an
exercise price equal to the trading price of such stock on the last trading day
prior to Board approval ($5.10), with an option for 166,666 shares to vest and
become exercisable on the effective date of the agreement and options for
166,667 shares to vest and become exercisable on each of the first and second
anniversaries of the effective date, subject to her continued employment and (2)
a non-qualified stock option to purchase 500,000 shares at an exercise price
equal to $2.50, with an option for 166,666 shares to vest and become exercisable
on the effective date of this agreement and options for 166,667 shares to vest
and become exercisable on each of the first and second anniversaries of the
effective date, subject to her continued employment. Both options will expire on
March 7, 2013. Ms. Soechtig resigned effective October 9, 2003. Accordingly, the
unvested portion of her options was forfeited.

On September 5, 2002, Paul Johnson, a Director and Chief Executive Officer of
the Company until March 7, 2003 and since January 1, 2004, was granted an option
to acquire 400,000 shares of common stock at an exercise price of $2.20, the
trading price on that day. The option will expire on September 5, 2005.

There were no option or SAR grants during fiscal 2005 or fiscal 2004.

                                       47
<PAGE>
<TABLE>

                           AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES

                                                                                                        Value of
                                                                       Number of Securities            Unexercised
                                                                      Underlying Unexercised          In-the-money
                                                                          Options/SARs at             Options/SARs
                                  Shares                                    FY-end (#)                at FY-end ($)
                                Acquired on            Value               Exercisable/               Exercisable/
            Name               Exercise (#)        Realized ($)            Unexercisable              Unexercisable
            ----               ------------        ------------            -------------              -------------
<S>                                  <C>                 <C>                  <C>                         <C>
Jacqueline E. Soechtig
  Exercisable                        -                   -                    333,332                     None

Paul Johnson
  Exercisable                        -                   -                    400,000                     None
</TABLE>


The Company has no formal long-term incentive compensation plans.

Compensation of directors - Directors do not currently receive any compensation
for their services as a director.

                              EMPLOYMENT CONTRACTS

Jacqueline E. Soechtig had a two-year employment contract with the Company for
her services as CEO of the Company and President, CEO and Chairman of the Board
of Directors of FutureSmart, which was effective on March 7, 2003. The
employment contract automatically extended for an additional one-year term at
the end of the initial two-year term and each one-year renewal thereafter unless
otherwise terminated. The contract provided for a salary of $250,000 per year,
the stock options described above and other normal and usual provisions. Ms.
Soechtig resigned effective October 9, 2003.


                                       48
<PAGE>

ITEM 11           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  AND RELATED STOCKHOLDER MATTERS

The following table indicates the beneficial ownership of the Company's voting
securities of all persons, all directors of the Company and all officers who are
not directors of the Company, as a group, as of October 18, 2005, the most
recent practicable date. As of October 18, 2005, there were 29,162,349 shares of
the Company's common stock outstanding.

<TABLE>
   Title                Name and Address             Amount and Nature
 of Class              of Beneficial Owner          of Beneficial Owner        % of Class
 --------              -------------------          -------------------        ----------
<S>           <C>                                       <C>                       <C>
Common        OneTravel Holdings, Inc.                  11,566,641                39.7%
              6836 Morrison Blvd., Ste 200
              Charlotte, NC  28211

Common        Randy Howell     (a)                       2,571,428                 8.8%
              2842 Placid Circle
              Grapevine, TX  76051

Common        Paul Johnson (b)                             400,000                 1.4%
              4700 Lakeshore Ct.
              Colleyville, TX  76034

              All officers and directors
              as a group (1 person)                        400,000                 1.4%
</TABLE>

 (a) The 2,571,428 shares represent the shares issued to Randy Howell. The SEC
has alleged that Mark White and Mr. Howell constitute a group and that their
shares should be aggregated. Mr. White has denied that he has any claim,
agreement or control over the 2,571,428 shares owned by Mr. Howell, nor is he a
member of any other group of shareholders of the Company. As a result of Mr.
White's disclaimer, the Company has not aggregated any of Mr. White's shares
with Mr. Howell.

If the SEC is successful in proving their allegation that Mr. White and Mr.
Howell constitute a group then the Company's previous disclosures in its
securities filing could be held to be deficient.

(b) Represents a vested option for 400,000 shares at $2.20.


                                       49
<PAGE>

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


At June 30, 2005, notes and advances due to affiliates from continuing
operations consisted of the following:

Due to OTV and its subsidiaries                                       $  945,372
Advance from and accrued interest payable to Michael Pruitt, CEO of
     OTV                                                                  17,811
Advances from and accrued interest payable to G. David Gordon, a
     shareholder and creditor of LFSI and OTV                            227,721
                                                                      ----------
                                                                      $1,190,904
                                                                      ==========

The amount due to OTV and its subsidiaries represents net advances to and from
OTV and its subsidiaries. OTV also has provided various services to the Company,
including accounting and finance assistance, capital and debt raising, human
resources and other general and administrative services, until November 2003.
For the year ended June 30, 2004, OTV charged the Company $25,000.

During fiscal 2004, OTV returned 4,000,000 shares of the Company's common stock,
which was recorded as treasury stock. This transaction was related to an
indemnification agreement between OTV and the Company, where OTV is indemnified
against potential liabilities as a shareholder of the Company.

At June 30, 2005, total debt outstanding to G. David Gordon, his wife and a
company in which he is the president and a shareholder, was $1,005,558 which is
included in notes payable to related parties. Mr. Gordon acts as special legal
counsel to OTV and the Company from time to time and is a shareholder of both.

Paul B. Johnson, President and acting Chief Executive Officer of the Company, is
owed $28,544 in accrued compensation at June 30, 2005, which is included in
accrued expenses.

TRANSACTIONS WITH RELATED PARTIES IN DISCONTINUED OPERATIONS

Mr. Pruitt, Mr. Gordon, Mr. Johnson, and Glenn Barrett, former President of LST,
had transactions with the discontinued operations of the Company.

Net current liabilities of discontinued operations include $232,023 due to OTV
and its subsidiaries.

Mr. Pruitt is also a minority investor in a company that has purchased franchise
licenses and business operations of LST's home technology business in three
markets in South Carolina and in another company that has purchased franchise
licenses in three locations in Maryland. At June 30, 2004, the franchise
locations in South Carolina were closed. The amounts due to the Company and its
subsidiaries were paid by the shareholders of these franchisees. The franchise
location in Maryland, LBI, was purchased by the Company in May 2004 and sold to
Mr. Pruitt in June 2005.

                                       50
<PAGE>

Mr. Johnson is an investor in a company, which in November 2001 became a
franchisee of the Company's home technology business in the Dallas, Texas market
and purchased two additional locations in that market during the quarter ended
March 31, 2003. The Dallas franchise locations were closed during fiscal 2004
and all amounts due the Company and its subsidiaries were paid by the
shareholders.

During fiscal 2002, Mr. Barrett resigned as President of Lifestyle and began LVA
Technologies LLC ("LVA"), a low voltage wiring business that operates as a
Lifestyle franchisee headquartered in Charlotte, NC to service the commercial
market. The Company waived LVA's initial franchise fee for the commercial
franchise. LVA also owns the Greenville and Columbia, SC franchises. LVA's low
voltage wiring business was charged royalties on products purchased from the
Company at the same rate as the Company's other franchisees, however, it does
not pay royalties on revenue generated from products purchased elsewhere as
required of the Company's other franchisees, including the Greenville and
Columbia, SC franchises. All amounts due by LVA and its subsidiaries to the
Company and its subsidiaries have been fully reserved.

Mr. Gordon has an ownership interest in the three markets in South Carolina
along with Mr. Pruitt, as discussed above; three locations in the Dallas market
along with Mr. Johnson; and four additional markets in Houston, Texas; Raleigh,
North Carolina; Wilmington, North Carolina; and Greensboro, North Carolina.
These four markets had paid the Company and its subsidiaries all amounts owed at
June 30, 2004.

Revenues from these franchisees for the year ended June 30, 2004 is as follows
(none in fiscal 2005):

                                                                      2004
                                                                      ----

Houston and three North Carolina markets                       $         93,000
Three South Carolina markets                                             84,000
Three Maryland markets                                                   17,000
LVA and subsidiaries                                                     30,000
Dallas                                                                   25,000
                                                               -----------------
                                                               $        249,000
                                                               =================

                                       51
<PAGE>

ITEM 13  EXHIBITS

Exhibits - See Exhibit Index at Page 54.


ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES - As of October 31, 2005, the aggregate fees billed for professional
services rendered was $9,100 and $50,100 for the audits of the Company's annual
consolidated financial statements for the fiscal years ended June 30, 2005 and
2004, respectively, which included the reviews of the condensed consolidated
financial statements included in the Company's Forms 10-QSB.

AUDIT-RELATED FEES - None.

TAX FEES - None.

ALL OTHER FEES - None.

AUDIT COMMITTEE POLICIES AND PROCEDURES - Not applicable.

If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's consolidated
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees - Not applicable.


                                       52
<PAGE>

                                   SIGNATURES


In accordance with the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       LIFESTYLE INNOVATIONS, INC.



November 11, 2005                      /s/ Paul Johnson
----------------                       ----------------
                                       Paul Johnson, President, Acting CEO and
                                       Principal Accounting Officer


In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following person on behalf of the registrant and in the
capacities and on the date indicated.

November 11, 2005                     /s/ Paul Johnson
----------------                      ----------------
                                      Paul Johnson, Director, President, Acting
                                      CEO and Principal Accounting Officer


                                       53
<PAGE>

EXHIBITS HAVE BEEN OMITTED FROM THIS COPY. COPIES OF EXHIBITS MAY BE OBTAINED
FROM LIFESTYLE INNOVATIONS, INC. (THE "COMPANY") UPON REQUEST AND PAYMENT OF THE
COMPANY'S COSTS IN FURNISHING SUCH COPIES. COPIES MAY ALSO BE OBTAINED FROM THE
SECURITIES AND EXCHANGE COMMISSION FOR A SLIGHT CHARGE.

          (The foregoing is not applicable to the original(s) hereof.)
<TABLE>
<S>     <C>
                                  EXHIBIT INDEX
Securities and
Exchange
Commission                                                                              Page
Exhibit No.           Type of Exhibit                                                  Number
-----------           ---------------                                                  ------
2                     Plan of acquisition, reorganization, arrangement,                  N/A
                      liquidation, or succession

3(i)                  Articles of incorporation N/A

3(ii)                 By-laws N/A

4                     Instruments defining the rights of holders, incl. Indentures       N/A

9                     Voting trust agreement                                             N/A

10                    Material contracts                                                 N/A

11                    Statement re: computation of per share earnings                  Item 7

16                    Letter on change in certifying accountant                          N/A

18                    Letter on change in accounting principles                          N/A

21                    Subsidiaries of the Registrant                                   Item 1

22                    Published report regarding matters submitted to vote               N/A

23                    Consent of experts and counsel                                     N/A

24                    Power of Attorney                                                  N/A

31                    Certifications pursuant to 18 U.S.C. Section 1350,
                      Section 302 of the Sarbanes-Oxley Act of 2002                      55

32                    Certifications pursuant to 18 U.S.C. Section 1350,
                      Section 906 of the Sarbanes-Oxley Act of 2002                      56
</TABLE>

                                       54