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, 2002

                       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, 2002, were  $1,572,870.
As of May 31,  2002,  Registrant  had  6,108,586  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 $273,392.  This  calculation is based upon the
closing sales price of $0.09 per share on May 31, 2002.

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).

<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             8

Item 6    Management's Discussion and Analysis                                 9

Item 7    Financial Statements                                                12

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                                              14

Item 10   Security Ownership of Certain Beneficial Owners and
          Management                                                          16

Item 11   Certain Relationships and Related Transactions                      16

PART IV
-------

Item 12   Exhibits and Reports on Form 8-K                                    18

Item 13   Certification                                                       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 was 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  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 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.

     In September  2001,  the company sold  certain  assets of  HomeLifeBuilders
Realty (Calgary) Ltd., a wholly owned subsidiary, for $38,700.


     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., and
     HomeLife  California  Properties,  Inc. (formerly named HomeLife Properties
     Inc.)


     o    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 Builders Realty (Calgary) Ltd.


     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.

     1.   PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKET

          A.   SERVICES AND LOCATIONS

     The Company  maintains its corporate office in Fountain Valley,  California
and maintains a regional office in Troy,  Michigan.  HomeLife  operates  through
various subsidiaries and companies servicing its franchised trade names.

                                       2
<PAGE>

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  30 real estate offices in the
State of Michigan and through its trade names,  Red Carpet Real Estate Services,
Network Real Estate and National Real Estate Services, services approximately 40
real estate  offices in various  states.  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
HomeLife California Properties Inc.

          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,   South   Carolina,   Texas,   and  Wisconsin  and  comprise
approximately  110  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.  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,  HomeLife
California  Properties Inc. 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 HomeLife California  Properties Inc. 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.  The seller of the home,  for the  benefit of the  purchaser,
typically  purchases  home  warranty  coverage.  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  trade names, 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,  Caldwell Banker, 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.

     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  homeowners,
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.

     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 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.

                                       5
<PAGE>

     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 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 6 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 110 franchise offices.

     13.  RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001,  the FASB issued SFAS No.141,  "Business  Combinations,"  and
SFAS  No.142,  "Goodwill  and Other  Intangible  Assets".  SFAS 141 requires all
business  combinations  initiated after June 30, 2001 be accounted for using the
purchase method.  Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer  amortized but are reviewed  annually (or more frequently if
impairment  indicators arise) for impairment.  Separable  intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful  lives.  The  amortization  provisions  of SFAS 142 apply to goodwill and
intangible  assets  acquired  after June 30, 2001.  With respect to goodwill and
intangible  assets  acquired  prior  to  July  1,  2001,  the  amortization  and
impairment  provisions of SFAS 142 are effective  upon the adoption of SFAS 142.
Accordingly the company has adopted this standard for the current fiscal year.

     In August 2001, the FASB issued SFAS No.144, "Accounting for the Impairment
or  Disposal  of  Long-Lived   Assets",   which  supercedes  both  SFAS  No.121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  Of", and the  accounting  and  reporting  provisions of APB Opinion
No.30, "Reporting the Results of Operations-Reporting  the Effects of a Disposal
of  a  Segment  of a  Business,  and  Extraordinary,  Unusual  and  Infrequently
Occurring Events and  Transactions"  (Opinion 30), for the disposal of a segment
of a  business  (as  previously  defined  in that  Opinion).  This  new  rule is
effective for fiscal years  beginning  after December 15, 2001. SFAS 144 retains
the fundamental  provisions in SFAS 121 for recognizing and measuring impairment
losses on  long-lived  assets to be "held and used." In addition,  the statement
provides more guidance on estimating cash flows when performing a recoverability
test,  requires  that a  long-lived  asset or group of assets to be  disposed of
other than by sale be classified  as" held and used" until they are disposed of,
and  establishes  more  restrictive  criteria  to  classify an asset or group of
assets to be "held for sale". SFAS 144 retains the basic provisions of

                                       6
<PAGE>

Opinion 30 on how to present discontinued  operations in the statement of income
but broadens that  presentation to include a component of an entity (rather than
a segment  of a  business).  The  adoption  of SFAS 144 will not have a material
impact on our operating results or financial position.

     In November  2001, the Emerging  Issues Task Force ("EITF")  released Issue
No.01-09,  "Accounting  for  Consideration  Given by a Vendor to a Customer or a
Reseller of the Vendor's  Product," which applies to annual or interim financial
statement  periods  beginning after December 15, 2001. The release provides that
cash  consideration  (including sales  incentives) that is given to customers or
resellers  should be accounted for as a reduction of revenue  unless the company
receives a benefit that is  identifiable  and that can be reasonably  estimated.
The adoption of this standard would not have a material  impact on the Company's
financial position, results of operations or cash flows.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No.  4,  44,  and  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
Corrections."  Statement 145 rescinds  Statement 4, "Reporting  Gains and Losses
from  Extinguishment  of Debt-an amendment of APB Opinion N. 30", which required
all gains and  losses  from  extinguishment  of debt to be  aggregated  and,  if
material, classified as an extraordinary item, net of related income tax effect.
As a  result,  the  criteria  set  forth by APB  Opinion  30 will now be used to
classify  those gains and losses.  Statement  64 amended  Statement 4, and is no
longer necessary because Statement 4 has been rescinded. Statement 44 was issued
to  establish  accounting  requirements  for the  effects of  transition  to the
provisions of the Motor Carrier Act of 1980. Statement 145 also amends Statement
13 to require certain lease  modifications that have economic effects similar to
sale-leaseback   transactions   be   accounted   for  in  the  same   manner  as
sale-leaseback transactions. This Statement also makes non-substantive technical
corrections  to existing  pronouncements.  SFAS No. 145 is effective  for fiscal
years beginning after May 15, 2002 with earlier adoption encouraged. The Company
does not expect the provisions of SFAS No. 145 to have a material  impact on the
Company's financial position or results of operations.

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities".  SFAS No. 146 addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and  nullifies  Emerging  Issues Task Force (EITF)  Issued No. 94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)".  This statement
requires  recognition of a liability for a cost associated with exit or disposal
activity when the liability is incurred,  as opposed to when the entity  commits
to an exit plan under EITF No. 94-3. This statement also  establishes  that fair
value is objective for initial  measurement of the liability.  The provisions of
this statement are effective for exit or disposal  activities that are initiated
after  December 31, 2002. The Company does not expect the provisions of SFAS No.
145 to have a material impact on the Company's  financial position or results of
operations.

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 a
lease for its other premise located in Troy, Michigan,  which expires in January
2003.  Annual lease  payments  exclusive of property taxes and insurance for all
locations through 2006 are $136,070.

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 $455,000  (Canadian  $695,000).  Should any expenditures be incurred for the
resolution of the lawsuit, they will be charged to the operations of the year in
which such expenditures are incurred.

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

     None.

                                       7
<PAGE>

                                     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  2001 and 2002  (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:

     --------------------------------------------------------------
                      2001                   High            Low
     --------------------------------------------------------------
     Quarter ended
          August 31                          $ 0.20          $ 0.19
          November 30                        $ 0.19          $ 0.03
          February 28                        $ 0.25          $ 0.09
          May 31                             $ 0.12          $ 0.16
     --------------------------------------------------------------
                      2002
     --------------------------------------------------------------
     Quarter ended
          August 31                          $ 0.20          $ 0.10
          November 30                        $ 0.11          $ 0.05
          February 28                        $ 0.09          $ 0.05
          May 31                             $ 0.15          $ 0.06
     --------------------------------------------------------------

     B.   HOLDERS

     As of May 31, 2002, there were 1,006 holders of the Company's Common Stock,
as reported by the Company's transfer agent.

     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 accrued  $2,000 in Preferred  dividends on its Class AA Preferred  stock for
the period ended May 31, 2001 and has accrued  $2,000 in Preferred  dividends on
its Class AA Preferred stock for the period ended May 31, 2002.

     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, 2002.

     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,
2002 and 2001.  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. Certain assets of Builders Realty (Calgary) were
sold  during the  current  fiscal  year.  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 fiscal year 2000, HomeLife has formed a strategic
alliance with Allstate  Funding.  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 2003. 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, 2002          May 31, 2001
                                                (audited)             (audited)
     ---------------------------------------------------------------------------
     Statement of Operations Data
          Revenue                             $ 1,572,870           $ 2,989,526
          Net Loss                            $  (219,216)          $  (717,936)
          Net Loss per share                  $      (.04)          $      (.13)
     ---------------------------------------------------------------------------
     Balance Sheet Data
          Current Assets                      $   172,826           $   419,424

          Total Property & Equipment, Net     $   259,058           $   337,407

          Total Assets                        $ 1,101,444           $ 1,616,555

          Total Current Liabilities           $   609,693           $   721,952

          Accumulated Deficit                 $(4,176,248)          $(3,707,032)

          Total Stockholder's Equity          $   347,048           $   522,596
     ===========================================================================

FISCAL YEAR ENDED MAY 31, 2002  (AUDITED)  COMPARED TO FISCAL YEAR ENDED MAY 31,
2001 (AUDITED)

     REVENUES.  The Company  generated  gross sales of $1,572,870 for the fiscal
year ended May 31, 2002  compared to gross  sales of  $2,989,526  for the fiscal
year ended May 31, 2001. Revenue by business segment is shown below:

                                  For the year ended      For the year ended
                                  May 31, 2002            May 31, 2001

                                    Amount       %          Amount        %
                                    ------     -----        ------      -----
         Real estate brokerage    $  411,776    26.2      $1,655,207     55.4
         Royalty fees                599,152    38.1         622,285     20.8
         Franchise fees               93,142     5.9         136,076      4.6
         Mortgage financing           23,693     1.5          81,356      2.7
         Home warranty sales         219,873    14.0         252,918      8.4
         Other                       225,234    14.3         241,684      8.1
                                  ----------   -----      ----------    -----
         TOTAL                    $1,572,870   100.0      $2,989,526    100.0

The  largest  decrease  in revenue  from  fiscal  year 2001 was from real estate
brokerage.  The Company sold certain assets of Builders Realty  (Calgary) at the
end of the first quarter.  The remaining  product lines and decrease in revenues
from the prior year was a direct  result of the  terrorist  attacks of September
11, 2001 and its  adverse  affect on the US  economy.  The real estate  industry
showed a slow down for three months following the attacks.

                                       10
<PAGE>

Royalty fees  decreased from $622,285 in fiscal year 2001 to $599,152 for fiscal
year 2002. This decrease of 4% relates to fewer franchise offices in the current
year.  The  current  year total  number of  franchise  offices  was 110  offices
compared  to 123  offices in the prior  year.  The loss of offices  was a direct
result of the slow down in economy after the terrorist attacks.

Franchise fees were $93,142 and $136,076 for the fiscal years ended May 31, 2002
and 2001, respectively. The decrease in franchise fees of $42,934 from the prior
year relates to the fewer  franchise  sales in the current  year.  Additionally,
there were no sales of master  franchise  agreements  during the current  fiscal
year whereas in the prior year, there were sales of master franchise  agreements
in Portugal and China.

Revenue  from  mortgage  financing  was  $23,693 for the year ended May 31, 2002
compared  to  $81,356  for the year ended May 31,  2001.  For the  Company,  the
terrorist attacks had a significant impact on the mortgage  financing  business.
Very few loans have been  written  since the attacks due to the slow down in the
economy for the period  following  the attacks.  Due to the reduction in company
employees and overall cost cutting efforts,  the company has not had a dedicated
person to work on the loans for the majority of the current fiscal year.

Home  warranty  sales were  $219,873 and $252,918 for the fiscal years ended May
31, 2002 and 2001,  respectively.  The number of warranty  contracts sold in the
current  year was 621 as compared  to 561 in fiscal year 2001.  During the three
months  following  the terrorist  attacks,  when the real estate market was at a
stand-still,  consumers were not purchasing homes or home  warranties.  Once the
market  started  picking up again,  the  company  sold more  contracts  but at a
discounted  rate.  Although the number of contracts  sold was higher  during the
current year, the average cost per contract was lower in the prior year.

     DIRECT  COSTS.  Direct  costs for the year ended May 31, 2002 was  $631,789
compared to  $1,788,835  for the year ended May 31,  2001.  Consistent  with the
decrease  in  revenues  mainly  attributable  to the sale of  certain  assets of
Builders Realty (Calgary), the direct costs are lower in the current year due to
lower sales commissions associated with this revenue.

     GROSS PROFIT PERCENTAGE. Gross profit percentage increased from 40% for the
year ended May 31, 2001 to 60% for the year ended May 31, 2002. This increase is
primarily  due to lower real estate  commissions  earned and paid to brokers and
agents  in  fiscal  year  2002,  as a result  of the sale of  certain  assets of
Builders Realty (Calgary). Lower commissions were earned in the current year due
to the decrease in real estate brokerage sales. The remaining product lines have
higher margins than the brokerage income.

     SALARIES  AND  FRINGE  BENEFITS.  Salaries  and fringe  benefits  decreased
$232,769,  from $571,357 for the fiscal year ended May 31, 2001, to $338,588 for
the fiscal year ended May 31, 2002. The decrease in salaries  expense relates to
the  reduction  in full time  employees  from 10 in the  prior  year to 6 in the
current year. Half of the reduction in employees  relates to the sale of certain
assets of Builders Realty (Calgary). The other reduction relates to a management
employee in the Michigan regional office and an  administrative  employee in the
California office.

     GENERAL AND ADMINISTRATIVE.  General and administrative  costs decreased to
$477,989  for the year ended May 31, 2002 from  $705,340  for the year ended May
31,  2001.  The  decrease  was  primarily  due to the sale of certain  assets of
Builders Realty (Calgary) in addition to a company wide monitoring of expenses.

     OCCUPANCY COSTS.  Occupancy costs decreased $111,122 from fiscal year 2001.
This  decrease  results from three  factors.  The first thing that helped reduce
occupancy  costs was the sale of certain  assets of  Builders  Realty  (Calgary)
whereby the new owners are now obligated on the monthly lease.  The company also
reduced  occupancy costs by the move of the California office from Newport Beach
to Fountain  Valley and the reduction in office space for the regional office in
Michigan.

     FINANCIAL.  Financial  costs for the year  ended May 31,  2001 was  $25,482
compared to $97,426 for the year ended May 31, 2002. The increase in the current
year relates to an increase in allowance for doubtful accounts.

     DEPRECIATION.  Depreciation  of fixed  assets  was  comparable  for the two
periods.

     WRITEDOWN OF GOODWILL. In the prior fiscal year, the company wrote down the
goodwill  associated with Builders Realty (Calgary).  The sale of certain assets
of Builders occurred in the first quarter of the current fiscal year.

     IMPAIRMENT  LOSS.  During the current fiscal year,  the Company  received a
franchise right in lieu of payment of a note

                                       11
<PAGE>

receivable  from a  franchisee.  An  impairment  loss of $79,500 was  recognized
during the current fiscal year.

     AMORTIZATION.  Amortization of intangibles for the years ended May 31, 2002
and 2001 was $51,852 and $81,053,  respectively.  The  decrease in  amortization
expense  from the prior  year is due to the  adoption  of FASB 142 and change in
estimate during the current fiscal year.

     MINORITY  INTEREST.  The minority  interest  expense in the current year of
$2,712  resulted  from the  combined  net income from Keim and  MaxAmerica  Home
Warranty during the respective years.

     PREFERRED DIVIDENDS.  Preferred Dividends were $2,000 in the year ended May
31, 2002 and 2001.  There were no  conversions  of  preferred  stock into common
stock during the current fiscal year.

     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  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  and  impairment of franchise
rights  purchased.  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 $436,867 as of May 31, 2002.  During the current  fiscal year, the
company  disposed  of  certain  assets of  Builders  Realty  (Calgary)  Ltd.,  a
wholly-owned  subsidiary  that  had  suffered  recurring  losses.  In  addition,
management has initiated  changes in operational  procedures,  reduced staff and
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.  Payments 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 prior  fiscal year,  the company sold master  franchise
agreements in Portugal and China.  During the current  fiscal year,  the company
has received payments on the master franchise agreements in Portugal and China.

                           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.

                                       12
<PAGE>

                                    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                54          President and Director

Terry A. Lyles, Ph.D.          43          Director

F. Bryson Farrill              74          Director

Charles Goodson                47          Vice President

Marie May                      35          Chief Financial Officer,
                                           Secretary and Director

ANDREW CIMERMAN,  54, 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, 43,  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,  74,  DIRECTOR  joined the company as a director in February
1997. Mr. Farrill has been in the securities industry for the past 34 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,  47, 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.

MARIE M. MAY, 35, CHIEF FINANCIAL OFFICER,  SECRETARY AND DIRECTOR has been with
the  company  since July  2000.  Ms.  May has 13 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

                                       13
<PAGE>

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.

ITEM 9-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,              2002    $   20,000        --         --            --            --            --            --
President, Director

Charles Goodson Vice          2002    $   84,000        --         --            --            --            --            --
President

Marie M. May, Chief           2002    $   24,000        --         --            --            --            --            --
Financial Officer,
Director, Secretary

F. Bryson Farrill,            2002          *(1)        --         --            --            --            --            --
Director

Terry A. Lyles,               2002          *(1)        --         --            --            --            --            --
Director

All Officers and              2002    $  128,000        --         --            --            --            --            --
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.

                                       14
<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           VALUE OF UNEXERCISED
NAME                            ACQUIRED ON     REALIZED     OPTIONS/SARS OF FY-END (#)     IN-THE-MONEY OPTIONS/SARS OF
                                EXERCISE (#)      ($)         EXERCISABLE/UNEXERCISABLE              FY-END ($)
                                                                                             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         30,000             0                   30,000                          $5.00
employee
------------------------------------------------------------------------------------------------------------------------
Total                           130,000            0                   130,000                           --
------------------------------------------------------------------------------------------------------------------------
</TABLE>

     (D)  LONG TERM INCENTIVE PLAN (LTIP)

     None.

     (E)  COMPENSATION OF DIRECTORS

     There was no compensation  of directors  during the current or prior fiscal
years.

     (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 prior 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.

                                       15
<PAGE>

ITEM 10 - 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, 2002: (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.

                                          AMOUNT AND NATURE OF       PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER       BENEFICIAL OWNER(1)       OF CLASS

Andrew Cimerman(2)                            2,949,894(3)             48%
Marie M. May(2)                                  60,000(1)              1%
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         3,129,894                51%

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

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 11-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

                                       16
<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.

                                       17
<PAGE>

                                     PART IV

ITEM 12 - 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.

                                       18
<PAGE>

ITEM 13-CERTIFICATION
---------------------


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the filing of HomeLife  Inc.'s (the "Company")  Annual Report
on Form 10-K for the period ending May 31, 2002 with the Securities and Exchange
Commission on the date hereof (the "Report"),  I, Andrew Cimerman, the President
and Chief  Executive  Officer of the  Company,  certify,  pursuant  to 18 U.S.C.
Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
2002, that:

     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.


                                        /s/ Andrew Cimerman
                                        ---------------------------
                                        Andrew Cimerman
                                        President and
                                        Chief Executive Officer
Date:  September 11, 2002


               CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the filing of HomeLife  Inc.'s (the "Company")  Annual Report
on Form  10-K for the  period  ending  May 31,  2002,  with the  Securities  and
Exchange  Commission  on the date hereof (the  "Report"),  I, Marie M. May,  the
Chief Financial Officer of the Company,  certify,  pursuant to 18 U.S.C. Section
1350,  as adopted  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002,
that:

     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.


                                        /s/ Marie M. May
                                        --------------------------
                                        Marie M. May
                                        Chief Financial Officer
Date:  September 11, 2002

                                       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 11 , 2002
          -----------------------------              ------------------------
          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 11, 2002
          -----------------------------              ------------------------
          Chief Executive Officer,
          President, Director

                                       20
<PAGE>

                                 HOMELIFE, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                       AS OF MAY 31, 2002 AND MAY 31, 2001

                  TOGETHER WITH REPORT OF INDEPENDENT AUDITORS

                       (AMOUNTS EXPRESSED IN U.S. DOLLARS)

<PAGE>

                                 HOMELIFE, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                       AS OF MAY 31, 2002 AND MAY 31, 2001

                  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 - 27

<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,  2002  and  2001  and  the  related
consolidated  statements of operations,  cash flows and changes in stockholders'
equity for each of the years  ended May 31,  2002 and 2001.  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, 2002 and 2001 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
August 1, 2002                                    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, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
                                                         2002            2001

                                                           $               $
                                     ASSETS
CURRENT ASSETS

    Cash                                                 113,475          73,881
    Marketable securities, at fair value                     900           5,250
    Accounts receivable (note 4)                          23,802         137,199
    Notes receivable (note 5)                                 --         145,506
    Prepaid expenses and deposits (note 6)                34,649          57,588
                                                    ----------------------------

                                                         172,826         419,424

PROPERTY AND EQUIPMENT (note 7)                          259,058         337,407

GOODWILL (note 8)                                        359,167         359,167

OTHER ASSETS (note 9)                                    250,393         302,245

PURCHASED FRANCHISE RIGHTS (note 10)                      60,000              --

CASH HELD IN TRUST (note 11)                                  --         198,312
                                                    ----------------------------

                                                       1,101,444       1,616,555
                                                    ============================

APPROVED ON BEHALF OF THE BOARD

---------------------- Director

---------------------- Director

                                      F-1
<PAGE>

HOMELIFE, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
                                                         2002            2001

                                                           $               $
                                   LIABILITIES
CURRENT LIABILITIES

Bank indebtedness (note 12)                             83,077           50,230
Accounts payable (note 13)                             329,092          400,538
Reserve for warranty                                    54,589           44,903
Dividends payable                                        6,770            4,770
Deferred revenue                                       136,165          221,511
                                                  -----------------------------

                                                       609,693          721,952

DEFERRED REVENUE                                       113,020          139,300

TRUST LIABILITY (note 11)                                   --          198,312

MINORITY INTEREST                                       31,683           34,395
                                                  -----------------------------

                                                       754,396        1,093,959


STOCKHOLDERS' EQUITY

CAPITAL STOCK (note 14)                              1,031,109        1,030,205

ADDITIONAL PAID IN CAPITAL (note 14)                 3,487,472        3,195,562

ACCUMULATED OTHER COMPREHENSIVE
     INCOME (note 17)                                    4,715            3,861

DEFICIT                                             (4,176,248)      (3,707,032)
                                                  -----------------------------

                                                       347,048          522,596
                                                  -----------------------------

                                                     1,101,444        1,616,555
                                                  =============================

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

                                      F-2
<PAGE>

HOMELIFE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
                                                        2002             2001

                                                          $                $
REVENUE

     Royalty and franchise fees                        692,294          758,361
     Warranty fees                                     219,873          252,918
     Mortgage financing fees                            23,693           81,356
     Real estate brokerage                             411,776        1,655,207
     Other income                                      225,234          241,684
                                                  -----------------------------

                                                     1,572,870        2,989,526

DIRECT COSTS                                           631,789        1,788,835
                                                  -----------------------------

                                                       941,081        1,200,691
                                                  -----------------------------
EXPENSES

     Salaries and fringe benefits                      338,588          571,357
     General and administrative                        477,989          705,340
     Occupancy                                          73,703          184,825
     Financial                                          97,426           25,482
     Depreciation                                       68,281           72,234
     Write down of goodwill                                 --          273,857
     Impairment loss on purchased franchise rights      79,500               --
     Amortization                                       51,852           81,053
                                                  -----------------------------

                                                     1,187,339        1,914,148
                                                  -----------------------------

LOSS BEFORE GAIN ON DISPOSAL OF SUBSIDIARY            (246,258)        (713,457)

GAIN ON DISPOSAL OF SUBSIDIARY (note 2c)                26,330               --
                                                  -----------------------------

LOSS BEFORE MINORITY INTEREST                         (219,928)        (713,457)

     Minority interest                                   2,712           (2,479)
                                                  -----------------------------

NET LOSS                                              (217,216)        (715,936)

Preferred dividends                                     (2,000)          (2,000)
                                                  -----------------------------

NET LOSS APPLICABLE TO COMMON
   SHARES                                             (219,216)        (717,936)
                                                  =============================

BASIC AND FULLY DILUTED LOSS
   PER COMMON SHARE                                      (0.04)           (0.13)
                                                  =============================

WEIGHTED-AVERAGE NUMBER
     OF COMMON SHARES                                5,834,887        5,429,872
                                                  =============================

                                      F-3
<PAGE>

HOMELIFE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
                                                                   2002             2001

                                                                     $                $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                              <C>              <C>
     Net loss                                                    (217,216)        (715,936)
     Adjustments to reconcile net loss to net cash
       provided by (used in) used in operating activities
     Depreciation                                                  68,281           72,234
     Amortization                                                  51,852           81,053
     Write down of goodwill                                            --          273,857
     Impairment loss on purchased franchise rights                 79,500               --
     Minority interest                                             (2,712)           2,479
     Provision for note receivable                                     --           30,000
     Loss on trading securities                                     4,350           15,375
     Loss on disposal of property and equipment                        --           15,678
     Gain on disposal of subsidiary assets                        (26,330)              --
     Shares issued for services                                    34,250            6,834
     Warrants issued for services                                   8,564               --
     Changes in reserve for warranty                                9,686          (13,558)
     Changes in accounts receivable                               111,095          (20,499)
     Changes in notes receivable                                    6,006              494
     Changes in prepaid expenses                                   22,939           (6,950)
     Changes in accounts payable                                  (71,446)          53,941
     Changes in deferred revenue                                 (111,626)           4,543
                                                             -----------------------------
                                                                  (32,807)        (200,455)
                                                             -----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of property and equipment                               --          (10,832)
     Proceeds from sale of subsidiary assets                       38,700               --
                                                             -----------------------------
                                                                   38,700          (10,832)
                                                             -----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Cash provided by bank indebtedness                            32,847           36,230
     Cash required for dividends                                       --           (1,000)
                                                             -----------------------------
                                                                   32,847           35,230
                                                             -----------------------------
EFFECT OF FOREIGN CURRENCY
     EXCHANGE RATE CHANGES                                            854            1,874
                                                             -----------------------------

NET INCREASE (DECREASE) IN CASH                                    39,594         (174,183)
     Cash, beginning of year                                       73,881          248,064
                                                             -----------------------------
CASH, END OF YEAR                                                 113,475           73,881
                                                             -----------------------------

SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION
     Interest paid                                                 13,887           10,700
                                                             =============================

     Income taxes paid                                                 --           16,000
                                                             =============================
</TABLE>

                                      F-4
<PAGE>

HOMELIFE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                                                         Accumulated
                                                          Class A              Class AA                                        Other
                                  Common Stock     Preference Stock - 6% Preferred Stock - 8%   Paid in   Accumulated  Comprehensive
                                Shares      Amount   Shares    Amount     Shares     Amount     Capital     Deficit           Income
                                               $                  $                     $          $            $             $

<S>                            <C>           <C>     <C>      <C>            <C>     <C>      <C>          <C>             <C>
BALANCE, MAY 31, 2000          5,637,358     5,129   10,000   1,000,000       63     31,500   3,182,304    (2,989,096)       277

Issuance (cancellation) of
  common stock (note 14)        (195,000)       55       --          --       --         --       6,779            --         --
Conversion of preferred
  stock to Common stock
  (note 14)                       21,228        21       --          --      (13)    (6,500)      6,479            --         --
Foreign currency translation          --        --       --          --       --         --          --            --      3,584
Net loss applicable to
  common shares                       --        --       --          --       --         --          --      (717,936)        --
                               -------------------------------------------------------------------------------------------------

BALANCE, MAY 31, 2001          5,463,586     5,205   10,000   1,000,000       50     25,000   3,195,562    (3,707,032)     3,861

Issuance of Common
  stock (note 14)                645,000       645       --          --       --         --      42,169            --         --
Write off of subscription
  receivable (note 14)                --       259       --          --       --         --     249,741      (250,000)        --
Foreign currency
  translation                         --        --       --          --       --         --          --            --        854
Net loss applicable to
  common shares                       --        --       --          --       --         --          --      (219,216)        --
                               -------------------------------------------------------------------------------------------------

BALANCE, MAY 31, 2002          6,108,586     6,109   10,000   1,000,000       50     25,000   3,487,472    (4,176,248)     4,715
                               =================================================================================================
</TABLE>

                                      F-5
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


1.   MANAGEMENT'S PLANS AND FUTURE OPERATIONS

As at May 31, 2002,  adverse principal  conditions and events are prevalent that
require  necessary  action by  management  to enable  the  company  to return to
profitability  and  to  reverse  these  adverse  conditions  and  events.  These
conditions  and events  include  recurring  operating  losses,  working  capital
deficiencies,  negative  cash flow from  operations  and adverse  key  financial
ratios.  Management's  plans to mitigate  these  adverse  conditions  and events
include:

     1.   During the year, the company closed the operations of an  unprofitable
          subsidiary,  HomeLife  Builders Realty (Calgary) Ltd, and sold certain
          assets.
     2.   During the year,  certain cost cutting  measures were  implemented  to
          significantly reduce office rental costs, payroll expenses and certain
          SEC filing costs in the Michigan and California offices.
     3.   During  the year,  the  company  settled  certain  lawsuits  regarding
          Network and International Estates which will further reduce legal fees
          and management involvement.
     4.   The company is currently focusing on:
          -    the core business of franchising,
          -    the home warranty business,
          -    attempting to raise additional funding through private and public
               offering,
          -    investigating and pursing potential mergers/acquisitions.

     The accompanying financial statements do not include any adjustments to the
     recoverability   and   classification   of  recorded   asset   amounts  and
     classification of liabilities that might be necessary in the event that the
     Company is unable to continue as a going concern.


2.   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,  (certain  of this  subsidiary's  assets  were sold on August 31,
          2001. [note 2c]) Aspen Benson & May Investment Bankers LLC.,  HomeLife
          California  Realty,  Inc.  and  HomeLife  California  Properties  Inc.
          (formerly known as 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, 2002 and 2001.

                                      F-6
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

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

          i)   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 (note 14)                                 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 (note 14 and 16)                 (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.

                                      F-7
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

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

          ii)  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 14 and 16)

               The assets acquired were recorded as follows:

               Net tangible current assets                         $     25,900
               Goodwill                                                 290,180
                                                                   ------------
                                                                   $    316,080
                                                                   ============

               On May 31, 2001 the company had written off the goodwill  related
               to its investment in Builders Realty (Calgary) Ltd.

               On August 31, 2001 the company  sold  certain  assets of HomeLife
               Builders Realty  (Calgary) Ltd., a wholly-owned  subsidiary,  for
               $38,700.  The company has recorded  $26,330 as a gain on the sale
               of the subsidiary's assets.

          iii) 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,  2001,  with  the  corresponding
               liability  satisfied  by the  issuance of common stock in January
               2001.

               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.

          iv)  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
                                                                   ============

                                      F-8
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

          v)   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.

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

          i)   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.

               93.33% 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.

               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
                    - paid in capital                                     2,617
               Warrant (note 14)                                        830,740
                                                                   ------------
                                                                   $  2,417,250
                                                                   ============

                                      F-9
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


3.   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,  HomeLife California Properties
               Inc.


               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.

                                      F-10
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


3.   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

               During  the  year  ended  the  company   adopted  the   Financial
               Accounting   Standards  Board  issued   Statements  of  Financial
               Accounting   Standards  (SFAS)  No.  142,   "Goodwill  and  Other
               Intangible Assets." Under the new rules,  goodwill and indefinite
               lived intangible  assets are no longer amortized but are reviewed
               annually for impairment. Separable intangible assets that are not
               deemed to have an  indefinite  life will continue to be amortized
               over their useful lives. The amortization  provisions of SFAS No.
               142 apply to goodwill and intangible  assets  acquired after June
               30, 2001. With respect to goodwill and intangible assets acquired
               prior  to  July 1,  2001,  the  Company  began  applying  the new
               accounting rules effective June 1, 2001. Consequently the company
               has changed its accounting policy of amortizing  goodwill over 40
               years to the amortization provisions of SFAS No. 142.


          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

          x)   Long-Term Assets

               In accordance  with the provisions of SFAS No. 121 Accounting for
               the Impairment of Long Lived Assets and for Long-Lived  Assets to
               be disposed of, 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, 2002, management expects its long-lived
               assets to be fully recoverable.

                                      F-11
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

          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.

          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 14 (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 2002 and 2001.

                                      F-12
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

          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.

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

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

               Fully  diluted net loss per common  stock is computed by dividing
               net 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 (note 14).

          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 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.

                                      F-13
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

          xvii) Recent Accounting Pronouncements (cont'd)

               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.

               In  July  2001,   the  FASB   issued   SFAS   No.141,   "Business
               Combinations,"  and SFAS No.142,  "Goodwill and Other  Intangible
               Assets".  SFAS 141 requires all business  combinations  initiated
               after June 30, 2001 be accounted  for using the purchase  method.
               Under SFAS 142,  goodwill and intangible  assets with  indefinite
               lives are no longer amortized but are reviewed  annually (or more
               frequently  if  impairment   indicators  arise)  for  impairment.
               Separable   intangible   assets  that  are  not  deemed  to  have
               indefinite  lives will continue to be amortized over their useful
               lives. The amortization  provisions of SFAS 142 apply to goodwill
               and intangible  assets acquired after June 30, 2001. With respect
               to goodwill and intangible assets acquired prior to July 1, 2001,
               the  amortization  and  impairment  provisions  of  SFAS  142 are
               effective  upon  the  adoption  of SFAS  142.  See note 8 for the
               effect of the adoption of this standard.

               In August 2001, the FASB issued SFAS No.144,  "Accounting for the
               Impairment or Disposal of Long-Lived  Assets",  which  supercedes
               both SFAS No.121,  "Accounting  for the  Impairment of Long-Lived
               Assets and for  Long-Lived  Assets to be  Disposed  Of",  and the
               accounting  and  reporting   provisions  of  APB  Opinion  No.30,
               "Reporting the Results of  Operations-Reporting  the Effects of a
               Disposal of a Segment of a Business,  and Extraordinary,  Unusual
               and Infrequently Occurring Events and Transactions" (Opinion 30),
               for the  disposal  of a  segment  of a  business  (as  previously
               defined in that  Opinion).  This new rule is effective for fiscal
               years  beginning  after  December 15, 2001.  SFAS 144 retains the
               fundamental  provisions in SFAS 121 for recognizing and measuring
               impairment  losses on long-lived assets to be "held and used." In
               addition, the statement provides more guidance on estimating cash
               flows when  performing a  recoverability  test,  requires  that a
               long-lived  asset or group of assets to be disposed of other than
               by sale be classified  as" held and used" until they are disposed
               of, and  establishes  more  restrictive  criteria  to classify an
               asset or group of assets to be "held for sale".  SFAS 144 retains
               the basic provisions of Opinion 30 on how to present discontinued
               operations   in  the   statement  of  income  but  broadens  that
               presentation  to include a component of an entity  (rather than a
               segment of a business).  The adoption of SFAS 144 will not have a
               material impact on our operating results or financial position.

               In  November  2001,  the  Emerging  Issues  Task  Force  ("EITF")
               released Issue No.01-09, "Accounting for Consideration Given by a
               Vendor to a Customer  or a  Reseller  of the  Vendor's  Product,"
               which applies to annual or interim  financial  statement  periods
               beginning after December 15, 2001. The release provides that cash
               consideration  (including  sales  incentives)  that is  given  to
               customers or resellers  should be accounted for as a reduction of
               revenue   unless  the   company   receives  a  benefit   that  is
               identifiable and that can be reasonably  estimated.  The adoption
               of  this  standard  would  not  have  a  material  impact  on the
               Company's  financial  position,  results  of  operations  or cash
               flows.

                                      F-14
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


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

          xvii) Recent Accounting Pronouncements (cont'd)

               In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB
               Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
               and Technical  Corrections."  Statement 145 rescinds Statement 4,
               "Reporting  Gains  and  Losses  from  Extinguishment  of  Debt-an
               amendment  of APB Opinion N. 30",  which  required  all gains and
               losses  from  extinguishment  of debt to be  aggregated  and,  if
               material,  classified as an  extraordinary  item,  net of related
               income tax effect.  As a result,  the  criteria  set forth by APB
               Opinion 30 will now be used to  classify  those gains and losses.
               Statement  64  amended  Statement  4, and is no longer  necessary
               because  Statement 4 has been rescinded.  Statement 44 was issued
               to  establish   accounting   requirements   for  the  effects  of
               transition  to the  provisions  of the Motor Carrier Act of 1980.
               Statement 145 also amends  Statement 13 to require  certain lease
               modifications    that   have   economic    effects   similar   to
               sale-leaseback  transactions  be accounted for in the same manner
               as  sale-leaseback   transactions.   This  Statement  also  makes
               non-substantive technical corrections to existing pronouncements.
               SFAS No. 145 is effective  for fiscal years  beginning  after May
               15, 2002 with earlier adoption  encouraged.  The Company does not
               expect the  provisions of SFAS No. 145 to have a material  impact
               on the Company's financial position or results of operations.

               In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
               Associated  with  Exit or  Disposal  Activities".  SFAS  No.  146
               addresses financial accounting and reporting for costs associated
               with exit or disposal  activities and nullifies  Emerging  Issues
               Task Force (EITF)  Issued No. 94-3,  "Liability  Recognition  for
               Certain Employee  Termination Benefits and Other Costs to Exit an
               Activity  (including Certain Costs Incurred in a Restructuring)".
               This  statement  requires  recognition  of a liability for a cost
               associated  with exit or disposal  activity when the liability is
               incurred,  as opposed to when the entity  commits to an exit plan
               under EITF No. 94-3.  This statement also  establishes  that fair
               value is objective for initial measurement of the liability.  The
               provisions  of this  statement are effective for exit or disposal
               activities  that are  initiated  after  December  31,  2002.  The
               Company does not expect the  provisions of SFAS No. 145 to have a
               material impact on the Company's financial position or results of
               operations.

4.   ACCOUNTS RECEIVABLE
                                                      2002             2001

                                                        $                $

     Accounts receivable                              81,252          170,838
     Less:  Allowance for doubtful accounts          (57,450)         (33,639)
                                                  ---------------------------
     Accounts receivable, net                         23,802          137,199
                                                  ===========================

                                      F-15
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


5.   NOTES RECEIVABLE
                                                        2002          2001

                                                          $             $
     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. In 2002, the company
     received franchise rights in lieu of payment
     (note 10)                                               --       139,500

     Notes receivable from franchisees for
     franchise fees. These notes are unsecured,
     non-interest bearing and payable in
     installments over one year. In 2002 this was
     written off                                             --         6,006
                                                     ------------------------

                                                             --       145,506

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

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


6.   PREPAID EXPENSES AND DEPOSITS
                                                        2002          2001

                                                          $             $

     Promotional materials and supplies                  28,033        53,498
     Deposits                                             6,616         4,090
                                                     ------------------------

                                                         34,649        57,588
                                                     ========================

                                      F-16
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


7.   PROPERTY AND EQUIPMENT
                                                        2002          2001

                                                          $             $

     Furniture and fixtures                             230,759       301,560
     Computer equipment and software                    597,162       626,933
     Leasehold improvements                              13,734        31,642
     Automobile                                          19,865        19,865
                                                     ------------------------

     Cost                                               861,520       980,000
                                                     ========================

     Less: Accumulated depreciation

     Furniture and fixtures                             178,689       232,632
     Computer equipment and software                    399,628       375,627
     Leasehold improvements                               4,280        14,469
     Automobile                                          19,865        19,865
                                                     ------------------------

                                                        602,462       642,593
                                                     ========================

     Net book value                                     259,058       337,407
                                                     ========================

     Depreciation for the year amounted to $68,281 ($72,234 in 2001).

8.   GOODWILL

                                                        2002          2001

                                                          $             $

           Cost                                         393,617       393,617
           Less:  Accumulated amortization               34,450        34,450
                                                     ------------------------

                                                        359,167       359,167
                                                     ========================

     Amortization for the year amounted to $nil ($10,768 in 2001).

                                      F-17
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


8.   GOODWILL (cont'd)

     Effective  May 31,  2002,  the  Company  adopted  Statements  of  Financial
     Accounting Standards No. 141, Business Combinations,  No. 142, Goodwill and
     Other  Intangible  Assets and No. 144,  Accounting  for the  Impairment  or
     Disposal of  Long-Lived  Assets.  These  statements  require the Company to
     evaluate the  carrying  value of goodwill  and  intangible  assets based on
     assumptions  and estimates of fair value and future cash flow  information.
     These  assumptions  and  estimates  may  differ  from  actual  results.  If
     different  assumptions  and  estimates are used,  carrying  values could be
     adversely impacted, resulting in writedowns that could adversely affect the
     Company's earnings.

     In accordance  with the  requirements  of SFAS No. 142, the company has not
     amortized  goodwill for the year ended May 31, 2002. For the year ended May
     31, 2001, the company had recorded amortization of goodwill of $10,768. The
     adjusted  net loss before  preferred  dividends  for the year ended May 31,
     2001  without  amortization  of  goodwill  would  have been  $705,168.  The
     adjusted net loss after preferred dividends for the year ended May 31, 2001
     without  amortization  of goodwill would have been  $707,168.  The adjusted
     loss per share before  preferred  dividends for the year ended May 31, 2001
     without  amortization of goodwill would have been $0.13.  The adjusted loss
     per share after preferred dividends for the year ended May 31, 2001 without
     amortization of goodwill would have been $0.13.


9.   OTHER ASSETS
                                                        2002          2001

                                                          $             $

     Trademarks and franchise rights                    200,000       200,000
     Franchise software                                 502,846       502,846
                                                     ------------------------

     Cost                                               702,846       702,846
                                                     ------------------------
     Less: Accumulated amortization:
           Trademarks and franchise rights              122,549       114,171
            Franchise software                          329,904       286,430
                                                     ------------------------

                                                        452,453       400,601
                                                     ------------------------

     Net book value                                     250,393       302,245
                                                     ========================

     Amortization for the year amounted to $51,852 ($70,385 in 2001).

     The estimated aggregate amortization expense is as follows:

     2003                                            $   51,852
     2004                                                51,852
     2005                                                51,852
     2006                                                51,852
     2007                                                 8,617
     Thereafter                                          34,368
                                                     ----------

                                                     $  250,393
                                                     ==========


                                      F-18
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


10.  PURCHASED FRANCHISE RIGHTS
                                                        2002          2001

                                                          $             $

     Purchased franchise rights                         139,500            --
     Impairment loss                                    (79,500)           --
                                                     ------------------------

                                                         60,000            --
                                                     ========================

     In lieu of payment  of notes  receivable  the  company  received  franchise
     rights (note 5).

     Monthly  royalty  fees are to be received  from each of the offices in this
     area.  The royalty fees are based on a percent of the gross  revenue of the
     respective  offices.  The franchise rights were tested for impairment.  The
     cash flows from these  rights are lower due to expected  collectibility  of
     the royalty fees. Thus an impairment loss of $79,500 was recognized.

11.  CASH HELD IN TRUST AND TRUST LIABILITY

     In the prior year, cash held in trust were deposits  received in connection
     with the  opening  of  escrow  accounts  for the sale of real  estate.  The
     deposits were recorded as trust liabilities and were refunded when the real
     estate  was sold or the  escrow  is  closed  according  to the terms of the
     escrow agreement.

12.  BANK INDEBTEDNESS

     At May 31, 2002, the company had three available lines of credit under bank
     loan  agreements.  Two of the lines  amounted to $53,879  combined and were
     unsecured  operating  credit lines bearing  interest at the rate of 12% per
     annum.  These lines were held by the corporate  office in  California.  The
     third line of credit amounted to $29,198 (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.

13.  ACCOUNTS PAYABLE
                                                        2002          2001

                                                          $             $

     Trade payable                                      174,419       185,766
     Accrued expenses                                   154,673       214,772
                                                     ------------------------

                                                        329,092       400,538
                                                     ========================

     The  accounts   payable  balance   includes  $68,508  and  $30,000  due  to
     shareholder as at May 31, 2002 and May 31, 2001 respectively.

                                      F-19
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


14.  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
                                                        2002          2001

                                                          $             $

      10,000   Class A Preferred shares               1,000,000     1,000,000
          50   Class AA Preferred shares (50 - 2001)     25,000        25,000
   6,108,586   Common shares (5,463,586 - 2001)           6,109         5,205
                                                     ------------------------

                                                      1,031,109     1,030,205
                                                     ========================

     b)   Shares issued since June 1, 2000 were as follows:

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

               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>

                                      F-20
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


14.  CAPITAL STOCK (cont'd)

     ii)  Common shares

          The company  issued  265,000  HomeLife  Inc.  shares in exchange for a
          promissory  note  receivable  of  $250,000.  On October  8, 1999,  the
          promissory note receivable in the amount of $250,000 was guaranteed by
          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.  The company has no  expectation
          of receipt of payment of this subscription  receivable of $250,000 and
          has written off this amount.

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

                                      F-21
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


14.  CAPITAL STOCK (cont'd)

     ii)  Common shares (cont'd)
<TABLE>
<CAPTION>
                                                                          Capital       Paid in
                                                             Number        stock        capital
                                                                             $              $
<S>                                                       <C>           <C>           <C>
          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
                                                          ======================================

          During the year ended May 31, 2002, 105,000
          Common shares were issued in consideration
          of services rendered at the fair market
          value of services received.                        105,000           105         7,145

          During the year ended May 31, 2002, 540,000
          Common shares were issued for acquisition of
          assets (note 14d)                                  540,000           540        26,460

          During the year ended May 31, 2002, replacement
          warrants were issued                                    --            --         8,564
                                                          --------------------------------------

                                                             645,000           645        42,169
                                                          ======================================
</TABLE>

     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 (note 2). 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
          (note 16).

     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.

          During  the  year,  replacement  warrants  were  issued.  The ten year
          warrants are for the  purchase of an  aggregate  of 200,000  shares of
          common  stock  at  $1.75  per  share.   The  company   recorded  these
          replacement warrants in the amount of $8,564 as expense.

                                      F-22
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


14.  CAPITAL STOCK (cont'd)

     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.  The  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.

     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, 2002 and 2001 would have been as follows:

<TABLE>
<CAPTION>
                                                      2002            2002           2001           2001
                                           ---------------  --------------  -------------  -------------

                                               As Reported       Pro-Forma    As Reported      Pro-Forma
                                           ---------------  --------------  -------------  -------------
                                                        $               $              $              $

<S>                                        <C>              <C>             <C>            <C>
          Net loss for common shares             (219,216)       (219,216)      (717,936)      (717,936)
          Basic and fully diluted loss
                per Common share                    (0.04)          (0.04)         (0.13)         (0.13)
</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 $1.75 per share
          iv.  Exercise of stock options to acquire  130,000  issuance of Common
               shares
          v.   Common stock which may be required [note 14(c)]

                                      F-23
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


15.  INCOME TAXES
                                                        2002          2001

                                                          $             $

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

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

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

          Losses carried-forward                        950,000       885,000
          Valuation allowance                          (950,000)     (885,000)
                                                     ------------------------

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

     c)   At May 31, 2002,  the company had  non-capital  losses  available  for
          carry-forward of approximately  $2,800,000.  These losses expire after
          May 31, 2021.

16.  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 $455,000 (Canadian  $695,000).  Should any expenditures
     be incurred by the company for the resolution of this lawsuit, they will be
     charged  to the  operations  of the year in  which  such  expenditures  are
     incurred.

17.  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:
                                                        2002          2001

                                                          $             $

     Net loss                                          (217,216)     (715,936)
     Other comprehensive gain
     Foreign currency translation adjustments               854         3,584
                                                     ------------------------


     Comprehensive loss                                (216,362)     (712,352)
                                                     ========================

                                      F-24
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


18.  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
                                                        2002           2001

                                                          $              $

          United States of America                    1,135,939     1,146,479
          Canada                                        436,931     1,843,047
                                                     ------------------------

                                                      1,572,870     2,989,526
                                                     ========================


     b)   Net loss by Geographic Area

          United States of America                     (219,336)     (644,492)
          Canada                                          2,120       (71,444)
                                                     ------------------------

                                                       (217,216)     (715,936)
                                                     ========================

     c)   Identifiable Assets by Geographic Area

          United States of America                    1,101,444     1,419,303
          Canada                                             --       197,252
                                                     ------------------------

                                                      1,101,444     1,616,555
                                                     ========================

                                      F-25
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


18.  SEGMENTED INFORMATION (cont'd)
                                                        2002           2001

                                                          $              $
     d)   Amortization by Geographic Area

          United States of America                      120,133       421,486
          Canada                                             --         5,658
                                                     ------------------------

                                                        120,133       427,144
                                                     ========================

     e)   Revenue by industry

          Real estate franchise                         692,294       758,361
          Real estate brokerage                         411,776     1,655,207
          Mortgage financing                             23,693        81,356
          Home warranty                                 219,873       252,918
          Other income                                  225,234       241,684
                                                     ------------------------

          Total                                       1,572,870     2,989,526
                                                     ========================

     e)   Net loss by industry

          Real estate franchise                        (206,412)     (646,249)
          Real estate brokerage                           2,120       (71,444)
          Mortgage financing                             (1,302)      (11,260)
          Home warranty                                 (12,888)       10,700
          Other                                           1,266         2,317
                                                     ------------------------

          Total                                        (217,216)     (715,936)
                                                     ========================

     f)   Identifiable assets by industry

          Real estate franchise                         908,305     1,239,296
          Real estate brokerage                              --       197,252
          Mortgage financing                             75,120        74,723
          Home warranty                                 104,295       101,312
          Other                                          13,724         3,972
                                                     ------------------------

          Total                                       1,101,444     1,616,555
                                                     ========================
     g)   Amortization by industry

          Real estate franchise                         119,989       419,973
          Real estate brokerage                              --         5,658
          Home warranty                                     144         1,513
                                                     ------------------------

          Total                                         120,133       427,144
                                                     ========================

                                      F-26
<PAGE>

HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 AND 2001
(AMOUNTS EXPRESSED IN U.S. DOLLARS)


19.  COMMITMENTS

     The company has operating  leases for premises which extend through May 31,
     2006. Future minimum rental payments as of May 31, 2002 under the operating
     lease agreements are as follows:

     2003                                            $   44,945
     2004                                                30,375
     2005                                                30,375
     2006                                                30,375
                                                     ----------

                                                     $  136,070
                                                     ==========

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

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

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

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

     d)   The  company  issued  105,000  common  shares  in lieu of  payment  of
          expenses during the year ended May 31, 2002.

     e)   The  company  received  franchise  rights in lieu of  payment of notes
          receivable of $139,500 during the year ended May 31, 2002.


21.  RELATED PARTY TRANSACTIONS
                                                        2002           2001

                                                          $              $

          Licensing expense accrued or paid to a
            company controlled by the President          10,000        10,000
          Notes receivable - franchise (note 5)              --       139,500
          Purchase of franchise rights (note 10)         60,000            --


22.  COMPARATIVE FIGURES

     Certain figures in the 2001 financial  statements have been reclassified to
     conform with the basis of presentation used in 2002.

                                      F-27
<PAGE>