<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, 2004

                        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) 307-6591

        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 - $138,059.

As of September 23, 2004, the registrant had outstanding 24,303,692 shares of
its common stock, par value $.001, and 577,391 shares of its Series A Voting
Preferred Stock, its only classes of voting securities. The aggregate market
value of the shares of common stock of the registrant held by non-affiliates on
September 23, 2004, was approximately $132,455 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                                            9
Item 3     Legal Proceedings                                                 10
Item 4     Submission of Matters to a Vote of Security Holders               10

                              Part II

Item 5     Market for Common Equity and Related Stockholder Matters          11
Item 6     Management's Discussion and Analysis or Plan of Operation         13
Item 7     Financial Statements                                              19
Item 8     Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure                                          46
Item 8A    Controls and Procedures                                           47
Item 8B    Other Information                                                 47

                             Part III

Item 9     Directors and Executive Officers of the Registrant                48
Item 10    Executive Compensation                                            50
Item 11    Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters                        53
Item 12    Certain Relationships and Related Transactions                    54
Item 13    Exhibits                                                          56
Item 14    Principal Accountant Fees and Services                            56


                                       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. On July 15, 2002, Princeton Mining Company
changed its name to Lifestyle Innovations, Inc. 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. RCG Companies Incorporated (formerly eResource
Capital Group, Inc.) ("RCG") owns approximately 48.5% of the LFSI's outstanding
common stock at June 30, 2004.

The consolidated financial statements include the accounts of LFSI and its
wholly owned subsidiaries: LST of Baltimore, Inc. ("LBI") which was incorporated
in Nevada on February 23, 2004; 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").
Franchising, Colorado and FutureSmart 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 Sports Management & Recreation, Inc. ("Sports"), a Nevada corporation,
on May 24, 2004, for 25,000 shares of Sports' 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 Sports on May 24, 2004, in exchange for 50,000 shares of Sports' common stock
and is included in discontinued operations.

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

On May 5, 2004, the Company, LFSI Acquisition, Inc. (a wholly-owned subsidiary),
and LST of Baltimore, Inc. 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. The
Second Debenture was issued as a finder's fee for the LBI acquisition. 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 has been accounted for as an acquisition of assets. The assets
acquired and liabilities assumed include: 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 has accordingly 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,
2004, $50,320 of the debt financing costs remain and $8,080 has been amortized.

On May 24, 2004, $800 in debenture principal and the related interest was
converted into 800,438 shares of the Company's common stock. On June 16, 2004,
$26,972 in debenture principal and the related interest was converted into
1,000,030 shares of the Company's common stock. The 1,800,468 shares were issued
from the 4,000,000 shares of treasury stock contributed by RCG.

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, 2004, 48,199,532 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
million dollars ($5,000,000) in a single transaction or series of related
transactions (excluding any portion of such financing consisting of forgiveness


                                       5
<PAGE>

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.

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 has accordingly 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.

Pursuant to the acquisition agreement, the shareholders of FutureSmart could
receive "Earn out Consideration" of up to 1,200,000 LFSI common shares if
FutureSmart achieves certain "Performance Milestones."

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.

In connection with LFSI's acquisition of FutureSmart, RCG agreed until March 3,
2005, or one year from the registration of the shares of common stock for the
FutureSmart shareholders if sooner, that if RCG proposes to transfer 15% or more
of the shares of LFSI owned by RCG (excluding registered offerings, sales to
certain investors and related party sales) then certain of the FutureSmart
shareholders shall have the right to participate in such transfer of stock on
the same terms and conditions for up to 25% of the total sale.

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
will be disbursed by the escrow agent no later than one year and one day after
the closing date. Due to the uncertainty of the amount, the Company has not
recorded the escrowed amount ($140,000) in earnings.

                                       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 RCG 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 has been treated as the issuance of stock by LST for the net
monetary assets of LFSI, accompanied by a recapitalization of LST. The
accounting treatment is identical to accounting for a reverse acquisition,
except that no goodwill or other intangible asset is 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 is leasing.


         (b)      Business of Issuer

Principal Products or Services and Their Markets
------------------------------------------------

LBI is a full service home technology integration company providing 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 backbone of the home network technology is the structured wiring system. The
structured cabling system is run in the wall of the home to provide immediate
access to the Internet, telephone, faxes, satellite, audio and video, as well as
an in-home LAN to every room via communications outlets or wall plates. All
cables are run to a central termination point where a structured wiring panel
contains the modules needed to integrate and distribute technology throughout
the home.

A growing percentage of new homebuilders are moving to include a basic
structured wiring package in their homes. This gives the consumer a chance to
plan and select, early in the construction process, the technology that best
suits their lifestyle and budget. By including a structured wiring package in a
home at the time of construction, additional modules can easily be added at a
later date by simply plugging the module into the central panel. This approach
to wiring provides consumers with flexibility and convenience when adding or
making upgrades to their homes.

                                       7
<PAGE>

The Company also pre-wires security systems and installs the related hardware
for the majority of the homes. The Company obtains a number of security
contracts as a part of this process and either bundles them for resale or
arranges for a monitoring company to handle the administration of billing and
collecting the service fees and thus provides a monthly revenue stream.

Brittany is the owner of two condominium units which are located in Dallas,
Texas. Both units are currently under lease.

Distribution Methods of the Products and Services
-------------------------------------------------

LBI acquires product from a number of vendors to complete their customer's
contracts. LBI maintains a supply of the basic components, wire, connections,
etc., but generally orders higher cost components on an as needed basis.

Competitive Business Conditions
-------------------------------

A dramatic trend towards the utilization of whole-house audio/video systems,
home automation, and networking technology in new and existing homes has created
a significant new revenue opportunity for homebuilders and technology providers.
Four major factors are driving the explosion in this area. First, homeowners
have more leisure time and want more of that time spent enjoying their homes.
Second, the cost of entertainment and other technology products continues to
decrease while the functionality and ease of use is increasing. Third, the trend
toward working at home is driving an increasing demand for computer networking.
Finally, there is a heightened awareness of the need for greater security
measures for the home.

The ability for consumers to wire their homes to enable and control high speed
internet access, home security functions, entertainment devices, and manage
computer networks for home offices and entertainment is now available at price
points affordable to the majority of homeowners. At the same time, the
functionality of such home networking applications is improving, which further
drives consumer demand. As penetration of home networking technology increases,
industry players, such as structured wire manufacturers and integrators, home
technology sellers and installers, electrical contractors, and home builders
stand to benefit by providing solutions to address a growing market projected to
total over $9 billion by 2006, according to Cahners In-Stat Group.

Over 75% of all new homes built will feature structured wiring as a standard by
2006, up from 27% in 2003. Structured wiring is used to connect security,
entertainment, home office and educational functions of a residence. A single
structured wiring panel, located next to the load center, aggregates a variety
of outside communications services including cable TV, CAT 5e, and fiber cables
throughout the home. Voice, data, video and Internet services are thereby
terminated at a single plate wall outlet located in any room to connected
homeowners devices, i.e. computers, printers, entertainment systems, security
and home automation.

Exploiting this expanding market are hundreds of small ($2 million or less) to
medium-sized (up to $40 million) companies engaged in the manufacturing, sales,
installation and integration of home technology systems. Generally, these
companies market products and services to new home builders who offer them to
new home buyers as either an option or as a standard feature of their new homes.

                                       8
<PAGE>

The installation of home technologies is highly competitive and fragmented. Our
current competitors are a diverse group of national and regional dealers such as
Tweeter and Best Buy as well as local, independent contractors. Our retail
competitors may sell any or all of the products and services we offer. Certain
of these retailers have substantially greater financial resources than we do,
which may increase their ability to purchase inventory at lower cost or to
initiate and sustain predatory price competition. Local contractors may have
long standing relationships with builders and homeowners, which could have a
material, adverse effect on our ability to expand.

Source and Availability of Materials
------------------------------------

A number of products we offer for sale are brand specific and thus may only be
available from a limited number of sources. In addition certain products may
require long lead times and thus limit our ability to offer the product. Our
ability to meet vendor payment requirements may also limit our ability to obtain
certain products at reasonable prices.

Dependence on One or a Few Major Suppliers
------------------------------------------

The sale of brand specific products limits the number of sources from whom we
can acquire certain products. This limitation in availability may cause our
sales prices to become uncompetitive and may also limit the number of products
which we can offer for sale.

Patents, Trademarks, Licenses & Franchises
------------------------------------------

Franchising sold franchise locations in 18.5 market areas and was using the
franchise strategy to expand its national presence. Franchising discontinued its
operations effective April 1, 2004.

Employees
---------

As of June 30, 2004, we employed six people on a full-time basis at LBI and one
person on a full-time basis at LFSI. We believe our future success will depend,
in part, on our ability to recruit and retain highly-skilled, creative
personnel. Professional personnel in the areas of audio/video, home automation
and computer networks are critical to our success.

None of our employees are represented by a labor union. We have experienced no
work stoppages and believe that our employee relationships are good.



ITEM 2   DESCRIPTION OF PROPERTY

We lease substantially all property which we use in our operations, as follows:

LBI leases its office location in Timonium, Maryland. The monthly lease payment
is $4,144 and runs through July 31, 2006.

The office space occupied by LFSI is provided at no cost by the President of the
Company.

Brittany owns two residential condominium units which are located in Dallas,
Texas. Both units are currently under lease.

                                       9
<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
filed a request for entry of default against Integrators and RichMark.

On September 29, 2004, LBI received notice that the guarantor of a $50,000 note
payable to a bank had obtained a judgment against LBI on August 23, 2004, in the
amount of $51,179 plus costs and post-judgment interest at 6.5%. (Case number
03-C-04-008855CJ, Circuit Court for Baltimore County). LBI had made an initial
payment on the judgment of approximately $10,000 as partial settlement of the
judgment and is negotiating a pay-out schedule for the balance.

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. The Company has not recorded an accrual
relating to this dispute.


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, 2004.


                                       10
<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, 2004.
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, 2004
-----------------------
Fourth Quarter                                    $    1.01      $      .03
Third Quarter                                     $    2.25      $      .35
Second Quarter                                    $    4.00      $     1.55
First Quarter                                     $    4.90      $     2.50


FYE June 30, 2003
-----------------------
Fourth Quarter                                    $    5.45      $     4.10
Third Quarter                                     $    6.90      $     4.40
Second Quarter                                    $    6.53      $     3.10
First Quarter                                     $    5.04      $     2.20


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, 2004, there were approximately 1,595 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.

                                       11
<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, 2004, with
respect to compensation plans (including individual compensation arrangements)
under which common stock of the Company is authorized for issuance:

<TABLE>
<CAPTION>
                                               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                  $       2.72                  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 8 to the
consolidated financial statements that appear in Item 7.

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

During the year ended June 30, 2004, the Company issued 25,000 shares ($76,250),
26,813 shares ($17,428) and 3,000 shares ($630) for services rendered. The
transactions were recorded based upon the value of the stock on the dates of the
related agreements. The shares were sold pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.

Effective May 5, 2004, the Company issued 1,900,000 shares of its common stock
to acquire LST of Baltimore Inc. The transaction was valued at $76,000 based
upon the value of the Company's common stock on the transaction date. The shares
were sold pursuant to an exemption from registration under Section 4(2)
promulgated under the Securities Act of 1933, as amended.

Effective June 24, 2004, the Company issued 2,860,000 shares of its common stock
to cancel warrant and registration rights due to investors in the RichMark
Capital Corporation and Legend Merchant Group private placements completed
during fiscal 2003. The shares were sold pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.

                                       12
<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.

Georgia and Integrators and its subsidiaries were sold to Sports in exchange for
75,000 shares of Sports common stock on May 24, 2004.

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. LBI
currently represents the continuing operations of the Company.

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 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
will be disbursed by the escrow agent no later than one year and one day after
the closing date. Due to the uncertainty of the amount, the Company has not
recorded the escrowed amount ($140,000) in earnings.

On September 5, 2002, LFSI acquired LST, a Delaware corporation, and it's wholly
owned subsidiaries, Lifestyle Technologies Franchising Corp., Lifestyle
Security, Inc. and Lifestyle Technologies Atlanta, all organized in July 2001.
LFSI issued 16,000,000 shares of its common stock to RCG to acquire 100%
interest in LST. On February 20, 2003, LFSI reorganized its corporate structure.


                                       13
<PAGE>

LST Integrators, Inc. 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. Accordingly for
accounting purposes the transaction has been treated as the issuance of stock by
LST for the net monetary assets of LFSI, accompanied by a recapitalization of
LST. The accounting treatment is identical to accounting for a reverse
acquisition, except that no goodwill or other intangible asset is recorded. The
historical financial statements prior to September 5, 2002, are those of LST.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2004, the Company has a significant working capital deficit of
$5,042,621. The major components of the working capital deficit include:
$1,083,524 due to affiliates, including RCG and its subsidiaries, $939,358 in
accounts payable and accrued expenses, current portion of long-term debt and
notes payable in the amount of $2,052,522 and net current liabilities of
discontinued operations of $1,147,158. 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 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 grow its business or improve its operating cash
flows as expected, (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 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.

On August 21, 2003, the Company converted a note in the amount of $300,000 plus
accrued interest in the amount of $42,500 into 200,000 shares of RCG common
stock. The obligation to the third party became due to RCG and was included as a
part of the sale of Integrators in May 2004.

In August 2003 the guarantor, a related party, paid a note owed by the Company
in the amount of $100,000. The obligation to the guarantor is included in notes
payable to related parties.

The Company's working capital deficit decreased from a deficit of $6,281,197 at
June 30, 2003, to a deficit of $5,042,621 at June 30, 2004. The decrease in
working capital deficit of $1,238,576 consists of an increase in current assets
of $106,110 and a decrease in current liabilities of $1,132,466. The decline in
net current liabilities of discontinued operations in the amount of $1,294,787
represents the major reason for the reduced working capital deficit. This
decline is primarily due to the sale of FutureSmart in October 2003 and the sale
of Georgia and Integrators and its subsidiaries in May 2004.

                                       14
<PAGE>

The Company's ability to continue as a going concern will rely on its ability to
continue to raise additional capital, since its ability to continue using vendor
debt to assist in financing the operations is limited by its ability to service
existing debt.

SALES AND COST OF SALES

Sales and cost of sales in fiscal 2004 represent the two months of operations
for LBI which was acquired May 5, 2004. All other operating activities of the
Company have been discontinued.

LBI realized a gross profit of 44.6% of sales, which is substantially higher
than that experienced by the Company's operations in prior years. This is
primarily due to the down-sized operational size which LBI maintains and LBI's
ability to maintain tight control of costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses from continuing operations for the
years ended June 30, 2004 and 2003 are as follows:

<TABLE>
                                                                              2004                  2003
                                                                              ----                  ----
         <S>                                                         <C>                   <C>
         Compensation expense                                        $          98,876     $          76,500
         Legal and professional expense                                        246,392               169,102
         Rent                                                                    8,089                    -
         Insurance                                                              43,139                24,026
         Office and other expenses                                              68,184                40,780
         Travel and entertainment                                               22,850                42,551
                                                                     -----------------     -----------------
              Total selling, general and administrative expenses     $         487,530     $         352,959
                                                                     =================     =================
</TABLE>

Selling, general and administrative expenses are $134,571 higher in 2004 than in
2003. The increase includes $49,215 from LBI, which was not owned in fiscal
2003, and an increase of $85,356 from corporate administration. The majority of
the reason for the fiscal 2004 increase was the settlement valued at $100,100
for shares issued to certain shareholders for their registration rights and to
cancel their rights to warrants.

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.
Included in operations is $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.

                                       15
<PAGE>

MANAGEMENT FEE TO RCG

RCG 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 years ended June 30, 2004
and 2003, RCG charged the Company $25,000 and $120,000, respectively. The
$120,000 in fiscal 2003 is included in discontinued operations.

INTEREST EXPENSE

Interest expense increased from $94,591 in fiscal 2003 to $222,080 in fiscal
2004. The majority of the increase is due to the transfer of debt from
discontinued operations to the parent company and to the increase in related
party notes during fiscal 2004.

DISCONTINUED OPERATIONS

Discontinued operations includes the results of operations for Integrators and
its subsidiaries, FutureSmart, Georgia, Franchising and Colorado during the
periods they were owned by the Company.

NEW ACCOUNTING STANDARDS

In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," ("SAB 104") which supersedes SAB 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). SAB 104's primary purpose is
to rescind accounting guidance contained in SAB 101 related to multiple element
revenue arrangements, superseded as a result of the issuance of Emerging Issues
Task Force ("EITF") 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." EITF 00-21 addresses certain aspects of the accounting by a
vendor for arrangements under which it will perform multiple revenue-generating
activities.

Specifically, EITF 00-21 addresses whether an arrangement contains more than one
unit of accounting and the measurement and allocation to the separate units of
accounting in the arrangement. Additionally, SAB 104 rescinds the SEC's "Revenue
Recognition in Financial Statements Frequently Asked Questions and Answers"
issued with SAB 101 that had been codified in SEC Topic 13. The revenue
recognition principles of SAB 101 remain largely unchanged by the issuance of
SAB 104. The adoption of SAB 104 and EITF 00-21 did not have a material effect
on our financial condition or results of operations.

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


                                       16
<PAGE>

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.

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.

Inventories - Inventories are stated at average cost. The Company also writes
down its inventory for discontinued, slow-moving and damaged inventory.

Long-lived Assets - Long-lived assets are periodically reviewed for impairment
by comparing the carrying amount of the assets with their estimated fair values.
If the evaluation indicates that the carrying amount of the asset may not be
recoverable, the potential impairment is measured based on a projected
discounted cash flow method, using a discount rate that is considered to be
commensurate with the risk inherent in the Company's current business model.
Assumptions are made with respect to cash flows expected to be generated by the
related assets based upon updated projections. Any changes in key assumptions or
market conditions could result in an unanticipated impairment charge. For
instance, in the event of a major market downturn, individual locations may
become unprofitable, which could result in a write-down of the carrying value of
the assets located there. Any impairment would be recognized in operating
results if a permanent reduction were to occur.

Goodwill - Goodwill, which represents the cost in excess of fair value of net
assets acquired, is subject to an impairment test on an annual basis, or when
there is reason to believe that the value has been diminished or impaired. The
fair value of the Company's identified reporting units was estimated using the
expected present value of corresponding future cash flows and market values of
comparable businesses where available. The Company completed the valuations of
its reporting units that include goodwill in fiscal 2004 and concluded that an
impairment charge was not required for its remaining home technology integration
operations.

Revenue Recognition - LBI's home technology services work is completed in three
phases - pre-wiring, trim-out and hardware installation. LBI invoices its
customers and records revenue as work is completed on each project. For alarm
monitoring service contracts sold by LBI, revenue is recognized only when the
contracts are sold to third party companies or as billed if LBI holds and
services the contract.

                                       17
<PAGE>

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, 2004, 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.

                                       18
<PAGE>


ITEM 7   FINANCIAL STATEMENTS

                  LIFESTYLE INNOVATIONS, INC. AND SUBSIDIARIES

                           Financial Statements Index

                                                                           Page

Independent Auditors' Report                                                20

Consolidated Balance Sheet as of June 30, 2004                              21

Consolidated Statements of Operations for the Years Ended
June 30, 2004 and 2003                                                      22

Consolidated Statements of Stockholders' Equity (Deficit) for the
Years Ended June 30, 2004 and 2003                                          23

Consolidated Statements of Cash Flows for the Years Ended
June 30, 2004 and 2003                                                     24-25

Notes to the Consolidated Financial Statements                             26-45


                                       19
<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

                                       20
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Balance Sheet
June 30, 2004



                                         ASSETS
<S>                                                                            <C>
Cash and cash equivalents                                                      $     33,947
Accounts receivable, net                                                             63,540
Inventories                                                                          26,954
Prepaid expenses and other assets                                                    55,500
                                                                               -------------
     Total current assets                                                           179,941
Property and equipment, net                                                          54,108
Goodwill, net                                                                       253,049
Deferred costs and other assets                                                      55,403
                                                                               -------------
     Total assets                                                              $    542,501
                                                                               =============

                          LIABILITIES AND STOCKHOLDERS' DEFICIT

Current portion of long-term debt and notes payable                            $    928,255
Notes payable to related parties                                                  1,124,267
Accounts payable                                                                    187,641
Accrued expenses                                                                    751,717
Amounts due to affiliates                                                         1,083,524
Net current liabilities of discontinued operations                                1,147,158
                                                                               -------------
     Total current liabilities                                                    5,222,562
Long-term debt less current portion                                                 175,683
                                                                               -------------
     Total liabilities                                                            5,398,245
                                                                               -------------
Stockholders' deficit:
  Series A Convertible Preferred stock; $0.10 par value; 1,000,000 shares
    authorized; 781,752 issued and outstanding; liquidation preference
    $2,149,818; voting; convertible into 1,719,854 common shares                     78,175
  Common stock; $0.001 par value; 250,000,000 shares authorized;
    26,053,625 shares issued; 23,854,093 outstanding                                 26,054
  Additional paid-in capital                                                     13,827,582
  Common stock warrants                                                             206,295
  Stock subscription receivable                                                      (4,000)
  Accumulated deficit                                                           (18,912,866)
                                                                               -------------
                                                                                 (4,778,760)
  Treasury stock; 2,199,532 shares                                                  (76,984)
                                                                               -------------
     Total stockholders' deficit                                                 (4,855,744)
                                                                               -------------
     Total liabilities and stockholders' deficit                               $    542,501
                                                                               =============

See accompanying notes to consolidated financial statements.

</TABLE>

                                            21
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended June 30, 2004 and 2003


                                                                         2004               2003
                                                                         ----               ----
<S>                                                                 <C>                <C>
Revenues from product sales                                         $    138,059       $         --
Cost of sales                                                             76,532                 --
                                                                    -------------      -------------
Gross profit                                                              61,527                 --

Selling, general and administrative expense                              487,530            352,959
Compensation related to issuance of stock options and warrants          (135,414)           568,749
Depreciation and amortization                                              2,187              1,406
Management fee to RCG                                                     25,000                 --
                                                                    -------------      -------------
     Total operating expenses                                            379,303            923,114
                                                                    -------------      -------------
     Loss from operations                                               (317,776)          (923,114)
Other income (expense):
  Interest and other income                                               10,416             11,965
  Interest expense                                                      (135,431)           (67,174)
  Interest expense - related party                                       (86,649)           (27,417)
                                                                    -------------      -------------
                                                                        (211,664)           (82,626)
                                                                    -------------      -------------
     Loss from continuing operations before income taxes                (529,440)        (1,005,740)
Income tax expense                                                            --                 --
                                                                    -------------      -------------
     Loss from continuing operations                                    (529,440)        (1,005,740)
Discontinued operations:
     Loss from discontinued operations                                (6,465,057)        (5,088,199)
     Income tax expense                                                       --                 --
                                                                    -------------      -------------
     Loss on discontinued operations                                  (6,465,057)        (5,088,199)
                                                                    -------------      -------------
     Net loss                                                       $ (6,994,497)      $ (6,093,939)
                                                                    =============      =============
Basic and diluted net loss per share:
  Continuing operations                                             $      (0.02)      $      (0.05)
  Discontinued operations                                                  (0.31)             (0.26)
                                                                    -------------      -------------
                                                                    $      (0.33)      $      (0.31)
                                                                    =============      =============
Weighted average shares outstanding                                   20,870,259         19,557,424
                                                                    =============      =============

See accompanying notes to consolidated financial statements.
</TABLE>

                                                 22
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
For the Years Ended June 30, 2004 and 2003


                                                                                                      Additional       Unissued
                                                   Preferred Stock               Common Stock           Paid-in         Common
                                                Shares         Amount         Shares       Amount       Capital          Stock
                                            -------------  -------------  ------------- ------------- -------------  -------------
<S>                                              <C>       <C>              <C>         <C>           <C>            <C>
Balance at June 30, 2002                              --   $         --     16,000,000  $     16,000  $ 11,602,587   $         --
 Acquire LifeStyle Innovations, Inc.                  --             --      4,074,530         4,075       103,572             --
 Note payable and accrued interest
  converted to common stock                           --             --        100,000           100       217,400             --
 Common stock sold for cash                           --             --        178,400           178       392,742        693,765
 Acquire FutureSmart Systems, Inc.             1,000,000        100,000             --            --            --             --
 Prepay interest on convertible debentures            --             --        106,395           106       265,882             --
 Consulting agreements                                --             --         10,000            10        57,490         37,500
 Net loss for year ended June 30, 2003                --             --             --            --            --             --
                                            -------------  -------------  ------------- ------------- -------------  -------------
Balance at June 30, 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   $         --
                                            ============   ============   ============  ============  ============   ============


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

Balance at June 30, 2002                    $         --  $         --   $         --   $ (5,824,430)  $         --   $  5,794,157
 Acquire LifeStyle Innovations, Inc.                  --            --         (4,000)            --             --        103,647
 Note payable and accrued interest
  converted to common stock                           --            --             --             --             --        217,500
 Common stock sold for cash                           --            --             --             --             --      1,086,685
 Acquire FutureSmart Systems, Inc.               206,295            --             --             --             --        306,295
 Prepay interest on convertible debentures            --      (265,988)            --             --             --             --
 Consulting agreements                                --       (37,500)            --             --             --         57,500
 Net loss for year ended June 30, 2003                --            --             --     (6,093,939)            --     (6,093,939)
                                            ------------- -------------  -------------  -------------  -------------  -------------
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)
                                            ============= =============  =============  =============  =============  =============

See accompanying notes to consolidated financial statements.

</TABLE>

                                                                23
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2004 and 2003

                                                                           2004              2003
                                                                           ----              ----
<S>                                                                    <C>               <C>
Cash flows from operating activities:
  Net loss                                                             $(6,994,497)      $(6,093,939)
    Loss from discontinued operations                                   (6,465,057)       (5,088,199)
                                                                       ------------      ------------
      Loss from continuing operations                                     (529,440)       (1,005,740)
  Adjustments to reconcile net loss to net cash used in
    operations:
      Depreciation and amortization                                          2,187             1,406
      Other                                                                    523                --
      Stock option compensation                                           (135,414)          568,749
      Stock based compensation                                             131,809                --
      Stock based settlements                                              100,100                --
     Amortize debenture discount                                             8,025                --
      Changes in operating assets and liabilities, net of effects
        of acquisitions and divestitures:
        Accounts and notes receivable                                       30,626                --
        Inventories                                                         (2,890)               --
        Prepaid expenses                                                    14,147           (14,147)
        Deferred costs and other assets                                      8,080                --
        Accounts payable and accrued expenses                              (32,520)          988,190
                                                                       ------------      ------------
          Net cash provided by (used in) continuing operations            (404,767)          538,458
          Net cash used in discontinued operations                        (138,787)       (2,282,305)
                                                                       ------------      ------------
            Net cash used in operations                                   (543,554)       (1,743,847)
                                                                       ------------      ------------
Cash flows from investing activities:
     Purchase of property and equipment                                       (523)               --
                                                                       ------------      ------------
          Net cash used in continuing operations                              (523)               --
          Net cash used in discontinued operations                              --          (681,339)
                                                                       ------------      ------------
            Net cash used in investing activities                             (523)         (681,339)
                                                                       ------------      ------------
Cash flows from financing activities:
     Loan proceeds                                                         191,600           225,000
     Loan proceeds from related parties                                    221,827           500,000
     Repayment of notes payable and long-term debt                         (80,722)          (86,000)
     Cash received in excess of cash paid in acquisition                       408                --
     Loan made                                                             (55,500)               --
     Due to affiliates                                                     (67,668)          441,477
     Sale of common stock                                                       --         1,086,685
                                                                       ------------      ------------
          Net cash provided by continuing operations                       209,945         2,167,162
          Net cash provided by discontinued operations                     365,000           261,103
                                                                       ------------      ------------
            Net cash provided by financing activities                      574,945         2,428,265
                                                                       ------------      ------------
Net increase in cash and cash equivalents                                   30,868             3,079
Cash and cash equivalents at beginning of year                               3,079                --
                                                                       ------------      ------------
Cash and cash equivalents at end of year                               $    33,947       $     3,079
                                                                       ============      ============

                                                                                            Continued

See accompanying notes to consolidated financial statements.
</TABLE>

                                                      24
<PAGE>
<TABLE>

Lifestyle Innovations, Inc. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
For the Years Ended June 30, 2004 and 2003

                                                                               2004         2003
                                                                               ----         ----
<S>                                                                         <C>           <C>
Supplemental Cash Flow Information - Continuing Operations
  Cash paid for interest                                                    $ 25,096      $ 27,236
  Cash paid for income taxes                                                      --            --

Non-cash investing and financing activities are as follows:
  Common stock issued for note payable and accrued interest                 $     --      $217,500
  Conversion of note payable for accounts receivable                              --        90,000
  Financial consulting agreement paid in common stock                             --        57,500
  Consulting agreement for public relations to be paid in common stock            --        37,500
  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                                  27,801            --
  Common stock issued for settlements with stockholders                      100,100            --
  Exchange of subsidiaries for investments                                        --            --

See accompanying notes to consolidated financial statements.

</TABLE>

                                                 25
<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: LST of Baltimore, Inc. ("LBI"); Lifestyle
              Technologies Franchising Corp. ("Franchising"); Brittany
              Enterprises, Inc. ("Brittany"); SYSLYNC - COLORADO, Inc.
              ("Colorado") and FutureSmart Systems, Inc. ("FutureSmart")
              (collectively the "Company"). Franchising, Colorado and
              FutureSmart are included in discontinued operations. All material
              intercompany accounts and transactions have been eliminated.

              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 Sports Management
              & Recreation, Inc. ("Sports"), a Nevada corporation, on May 24,
              2004, in exchange for 25,000 shares of Sports' common stock.
              Integrators and its subsidiaries are included in discontinued
              operations during the period owned by LFSI.

              SYSLYNC-GEORGIA, Inc. ("Georgia") was also sold to Sports in
              exchange for 50,000 shares of Sports' common stock on May 24,
              2004, and is included in discontinued operations.

              (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. 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.

              LST Integrators, Inc. and its wholly owned subsidiaries were all
              sold to Sports on May 24, 2004, in exchange for 25,000 shares of
              Sports' common stock. Integrators and its subsidiaries are
              included in discontinued operations during the period owned by
              LFSI.

                                       26
<PAGE>

              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 Sports on May 24, 2004, in exchange for 50,000 shares of
              Sports' common stock and is included in discontinued operations.

              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 RCG Companies Incorporated, formerly eResource
              Capital Group, Inc. ("RCG"), 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. Accordingly, for accounting
              purposes the transaction has been treated as the issuance of stock
              by LST for the net monetary assets of LFSI, accompanied by a
              recapitalization of LST. The accounting treatment is identical to
              accounting for a reverse acquisition, except that no goodwill or
              other intangible asset is recorded. The historical financial
              statements prior to September 5, 2002, are those of LST. At June
              30, 2004, RCG owns 48.5% 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 has been treated as the acquisition of Brittany by
              LFSI with Brittany as the purchaser (reverse acquisition).
              Brittany did not have operations until March 30, 2001.

              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 - LBI is a full service home technology
              integration company providing 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.

              Brittany is the owner of two condominium units that are located in
              Dallas, Texas which are currently under lease.

              (d) FISCAL YEARS - As used herein, fiscal 2004 refers to the
              periods included in the fiscal year ended June 30, 2004, and
              fiscal 2003 refers to the periods included in the fiscal year
              ended June 30, 2003.

                                       27
<PAGE>

              (e) GOING CONCERN - At June 30, 2004, the Company has a
              significant working capital deficit of $5,042,621. The major
              components of the working capital deficit include: $1,083,524 due
              to affiliates, $939,358 in accounts payable and accrued expenses,
              current portion of long-term debt and notes payable in the amount
              of $928,255, notes payable due related parties of $1,124,267 and
              net current liabilities of discontinued operations in the amount
              of $1,147,158. 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 is currently
              negotiating a line of credit of up to $150,000 in addition to
              exploring additional sources of liquidity, through debt and equity
              financing alternatives and potential sales of its common stock in
              private placement transactions. Additionally, 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 to grow its
              business or improve its operating cash flows as expected, (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.

                                       28
<PAGE>

         o        Accounts receivable and accounts payable: Due to their short
                  term nature, the carrying amounts reported in the consolidated
                  balance sheet for accounts receivable and accounts payable
                  approximate their fair value. The Company provides for any
                  losses through its allowance for doubtful accounts.

         o        Notes payable: The carrying amount of the Company's notes
                  payable approximate their fair value.

CONCENTRATION OF CREDIT RISK

         Financial instruments that potentially subject the Company to
         concentrations of credit risk consist principally of cash, accounts
         receivable, investments, and notes payable. The Company places its cash
         with major financial institutions. The Company performs periodic credit
         evaluations of its customers' financial condition and generally does
         not require collateral. Although due dates of receivables vary based on
         contract terms, credit losses have been within management's estimates
         in determining the level of allowance for doubtful accounts. Overall
         financial strategies are reviewed periodically.

TRADE ACCOUNTS RECEIVABLE

         Accounts receivable from the sale of products or services are recorded
         at net realizable value and the Company grants credit to customers on
         an unsecured basis. The Company provides an allowance for doubtful
         collections that is based upon a review of outstanding receivables,
         historical collection information, and existing economic conditions.
         Normal trade receivables are due from 15 to 30 days after the issuance
         of an invoice. Receivables past due more than 120 days are considered
         delinquent. Delinquent receivables are written off based on individual
         credit evaluation and specific circumstances of the customer.

         The Company computes finance charges on accounts that are 30 days past
         due. The finance charges are recognized into income when accrued unless
         collection is doubtful.

INVENTORIES

         Inventories for LBI consists of purchased components, which are
         recorded at average cost.

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, with 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.

                                       29
<PAGE>

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.

         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.

                                       30
<PAGE>

         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.

         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,
                                                                2004              2003
                                                                ----              ----
         <S>                                                 <C>               <C>
         Net loss, as reported                               $(6,994,497)      $(6,093,939)

         Add:  Stock-based employee compensation
         included in reported net loss                          (135,414)          568,749

         Deduct: Total stock-based compensation
         expense determined under fair value method
         for all awards                                          433,023        (2,729,304)
                                                             ------------      ------------

         Net loss, proforma                                  $(6,696,888)      $(8,254,494)
                                                             ============      ============

         Net proforma loss per share, basic and diluted      $      (.32)      $      (.42)
                                                             ============      ============
</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.

                                       31
<PAGE>

         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, 2004, 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,
         2004, which are not granted under the Plan.

REVENUE RECOGNITION

         LBI's home technology services work is completed in three phases -
         pre-wiring, trim-out and hardware installation. LBI invoices its
         customers and records revenue as work is completed on each project. For
         alarm monitoring service contracts sold by LBI, revenue is recognized
         only when the contracts are sold to third party finance companies or as
         billed if LBI holds and services the contract.

NET LOSS PER COMMON SHARE

         The Company has adopted SFAS No. 128 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 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, 2004 and 2003.
         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.

                                       32
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No.
         104, "Revenue Recognition," ("SAB 104") which supersedes SAB 101,
         "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 104's
         primary purpose is to rescind accounting guidance contained in SAB 101
         related to multiple element revenue arrangements, superseded as a
         result of the issuance of Emerging Issues Task Force ("EITF") 00-21,
         "Accounting for Revenue Arrangements with Multiple Deliverables." EITF
         00-21 addresses certain aspects of the accounting by a vendor for
         arrangements under which it will perform multiple revenue-generating
         activities.

         Specifically, EITF 00-21 addresses whether an arrangement contains more
         than one unit of accounting and the measurement and allocation to the
         separate units of accounting in the arrangement. Additionally, SAB 104
         rescinds the SEC's "Revenue Recognition in Financial Statements
         Frequently Asked Questions and Answers" issued with SAB 101 that had
         been codified in SEC Topic 13. The revenue recognition principles of
         SAB 101 remain largely unchanged by the issuance of SAB 104. The
         adoption of SAB 104 and EITF 00-21 did not have a material effect on
         our consolidated financial condition or results of consolidated
         operations.


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 Sports on May 24, 2004, in exchange for 25,000
shares of Sports' 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 Sports in exchange for
50,000 shares of Sports' common stock on May 24, 2004, and is included in
discontinued operations.

Sports' common stock is not currently trading, 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 Sports common stock owned had no
value on the date of the exchange and at June 30, 2004. Accordingly, the Company
has recorded a zero value for the stock received in the above transactions.

                                       33
<PAGE>

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. 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.

The purchase price consisted of 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 consideration was allocated as follows:

         Current assets                                   $       61,625
         Property and equipment                                   13,174
         Goodwill                                                253,049
         Other assets                                              5,083
                                                          --------------
              Total assets acquired                              332,931
                                                          --------------
         Current liabilities                                     246,500
         Non-current liabilities                                  10,839
                                                          --------------
              Total liabilities assumed                          257,339
         Common stock issued                                      76,000
                                                          --------------
              Cash acquired, net                          $          408
                                                          ==============


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.

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

Pursuant to the acquisition agreement, the shareholders of FutureSmart could
receive "Earn out Consideration" of up to 1,200,000 LFSI common shares if
FutureSmart achieves certain "Performance Milestones."

                                       34
<PAGE>

In connection with LFSI's acquisition of FutureSmart, RCG agreed until March 3,
2005, or one year from the registration of the shares of common stock for the
FutureSmart shareholders if sooner, that if RCG proposes to transfer 15% or more
of the shares of LFSI owned by RCG (excluding registered offerings, sales to
certain investors and related party sales) then certain of the FutureSmart
shareholders shall have the right to participate in such transfer of stock on
the same terms and conditions for up to 25% of the total sale.

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
will be disbursed by the escrow agent no later than one year and one day after
the closing date. Due to the uncertainty of the amount, the Company has not
recorded the escrowed amount ($140,000) in earnings.

DISCONTINUED OPERATIONS
Discontinued operations include the results of operations for 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 2004     Fiscal 2003
                                                    -----------     ------------

         Revenues                                   $ 2,288,248     $ 4,611,235
                                                    ============    ============

         Net loss from operations                   $(8,666,582)    $(5,088,199)
         Gain on sale of discontinued operations      2,201,525              --
                                                    ------------    ------------
           Net loss                                 $(6,465,057)    $(5,088,199)
                                                    ============    ============

         Net loss per share                         $      (.31)    $      (.26)
                                                    ============    ============

The net loss from discontinued operations includes goodwill impairment in the
amount of $6,899,054 and $2,577,047 in fiscal 2004 and fiscal 2003,
respectively.

Net non-current assets of discontinued operations includes fixed assets which
are fully depreciated.

Net current liabilities of discontinued operations includes: accounts receivable
(fully reserved); $130,681 in accounts payable; $232,023 due to RCG and
subsidiaries; $295,000 in notes payable; and $489,454 in accrued expenses as of
June 30, 2004.

                                       35
<PAGE>

4.       PROPERTY AND EQUIPMENT

A summary of property and equipment as of June 30, 2004, is as follows:

Real estate                                                    $      46,394
Showroom equipment                                                     3,763
Transportation equipment                                               7,496
Computers and office equipment                                           523
Furniture and fixtures                                                 1,915
                                                               --------------
                                                                      60,091
Less:  Accumulated depreciation                                       (5,983)
                                                               --------------
Property and equipment, net                                    $      54,108
                                                               ==============


5.       LONG-TERM DEBT AND NOTES PAYABLE
<TABLE>

Long-term debt and notes payable at June 30, 2004, consists of the following:

<S>                                                                                     <C>
Unsecured note payable - due January 1, 2004; with interest at 12%                      $    145,000
Note payable - due August 31, 2004; with interest at 12%;
   collateralized by real estate                                                              34,919
Convertible debentures - due May 4, 2009; with interest at 1% (1)                            165,566
Note payable - due upon demand; with interest at 4.5%;
   Uncollateralized (2)                                                                       50,000
Note payable to bank - due July 31, 2004; with interest at 8.5%;
   collateralized by a blanket lien on all business assets of LBI;
   guaranteed by the president of LBI                                                         44,000
Note payable - due in monthly installments of $361; with final
   payment duen October 17, 2007; collateralized by a vehicle;
   non-interest bearing                                                                       14,453
Note payable - due in August 2003 with interest at 12% and
   collateralized by certain home technology accounts receivable and
   inventory (3)                                                                             650,000
                                                                                        ------------
     Total notes payable and long-term debt                                                1,103,938
     Less current portion of long-term debt                                                  928,255
                                                                                        ------------
       Long-term debt less current portion                                              $    175,683
                                                                                        ============
</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


                                       36
<PAGE>

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. The
Second Debenture was issued as a finder's fee for the LBI acquisition. 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 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,
2004, $50,320 of the debt financing costs remain and $8,080 has been amortized.

On May 24, 2004, $800 in debenture principal and the related interest was
converted into 800,438 shares of the Company's common stock. On June 16, 2004,
$26,972 in debenture principal and the related interest was converted into
1,000,030 shares of the Company's common stock. The 1,800,468 shares were issued
from the 4,000,000 shares of treasury stock contributed by RCG.

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, 2004, 48,199,532 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.

                                       37
<PAGE>

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
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) This note payable was originally payable to a bank. The individual guarantor
of the note paid the note in June 2004 and has obtained a judgment against LBI
in the amount of $51,179, plus interest and costs from August 23, 2004.

(3) At the option of the note holder, this note can be converted into RCG's
common stock at a ratio of one share of common stock for each $4.55 of
outstanding principal and interest. RCG's common stock closed at $2.10 on June
30, 2004.

                                       38
<PAGE>

Future maturities of long-term debt and notes payable are as follows at June 30,
2004:
<TABLE>

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

<S>             <C>                                                                     <C>
                2005                                                                    $          928,255
                2006                                                                                 4,336
                2007                                                                                 4,336
                2008                                                                               167,011
                                                                                        ------------------

                Total                                                                   $        1,103,938
                                                                                        ==================


6.       NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties at June 30, 2004, consist of the following:

Unsecured note payable - due on demand; with interest at 6%                             $          500,000
Unsecured notes payable - due in August 2003 with interest at 12%                                  505,558
Unsecured notes payable - due in December 2004 with interest ranging from 8%-12%                   118,709
                                                                                        ------------------

     Total                                                                                $      1,124,267
                                                                                        ==================


7.       INCOME TAXES

Deferred income tax assets consist of the following as of June 30, 2004:

Net operating loss and capital loss carryforwards                                       $        6,859,500
Deferred income tax asset valuation allowance                                                   (6,859,500)
                                                                                        -------------------
     Net deferred income tax assets                                                     $                -
                                                                                        ===================

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

                                                                                 Years ending June 30,
                                                                               2004                2003
                                                                               ----                ----

Federal tax benefit at statutory rate                                 $       (2,378,100)   $     (2,071,900)
State tax benefit, net of federal                                               (314,800)           (274,200)
Goodwill impairment                                                             (992,200)            992,200
Permanent differences                                                             10,000              31,000
Change in deferred tax valuation allowance                                     3,675,100           1,322,900
                                                                      -------------------   -----------------
     Income tax expense                                               $                -    $              -
                                                                      ===================   =================
</TABLE>

                                       39
<PAGE>

As of June 30, 2004, the Company had approximately $19,500,000 of net operating
loss and capital loss carry forwards for federal income tax purposes, which
expire between 2020 and 2024. 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.


8.       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 2004               Fiscal 2003
                                   --------------------------  ----------------------
                                                    Weighted                 Weighted
                                                     Average                  Average
                                    Number          Exercise     Number      Exercise
                                   of Shares         Price     of Shares      Price
                                   ---------         -----     ---------      -----
<S>                                  <C>           <C>         <C>          <C>
Outstanding, beginning of year       939,800       $   4.72         --      $  --

Cancelled                           (889,800)          4.83         --         --
Granted                                   --          --       398,400          4.00
Granted                                   --          --       398,400          6.00
Granted                                   --          --        50,000          2.75
Granted                                   --          --        93,000          3.33
                                    --------       --------   --------      --------
Outstanding, end of year              50,000       $   2.75    939,800      $   4.72
                                    ========       ========   ========      ========

Vested, end of year                   50,000       $   2.75    939,800      $   4.72
                                    ========       ========   ========      ========
</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. The
weighted average fair value for all warrants granted in fiscal 2003 was $4.72
and none in fiscal 2004. Warrants outstanding at June 30, 2004, will expire in
fiscal 2005.

                                       40
<PAGE>

On September 5, 2002, RCG completed a transaction with LFSI to sell 100% of the
common stock of LST in exchange for 16 million shares of LFSI stock. Pursuant to
the terms of the Merger Agreement, each outstanding option or warrant issued to
LST employees in connection with RCG's acquisition of LST will either be
converted with the appropriate adjustment into an option or warrant to purchase
LFSI common stock or will be terminated pursuant to their terms. If options or
warrants are terminated pursuant to the terms of outstanding warrants or stock
options agreements, or RCG's stock option plan, LFSI will grant warrants or
options to holders of these securities. Newly granted options or warrants will
be proportionate to the terminated amount and will have an exercise price equal
to the market price of LFSI stock.

During the years ended June 30, 2004 and 2003, the Company recorded, in
discontinued operations, $2,375 and $28,500, respectively, in non-cash expense
related to common stock and stock purchase warrants that were granted to a
consultant engaged to assist the Company in developing and implementing its
national franchising program. The fair value of these warrants to purchase RCG
common stock, $57,000, as determined in accordance with SFAS 123 was recorded on
the Company's consolidated financial statements and was amortized to expense
over the service period of the related agreement. At June 30, 2004, the balance
had been fully amortized.

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.

Following is a summary of activity of the Plan:

<TABLE>
                                           Fiscal 2004               Fiscal 2003
                                   --------------------------  ----------------------
                                                    Weighted                Weighted
                                                     Average                 Average
                                    Number          Exercise     Number     Exercise
                                   of Shares         Price     of Shares     Price
                                   ---------         -----     ---------     -----
<S>                                 <C>            <C>         <C>          <C>
Outstanding, beginning of year      1,050,000      $   2.73      150,000    $   1.50

Granted                               113,795          1.45      900,000        3.81
Forfeited                            (483,334)         3.98           --       --
Expired                                    --         --              --       --
                                   ----------      --------   ----------    --------
Outstanding, end of year              680,461      $   2.78    1,050,000    $   3.48
                                   ==========      ========   ==========    ========
Vested, end of year                   680,461      $   2.78      716,666    $   2.73
                                   ==========      ========   ==========    ========
</TABLE>

                                       41
<PAGE>

The weighted average contractual life for all options under the Plan as of June
30, 2004, was approximately 3.44 years with exercise prices ranging from $2.20
to $5.10. If not previously exercised, all Plan options outstanding at June 30,
2004, 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
June 30, 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.


9.       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.

During fiscal 2004, 223,476 shares of preferred stock were converted into
444,487 shares of common stock of the Company.


10.      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.

                                       42
<PAGE>

11.      TRANSACTIONS WITH RELATED PARTIES

At June 30, 2004, notes and advances due to affiliates from continuing
operations consisted of the following:

Due to RCG and its subsidiaries                                       $  945,372
Advance from and accrued interest
  payable to Michael Pruitt, CEO of RCG                                    5,940
Advances from and accrued interest
  payable to G. David Gordon, a shareholder
  and creditor of LFSI and RCG                                           114,554
Advances from Steven Zink, President of LBI                               17,658
                                                                      ----------

                                                                      $1,083,524
                                                                      ==========

The amount due to RCG and its subsidiaries represents net advances to and from
RCG and its subsidiaries. RCG 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 years ended June 30, 2004 and 2003, RCG charged the Company $25,000 and
$120,000, respectively. The $120,000 in fiscal 2003 is included in discontinued
operations.

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

Mr. Pruitt had pledged certain personal assets to secure a $100,000 bank credit
facility for LST's home technology business. At June 30, 2003, the balance
outstanding on this bank facility was $100,000. Mr. Pruitt paid this loan in
August 2003, and the corresponding note payable to him is included in notes
payable to related parties.

At June 30, 2004, 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 and this company also
loaned RCG an additional $1,067,500 during fiscal 2002 at interest rates ranging
from 8% to 12%. The balance of $1,017,500 was converted into RCG common stock
during fiscal 2004. Mr. Gordon acts as special legal counsel to RCG 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 $42,254 in accrued compensation at June 30, 2004, 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 RCG
and its subsidiaries.

                                       43
<PAGE>

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.

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 two years ended June 30, 2004 and 2003,
are as follows:

                                                     2004           2003
                                                     ----           ----

Houston and three North Carolina markets        $      93,000  $     258,000
Three South Carolina markets                           84,000        270,000
Three Maryland markets                                 17,000         47,000
LVA and subsidiaries                                   30,000        183,000
Dallas                                                 25,000        134,000
                                                -------------  -------------

                                                $     249,000  $     892,000
                                                =============  =============


12.      BUSINESS SEGMENT INFORMATION

As of June 30, 2004, the Company's continuing operations consisted of one
location. Accordingly, the Company only operates in one business segment.

                                       44
<PAGE>

13.      COMMITMENTS AND CONTINGENCIES

Future minimum operating lease commitments under non-cancelable leases for
office space is summarized as follows:

Fiscal year                                                        Total
-----------                                                        -----

   2005                                                     $           49,700
   2006                                                                 49,700
   2007                                                                  4,200
                                                            ------------------

                                                            $          103,600
                                                            ==================

Rent expense from continuing operations for the years ended June 30, 2004 and
2003, amounted to $8,089 (2 months) and $0, respectively.

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
filed a request for entry of default against Integrators and Richmark.

On September 29, 2004, LBI received notice that the guarantor of a $50,000 note
payable to a bank had obtained a judgment against LBI on August 23, 2004, in the
amount of $51,179 plus costs and post-judgment interest at 6.5%. (Case number
03-C-04-008855CJ, Circuit Court for Baltimore County). LBI had made an initial
payment on the judgment of approximately $10,000 as partial settlement of the
judgment and is negotiating a pay-out schedule for the balance.

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. The Company has not recorded an accrual
for this dispute.


                                       45
<PAGE>


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

(a) Previous Independent Accountant - On January 23, 2004, Crisp Hughes Evans
LLP ("CHE") informed the Registrant and the Audit Committee of the Registrant in
writing of its decision to resign as the Registrant's independent auditors
effective as of that date. CHE had served as the registrant's principal
independent accountant to audit the Company's consolidated financial statements
for the fiscal year ended June 30, 2003.

The independent audit report of CHE on the consolidated financial statements of
the Company as of and for the fiscal years ended June 30, 2003 and 2002, did not
contain any adverse or disclaimer of opinion and was not qualified or modified
as to uncertainty, audit scope, or accounting principles. In connection with the
audit of the June 30, 2003 and 2002 consolidated financial statements, the
review of the September 30, 2003, quarterly consolidated financial statement and
through the date of their resignation, there were no disagreements with CHE on
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure which, if not resolved to the satisfaction of
CHE, would have caused CHE to make reference to the matter in its reports.

In the Report to the Audit Committee as of June 30, 2003, CHE recommended the
Company hire a Chief Financial Officer. The Company agreed with the
recommendation and has retained a consultant to serve this function. No other
reportable event described under Item 304 (a)(1)(v) of Regulation S-K occurred
within the two most recent fiscal years ended June 30, 2003 and 2002, or within
the quarter ended September 30, 2003.

(b) New Independent Accountant - As of February 4, 2004, the Company engaged
Guest & Company, P.C. ("Guest") of Tulsa, Oklahoma as its new independent
accountant. The engagement of Guest was approved by the Board of Directors of
the Company on February 4, 2004.

During the period that CHE was independent accountant for the registrant,
neither the Company nor anyone acting on the Company's behalf consulted Guest
regarding either:
         (i) the application of accounting principles to a specified
         transaction, either completed or proposed; or the type of audit opinion
         that might be rendered on the Company's consolidated financial
         statement, and neither a written report nor oral advise was provided by
         Guest to the Company that Guest concluded was an important factor
         considered by the Company in reaching a decision as to any such
         accounting, auditing or financial reporting issue; or (ii) any matter
         that was either the subject of a "disagreement," as that term is
         defined in Item 304(a)(1)(v) of Regulation S-K and the related
         instructions to Item 304 of Regulation S-K, or a "reportable event," as
         that term is defined in Item 304(a)(1)(v) of Regulation S-K.

                                       46
<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, 2004, 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


                                       47
<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         56        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 The Sports Lineup.com and
Premier Concepts, Inc. 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.

                                       48
<PAGE>

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


                                 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 10.58% 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
2004, 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.


                                       49
<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
two years ended June 30, 2004 and 2003; the year ended December 31, 2001 and the
six-months ended June 30, 2002. There was no executive compensation during these
periods until September 2002.

<TABLE>

                                    SUMMARY COMPENSATION TABLE

     Name and                                                                                  Other Annual
Principal Position                           Year            Salary               Bonus        Compensation
------------------                           ----            ------               -----        ------------
<S>                                          <C>               <C>                   <C>            <C>
Paul Johnson                                 2004              $150,000              -                     -
(CEO from 9/5/02                             2003              $126,500              -                     -
to 3/7/03 and since                          2002                     -              -                     -
1/1/04)                                      2001                     -              -                     -

Ron Pitcock                                  2004                     -              -                     -
(CEO from 10/9/03                            2003                     -              -                     -
to 1/1/04)                                   2002                     -              -                     -
                                             2001                     -              -                     -

Jacqueline E. Soechtig                       2004               $72,916              -                     -
(CEO from 3/7/03                             2003               $83,333              -              $433,332
to 10/9/03)                                  2002                     -              -                     -
                                             2001                     -              -                     -

Randy Howell                                 2004                     -              -                     -
(CEO from 4/24/01                            2003               $5,000               -                     -
to 9/5/02)                                   2002                     -              -                     -
                                             2001                     -              -                     -

H. James Magnuson                            2004                     -              -                     -
(CEO from 1/1/99                             2003                     -              -                     -
to 4/24/01)                                  2002                     -              -                     -
                                             2001                     -              -                     -
</TABLE>

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.

                                       50
<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)

H. James Magnuson -                              -                   -                  -                 -
(CEO from 1/1/99 to 4/24/01)
</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
ten years from the effective date. 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 three years from the effective
date.

There were no option or SAR grants during fiscal 2004

                                       51
<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 extends 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 provides 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.

                                       52
<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 September 23, 2004, the most
recent practicable date. As of September 23, 2004, there were 24,303,692 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                RCG Companies Incorporated               11,566,641                   47.59%
                      6836 Morrison Blvd., Ste 200
                      Charlotte, NC  28211

Common                Randy Howell (a)                          2,571,428                   10.58%
                      2842 Placid Circle
                      Grapevine, TX  76051

Common                Steve Zink                                1,335,320                    5.49%
                      1850 York Road, Ste I
                      Timonium, MD  21093

Common                Paul Johnson (b)                           400,000                     1.62%
                      4700 Lakeshore Ct.
                      Colleyville, TX  76034

                      All officers and directors
                      as a group (1 person)                      400,000                     1.62%
</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.

                                       53
<PAGE>

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


At June 30, 2004, notes and advances due to affiliates from continuing
operations consisted of the following:

Due to RCG and its subsidiaries                                       $  945,372
Advance from and accrued interest
  payable to Michael Pruitt, CEO of RCG                                    5,940
Advances from and accrued interest
  payable to G. David Gordon, a shareholder and
  creditor of LFSI and RCG                                               114,554
Advances from Steven Zink, President of LBI                               17,658
                                                                      ----------

                                                                      $1,083,524
                                                                      ==========

The amount due to RCG and its subsidiaries represents net advances to and from
RCG and its subsidiaries. RCG 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 years ended June 30, 2004 and 2003, RCG charged the Company $25,000 and
$120,000, respectively. The $120,000 in fiscal 2003 is included in discontinued
operations.

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

Mr. Pruitt had pledged certain personal assets to secure a $100,000 bank credit
facility for LST's home technology business. At June 30, 2003, the balance
outstanding on this bank facility was $100,000. Mr. Pruitt paid this loan in
August 2003, and the corresponding note payable to him is included in notes
payable to related parties.

At June 30, 2004, 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 and this company also
loaned RCG an additional $1,067,500 during fiscal 2002 at interest rates ranging
from 8% to 12%. The balance of $1,017,500 was converted into RCG common stock
during fiscal 2004. Mr. Gordon acts as special legal counsel to RCG 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 $42,254 in accrued compensation at June 30, 2004, 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 RCG
and its subsidiaries.

                                       54
<PAGE>

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.

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 two years ended June 30, 2004 and 2003,
are as follows:

                                                      2004         2003
                                                      ----         ----

Houston and three North Carolina markets       $       93,000  $     258,000
Three South Carolina markets                           84,000        270,000
Three Maryland markets                                 17,000         47,000
LVA and subsidiaries                                   30,000        183,000
Dallas                                                 25,000        134,000
                                               --------------  -------------

                                               $      249,000  $     892,000
                                               ==============  =============


                                       55
<PAGE>

ITEM 13  EXHIBITS

     Exhibits - See Exhibit Index at Page 58.


ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES - As of October 5, 2004, the aggregate fees billed for professional
services rendered was $33,000 and $103,000 for the audits of the Company's
annual consolidated financial statements for the fiscal years ended June 30,
2004 and 2003, respectively, which included the reviews of the condensed
consolidated financial statements included in the Company's Forms 10-QSB.

AUDIT-RELATED FEES - The Company was billed $0 and $14,000 during the fiscal
years ended June 30, 2004 and 2003, respectively, for accounting consultation
and discussions with the SEC, primarily in connection with the acquisition of
FutureSmart.

TAX FEES - No fees were billed for professional services rendered by the
principal accountants for tax compliance, tax advice and tax planning services
during fiscal 2004 and 2003.

ALL OTHER FEES - Other than the services described above, no other fees were
billed for services rendered by the principal accountants during fiscal 2004 and
2003.

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.



                                       56
<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.



October 12, 2004                     /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.

October 12, 2004                     /s/ Paul Johnson
                                     -------------------------------------------
                                     Paul Johnson, Director, President,
                                     Acting CEO and Principal Accounting Officer



                                       57
<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>
                                                 EXHIBIT INDEX

Securities and
Exchange
Commission                                                                                              Page
Exhibit No.           Type of Exhibit                                                                  Number
-----------           ---------------                                                                  ------
<S>                   <C>                                                                               <C>
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                                      59

32                    Certifications pursuant to 18 U.S.C. Section 1350,
                      Section 906 of the Sarbanes-Oxley Act of 2002                                      60
</TABLE>

                                       58