UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934

                     FOR THE FISCAL YEAR ENDED MAY 31, 2001

                       Commission File Number #000-1024048
                                 HOMELIFE, INC.
           (Name of small business issuer as specified in its charter)

     NEVADA                                          33-0680443
     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                  Identification Number)

     9475 HEIL AVENUE, SUITE D
     FOUNTAIN VALLEY, CA                             92708
     (Address of principal executive offices)        (Zip code)

                                 (714) 418-1414
                (Issuer's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                     (None)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                     Common Stock, par value $.001 per share

Check whether  Registrant (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
the Form 10-KSB.  [X]

Registrant's  revenues for its fiscal year ended May 31, 2001, were  $2,989,526.
As of May 31,  2001,  Registrant  had  5,463,586  shares  of its $.001 par value
Common Stock issued and outstanding with an aggregate market value of the common
stock held by  non-affiliates  of $293,273.  This  calculation is based upon the
closing sales price of $0.12 per share on May 31, 2001.

Transitional Small Business Disclosure Format (check one).   Yes [ ]   No [X]

The following  documents  are  incorporated  herein by  reference:  Registration
Statement on Form 10-SB,  filed with the SEC on November 2, 1999 is incorporated
in Part IV, Item 13(a).

                                        i
<PAGE>

                                TABLE OF CONTENTS
                                -----------------

PART I                                                                      PAGE
------                                                                      ----

Item 1    Description of Business                                              1

Item 2    Description of Property                                              7

Item 3    Legal Proceedings                                                    7

Item 4    Submission of Matters to a Vote of Security Holders                  7

PART II
-------

Item 5    Market for Common Equity and Related Stockholder Matters             7

Item 6    Management's Discussion and Analysis                                 9

Item 7    Financial Statements                                                13

PART III
--------

Item 8    Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act                   13

Item 9    Executive Compensation                                              15

Item 10   Security Ownership of Certain Beneficial Owners and
          Management                                                          17

Item 11   Certain Relationships and Related Transactions                      17

PART IV
-------

Item 12   Exhibits and Reports on Form 8-K                                    19

                                       ii
<PAGE>

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS
-------   -----------------------

     A.   BUSINESS DEVELOPMENT

          1.   FORM AND YEAR OF ORGANIZATION

     HomeLife,  Inc. ("HomeLife") was incorporated in 1995 under the laws of the
state of Nevada.  The terms "HomeLife" or the "Company" shall refer to HomeLife,
Inc. and all of its controlled subsidiary  corporations.  The Company provides a
broad range of services to its franchisees,  licensees and consumers in the real
estate  marketplace.   HomeLife  utilizes  both  its  proprietary  "SuperSystem"
marketing  system and business  combinations  and acquisitions to grow as a real
estate services company.

          2.   ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING

     Not Applicable.

          3.   ANY MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION, OR PURCHASE
OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS NOT IN THE ORDINARY COURSE OF BUSINESS

     The Company's growth is largely  attributable to business  combinations and
acquisitions.  The Company was initially incorporated in 1995 for the purpose of
merging with Management Dynamics,  Inc. a publicly owned New Jersey corporation.
Upon completing this merger,  in November 1995,  HomeLife  purchased 100% of the
issued and outstanding shares and partnership interests respectively of HomeLife
Realty Services, Inc. and HomeLife Realty U.S. Limited Partnership  (California)
in exchange for common and preferred shares of the Company.  At the time of this
acquisition,  the Company assumed contracts of the purchased entities to provide
franchise services, as the franchisor, to approximately 60 real estate franchise
offices.

     In August  1996,  HomeLife  Realty  Services  acquired  93.33%  and  82.72%
respectively  of the  outstanding  stock of  Michigan-based  Red Carpet Keim and
Guardian Home Warranty Company. With this acquisition,  the Company acquired the
franchise  name "Red  Carpet"  for the state of  Michigan,  and began  providing
franchise  services,  as franchisor,  to approximately 60 real estate offices of
Red Carpet Keim.  Guardian  Home Warranty  Company,  a provider of home warranty
coverage, changed its name to MaxAmerica Home Warranty Company in March 1999.

     In November 1996, the Company incorporated FamilyLife Realty Services, Inc.
in Michigan as a wholly owned subsidiary.

     In January 1997,  FamilyLife  Realty Services,  Inc. acquired the assets of
Salt Lake City  based  franchisor,  S & S  Acquisition  Corp.  This  acquisition
included:  (a) the  trademarks  "Red Carpet" for all states other than Michigan,
and "National Real Estate Services";  (b) the licensing agreements of Red Carpet
Real Estate Services and National Real Estate Services,  adding approximately 58
real  estate  franchise  offices  for  which  the  Company  provides  franchisor
services;  and (c) real estate computer  technology  entitled House by Mouse and
Virtual  Assistant.  House by Mouse is an Internet based  software  system which
real estate professionals and consumers may utilize to identify residential real
estate listings  according to geographical  and other profile data,  obtained by
the Company's real estate offices. Virtual Assistant is an Internet based system
utilized  by  HomeLife's   agents  to  create  marketing   brochures  and  other
literature.

     In August of 1997,  the Company  acquired  the real estate  operations  and
licensing  agreements and trademarks of Network Real Estate, Inc., including its
12 Northern  California real estate brokerage  offices and its "high-end" luxury
division of "International Estates," a Network Real Estate, Inc. trade name.

     In November 1997, HomeLife incorporated MaxAmerica Financial Services, Inc.
MaxAmerica Financial Services,  Inc. provides mortgage financing services to the
Company's real estate customers.  MaxAmerica Financial Services,  Inc. acts as a
mortgage  brokerage  while funding and  processing  the loans  through  Allstate
Funding.  MaxAmerica  Financial  Services,  Inc. has an agreement  with Allstate
Funding wherein Mortgage Capital  Resources agrees to process and fund loans for
MaxAmerica Financial Services,  Inc. Allstate Funding is not affiliated with the
Company.

                                        1
<PAGE>

     In February  1998,  the Company  acquired  Builders  Realty  (Calgary) Ltd.
Builders  Realty  (Calgary)  is a two office  residential  real  estate  company
located in Calgary,  Alberta, Canada. Builders Realty (Calgary) Ltd. changed its
trade name to HomeLife Builders Realty and operates as a wholly owned subsidiary
of HomeLife, Inc.

     In April 1998, the company incorporated National Sellers Network,  Inc., as
a Nevada  corporation,  to function as a real estate  licensing  company for the
National Real Estate Services trade name.  National Sellers  Network,  Inc. is a
wholly  owned  subsidiary  of the  Company.  Also in  April  1998,  the  company
incorporated  Red Carpet  Broker  Network,  Inc.,  as a Nevada  corporation,  to
function  as a real  estate  licensing  company  for the Red Carpet  Real Estate
Services  trade name.  Red Carpet Real  Estate  Services,  Inc. is also a wholly
owned subsidiary of the Company.

     In August 1998, the Company  incorporated  HomeLife  Properties,  Inc. as a
Nevada  corporation  to  function as a buyer and seller of real  property.  This
company  currently  has  no  operations  and is a  wholly  owned  subsidiary  of
HomeLife.

     In September  1998,  the company  acquired the  investment  banking firm of
Aspen,  Benson & May, LLC. Aspen,  Benson & May, LLC currently has no operations
and the Company does not anticipate  operating through this subsidiary during at
least the next 12 months.

     In November 1998, the Company sold a master franchise in Germany.

     In January of 1999, the Company's Builders Realty (Calgary) Ltd. subsidiary
purchased the assets and business of HomeLife  Higher  Standards,  a real estate
brokerage firm in Calgary, Alberta, Canada.

     On July 8, 2001,  the company  entered into an agreement to sell the assets
     and  business  operated by  Homelife  Builders  Realty  (Calgary)  Ltd.,  a
     wholly-owned  subsidiary,  for $65,000.  This  transaction  is effective on
     September 4, 2001. The company does not anticipate significant gain or loss
     on this disposition.

     As a consequence of the foregoing,  the company presently  operates through
the following:

     o    Wholly-Owned Subsidiaries - active
          ----------------------------------

     HomeLife  Realty  Services,  Inc.,  MaxAmerica  Financial  Services,  Inc.,
     Builders Realty (Calgary) Ltd. ,

          Wholly-Owned Subsidiaries - inactive
          ------------------------------------

     FamilyLife Realty Services, Inc., Red Carpet Broker Network, Inc., National
     Sellers Network, Inc., Aspen Benson & May LLC., HomeLife California Realty,
     Inc. and HomeLife Properties, Inc.


     o    Majority-Owned Subsidiaries
          ---------------------------

     The Keim Group  Ltd.  and  MaxAmerica  Home  Warranty  Company - 93.33% and
     82.72% respectively.

B.   BUSINESS OF ISSUER

     The company  offers  consumer-oriented  real estate  brokerage  and finance
services  through  subsidiaries  and franchises.  It presently  operates in nine
states in the United States and the province of Alberta, Canada.

     1.   PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKET

          a.   SERVICES AND LOCATIONS

     The Company maintains its corporate office in Fountain Valley,  California,
and maintains regional offices in Troy, Michigan and Calgary,  Alberta,  Canada.
HomeLife operates through various subsidiaries and companies servicing

                                        2
<PAGE>

its franchised  tradenames.  Through its subsidiary,  HomeLife Realty  Services,
Inc., the Company, services approximately 40 real estate offices in the State of
California.  Through Red Carpet Keim, the Company services approximately 50 real
estate offices in the State of Michigan and through its  tradenames,  Red Carpet
Real Estate  Services,  Network Real Estate and National  Real Estate  Services,
services  approximately  33 real estate offices in various  states.  The Company
also  operates  two full  service  real  estate  brokerage  offices in  Calgary,
Alberta,  Canada, employing 45 agents, under the name "Builders Realty (Calgary)
Ltd.".  In addition to the above,  the Company  offers the following real estate
services through its various subsidiaries:

     o    FRANCHISE  SERVICES - Name  recognition,  advertising,  training,  and
          recruiting for franchise offices.

     o    MORTGAGE  FINANCING - through  its  subsidiary,  MaxAmerica  Financial
          Services, Inc.

     o    RETAIL REAL ESTATE BROKERAGE  SERVICES - The Company owns and operates
          a full service  retail real estate  brokerage  through its  subsidiary
          Builders Realty (Calgary) Ltd.

     o    HOME WARRANTY - HomeLife  provides home warranty  coverage through its
          subsidiary MaxAmerica Home Warranty Company.

          b.   FRANCHISE AND LICENSING OPERATIONS

     HomeLife  operates  its  real  estate  services  through  franchises.   The
franchise  allows  independently  operated real estate  offices to have national
brand name recognition and to share in regional advertising. HomeLife franchisor
management periodically visits each real estate office to conduct in-house sales
and  marketing  training.  The  franchisor  also trains the real  estate  office
manager on how to recruit new sales personnel.

     Franchises  are granted to licensed  brokers to operate  under the business
system and plan  developed by HomeLife and to use one of the following  HomeLife
trademarks for such operations:  HomeLife,  HomeLife (Words & Design),  HomeLife
Realty Services and HomeLife Realty,  and such other and substitute trade names,
trademarks,  service  marks,  graphics and logotypes as may from time to time be
designated by HomeLife.

     Franchises  are  operated  in  Arizona,   California,   Florida,  Illinois,
Michigan,  Nevada,  New York, South Carolina,  Texas, and Wisconsin and comprise
approximately  123  offices.  The  franchise  relationship  is  governed  by the
franchise  offering  circular  applicable  to the state in which the  franchisee
operates  and  according  to the  terms  and  conditions  of the  "Participating
Independent Broker Franchise  Agreement".  The terms of the franchise agreements
vary depending upon the market in which the franchisee  operates.  However,  the
typical initial  franchise fee is $12,500 with each additional  office's initial
fee being $5,000. From time to time, HomeLife offers incentive or bonus plans to
attract new  franchise  members.  These  programs  may  directly  or  indirectly
decrease initial franchise fees of those franchisees entitled to such bonuses or
incentives.

     The  Franchise  Agreement  also requires the payment of "Other Fees." These
fees  include  monthly  franchise  fees on a fixed  fee or  percentage  of gross
revenues basis,  termed royalty fees and advertising  contributions.  Other fees
also include transfer fees,  training fees,  interest on overdue accounts,  fees
related to accounting and bookkeeping system materials,  and renewal fees. There
are  also  fees  that  may be  incurred  under  special  circumstances  such  as
indemnification  responsibilities,  insurance  costs,  costs  of  enforcing  the
franchise agreements and audit costs.

     In addition to the above fees, the franchisee has certain obligations under
the Franchise  Agreement  including but not limited to compliance with standards
and policies set forth in operating manuals,  territorial  development and sales
quotas,  initial and on-going training and certain advertising and participation
requirements.  In exchange for the franchisee's  obligations and fees,  HomeLife
provides training programs, the use of its marketing system, its business system
and  plan,   on-going   education,   advertising  and  general  support  to  its
franchisees.

     HomeLife  also  operates  its  business  through  licensing of the HomeLife
trademarks.  According  to  the  terms  of  the  standard  licensing  agreement,
licensees  are obligated to pay a membership  fee to HomeLife's  Red Carpet Real
Estate Services in exchange for the right to use certain  trademarks and service
marks and to operate its  business  under the Red Carpet trade name to HomeLife,
and HomeLife is obligated to provide these  licensees  with the right to use its
proprietary trademarks and service marks.

                                        3
<PAGE>

          c.   MORTGAGE FINANCING

     The company offers  mortgage  brokerage  services  through it's  subsidiary
MaxAmerica  Financial  Services,  Inc. Loan  referrals  are  generated  from the
Company's  real  estate  franchise  offices,  as well as through  mortgage  loan
brokers. In this regard,  MaxAmerica  Financial  Services,  Inc. has established
relationships  with a  number  of  loan  funding  sources  to  which  it  refers
residential  loan  applicants.  Prior to such  referral,  the Company  qualifies
prospective  borrowers to assure  compliance  with  existing  loan  underwriting
criteria,  selects the appropriate  financing  referral,  and assists clients in
preparing loan application packages.

          d.   RETAIL REAL ESTATE BROKERAGE SERVICES

     The  company is engaged in  providing  real  estate  brokerage  services to
buyers and sellers of  residential  property  through its  subsidiary,  Builders
Realty  (Calgary) Ltd., which comprises 2 offices in Calgary,  Alberta,  Canada.
These operations are similar to those of franchisee,  i.e.  representing  buyers
and sellers in transactions,  soliciting listings, providing comparison reports,
preparing real estate  purchase and sale  agreements,  marketing and advertising
listed   properties,   assisting  clients  through  the  marketing,   appraisal,
inspection  and closing  process,  and related  services.  The  difference  with
Builders  Realty  (Calgary) Ltd. is that this is a company-owned  operation,  as
opposed to a franchise.

          e.   HOME WARRANTY SERVICES

     The company  offers home  warranty  coverage  through its  MaxAmerica  Home
Warranty Company. Home warranty coverage is typically purchased by the seller of
the home,  for the  benefit  of the  purchaser.  This  coverage  protects  major
appliances  in the home for a period of up to one year from the date of purchase
of the  home.  Repairs  or  replacements  are  contracted  out to  local  repair
companies.

     2.   DISTRIBUTION METHODS

     The Company's niche in the market is maintained  through the development of
its proprietary  marketing system. This community based marketing system, called
the  "SuperSystem"  replaces the outdated  marketing methods of cold calling and
door  knocking  to  obtain  real  estate  listings  and  potential  buyers.  The
SuperSystem is made available to the Company's  corporately owned and franchised
brokerage  offices.  The  elimination  of cold  calling  and door  knocking  has
attracted two types of  franchisees;  franchisees  new to operating a franchise;
and  those  who  terminated  other  franchise   agreements  with  the  Company's
competitors to become a franchisee of the Company.

     Management believes that the real estate market will continue to experience
sustained   growth.   HomeLife's   business  plan  includes  focusing  upon  the
acquisition of three types of real estate brokerage firms:

          o    the  continuing  acquisition of real estate  brokerage  companies
               with 2 to 20 offices,

          o    real estate  companies who are  financially  weak and lack a good
               marketing system, and

          o    real estate  companies  without  strong  name brand  recognition,
               which could utilize the existing trademarks of HomeLife.

     In addition to this proprietary  system,  the acquisition by the Company of
companies with both recognizable  tradenames,  such as Red Carpet,  and existing
franchise  locations has enabled the company to gain  immediate  market share in
its office locations.

     3.   STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE

     None.

                                        4
<PAGE>

     4.   COMPETITION

     HomeLife faces competition from numerous companies,  some of which are more
established, benefit from greater market recognition, have greater financial and
marketing resources, and a broader geographical base than the Company.

     The real  estate  franchise  industry  is large and  composed of many other
companies.  Companies such as Century 21,  Prudential,  Coldwell Banker,  Better
Homes and Gardens,  ERA, and RE/Max,  provide  services  similar to the services
provided by HomeLife.  Such  competition may diminish the Company's market share
or its ability to gain entry into certain markets,  and may consequently  have a
material adverse effect on the Company.

     Management believes that the Company has the following  advantages over its
competition:

     *    A unique lead generating system provided to its franchisees.

     *    Lower cost of the Company's  products to franchisees and the increased
          benefit realized from the placement of its advertising dollars.

     *    Consistent  use and  acquisition  of new  technology  to  provide  its
          services to its franchisees.

     5.   SOURCES AND AVAILABILITY OF RAW MATERIALS

     The Company is not dependent on any raw materials.  As a service  business,
it relies  primarily  on the  efforts of its  employees  and agents to  generate
sales.  All  software  which  comprises a material  component of its services is
developed through various outside contractors.

     6.   DEPENDENCE ON ONE OR FEW MAJOR CUSTOMERS

     The company  offers its  services  primarily  to  consumers  in the various
regional  markets where it maintains a presence,  i.e.  individual  home owners,
purchasers and buyers. As a consequence,  its business  activities are primarily
transactional  in nature and not dependent  upon  long-term  relationships  with
customers.  Further, as a retail-based  business, its customer base is broad and
diverse.

     7.   PATENTS, TRADEMARKS, LICENSES AND FRANCHISES

     The Company owns more than 40 copyrights on unique marketing concepts which
include printed materials for buying and selling property, and point of sale and
sales follow up techniques. The Company licenses exclusive rights, from Jerome's
Magic World, Inc., to use its exclusively  developed animated characters for its
real estate service business for a period of eight years commencing  October 30,
1995 and ending October 30, 2003 at a cost of $10,000 per year. Thereafter,  the
license is automatically renewable for additional eight year periods at the fair
market value.  These characters include Jerome the Gnome, Crok `N Roll, The Waz,
King D Lish and Rock Head.

                                        5
<PAGE>

     The Company  licenses the following  trademarks  from HomeLife  Securities,
Inc.:  "Blueprint to Selling Your Home,"  "Blueprint to Buying a Home,"  "Family
Life Realty  Services,"  "Family  HomeLife Realty  Services,"  "Family  HomeLife
Realty  Services"  (words  only),  "Focus  20/20"  (words and  design),  "Higher
Standards" (words only), "HomeLife" (words only), "HOMELIFE" (words and design),
"HomeLife Higher Standards" (words and design),  "HomeLife Realty Services," and
"It's What Everyone's  Looking For" (words only). These marks are licensed for a
period  of eight  years at no cost to the  company.  The  license  commenced  on
October 30, 1995 and expires on October 30, 2003. Thereafter, the license may be
renewed at fair market value for additional eight year periods.

     HomeLife   has   developed   its   Community   Marketing   SuperSystem,   a
lead-generating,  community-based  marketing system that eliminates cold calling
and door-knocking  used by traditional  realtors.  The marketing system involves
use of the  fictional  character  "Jerome  the Gnome" and an  accompanying  cash
sweepstakes.  Jerome is a child-friendly mascot, a "child magnet" who appeals to
children.  Real  estate  offices  hire a person to wear a life size  "Jerome the
Gnome" costume to act as HomeLife's  goodwill  ambassador at shopping malls, and
community events, such as business openings,  in parks and plazas to promote the
HomeLife  name.  The Jerome the Gnome  character  and  accompanying  sweepstakes
encourages  clients to complete  cards  listing  personal  information  and real
estate needs.  The  sweepstakes is an annual,  national  sweepstakes  offering a
$25,000 cash prize.  Through Jerome the Gnome,  the Company  attracts  families,
helping them identify their real estate needs,  spreading goodwill and promoting
HomeLife as the "Family Values  Company".  The system was developed over several
years and test  marketed  successfully  in 80 real  estate  offices in  Southern
California.  Thousands  of buyer  and  seller  leads  were  generated  for these
affiliates,  who in turn  offer  customers  the  opportunity  to buy,  sell,  or
re-finance their home or property.

     8.   NEED FOR GOVERNMENT APPROVAL

     The Company's  franchise  operations  are subject to various state laws and
regulations  concerning  the disclosure  obligations  of  franchisors  and other
aspects of the relationship between franchisor and franchisee.  In addition, all
personnel  who provide  real  estate  brokerage  and/or  mortgage  services  are
generally  required to be licensed by the states and/or  provinces in which such
services are performed. Otherwise, no government approval is required for any of
the Company's current operations.

     9.   EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT APPROVAL

     As noted above the company is required to comply with state laws  governing
franchise  operations,  and the Company's  professional  staff is required to be
licensed  by  state  real  estate  authorities.  Otherwise,  except  for  normal
government  regulation that any business  encounters,  the Company's business is
not affected by any government regulations.

     10.  RESEARCH AND DEVELOPMENT COSTS

     HomeLife  has no research or  development  costs  outside of the expense of
developing  software  for its internet  applications,  which are expensed in the
year they occur.

     11.  COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENT LAWS AND REGULATIONS

     The  Company  is not  involved  in a  business  which  involves  the use of
materials in a manufacturing  stage where such materials are likely to result in
the violation of any existing  environmental rules and/or regulations.  Further,
the Company  does not own any real  property  which would lead to liability as a
land owner.  Therefore,  the Company does not anticipate  that there will be any
costs associated with the compliance of environmental laws and regulations.

     12.  EMPLOYEES

     As of  the  date  of  this  registration  statement,  HomeLife  employs  10
full-time employees. The Company hires independent contractors on an "as needed"
basis  only.  The  Company  has no  collective  bargaining  agreements  with its
employees. The Company has approximately 123 franchise offices.

                                        6
<PAGE>

     13.  RECENT ACCOUNTING PRONOUNCEMENTS

     In  1998,  the  AICPA  Accounting   Standards  Executive  Committee  issued
Statement of Position No. 98-5 (SOP 98-5),  "Reporting  on the Costs of Start-up
Activities".  SOP 98-5 was issued to provide guidance on financial  reporting of
start-up costs and organization  costs and requires such costs to be expensed as
incurred.  SOP 98-5 is effective for financial  statements  for years  beginning
after December 15, 1998. The company adopted the new requirements of SOP 98-5 in
fiscal  year  2000 and  wrote  off  organization  costs  with net book  value of
$48,955.

ITEM 2 - PROPERTIES
-------------------

     The  company  leases  a  2,000  square  foot  office  in  Fountain  Valley,
California.  The lease term expires in June,  2006.  The company is obligated on
leases for its other premises located in Troy,  Michigan,  which expires in May,
2002 and for two HomeLife  Builders Realty offices located in Calgary,  Alberta,
Canada. The HomeLife Builders Realty leases expire in October,  2001 and August,
2002.  Annual lease  payments  exclusive of property taxes and insurance for all
locations through 2006 is $173,884.

ITEM 3 - LEGAL PROCEEDINGS
--------------------------

     The company is involved  in a lawsuit  with the sellers of Builders  Realty
     (Calgary)  Ltd.  to reduce  the  purchase  price paid for  Builders  Realty
     (Calgary) Ltd. The sellers of Builders  Realty  (Calgary) Ltd. have filed a
     counter   lawsuit  for  damages  of  $238,275   (Canadian   $356,699).   In
     management's  opinion,  this matter will not have a material  affect on the
     financial position of the company.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

     None.

                                     PART II
                                     -------

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------

     A.   MARKET INFORMATION

     The Company's common stock is traded in the over-the-counter bulletin board
under the symbol HMLF.

     The  following  table  sets  forth  the  high  and low bid  prices  for the
Company's  common  stock for  fiscal  years  2000 and 2001  (ended  May 31),  by
quarter.  The prices  below  reflect  inter-dealer  quotations,  without  retail
mark-up, mark-down or commissions and may not represent actual transactions:

               ------------------------------------------------
                    2000                  High            Low
               ------------------------------------------------
               Quarter ended
                 August 31               $ 0.42          $ 0.31
                 November 30             $ 0.34          $ 0.20
                 February 28             $ 0.30          $ 0.17
                 May 31                  $ 1.05          $ 0.17
               ------------------------------------------------
                    2001
               ------------------------------------------------
               Quarter ended
                 August 31               $ 0.20          $ 0.19
                 November 30             $ 0.19          $ 0.03
                 February 28             $ 0.25          $ 0.09
                 May 31                  $ 0.12          $ 0.06
               ------------------------------------------------

     B.   HOLDERS

     As of May 31, 2001, there were 1,006 holders of the Company's Common Stock,
as reported by the Company's transfer agent.

                                        7
<PAGE>

           C.        DIVIDENDS

     The Company has not paid any  dividends  on its Common  stock.  The Company
currently intends to retain any earnings for use in its business,  and therefore
does not anticipate paying cash dividends in the foreseeable future. The Company
has paid $2,520 in Preferred  dividends on its Class AA Preferred  stock for the
period ended May 31, 2000, and has accrued $2,000 in Preferred  dividends on its
Class AA Preferred  stock for the period ended May 31,  2001.  The  reduction in
dividends is due to the conversion of Preferred stock into Common stock.

     D.   RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS

     The  Company  has not sold any  unregistered  securities  over the 12 month
period ended May 31, 2001.

     Earlier  sales of  unregistered  securities  are disclosed in the Company's
Form 10-SB.

                                        8
<PAGE>

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------

     The  following  is  management's  discussion  and  analysis  of  HomeLife's
financial condition and results of operations for the fiscal years ended May 31,
2001 and 2000.  Detailed  information  is contained in the financial  statements
included with this document.  This section contains  forward-looking  statements
that involve risks and uncertainties, such as statements of the Company's plans,
objectives,  expectations and intentions. The cautionary statements made in this
document  should  be read as being  applicable  to all  related  forward-looking
statements  wherever  they appear in this  document.  The  following  table sets
forth,  for  the  periods  indicated,  selected  financial  information  for the
Company.

OVERVIEW

     HomeLife,  Inc. is a real estate services provider including franchisor and
licensor.  HomeLife, Inc. utilizes both its proprietary "Super System" marketing
system and its business  combinations  and acquisitions to fuel development as a
fast growing real estate services  company.  The Company has experienced  growth
primarily  through its  acquisitions  of and  combinations  with  various  other
companies.  This  includes the  acquisition  in August 1996 of the Keim Group of
Companies and MaxAmerica Home Warranty Company  (Michigan) adding 60 real estate
offices and a home warranty company in Michigan.  In 1997, the Company purchased
certain assets of S & S Acquisition Corp., providing the company with Red Carpet
Real Estate  Services and National Real Estate  Services,  adding 58 real estate
offices.  The  acquisition  of the real estate  computer  technology of House by
Mouse and Virtual Assistant provided the Company with the ability to enhance its
Internet  communication  services to its  franchises.  In July 1997, the Company
acquired the licensing  agreements,  trademarks and franchise offices of Network
Real Estate,  Inc. This  acquisition  provided the Company with an additional 12
offices in Northern  California and access to the "high-end"  luxury division of
"International  Estates". In February 1998, the Company acquired Builders Realty
(Calgary),  Ltd., providing access to the Alberta,  Canada market in both retail
real estate and mortgage loans. On September 15, 1998, the Company purchased the
stock of the  investment  banking firm of Aspen,  Benson and May, LLC for Common
stock.

     From time to time,  the Company has entered into  strategic  alliances with
various companies in order to explore the  cross-marketing  of their services to
customers of the Company or its franchises.  To date, these strategic  alliances
have not included any funding agreements or other liabilities on the part of the
Company.  Since the end of its last fiscal year,  HomeLife has formed  strategic
alliances with Home Value Check,  LLC, and Allstate  Funding.  Home Value Check,
LLC  provides  Internet  based  appraisals  for  lenders  and  consumers  of the
Company's  services.  Allstate Funding provides loan processing and underwriting
for MaxAmerica  Financial  Services,  Inc., the real estate  mortgage  brokerage
subsidiary of HomeLife.

     Management   believes  the  growth   fueled  by  these   acquisitions   and
combinations will continue to fuel growth in 2001. However,  certain key factors
that are necessary in maintaining  and exceeding the current growth rates are as
follows:

     o    Acquiring national recognition by acquiring regional franchises;
     o    Targeting high achieving-high market share regional brokerage houses;
     o    Continually updating its marketing techniques; and
     o    Improving services available to its franchises.

PLAN OF OPERATION

     HomeLife's  business  plan  is to  acquire,  as the  franchisor  or  master
franchisor,  regional real estate brokerage companies  throughout North America.
The newly acquired  companies  will have the choice of retaining  their regional
identities,  or  changing  their  name to a  HomeLife  brand.  This  allows  the
companies to enjoy the benefits of its regional  identity while at the same time
securing the support of a publicly traded national real estate company. HomeLife
also intends to introduce  mortgage  banking as a service to agents and brokers.
The Company  intends to enter into the  business by way of merger,  acquisition,
joint  venture or  strategic  alliance.  It also intends to provide a variety of
ancillary  real estate  related  products and services to the industry  over the
next five years.  Such services will include beginning to offer title and escrow
services;  and  entering  into other  areas such as an Internet  shopping  mall.
Expanding  into  ancillary  services will allow the Company to use its franchise
network to market other products and services to the existing  customers.  While
the Company has currently implemented some of these plans, there is no assurance
that the  Company  will  complete  all of these  plans or that it will  continue
providing such services.

                                        9
<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth, for the years indicated, selected financial
information for the Company:

================================================================================
                                               Year Ended            Year Ended
                                              May 31, 2001          May 31, 2000
                                               (audited)             (audited)
--------------------------------------------------------------------------------
Statement of Operations Data
    Revenue                                   $ 2,989,526           $ 3,450,918
    Net Loss                                  $  (717,936)          $  (761,413)
    Net Loss per share                        $      (.13)          $      (.15)
--------------------------------------------------------------------------------
Balance Sheet Data
    Current Assets                            $   419,424           $   612,027
    Total Property & Equipment, Net           $   337,407           $   414,679
    Total Assets                              $ 1,616,555           $ 2,292,943
    Total Current Liabilities                 $   721,952           $   626,977
    Accumulated Deficit                       $(3,707,032)          $(2,989,096)
    Total Stockholder's Equity                $   522,596           $ 1,230,114
================================================================================

FISCAL YEAR ENDED MAY 31, 2001  (AUDITED)  COMPARED TO FISCAL YEAR ENDED MAY 31,
2000 (AUDITED)

     REVENUES.  The Company  generated  gross sales of $2,989,526 for the fiscal
year ended May 31, 2001  compared to gross  sales of  $3,450,918  for the fiscal
year ended May 31, 2000. Revenue by business segment is shown below:

                                    For the year ended      For the year ended
                                    May 31, 2001            May 31, 2000

                                      Amount         %        Amount         %
                                    ----------     -----    ----------     -----
Real estate brokerage               $1,655,207      55.4    $2,036,892      59.0
Royalty fees                           622,285      20.8       679,365      19.7
Franchise fees                         136,076       4.6       112,128       3.2
Mortgage financing                      81,356       2.7        90,520       2.6
Home warranty sales                    252,918       8.4       255,522       7.5
Other                                  241,684       8.1       276,491       8.0
                                    ----------     -----    ----------     -----
TOTAL                               $2,989,526     100.0    $3,450,918     100.0

The  largest  decrease  in revenue  from  fiscal  year 2000 was from real estate
brokerage.  This decrease of $381,685 from  $2,036,892 for the fiscal year ended
May 31, 2000 to $1,655,207  for the fiscal year ended May 31, 2001 accounted for
the majority of the overall  decrease in revenue  between the years.  During the
current year, the Company lost approximately 17

                                       10
<PAGE>

brokers to retirement or that did not renew their license in the Calgary  office
of Builders  Realty.  The total number of brokers in that office at May 31, 2001
was 45 who generated lower sales than in the prior year.

Royalty fees  decreased from $679,365 in fiscal year 2000 to $622,285 for fiscal
year 2001.  This  decrease of 8% relates to some  royalty fees that were reduced
upon renewal in accordance  with industry  practices as well as fewer  franchise
offices in the current year. The current year total number of franchise  offices
was 123 offices compared to 167 offices in the prior year.

Franchise  fees were  $136,076  and  $112,128 for the fiscal years ended May 31,
2001 and 2000, respectively.  The increase in franchise fees from the prior year
relates to the sale of the master  franchise  agreements  in the current year in
Portugal and China.

Revenue  from  mortgage  financing  was  $81,356 for the year ended May 31, 2001
compared to $90,520  for the year ended May 31,  2000.  The Company  financed 30
loans in fiscal  year 2001  compared  to 25 loans  financed  in the prior  year.
Although the number of loans was slightly  higher during the current  year,  the
average fee per loan was slightly lower than in the prior year.

Home  warranty  sales were  $252,918 and $255,522 for the fiscal years ended May
31, 2001 and 2000,  respectively.  The number of warranty  contracts sold in the
current year was 561 as compared to 753 in fiscal year 2000. Although the number
of  contracts  sold was lower  during the current  year,  the  average  cost per
contract was higher in the prior year.

     DIRECT COSTS.  Direct costs for the year ended May 31, 2001 was  $1,788,835
compared to  $2,127,237  for the year ended May 31,  2000.  Consistent  with the
decrease  in  revenues  mainly  attributable  to  lower  real  estate  brokerage
revenues,  direct  costs  is  lower  in the  current  year  due to  lower  sales
commissions associated with this revenue.

     GROSS PROFIT PERCENTAGE. Gross profit percentage increased from 38% for the
year ended May 31, 2000 to 40% for the year ended May 31, 2001. This increase is
primarily  due to lower real estate  commissions  earned and paid to brokers and
agents in fiscal year 2001.  Lower  commissions  were earned in the current year
due to the decrease in real estate brokerage sales.

     SALARIES AND FRINGE BENEFITS.  Salaries and fringe benefits  decreased from
$637,455  for the fiscal year ended May 31, 2000 to $571,357 for the fiscal year
ended May 31, 2001. The decrease in salaries expense relates to the reduction in
full time employees.  In the prior year, the company had 16 full time employees.
In the current year, the company cut back and has 10 full time employees at year
end.

     GENERAL AND ADMINISTRATIVE.  General and administrative  costs decreased to
$705,340  for the year ended May 31, 2001 from  $894,568  for the year ended May
31, 2000.  The  decrease  was  primarily  due to a company  wide  monitoring  of
expenses.

     OCCUPANCY  COSTS.  Occupancy costs increased $8,944 or 5%, from fiscal year
2000.  This  increase  results from annual  increases as stated in the occupancy
lease agreements.

     FINANCIAL.  Financial  costs for the year ended May 31,  2001 were  $25,482
compared to $57,268 for the year ended May 31, 2000. The decrease relates to the
decrease in interest expense paid by the company.

     AMORTIZATION.  Amortization of intangibles for the years ended May 31, 2001
and 2000 was $427,144 and $328,864 , respectively.  This increase in the current
year relates to the write off of Builders goodwill as a result of the sale which
happened subsequent to fiscal year end.

     MINORITY  INTEREST.  The  increase in net loss in minority  interest in the
current year of $2,479  resulted from the loss from Keim and the net income from
MaxAmerica Home Warranty.

     PREFERRED DIVIDENDS.  Preferred Dividends were $2,000 in the year ended May
31, 2001 versus  $2,520 for the year ended May 31, 2000.  This  decrease of $520
was due to the conversion of preferred stock into common stock.

     LIQUIDITY  AND CAPITAL  RESOURCES.  The  Company has 3,750  shares of Voice
Mobility  Inc. as a marketable  security and lines of credit with three banks in
the amounts of CDN$50,000 and $80,000.  The capital  requirements of the Company
are for

                                       11
<PAGE>

operating  expenses  and to service and use of its lines of credit.  The Company
has recorded a loss on its  marketable  security as the share price has declined
in the public  market from the purchase  share  price.  The Company has recorded
significant  operating losses in the prior two years. These losses are primarily
due to amortization and depreciation of acquisitions  made in prior years,  loss
on  investments  made in prior  years,  and write  down of  marketing  materials
purchased in prior years.  The company does not have any derivative  instruments
or hedging  activities  therefore,  the company  believes that SFAS No. 133 will
have no material impact on the company's financial statements or notes thereto.

The company has experienced recurring operating losses and has a working capital
deficiency  of  $302,528 as of May 31,  2001.  Subsequent  to the year end,  the
company  has  disposed  of  Builders  Realty   (Calgary)  Ltd.,  a  wholly-owned
subsidiary  which had suffered  recurring  losses.  In addition,  management has
initiated  changes in operational  procedures,  reduced expenses and focused its
efforts on its core  business.  Management  believes  that,  despite  the losses
incurred and the deterioration in stockholders'  equity, it has developed a plan
which,  if  successfully  implemented,  can  improve the  operating  results and
financial  condition  of the company.  Furthermore,  the company  continues  its
attempt to raise additional financings through private and public offerings.

     FOREIGN  FRANCHISEES.  Foreign  franchisees consist of the sale of a master
franchise agreement to an individual in Germany. Payment for this agreement were
scheduled to be made in 12 quarterly  payments  beginning in October 1999.  Only
partial  payments  have  been  received,  however,  and  the  company  is now in
negotiations with the obligor to restructure this obligation.  Continued default
of this agreement will deprive the Company of the anticipated  payments,  but is
anticipated  to have no adverse  consequences  to the operations of the Company,
since it has no  commitments  of  capital  of  other  resources  to its  foreign
franchisees.  During the current fiscal year, the company sold master  franchise
agreements in Portugal and China.

                                       12
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 7. FINANCIAL STATEMENTS
----------------------------

     The Financial  Statements that constitute Item 7 are included at the end of
this report beginning on Page F-1.


                                    PART III

ITEM 8. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------

     The directors and officers of the company are as follows:

NAME                       AGE   POSITION
----                       ---   --------

Andrew Cimerman            53    President and Director

Terry A. Lyles, Ph.D.      42    Director

F. Bryson Farrill          73    Director

Charles Goodson            46    Vice President

Marie May                  34    Chief Financial Officer, Secretary and Director

ANDREW CIMERMAN,  53, PRESIDENT AND DIRECTOR, has held the positions of Director
and President  since April 1996. For 7 years prior  thereto,  he was the founder
and  majority  shareholder  of HomeLife  Securities,  Inc.  and its wholly owned
subsidiary HomeLife Realty Services, Inc. Mr. Cimerman is the founder, President
and  majority   shareholder  of:  Simcoe  Fox  Developments,   Ltd.,  a  private
development company located in Toronto,  Ontario, Canada; HomeLife Cimerman Real
Estate Ltd., a Toronto based real estate  company;  Jerome's Magic World,  Inc.,
the  owner  of  certain  animated  characters;  and,  majority  shareholder  and
President of Realty  World  America,  Inc. Mr.  Cimerman  owns  HomeLife  Realty
Services  Inc.,  a Canadian  affiliate  which  operates a real estate  franchise
company in Canada. HomeLife Securities is a separate company from HomeLife, Inc.
and HomeLife Securities licenses certain "HomeLife" trademarks and service marks
to  HomeLife,  Inc.  Mr.  Cimerman  brings over 30 years of real estate  service
experience to the company,  and is a strong and committed  leader focused on the
growth and success of the company.

TERRY A. LYLES,  PH.D, 42,  DIRECTOR  joined the company as a director in August
1997.  Dr.  Lyles  is a  national  and  international  speaker  and  trainer  to
professional athletes, Fortune 500 Companies,  schools,  universities and public
audiences.  Dr.  Lyles'  program  is to reach  people  around the world with the
message  of  "balance  and  excellence."  For the past 16 years,  Dr.  Lyles has
traveled  across the United States and around the world  conveying this profound
message of "Life  Accountability"  and "A Better You." Dr. Lyles has conducted a
weekly radio program "A Better You" since May 1, 1994,  which is currently heard
by over 1  million  people  in 65  nations.  Dr.  Lyles  holds a Ph.D  degree in
Psychology from Wayne State University in Detroit, Michigan.

F. BRYSON  FARRILL,  73,  DIRECTOR  joined the company as a director in February
1997. Mr. Farrill has been in the securities industry for the past 33 years. Mr.
Farrill has held various  senior  positions,  including  that of  President  and
Chairman of McLeod, Young, Weir International,  an investment dealer in Toronto,
Canada.  He was also the Chairman of Scotia  McLeod (USA) Inc. for eleven years.
Mr.  Farrill's  broad  experience  is not only utilized in the United States and
Canada but has served to direct the expansion of McLeod,  Young,  Weir Ltd. into
Europe and Asia through an extensive network of branch offices.

CHARLES  GOODSON,  46, VICE  PRESIDENT has been employed by the company,  or its
subsidiary  companies  since March 1992.  Mr. Goodson had 16 years of commercial
banking  experience prior to joining HomeLife Realty Services.  He is a licensed
realtor.  Mr. Goodson  earned his B.S.  degree in Business  Administration  from
California State University, Northridge.

                                       13
<PAGE>

MARIE M. MAY, 34, CHIEF FINANCIAL OFFICER,  SECRETARY AND DIRECTOR has been with
the  company  since July  2000.  Ms.  May has 12 years  experience  in finance &
accounting  mainly  related  to small  emerging  businesses.  Prior  to  joining
HomeLife Ms. May was Chief  Financial  Officer for Medical  Data  International,
Inc, a provider  of  healthcare  business  information.  Ms. May is a  certified
public  accountant and received her B.S.  degree in Accounting  from  Pepperdine
University in 1989.

(b)  COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers  and  directors,  and  persons  who own more  than ten  percent  of the
Company's  Common  Stock,  to file reports of ownership and changes in ownership
with the Securities and Exchange  Commission  ("SEC").  Officers,  directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company  with copies of all Section  16(a) forms they file.  Based solely on
its  review  of  the  copies  of  such   forms   received   by  it,  or  written
representations from certain reporting persons, the Company believes that during
its 2001 fiscal year, all such filing  requirements  applicable to its officers,
directors, and greater than 10% beneficial owners were complied with.

                                       14
<PAGE>

ITEM 10-EXECUTIVE COMPENSATION
------------------------------

     (a)  SUMMARY OF COMPENSATION

     The following  officers of the Company  receive the  following  annual cash
salaries and other compensation:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------

                                 Annual Compensation                            Long Term Compensation
                                 -------------------                            ----------------------
                                                                                  Awards               Payouts
                                                                                  ------               -------

                                                                   Other                                      All Other
Name                                                               Annual       Restricted                    Compensation
and                                                                Compen-      Stock      Options     LTIP
Principal Position                Year      Salary       Bonus     sation       Awards     SARs        Payouts

<S>                               <C>     <C>            <C>       <C>          <C>        <C>         <C>            <C>
Andrew Cimerman,                  2001    $ 20,000          --          --          --          --          --          --
President, Director

Charles Goodson                   2001    $ 84,000          --          --          --          --          --          --
Vice President

Marie M. May,                     2001    $ 25,000          --          --          --          --          --          --
Chief Financial
Officer,
Secretary

F. Bryson Farrill,                2001        *(1)          --          --          --          --          --          --
Director

Terry A. Lyles,                   2001        *(1)          --          --          --          --          --          --
Director

All Officers and                  2001    $129,000          --          --          --          --          --          --
Directors as a
group
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Mr. Farrill and Mr. Lyles each have an option to purchase  50,000 shares of
     the  company's  common  stock.  These  options are fully  vested and may be
     exercised at the price of $3.00 per share.

     (b)  OPTIONS/SAR GRANTS IN THE LAST FISCAL YEAR

     None.
                                       15
<PAGE>

     (c)  AGGREGATE OPTIONS/SAR GRANTS

     While the  company  has not  enacted  a formal  stock  option  plan for its
directors and senior  executives,  the company has granted certain directors and
officers  options to purchase  common stock of the  company.  Board of Directors
members,  Mr. F. Bryson  Farrill and Dr.  Terry Lyles,  were granted  options to
purchase  50,000 shares of common stock of the company each.  The exercise price
of  the  option  is  $3.00  per  share.  These  options  are  fully  vested  and
exercisable.  Former  employee,  Gabrielle  Jeans, has been granted an option to
purchase 30,000 shares of common stock at the exercise price of $5.00 per share.
Ms. Jeans' options are also fully vested and exercisable.

     The following table describes the above options:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                     SHARES        VALUE      NUMBER OF UNEXERCISED OPTIONS/SARS  VALUE OF UNEXERCISED IN-THE-MONEY
NAME                              ACQUIRED ON   REALIZED ($)            OF FY-END (#)                OPTIONS/SARS OF FY-END ($)
                                  EXERCISE (#)                    EXERCISABLE/UNEXERCISABLE           EXERCISABLE/UNEXERCISABLE
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>              <C>                   <C>                                 <C>
F. Bryson Farrill, Director          50,000           0                     50,000                              $3.00
-----------------------------------------------------------------------------------------------------------------------------------
Terry Lyles, Ph.D., Director         50,000           0                     50,000                              $3.00
-----------------------------------------------------------------------------------------------------------------------------------
Gabrielle Jeans, Former employee     30,000           0                     30,000                              $5.00
-----------------------------------------------------------------------------------------------------------------------------------
Total                               130,000           0                    130,000                                 --
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     (d)  LONG TERM INCENTIVE PLAN (LTIP)

     None.

     (e)  COMPENSATION OF DIRECTORS

     During the prior fiscal year, F. Bryson  Farrill,  and Terry Lyles,  Ph.D.,
both directors,  were each issued 10,000 shares of the Company's common stock as
compensation  for their  services.  These  shares were issued at the fair market
value,  which amounted to $.40 per share for a total of $4,000  compensation  to
each director.  There was no compensation of directors during the current fiscal
year.

     (f)  EMPLOYMENT AGREEMENTS

     On October 25, 1995 the Company  entered in an  employment  agreement  with
Andrew Cimerman.  The agreement is for a five year term, with an option to renew
it for another five years.  The agreement was renewed  during the current fiscal
year. Mr.  Cimerman's  duties under the agreement  include  performing all those
executive and managerial duties that are necessary for running and directing the
Company's operations.

     (g)  REPORT ON RE-PRICING OF STOCK OPTIONS/SARS

     Over the  last  fiscal  year,  the  Company  has not  re-priced  any of its
previously granted stock options/SARs.

                                       16
<PAGE>

ITEM 11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The following  table sets forth certain  information  regarding  beneficial
ownership of the Company's Common Stock as of May 31, 2001: (i) each stockholder
known by the Company to be the beneficial owner of more than five percent of the
outstanding  Common  Stock,  (ii) each  director  of the  Company  and (iii) all
directors and officers as a group.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER    AMOUNT AND NATURE OF BENEFICIAL OWNER(1)    PERCENT OF CLASS

<S>                                                   <C>                                 <C>
Andrew Cimerman(2)                                    2,949,594(3)                        54%
Marie M. May(2)                                           5,000(1)                         0%
Charles Goodson(2)                                            0                            0%
F. Bryson Farrill(2)                                     60,000(4)                         1%
Terry Lyles(2)                                           60,000(4)                         1%

All Officers and Directors as a group                 3,074,594                           56%
</TABLE>

-----------------------------

1.   Except as otherwise  indicated,  the Company  believes that the  beneficial
     owners of Common Stock listed above, based on information furnished by such
     owners,  have sole investment and voting power with respect to such shares,
     subject to community property laws where applicable.  Beneficial  ownership
     is determined in accordance  with the rules of the  Securities and Exchange
     Commission and generally  includes voting or investment  power with respect
     to  securities.  Shares of Common  Stock  subject to  options  or  warrants
     currently   exercisable,   or  exercisable   within  60  days,  are  deemed
     outstanding  for purposes of computing the percentage of the person holding
     such options or warrants,  but are not deemed  outstanding  for purposes of
     computing the percentage of any other person.
2.   c/o  Company's  address:  9475 Heil Avenue,  Suite D, Fountain  Valley,  CA
     92708.
3.   249,594 of these  shares are held in the name of Cimerman  Real Estate Ltd.
     Cimerman Real Estate Ltd. was created as a Real Estate Sales  Company.  Mr.
     Cimerman  has  certain  voting  powers  associated  with the shares held by
     Cimerman Real Estate Ltd., as 100% of the financial  benefits  derived from
     the shares  held by Cimerman  Real  Estate Ltd.  are for the benefit of Mr.
     Cimerman.
4.   Includes 50,000 options to purchase Common Stock

ITEM 12-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-------------------------------------------------------

B.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Mr.  Cimerman is President and majority  shareholder  of HomeLife  Cimerman
Real Estate  Ltd.  HomeLife  Cimerman  Real Estate  Ltd.'s  business  activities
consist of real estate  sales in Toronto,  Canada.  The  activities  of HomeLife
Cimerman  Real  Estate  Ltd.  are  managed  by  the  on-site  management.  These
activities do not demand a large portion of Mr. Cimerman's time and effort.  Any
corporate  opportunities  that would be  available  to both the  Company  and to
HomeLife Cimerman Real Estate Ltd. is presented to HomeLife's Board of Directors
for consideration  and for approval by a disinterested  majority of the Board of
Directors.

     The President and majority  shareholder of the Company,  Andrew Cimerman is
the sole  shareholder  and President of Realty World America,  Inc. Realty World
America,   Inc.  is  a  real  estate  services  company  providing  services  to
franchises.  Any  transactions  undertaken  by Mr.  Cimerman on behalf of Realty
World  America,  Inc.  which may  constitute a corporate  opportunity  are first
presented to the company's  board of directors  for approval by a  disinterested
majority.

     Mr.  Cimerman is also the sole  shareholder of Jerome's Magic World,  Inc.,
the owner of certain  characters  licensed to the company.  The license of these
characters to the Company is for an eight year term expiring in October 2003, at
$10,000 per year to the Company. Thereafter it is renewable for additional eight
year terms at the fair  market  value.  Mr.  Cimerman  is sole  shareholder  and
President  of HomeLife  Securities,  Inc.  HomeLife  Securities,  Inc.  licenses
certain "HomeLife"  trademarks and service marks to the Company. The term of the
licensing  agreement  is eight years  commencing  October 1995 at no cost to the
Company. Thereafter, the license is renewable for additional eight year terms at
the fair market value.

     Mr.   Cimerman  is  President  and  majority   shareholder  of  Simcoe  Fox
Developments.  Simcoe Fox Developments'  business  activities consist of holding
real estate investment property.  The activities of Simcoe Fox Developments does
not

                                       17
<PAGE>

demand a large  portion of Mr.  Cimerman's  time and effort,  and any  corporate
opportunities  that would be  available  to both the  company  and to Simcoe Fox
Developments is presented to HomeLife's Board of Directors for consideration and
for approval by a disinterested majority of the Board of Directors.

     The Company was formed  through the purchase of HomeLife  Realty  Services,
Inc., and HomeLife Realty U.S. Limited  Partnership  from Andrew  Cimerman,  the
current President of the Company. Mr. Cimerman received 10,000 shares of Class A
Preferred  stock with certain  voting power and with a face value of  $1,000,000
for the sale of HomeLife US Partnership to the Company,  and 2,500,000 shares of
Common stock for the sale of HomeLife Realty Services, Inc. to the Company.

                                       18
<PAGE>

                                     PART IV
                                     -------

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

     (a)  EXHIBITS

3.1       Articles of  Incorporation  of HomeLife,  Inc., a Nevada  corporation,
          dated October 9, 1995*
3.2       Certificate  of  Amendment of Articles of  Incorporation  of HomeLife,
          Inc., a Nevada corporation, dated July 2, 1997*
3.3       Certificate  of  Amendment of Articles of  Incorporation  of HomeLife,
          Inc., a Nevada corporation, dated September 1, 1998*
3.4       Bylaws of HomeLife, Inc., dated October 10, 1995*
4.1       Certificate of Designated Class A Preferred Stock*
4.2       Certificate of Designated Class AA Preferred Stock*
10.1      Lease  Agreement  dated  November  1, 1996 for the  office  located in
          Calgary, Alberta, Canada*
10.2      Lease  Agreement  dated  September  1, 1997 for the office  located in
          Airdrie, Alberta, Canada*
10.3      Lease  Agreement  dated  January  15,  1999 for the office  located in
          Newport Beach, California*
10.4      Lease Agreement dated April 12, 1990 for the office located in Newport
          Beach, California*
10.5      First Addendum to Lease dated April 12, 1990 for the property  located
          in Newport Beach, California*
10.6      Second  Addendum to Lease dated July 8, 1993 for the property  located
          in Newport Beach, California*
10.7      Third Addendum to Lease dated July 17,1996 for the property located in
          Newport Beach, California*
10.8      Builder's Realty Stock Purchase Agreement dated February 27, 1998*
10.9      Agreement  for  Purchase  of  Network  Real  Estate,   Inc.  Licensing
          Agreement and Trademarks, dated June 12, 1998*
10.10     Stock Purchase Agreement, dated July 23, 1998*
10.11     Asset Purchase Agreement, dated January 16, 1997*
10.12     Option Agreement, dated July 10, 1996*
10.13     Asset Purchase Agreement, dated April 13, 1998*
10.14     Loan Purchase Agreement, dated July 7, 1998*
10.15     Agreement and Plan of Acquisition, dated April 15, 1996*
10.16     Agreement and Plan of Acquisition, dated April 15, 1996*
10.18     Form of Participating Independent Broker Franchise Agreement*
10.19     Form of Broker Membership Agreement*
10.20     Stock Purchase Agreement, dated September 10, 1998*
10.21     Employment Agreement between HomeLife, Inc. and Andrew Cimerman*
10.22     Trademark License Agreement between HomeLife,  Inc. and Jerome's Magic
          World, Inc.*
10.23     HomeLife Higher Standards Asset Purchase Agreement,  dated January 20,
          1999*
10.24     Acquisition   Agreement  between  Bright  Financial   Corporation  and
          MaxAmerica Financial Services, Inc.*
21        List of Subsidiaries*
27.1      Financial Data Schedule

-----------------------------
*Incorporated  by reference from  Registration  Statement on Form 10-SB filed by
the Company on November 2, 1999.

     (b)  REPORTS ON FORM 8-K

     The Company has not filed any Form 8-K Report over the last fiscal year.

                                       19
<PAGE>

                                   SIGNATURES

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

HOMELIFE, INC.
--------------
Registrant


By: /s/ Andrew Cimerman                                Date: September 13, 2001
    --------------------------------------------       -------------------------
    Chief Executive Officer, President, Director

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


By: /s/ Andrew Cimerman                                Date: September 13, 2001
    --------------------------------------------       -------------------------
    Chief Executive Officer, President, Director

                                       20
<PAGE>


                                 HOMELIFE, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                       AS OF MAY 31, 2001 AND MAY 31, 2000

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS

                       (AMOUNTS EXPRESSED IN U.S. DOLLARS)

<PAGE>

                                 HOMELIFE, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                       AS OF MAY 31, 2001 AND MAY 31, 2000

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS

                       (AMOUNTS EXPRESSED IN U.S. DOLLARS)

                                TABLE OF CONTENTS

Report of Independent Auditors                                                 1

Consolidated Balance Sheets                                                    2

Consolidated Statements of Operations                                          3

Consolidated Statements of Cash Flows                                          4

Consolidated Statements of Stockholders' Equity                                5

Notes to Consolidated financial statements                                6 - 28

<PAGE>

SCHWARTZ LEVITSKY FELDMAN LLP
CHARTERED ACCOUNTANTS
TORONTO, MONTREAL, OTTAWA

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Homelife, Inc.

We have audited the accompanying  consolidated balance sheets of Homelife,  Inc.
(incorporated  in  Nevada)  as  of  May  31,  2001  and  2000  and  the  related
consolidated  statements of operations,  cash flows and changes in stockholders'
equity  for  each  of the  years  then  ended  May  31,  2001  and  2000.  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 generally accepted auditing standards
in the  United  States of  America.  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 evaluating the 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
Homelife,  Inc. as of May 31, 2001 and 2000 and the consolidated  results of its
operations  and its cash flows for each of the years then ended,  in  conformity
with generally accepted accounting principles in the United States of America.

Toronto, Ontario                                 "Schwartz Levitsky Feldman llp"
August 4, 2001                                             Chartered Accountants

1167 Caledonia Road
Toronto, Ontario M6A 2X1
Tel: 416 785 5353
Fax: 416 785 5663

<PAGE>

HOMELIFE, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

                                                       2001             2000
                                                        $                $
ASSETS
CURRENT ASSETS

   Cash                                                 73,881          248,064
   Marketable securities, at fair value                  5,250           20,625
   Accounts receivable (note 4)                        137,199          116,700
   Notes receivable (note 5)                           145,506          176,000
   Prepaid expenses and deposits (note 6)               57,588           50,638
                                                    ---------------------------

                                                       419,424          612,027

PROPERTY AND EQUIPMENT (note 7)                        337,407          414,679

GOODWILL (note 8)                                      359,167          643,790

OTHER ASSETS (note 9)                                  302,245          372,630

CASH HELD IN TRUST (note 10)                           198,312          249,817
                                                    ---------------------------

                                                     1,616,555        2,292,943
                                                    ===========================

<PAGE>

HOMELIFE, INC.
Consolidated Balance Sheets
As of May 31, 2001 and 2000
(Amounts expressed in U.S. dollars)

                                                       2001             2000
                                                        $                $
LIABILITIES
CURRENT LIABILITIES

Bank indebtedness (note 11)                             50,230           14,000
Accounts payable (note 12)                             400,538          346,597
Reserve for warranty                                    44,903           58,461
Dividends payable                                        4,770            5,770
Deferred revenue                                       221,511          202,149
                                                    ---------------------------

                                                       721,952          626,977

DEFERRED REVENUE                                       139,300          154,119

TRUST LIABILITY (note 10)                              198,312          249,817

MINORITY INTEREST                                       34,395           31,916
                                                    ---------------------------

                                                     1,093,959        1,062,829
                                                    ---------------------------
STOCKHOLDERS' EQUITY

CAPITAL STOCK (note 13)                              1,030,205        1,036,629

ADDITIONAL PAID IN CAPITAL (note 13)                 3,195,562        3,182,304

ACCUMULATED OTHER COMPREHENSIVE
   INCOME (LOSS) (note 16)                               3,861              277

DEFICIT                                             (3,707,032)      (2,989,096)
                                                    ---------------------------

                                                       522,596        1,230,114
                                                    ---------------------------

                                                     1,616,555        2,292,943
                                                    ===========================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                                                               2
<PAGE>

HOMELIFE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

                                                       2001             2000
                                                        $                $
REVENUE

Royalty and franchise fees                             758,361          791,493
Warranty fees                                          252,918          255,522
Mortgage financing fees                                 81,356           90,520
Real estate brokerage                                1,655,207        2,036,892
Other income                                           241,684          276,491
                                                    ---------------------------

                                                     2,989,526        3,450,918

DIRECT COSTS                                         1,788,835        2,127,237
                                                    ---------------------------

                                                     1,200,691        1,323,681
                                                    ---------------------------
EXPENSES

Salaries and fringe benefits                           571,357          637,455
General and administrative                             705,340          894,568
Occupancy                                              184,825          175,881
Financial                                               25,482           57,268
Amortization and depreciation                          427,144          328,864
                                                    ---------------------------

                                                     1,914,148        2,094,036
                                                    ---------------------------

LOSS BEFORE MINORITY INTEREST                         (713,457)        (770,355)

Minority interest                                       (2,479)          11,462
                                                    ---------------------------

LOSS BEFORE INCOME TAXES                              (715,936)        (758,893)

Income taxes (note 14)                                      --               --
                                                    ---------------------------

NET LOSS                                              (715,936)        (758,893)

Preferred dividends                                     (2,000)          (2,520)
                                                    ---------------------------
NET LOSS APPLICABLE TO COMMON
   SHARES                                             (717,936)        (761,413)
                                                    ===========================
BASIC AND FULLY DILUTED LOSS
   PER COMMON SHARE                                      (0.13)           (0.15)
                                                    ===========================
WEIGHTED-AVERAGE NUMBER
   OF COMMON SHARES                                  5,429,872        4,940,155
                                                    ===========================

                                                                               3
<PAGE>

HOMELIFE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

                                                       2001             2000
                                                        $                $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                              (715,936)        (758,893)
Adjustments to reconcile net loss to net
   cash provided by (used in) used in
   operating activities
Depreciation and amortization                          427,144          328,864
Minority interest                                        2,479          (11,462)
Provision for note receivable                           30,000               --
Loss on trading securities                              15,375           90,731
Loss on disposal of property and equipment              15,678               --
Stock based compensation                                 6,834               --
Changes in reserve for warranty                        (13,558)           6,961
Increase (decrease) in accounts receivable             (20,499)          51,333
(Increase) decrease in notes receivable                    494           39,803
(Increase) decrease in prepaid expenses                 (6,950)          27,521
Increase (decrease) in accounts payable                 53,941         (113,065)
(Increase) decrease in deferred revenue                  4,543          (46,961)
                                                    ---------------------------
                                                      (200,455)        (385,168)
                                                    ---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                    (10,832)         (10,162)
Sale of marketable securities                               --           83,519
                                                    ---------------------------
                                                       (10,832)          73,357
                                                    ---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash provided by (required for) bank indebtedness       36,230           (2,960)
Cash required for notes payable                             --          (10,000)
Cash (required for) provided by advances
   from stockholder                                         --         (143,472)
Cash provided by issuance of capital stock                  --          388,220
Cash required for dividends                             (1,000)            (920)
                                                    ---------------------------
                                                        35,230          230,868
                                                    ---------------------------
EFFECT OF FOREIGN CURRENCY
   EXCHANGE RATE CHANGES                                 1,874            1,370
                                                    ---------------------------
NET INCREASE (DECREASE) IN CASH                       (174,183)         (79,573)
Cash, beginning of year                                248,064          327,637
                                                    ---------------------------
CASH, END OF YEAR                                       73,881          248,064
                                                    ---------------------------
SUPPLEMENTAL DISCLOSURE OF CASH
   FLOW INFORMATION
Interest paid                                           10,700            2,387
                                                    ===========================
Income taxes paid                                       16,000               --
                                                    ===========================

                                                                               4
<PAGE>

HOMELIFE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                             Class A                   Class AA
                                                Common Stock          Preference Stock - 6%       Preferred Stock - 8%      Paid in
                                            Shares         Amount       Shares     Amount         Shares       Amount       Capital
                                                              $                         $                          $             $
<S>                                       <C>               <C>         <C>       <C>                 <C>       <C>        <C>
BALANCE, MAY 31, 1999                     4,803,932         4,288       10,000    1,000,000           78        39,000     2,846,093

Issuance of common stock (note 13)          820,756           828           --           --           --            --       298,724
Compensation and licensing arrangement           --            --           --           --           --            --        30,000
Conversion of preferred stock to
   common stock (note 13)                    12,670            13           --           --          (15)       (7,500)        7,487
Foreign currency translation                     --            --           --           --           --            --            --
Net loss applicable to common shares             --            --           --           --           --            --            --
------------------------------------------------------------------------------------------------------------------------------------

BALANCE, MAY 31, 2000                     5,637,358         5,129       10,000    1,000,000           63        31,500     3,182,304

Issuance (cancellation) of
   Common stock (note 13)                  (195,000)           55           --           --           --            --         6,779
Conversion of preferred stock to
   common stock (note 13)                    21,228            21           --           --          (13)       (6,500)        6,479
Foreign currency translation                     --            --           --           --           --            --            --
Net loss applicable to common shares             --            --           --           --           --            --            --
------------------------------------------------------------------------------------------------------------------------------------

BALANCE, MAY 31, 2001                     5,463,586         5,205       10,000    1,000,000           50        25,000     3,195,562
====================================================================================================================================

                                                       Accumulated Other
                                         Accumulated    Comprehensive
                                           Deficit      Income (Loss)
                                                $             $

BALANCE, MAY 31, 1999                    (2,227,683)       (1,093)

Issuance of common stock (note 13)               --            --
Compensation and licensing arrangement           --            --
Conversion of preferred stock to
   common stock (note 13)                        --            --
Foreign currency translation                     --         1,370
Net loss applicable to common shares       (761,413)           --
-----------------------------------------------------------------

BALANCE, MAY 31, 2000                    (2,989,096)          277

Issuance (cancellation) of
   Common stock (note 13)                        --            --
Conversion of preferred stock to
   common stock (note 13)                        --            --
Foreign currency translation                     --         3,584
Net loss applicable to common shares       (717,936)           --
-----------------------------------------------------------------

BALANCE, MAY 31, 2001                    (3,707,032)        3,861
=================================================================
</TABLE>

                                                                               5
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

1.   BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION

     These consolidated  financial  statements  consolidate,  using the purchase
     method, the accounts of the company and its subsidiaries listed below:

     a)   Wholly-owned subsidiaries

          HomeLife Realty Services,  Inc.,  FamilyLife  Realty  Services,  Inc.,
          MaxAmerica Financial Services,  Inc., Red Carpet Broker Network, Inc.,
          National Sellers  Network,  Inc.,  Homelife  Builders Realty (Calgary)
          Ltd, Aspen Benson & May Investment Bankers LLC.,  Homelife  California
          Realty, Inc. and Homelife Properties, Inc.

     b)   Majority-owned subsidiaries

          The Keim Group Ltd.  ("Keim") and  MaxAmerica  Home  Warranty  Company
          ("MaxAmerica") - 93.33% and 82.72% respectively.

          On  consolidation,   all  material  intercompany  accounts  have  been
          eliminated.  Consolidation  commenced  with  the  effective  dates  of
          acquisition of the  operations of the  subsidiary  companies and these
          consolidated financial statements include the financial results of the
          subsidiaries to May 31, 2001 and 2000.

          Business  acquisitions  by the  company  since  June 1,  1997  were as
          follows:

          a)   Effective  on August 20,  1997,  the  company  acquired  the real
               estate  operations,   including  the  licencing   agreements  and
               trademarks,  of Network Real Estate,  Inc., a real estate broker,
               for $100,000 as follows:

               Cash                                                  $   10,000
               Note payable, 8%, due October 25, 1997                    10,000
               160 Class AA convertible, redeemable Preferred
                shares of the company carrying 8% cumulative
                dividend; convertible after 12 months from date
                of issue (see note 13)                                   80,000
                                                                     ----------

                                                                        100,000

               Less: 146,667 Common shares submitted for
                     cancellation on October 1, 1999 totaling
                     $58,667. Accordingly trademarks recorded
                     were reduced by $58,667 (see note 13 and 15)       (58,667)
                                                                     ----------

                                                                     $   41,333
                                                                     ==========

               The company had the option of buying back the Class AA  Preferred
               shares  at $5 per  share  prior to  August  20,  1998 but did not
               exercise the option.

               The assets  acquired  were  recorded  as  trademarks  and will be
               amortized over 10 years on a straight-line basis.

                                                                               6
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

1.   BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION (cont'd)

          b)   On February 27, 1998,  the company  acquired all issued shares of
               Builders  Realty  (Calgary)  Ltd., a Canadian real estate broker,
               for $316,080 as follows:

               Cash                                                  $  158,040
               36,000 Common shares of the company                      158,040
                                                                     ----------

                                                                     $  316,080
                                                                     ==========

               The  company  agreed  to  issue   additional   Common  shares  to
               stockholders  should  the market  price per Common  share be less
               than $5 after 12 months  from date of issue,  so that the  market
               value of total Common shares issued for this acquisition would be
               $158,040. (see notes 13 and 15)

               The assets acquired were recorded as follows:

               Net tangible current assets                           $   25,900
               Goodwill                                                 290,180
                                                                     ----------

                                                                     $  316,080
                                                                     ==========

               The goodwill will be amortized  over 40 years on a  straight-line
               basis.

          c)   On  September  15,  1998,  the company  purchased  all the issued
               shares of an  inactive  holding  company,  Aspen  Benson  and May
               Investment  Bankers  LLC.,  for  common  stock in the  amount  of
               $77,500 to be issued in January  2000.  At the time of  purchase,
               Aspen  Benson and May  Investment  Bankers  LLC.  had  negligible
               assets and revenue.

               Effectively,  the  acquisition  allowed  the  company  to pay the
               vendor a salary of $77,500  from  September  10, 1998 to December
               31, 1999 by the issuance of the company's common stock.

               The company has  recorded a salary  expense of $45,000 in May 31,
               1999  and  $32,500  in  May  31,  2000,  with  the  corresponding
               liability  satisfied  by the  issuance of common stock in January
               2000.

               The number of common shares to be issued was based on the average
               month  end stock  price for the  company  for  September  1998 to
               December 1999.

          d)   On January 20, 1999, Builders Realty (Calgary) Ltd. purchased the
               real estate brokerage business including licensing agreements and
               trademarks of HomeLife Higher  Standards,  a franchise owned by a
               party  unrelated to the company,  operating in Calgary,  Alberta,
               Canada,  for $42,061  cash in  fourteen  monthly  instalments  of
               $2,714 and a final payment of $4,065.

               The assets acquired were recorded as follows:

               Trademarks                                            $   42,061
                                                                     ==========

               These   trademarks   will  be  amortized   over  10  years  on  a
               straight-line basis.

                                                                               7
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

1.   BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION (cont'd)

     e)   During the fiscal year May 31, 1998, the company acquired,  by cash of
          $5,000 in total,  all  issued  shares of  several  newly  incorporated
          companies.  These new companies include MaxAmerica Financial Services,
          Inc. which will be originating real estate loans,  Homelife California
          Realty,  Inc.  which will be a full  service  real  estate  operation,
          Homelife Properties,  Inc. which will be a real estate holding company
          and Red Carpet  Broker  Network,  Inc. and National  Sellers  Network,
          Inc., which will be licensing real estate brokerages.

          Business  acquisitions  by the  company  prior to June 1, 1997 were as
          follows:

          a)   Prior to June 1, 1997, the company acquired the following:

               The net  assets of  Homelife  U. S.  Partnership,  a real  estate
               operation, for $1,000,000.

               All the issued shares of Homelife Realty  Services,  Inc., a real
               estate operation, for $250,000.

               93 1/3% and 82.72%  respectively  of the issued  Common shares of
               The  Keim  Group,   Ltd.  and  Guardian  Home  Warranty   Company
               (subsequently  re-named  MaxAmerica Home Warranty Company),  real
               estate and home warranty operations, for $766,250.

               The  net  assets  of  S &  S  Acquisition  Corp.  a  real  estate
               operation, for $400,000.

               All the issued  shares of  Familylife  Realty  Services,  Inc., a
               newly  incorporated  company to engage in real estate operations,
               for $1,000.

               Homelife U.S.  Partnership and Homelife Realty Services Inc. were
               entities  owned  by a  company  controlled  by the  president  of
               Homelife,  Inc.  The  assets  acquired  below  are  reflected  at
               historical   cost  and  no  goodwill   was   reflected  on  these
               acquisitions.

          b)   The combined assets acquired were as follows:

               Current assets                                        $  162,000
               Note receivable                                          494,899
               Prepaid printed advertising materials                    320,000
               Property and equipment                                   369,696
               Goodwill                                                 409,142
               Trademarks and franchise rights                          661,513
                                                                     ----------
                                                                     $2,417,250
                                                                     ----------

               The combined consideration given was as follows:

               Cash                                                  $  583,893
               10,000 Class A Preferred shares - par value of $100    1,000,000
               2,616,662 Common shares -
                  - par value of $0.001                                   2,617
                  - paid in capital                                     830,740
               Warrant (see note 13)                                         --
                                                                     ----------

                                                                     $2,417,250
                                                                     ==========

                                                                               8
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     i)   Principal Activities

          HomeLife, Inc. together with its subsidiaries is a leading provider of
          services to the real estate and mortgage loan industries.  The company
          engages in the following activities:

          The company  franchises full service real estate brokerage offices and
          provides  operational and  administrative  services to its franchisees
          under the  names,  HomeLife  Realty  Services,  National  Real  Estate
          Service,  Red Carpet Real Estate  Services,  Red Carpet Keim,  Network
          Real Estate and International Estates Inc.

          The  company is a mortgage  financing  services  provider  through its
          subsidiary, MaxAmerica Financial Services, Inc.

          The  company  owns and  operates a full  service  retail  real  estate
          brokerage through its subsidiary, Builders Realty (Calgary) Ltd.

          The  company is a  provider  of home  warranty  coverage  through  its
          subsidiary, MaxAmerica Home Warranty Company.

     ii)  Significant Group Concentrations of Credit Risk

          The company's  accounts  receivable and notes receivable are primarily
          from franchisees in the real estate brokerage industry.

     iii) Cash and Cash Equivalents

          Cash and cash equivalents  include cash on hand,  amounts due to banks
          and any other highly liquid  investments  purchased with a maturity of
          three months or less.  The  carrying  amount  approximates  fair value
          because of the short-term maturity of those instruments.

     iv)  Marketable Securities

          Marketable  securities  represent  trading  securities which have been
          reflected at their fair market value at the year end.

     v)   Other Financial Instruments

          The  carrying  amount of the  company's  other  financial  instruments
          approximates  fair  value  because  of the  short  maturity  of  these
          instruments  or the current  nature of  interest  rates borne by these
          instruments.

     vi)  Long-term Financial Instruments

          The fair value of each of the company's long-term financial assets and
          debt  instruments  is  based  on  the  amount  of  future  cash  flows
          associated with each instrument  discounted  using an estimate of what
          the  company's  current  borrowing  rate for  similar  instruments  of
          comparable maturity would be.

                                                                               9
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     vii) Amortization of Property and Equipment

          Amortization   of  property  and  equipment  is  provided   using  the
          straight-line method as follows;

          Furniture and fixtures                     7 years
          Computer equipment and software            7 years
          Leasehold improvements                     7 years
          Automobile                                 4 years

    viii) Goodwill

          Goodwill  is the  excess  of cost over the  value of  tangible  assets
          acquired. It is amortized on the straight-line basis over 40 years.

     ix)  Amortization of Other Assets

          Amortization  of other assets is on a  straight-line  basis over their
          estimated useful lives as follows:

          Trademarks and franchise rights            10 years (20 years in 1998)

     x)   Impairment

          The  company's  policy is to record an  impairment  loss  against  the
          balance of a long-lived asset in the period when it is determined that
          the  carrying  amount  of  the  asset  may  not be  recoverable.  This
          determination  is  based  on an  evaluation  of  such  factors  as the
          occurrence  of a  significant  event,  a  significant  change  in  the
          environment  in which the business  assets  operate or if the expected
          future  non-discounted cash flows of the business was determined to be
          less than the carrying value of the assets. If impairment is deemed to
          exist, the assets will be written down to fair value.  Management also
          evaluates  events  and  circumstances  to  determine  whether  revised
          estimates  of  useful  lives  are  warranted.  As  of  May  31,  2001,
          management expects its long-lived assets to be fully recoverable.

     xi)  Revenue Recognition

          Income from the sale of franchises is recognized over a 5-year period.
          Master franchise agreement fees are recognized over 10 years.  Royalty
          income stemming from the gross commissions on the sales of real estate
          by the franchise offices is recognized at the date of receipt; this is
          due to the  complexity of  attempting  to forecast the actual  closing
          date of the properties. Warranty income is recognized over the term of
          the contract which is usually 12 months; anticipated obligations which
          represent   incurred  but  not  reported  losses  (IBNR)  under  these
          warranties have been recorded as reserve for warranty and are based on
          past loss  experience.  Real estate  brokerage income is recognized at
          the close of escrow.  Loan fees are recognized as income when the loan
          is closed  and  funded at the close of  escrow.  Revenue  received  or
          receivable,  from  the  sale  of  franchises,  master  franchises  and
          warranties,  which is not  recognized  as  income is  recorded  on the
          balance sheet as deferred revenue.

                                                                              10
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     xii) Income taxes

          The company  accounts for income tax under the provisions of Statement
          of Financial  Accounting Standards No. 109, which requires recognition
          of deferred tax assets and  liabilities  for the  expected  future tax
          consequences  of events that have been  included  in the  consolidated
          financial  statements  or  tax  returns.  Deferred  income  taxes  are
          provided  using the  liability  method.  Under the  liability  method,
          deferred  income taxes are  recognized for all  significant  temporary
          differences  between the tax and financial  statement  bases of assets
          and  liabilities.  In addition,  the company is required to record all
          deferred tax assets,  including  future tax benefits of capital losses
          carried  forward,  and to  record  a  "valuation  allowance"  for  any
          deferred  tax assets  where it is more  likely than not that the asset
          will not be realized.

    xiii) Stock-Based Compensation

          In  December  1995,   SFAS  No.  123,   Accounting   for   Stock-Based
          Compensation,  was issued. It introduced the use of a fair value-based
          method of accounting for stock-based compensation.  It encourages, but
          does not  require,  companies to  recognize  compensation  expense for
          stock-based  compensation  to  employees  based on the new fair  value
          accounting  rules.  Companies  that  choose not to adopt the new rules
          will  continue to apply the  existing  accounting  rules  contained in
          Accounting  Principles  Board  Opinion  No. 25,  Accounting  for Stock
          Issued to Employees.  However,  SFAS No. 123 requires  companies  that
          choose not to adopt the new fair value  accounting  rules to  disclose
          pro forma net income and earnings per share under the new method. SFAS
          No. 123 is effective for consolidated  financial statements for fiscal
          years  beginning  after December 15, 1995. The company has adopted the
          disclosure  provisions  of SFAS  No.  123  for  employee  stock  based
          compensation.  Accordingly,  compensation  cost for  stock  option  is
          measured as the  excess,  if any,  of the quoted  market  price of the
          Company's  stock at the  measurement  date over the amount an employee
          must pay to acquire  the  stock.  See note 13 (f) for a summary of the
          pro-forma  EPS  determined  as if the company had applied FAS No. 123.
          The company's stock option plan prior to 1997 which vested immediately
          and  therefore  there are no expense  amounts to be  reflected  in the
          current consolidated  financial  statements.  The company will use the
          fair value  approach for stock  option plan  granted to  non-employees
          according  to EITF  96-18.  There  were no stock  options  granted  to
          non-employees in fiscal years 2001 and 2000.

     xiv) Foreign Currency Translation

          Builders Realty (Calgary) Ltd., a wholly-owned  subsidiary,  maintains
          its books and records in Canadian dollars.  Balance sheet accounts are
          translated using closing exchange rates in effect at the balance sheet
          date and income and expenses  accounts are translated using an average
          exchange   rate   prevailing   during  each   reporting   period.   No
          representation  is made that the Canadian  dollar  amounts  could have
          been, or could be,  converted  into United States dollars at the rates
          on the  respective  dates or at any other certain  rates.  Adjustments
          resulting  from the  translation  are  included in  accumulated  other
          comprehensive income in stockholders' equity.

                                                                              11
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     xv)  Net Income  (Loss) and Fully  Diluted Net Income  (Loss) Per  Weighted
          Average Common Stock

          Net income  (loss) per common stock is computed by dividing net income
          (loss) for the year by the  weighted  average  number of common  stock
          outstanding during the year.

          Fully  diluted  net  income  (loss) per common  stock is  computed  by
          dividing net income (loss) for the year by the weighted average number
          of common stock outstanding  during the year,  assuming,  except where
          the result  would be  anti-dilutive,  that all  convertible  Preferred
          shares were converted,  the contingent  common stock were issued,  the
          warrant was  exercised and the stock  options  granted were  exercised
          (see note 13).

     xvi) Use of Estimates

          The  preparation of  consolidated  financial  statements in conformity
          with generally accepted accounting  principles in the United States of
          America  requires  management to make estimates and  assumptions  that
          affect  certain   reported  amounts  of  assets  and  liabilities  and
          disclosures  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.

    xvii) Recent Accounting Pronouncements

          In  1998,  the  company  adopted  the  provisions  of  SFAS  No.  130,
          "Reporting  Comprehensive Income" and SFAS No. 131, "Disclosures About
          Segments of an Enterprise and Related  Information." SFAS 130 requires
          companies  to  disclose  comprehensive  income  in their  consolidated
          financial  statements.  In addition  to items  included in net income,
          comprehensive  income  includes  items  currently  charged or credited
          directly to  stockholders'  equity,  such as the change in  unrealized
          appreciation  (depreciation)  of securities.  SFAS 131 established new
          standards for  reporting  operating  segments,  products and services,
          geographic areas and major customers.  Segments are defined consistent
          with the basis  management used  internally to assess  performance and
          allocate resources.

          On March 4, 1998, the AICPA Accounting  Standards  Executive Committee
          issued Statement of Position No. 98-1 (SOP 98-1),  "Accounting for the
          Cost of Computer Software developed or obtained for internal use." SOP
          98-1 was issued to address diversity in practice regarding whether and
          under what  conditions the costs of  internal-use  software  should be
          capitalized.   SOP  98-1  is  effective  for  consolidated   financial
          statements for years  beginning  after December 15, 1998. In 1999, the
          company adopted the new  requirements of SOP 98-1 which did not have a
          significant effect on net earnings during that year.

          In 1998, the AICPA  Accounting  Standards  Executive  Committee issued
          Statement of Position No. 98-5 (SOP 98-5),  "Reporting on the Costs of
          Start-up  Activities".  SOP 98-5 was  issued to  provide  guidance  on
          financial  reporting  of  start-up  costs and  organization  costs and
          requires such costs to be expensed as incurred.  SOP 98-5 is effective
          for  consolidated  financial  statements  for  years  beginning  after
          December 15, 1998.  The company  adopted the new  requirements  of SOP
          98-5 in the fiscal year 2000 and wrote off organization costs with net
          book value of $48,955.

                                                                              12
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

    xvii) Recent Accounting Pronouncements (cont'd)

          In December 1999, the Securities and Exchange  Commission issued Staff
          Accounting  Bulletin  No. 101 ("SAB  101"),  "Revenue  Recognition  in
          Financial Statements". SAB 101 provides guidance on applying generally
          accepted  accounting  principles to revenue  recognition  issues.  The
          adoption  of this  standard  would not have a  material  impact on the
          Company's financial position, results of operations or cash flows.

          In June 2000, the Financial Accounting Standards Board ("FASB") issued
          No. 138,  "Accounting for Certain  Derivative  Instruments and Certain
          Hedging  Activities,  An Amendment of FASB Statement No. 133. SFAS No.
          133, as amended,  is effective for fiscal periods beginning after June
          15,  2000 and  establishes  accounting  and  reporting  standards  for
          derivative  instruments and hedging  activities.  The adoption of this
          standard would not have a material  impact on the Company's  financial
          position, results of operations or cash flows.

          In  September,  2000,  FASB  issued  SFAS  No.  140,  "Accounting  for
          Transfers and  Servicing of Financial  Assets and  Extinguishments  of
          Liabilities".  This statement is effective for transfers and servicing
          of financial assets and extinguishment of liabilities  occurring after
          March 31, 2001.  SFAS No. 140 also  includes  provisions  that require
          additional  disclosures  in the financial  statements for fiscal years
          ending after  December 15, 2000.  The adoption of this standard  would
          not  have a  material  impact  on the  company's  financial  position,
          results of operations or cash flows.

3.   MANAGEMENT'S PLANS

     The company has experienced  recurring  operating  losses and has a working
     capital  deficiency of $302,528 as at May 31, 2001.  Subsequent to the year
     end,  the  company  has  disposed  of Builders  Realty  (Calgary)  Ltd.,  a
     wholly-owned  subsidiary which had suffered  recurring losses. In addition,
     management  has  initiated  changes  in  operational  procedures,   reduced
     expenses and focused its efforts on its core business.  Management believes
     that,  despite the losses incurred and the  deterioration  in stockholders'
     equity,  it has developed a plan which,  if successfully  implemented,  can
     improve the  operating  results and  financial  condition  of the  company.
     Furthermore,   the  company  continues  its  attempt  to  raise  additional
     financings through private and public offerings.

4.   ACCOUNTS RECEIVABLE

                                                              2001        2000
                                                               $           $

     Accounts receivable                                    170,838     121,950
     Less:  Allowance for doubtful accounts                 (33,639)     (5,250)
                                                            -------------------

     Accounts receivable, net                               137,199     116,700
                                                            ===================

                                                                              13
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

5.   NOTES RECEIVABLE 2001 2000

                                                              2001        2000
                                                               $           $
     Note receivable from a franchisee arising
     from the sale of an existing franchise
     agreement. The note is unsecured and bears
     interest at a rate of 3% per year. The note
     is payable on demand.                                  139,500     176,000

     Notes receivable from franchisees for franchise
     fees. These notes are unsecured, non-interest
     bearing and payable in installments over one year.       6,006          --
                                                            -------------------

                                                            145,506     176,000

     Less:  Current portion                                 145,506     176,000
                                                            -------------------

                                                                 --          --
                                                            ===================

6.   PREPAID EXPENSES AND DEPOSITS

                                                              2001        2000
                                                               $           $

     Promotional materials and supplies                      53,498      42,302
     Deposits                                                 4,090       8,336
                                                            -------------------

                                                             57,588      50,638
                                                            ===================

                                                                              14
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

7.   PROPERTY AND EQUIPMENT

                                                              2001        2000
                                                               $           $

     Furniture and fixtures                                 301,560     336,147
     Computer equipment and software                        626,933     625,926
     Leasehold improvements                                  31,642      28,398
     Automobile                                              19,865      19,865
                                                            -------------------

     Cost                                                   980,000   1,010,336
                                                            ===================

     Less: Accumulated depreciation

     Furniture and fixtures                                 232,632     233,956
     Computer equipment and software                        375,627     324,177
     Leasehold improvements                                  14,469      17,659
     Automobile                                              19,865      19,865
                                                            -------------------

                                                            642,593     595,657
                                                            -------------------

     Net book value                                         337,407     414,679
                                                            ===================

     Depreciation for the year amounted to $72,234 ($76,476 in 2000).

8.   GOODWILL

                                                              2001        2000
                                                               $           $

     Cost                                                     393,617   699,322
     Less: Accumulated amortization                            34,450    55,532
                                                            -------------------

                                                              359,167   643,790
                                                            ===================

     Amortization for the year amounted to $284,525 ($17,483 in 2000).

                                                                              15
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

9.   OTHER ASSETS

                                                              2001        2000
                                                               $           $

     Trademarks and franchise rights                        702,846     702,846
     Organization costs                                     106,462     106,462
                                                            -------------------

     Cost                                                   809,308     809,308
                                                            -------------------
     Less: Accumulated amortization
           Trademarks and franchise rights                  400,601     330,216
           Organization costs                               106,462     106,462
                                                            -------------------

                                                            507,063     436,678
                                                            -------------------

     Net book value                                         302,245     372,630
                                                            ===================

     Amortization for the year amounted to $70,385 ($234,906 in 2000).

10.  CASH HELD IN TRUST AND TRUST LIABILITY

     Cash held in trust are deposits  received in connection with the opening of
     escrow  accounts for the sale of real estate.  The deposits are recorded as
     trust  liabilities  and are  refunded  when the real  estate is sold or the
     escrow is closed according to the terms of the escrow agreement.

11.  BANK INDEBTEDNESS

     At May 31, 2001, the company had three available lines of credit under bank
     loan  agreements.  Two of the lines  amounted to $80,000  combined and were
     unsecured  operating  credit lines bearing  interest at the rate of 16% per
     annum.  These lines were held by the corporate  office in  California.  The
     third line of credit amounted to $32,500 (Canadian $50,000) and was held by
     the Calgary  office.  This operating  credit facility bears interest at the
     bank's prime lending rate plus 2% per annum with interest  payable monthly.
     All three credit  facilities are  guaranteed by a major  shareholder of the
     company.

12.  ACCOUNTS PAYABLE

                                                              2001        2000
                                                               $           $

     Trade payable                                          185,766     262,126
     Accrued expenses                                       214,772      84,471
                                                            -------------------

                                                            400,538     346,597
                                                            ===================

                                                                              16
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK

     a)   Authorized

          100,000 Class A Preferred  shares of no par value,  6%  non-cumulative
          dividend,  voting,  convertible  to Common shares at the option of the
          shareholder  at a price equal to the face value of the Class A shares.
          Each Class A Preferred  share  carries  1,000 votes as compared with 1
          vote for each Common share.

          2,000  Class AA  Preferred  shares of $500 par  value,  8%  cumulative
          dividend,  non-voting,  redeemable  at  face  value  by  the  company,
          convertible  after 12 months from the date of issuance,  at the option
          of the  shareholder,  to Common shares at a price equal to the 125% of
          the face  value of the  Class AA shares as  compared  with the  market
          price of the common stock.

          100,000,000 Common shares of $0.001 par value

          Issued
                                                               2001       2000
                                                                $          $

             10,000   Class A Preferred shares              1,000,000  1,000,000
                 50   Class AA Preferred shares (63 - 2000)    25,000     31,500
          5,463,586   Common shares (5,637,358 - 2000)          5,205      5,129
                                                            --------------------

                                                            1,030,205  1,036,629
                                                            ====================

                                                                              17
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK (cont'd)

     b)   Shares issued during the years ended in May 31, 2001,  2000,  1999 and
          1998 were as follows:

<TABLE>
<CAPTION>
                                                                                     Capital    Paid in
                                                                          Number      stock     capital
                                                                                        $          $
<S>                                                                          <C>    <C>              <C>
          i)   Class AA Preferred shares

               On August 20, 1997, 160 Class
               AA Preferred shares were
               issued to acquire the business
               of Network Real Estate Inc.
               (see note 1)                                                   160     80,000         --

               During the year ended May 31, 1998,
               165 Class AA Preferred shares were
               issued for cash                                                165     82,500         --
                                                                         ------------------------------

                                                                              325    162,500         --
                                                                         ==============================
               On October 7, 1998, 247 Class
               AA Preferred shares were
               converted to 239,707 Common
               shares at their face
               value                                                         (247)  (123,500)        --
                                                                         ==============================

               On September 30, 1999, 15 Class AA
               Preferred shares were converted to
               12,670 Common shares at their face
               value                                                          (15)    (7,500)        --
                                                                         ==============================

               On June 12, 2000, 7 Class AA
               Preferred shares were
               converted to 11,228 Common
               shares at their face value                                      (7)    (3,500)        --

               On April 12, 2001, 6 Class AA
               Preferred shares were
               converted to 10,000 Common
               shares at their face value                                      (6)    (3,000)        --
                                                                         ------------------------------

                                                                              (13)    (6,500)        --
                                                                         ==============================
</TABLE>

                                                                              18
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK (cont'd)

     b)   Shares issued during the years ended in May 31, 2001,  2000,  1999 and
          1998 were as follows:

<TABLE>
<CAPTION>
                                                                                     Capital    Paid in
                                                                          Number      stock     capital
                                                                                        $          $
<S>                                                                       <C>           <C>    <C>

          ii)  Common shares

               On February 27, 1998, the company
               issued 36,000 Common shares for
               $158,040 to acquire the issued shares
               of Builders Realty (Calgary) Ltd.
               (see note 1)                                                36,000         36    158,004

               During the year ended May 31, 1998,
               25,690 Common shares were issued in
               consideration of services rendered at the
               fair market value of the shares issued                      25,690         25     49,317

               During the year ended May 31, 1998,
               250,000 Common shares were issued
               for promissory notes, non-interest
               bearing, payable on December 31, 2000,
               totaling $485,000. (This transaction was
               subsequently cancelled during the year
               ended May 31, 2001)                                        250,000        250    484,750

               During the year ended May 31, 1998,
               265,000 Common shares were issued for
               promissory notes, non-interest bearing,
               payable on December 31, 2000, totaling
               $250,000                                                   265,000        265    249,735

               Promissory note receivable,
               due December 31, 2001                                           --       (250)  (484,750)

               Promissory note receivable,
               due December 31, 2001                                           --       (265)  (249,735)
                                                                         ------------------------------

                                                                          576,690         61    207,321
                                                                         ==============================
</TABLE>

                                                                              19
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK (cont'd)

          ii)  Common shares (cont'd)

               On October 8, 1999, a promissory note receivable in the amount of
               $250,000 was exchanged for 100,000 shares of Pioneer Growth Corp.
               ("Pioneer").   The  value  of  these  Pioneer  shares  have  been
               guaranteed by the issuer of the promissory note for $250,000 (the
               "guaranty").  Should the value of the Pioneer shares be less than
               $250,000 on the due date of the promissory note, October 8, 2000,
               the issuer of the note has the  option to make up the  difference
               in cash, or make up the  difference  with HomeLife  Inc.'s common
               stock by providing one share of HomeLife,  Inc's common stock for
               each dollar that is deficient.

               On November 1, 2000,  the company agreed to accept full ownership
               rights to a company,  Consolidated  International  Telecom,  Inc.
               ("Consolidated"),  in exchange for the 100,000 shares of Pioneer,
               the guaranty and to extend the repayment  date of the  promissory
               note from October 8, 2000 to December 31, 2001.  Should the value
               of the  shares  of  Consolidated  be  less  than  $250,000  as at
               December 31, 2001, the promissory  note would then be immediately
               due and  payable  and the  issuer of the note would be subject to
               the  guaranty  as  detailed  above.  The  amount is  included  in
               subscriptions  receivable  and the  shares  of  Consolidated  and
               Pioneer are not reflected, as resolution of these items will only
               occur on December 31, 2001.

<TABLE>
<CAPTION>
                                                                                     Capital    Paid in
                                                                          Number      stock     capital
                                                                                        $          $
<S>                                                                       <C>            <C>    <C>
               During the year ended May 31, 1999, 7,250
               Common shares were issued in accordance with
               the agreement for the acquisition of Keim and
               MaxAmerica (note 1)                                          7,250          7         (7)

               During the year ended May 31, 1999, 10,000
               Common shares were issued in consideration of
               services rendered at the fair market value of the
               shares issued                                               10,000         10      8,490

               During the year ended May 31, 1999, 49,500
               Common shares were issued. The fair market
               value of the shares at the time of issue was $22,275        49,500         50     22,225
                                                                         ------------------------------

                                                                           66,750         67     30,708
                                                                         ==============================

               On October 7, 1998, the company issued 239,707
               Common shares for $123,500 on the conversion
               of 247 Class AA Preferred shares                           239,707        240    123,260
                                                                         ==============================
</TABLE>

                                                                              20
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK (cont'd)

          ii)  Common shares (cont'd)

<TABLE>
<CAPTION>
                                                                                     Capital    Paid in
                                                                          Number      stock     capital
                                                                                        $          $
<S>                                                                      <C>            <C>     <C>
               On October 1, 1999, the company cancelled 146,667
               Common shares for the value of $58,667 (note 1 (a))       (146,667)      (147)   (58,520)

               During the year ended May 31, 2000, 502,594
               Common shares were issued towards repayment of
               advances from the stockholder (note 12)                    502,594        502    142,970

               During the year ended May 31, 2000, 472,614 Common
               shares were issued in consideration of services
               rendered at the fair market value of the shares issued     472,614        473    214,275

               During the year ended May 31, 2000, 5,000
               Common shares were issued. The fair market value
               of the shares at the time of issue was $1,100.               5,000          5      1,095

               During the year ended May 31, 2000, 12,785 Common
               shares were cancelled. The fair market value of the
               shares at the time of cancellation was $2,173.             (12,785)       (12)    (2,161)

               Net subscription receivable/(payable)                           --          7      1,065
                                                                         ------------------------------

                                                                          820,756        828    298,724
                                                                         ==============================

               On September 30, 1999, the company issued 12,670
               Common shares for $7,500 on the conversion of
               15 Class AA Preferred shares                                12,670         13      7,487
                                                                         ==============================

               During the year ended May 31, 2001, 250,000
               Common shares and corresponding
               promissory note receivable issued during
               the year ended May 31, 1998 were cancelled                (250,000)      (250)  (484,750)

               Promissory note receivable                                      --        250    484,750

               During the year ended May 31, 2001, 55,000 Common
               shares were issued in consideration of services
               rendered at the fair market value of services rendered      55,000         55      6,779
                                                                         ------------------------------

                                                                         (195,000)        55      6,779
                                                                         ==============================

               During the year ended May 31, 2001, the company
               issued 21,228 Common shares for $6,500 on the
               conversion of 13 Class AA Preferred shares                  21,228         21      6,479
                                                                         ==============================
</TABLE>

                                                                              21
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK (cont'd)

     c)   Contingent shares to be issued

          In the  purchase  agreement  for the  acquisition  of Builders  Realty
          (Calgary)  Ltd.,  the  Company  issued  common  stock  as  part of the
          purchase  price (see note 1). The value of the common stock issued was
          set at $5 per share  which was  substantially  higher than the current
          market  value.  The company  agreed that if the actual market value of
          the stock did not reach $5 per share within one year, the stockholders
          of Builders Realty (Calgary) Ltd.,  would be issued either  additional
          Common  shares of Homelife,  Inc. or cash to complete the  transaction
          (see note 15).

     d)   Warrant

          On  January  16,  1997,  the  company  granted  a  warrant  to  S  & S
          Acquisition  Corp. as part of the consideration for the acquisition of
          its assets.  The warrant entitles S & S Acquisition  Corp. to acquire,
          from January 31, 1998 to January 31, 2002, up to 200,000 Common shares
          of the  company at $6 per share.  The number of Common  shares and the
          price per share are adjusted  proportionately with the increase in the
          number of Common shares issued by the Company.  As the market value of
          the Common  share of the company was  significantly  lower than $6 per
          share, no value was assigned to the warrant by the company.

     e)   Stock options

          On September 18, 1998 the board of directors of the company  adopted a
          stock  option plan (the  "plan")  for its  directors,  employees,  and
          consultants.  An  authorized  number of shares of common  stock of the
          company which may be granted under the plan is one million shares. The
          terms of the options  were to be  determined  by the  president of the
          company, subject to the approval by the shareholders.

                                                                              22
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

13.  CAPITAL STOCK (cont'd)

     f)   Stock option plan

          As at May 31,  2001,  options to various  employees  of the company to
          acquire  130,000  Common stock had been granted under the stock option
          plan with the following terms:

          100,000  Common  shares at $3 per share,  granted in  February,  1998,
             vested and exercisable for 5 years

          30,000  Common  shares at $5 per share,  granted in  September,  1998,
             vested and exercisable for 5 years

          Pro-forma  information  regarding net income and earnings per share is
          required by FAS No. 123 -  "Accounting  for Stock Based  Compensation"
          and has  been  determined  as if the  company  had  accounted  for its
          employee  stock  options  based on fair  values at the grant  date for
          options  granted.  The Company's  pro-forma  information  for the year
          ended May 31, 2001 and 2000 would have been as follows:

<TABLE>
<CAPTION>
                                              2001          2001          2000          2000
                                          -----------    ---------    -----------    ---------

                                          As Reported    Pro-Forma    As Reported    Pro-Forma
                                          -----------    ---------    -----------    ---------
                                               $             $             $             $
<S>                                        <C>           <C>           <C>           <C>
          Net loss                         (717,936)     (717,936)     (761,413)     (761,413)
          Basic and fully diluted loss
             per Common share                 (0.13)        (0.13)        (0.15)        (0.15)
</TABLE>

     g)   Earnings per share

          The fully diluted  earnings per share does not include the issuance of
          shares which would be anti-dilutive arising from the following:

          i.   Conversion of 10,000 Class A Preferred shares to Common shares
          ii.  Conversion of 50 Class AA Preferred shares to Common shares
          iii. Exercise  of warrant  which  entitles  holder to acquire  200,000
               Common shares at $6 per share
          iv.  Exercise of stock options to acquire  130,000  issuance of Common
               shares
          v.   Common stock which may be required [note 13(c)]

                                                                              23
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

14.  INCOME TAXES

                                                              2001        2000
                                                               $           $

     a)   Current                                                --          --
          Deferred                                               --          --
                                                           --------------------
                                                                 --          --
                                                           ====================

     b)   The components of deferred income taxes
          are comprised as follows:

          Losses carried-forward                            885,000     665,000
          Valuation allowance                              (885,000)   (665,000)
                                                           --------------------
                                                                 --         --
                                                           ====================

     c)   At May 31, 2001,  the company had  non-capital  losses  available  for
          carry-forward of approximately  $2,600,000.  These losses expire after
          May 31, 2020.

15.  CONTINGENT LIABILITIES

     The company is involved  in a lawsuit  with the sellers of Builders  Realty
     (Calgary)  Ltd.  to reduce  the  purchase  price paid for  Builders  Realty
     (Calgary) Ltd. The sellers of Builders  Realty  (Calgary) Ltd. have filed a
     counter   lawsuit  for  damages  of  $238,275   (Canadian   $356,699).   In
     management's  opinion,  this matter will not have a material  affect on the
     financial position of the company.

                                                                              24
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

16.  COMPREHENSIVE INCOME

     The company has adopted statement of financial accounting standards No. 130
     "Reporting  Comprehensive  Income" as of January 1, 1998 which requires new
     standards  for  reporting  and  display  of  comprehensive  income  and its
     components in the consolidated  financial statements.  However, it does not
     affect  net  income  or  total  stockholders'  equity.  The  components  of
     comprehensive income are as follows:

                                                              2001        2000
                                                               $           $

     Net loss                                              (715,936)   (758,893)
     Other comprehensive (loss) gain
     Foreign currency translation adjustments                 3,584       1,370
                                                           --------------------

     Comprehensive loss                                    (712,352)   (757,523)
                                                           ====================

17.  SEGMENTED INFORMATION

     Segmented  information  has been  provided  for the company on the basis of
     different  geographic areas and different services.  The revenue for Canada
     is substantially all derived from real estate brokerage.

     a)   Revenue by Geographic Area

                                                              2001        2000
                                                               $           $

          United States of America                        1,146,479   1,165,289
          Canada                                          1,843,047   2,285,629
                                                          ---------------------

                                                          2,989,526   3,450,918
                                                          =====================

     b)   Net loss by Geographic Area

          United States of America                         (644,492)   (712,402)
          Canada                                            (71,444)    (46,491)
                                                          ---------------------

                                                           (715,936)   (758,893)
                                                          =====================

     c)   Identifiable Assets by Geographic Area

          United States of America                        1,419,303   1,995,601
          Canada                                            197,252     297,342
                                                          ---------------------

                                                          1,616,555   2,292,943
                                                          =====================

                                                                              25
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

17.  SEGMENTED INFORMATION (cont'd)

                                                              2001        2000
                                                               $           $
     d)   Amortization by Geographic Area

          United States of America                          421,486     318,965
          Canada                                              5,658       9,899
                                                          ---------------------

                                                            427,144     328,864
                                                          =====================

     e)   Revenue by industry

          Real Estate Franchise                             758,361     791,493
          Real Estate Brokerage                           1,655,207   2,036,892
          Mortgage Financing                                 81,356      90,520
          Home Warranty                                     252,918     255,522
          Other Income                                      241,684     276,491
                                                          ---------------------

          Total                                           2,989,526   3,450,918
                                                          =====================
     f)   Net loss by industry

          Real Estate Franchise                            (646,249)   (797,357)
          Real Estate Brokerage                             (71,444)    (46,491)
          Mortgage Financing                                (11,260)     12,986
          Home Warranty                                      10,700      62,245
          Other                                               2,313       9,724
                                                          ---------------------

          Total                                            (715,936)   (758,893)
                                                          =====================

     g)   Identifiable assets by industry

          Real Estate Franchise                           1,239,296   1,731,695
          Real Estate Brokerage                             197,252     297,342
          Mortgage Financing                                 74,723      55,983
          Home Warranty                                     101,312     143,778
          Other                                               3,972      64,145
                                                          ---------------------

          Total                                           1,616,555   2,292,943
                                                          =====================

     h)   Amortization by industry

          Real Estate Franchise                             419,973     317,452
          Real Estate Brokerage                               5,658       9,899
          Mortgage Financing                                     --          --
          Home Warranty                                       1,513       1,513
                                                          ---------------------

          Total                                             427,144     328,864
                                                          =====================

                                                                              26
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

18.  COMMITMENTS

     The company has operating  leases for premises which extend through May 31,
     2006. Future minimum rental payments as of May 31, 2001 under the operating
     lease agreements are as follows:

     2002                                                          $     54,814
     2003                                                                27,945
     2004                                                                30,375
     2005                                                                30,375
     2006                                                                30,375
                                                                   ------------

                                                                   $    173,884
                                                                   ============

19.  SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

     a)   The  company  repaid  advances  from the  shareholder  of  $143,472 by
          issuing 502,594 Common shares during the year ended May 31, 2000.

     b)   The company cancelled  146,667 Common shares,  reducing its trademarks
          acquired totalling $58,667 during the year ended May 31, 2000.

     c)   The company  issued 12,670 Common shares on the conversion of 15 Class
          AA Preferred shares during the year ended May 31, 2000.

     d)   The company  cancelled  250,000  Common  shares and the  corresponding
          promissory  note  receivable of $485,000 during the year ended May 31,
          2001.

     e)   The  company  issued 55 Common  shares in lieu of payment of  expenses
          during the year ended May 31. 2001.

     f)   The company  issued 21,228 Common shares on the conversion of 13 Class
          AA Preferred shares during the year ended May 31, 2001.

20.  RELATED PARTY TRANSACTIONS

                                                              2001        2000
                                                               $           $
          Licensing expense paid to a company
             controlled by the President                     10,000      10,000

          Notes receivable - franchise (note 5)             139,500     176,000

                                                                              27
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

21.  SUBSEQUENT EVENT

     On July 8, 2001,  the company  entered into an agreement to sell the assets
     and  business  operated by  Homelife  Builders  Realty  (Calgary)  Ltd.,  a
     wholly-owned  subsidiary,  for $65,000.  This  transaction  is effective on
     September 4, 2001. The company does not anticipate significant gain or loss
     on this disposition.

                                                                              28