SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-KSB

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

                              FOR FISCAL YEAR ENDED
                                DECEMBER 31, 2004

                            COMMISSION FILE #0-28223

                           CHAMPIONLYTE HOLDINGS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                     FLORIDA
         (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)

                                   65-0510294
                      (IRS EMPLOYER IDENTIFICATION NUMBER)

            3450 Park Central Blvd., N. Pompano Beach, Florida 33064
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ) (ZIP CODE)

                                 (954) 465-9707
                (REGISTRANT'S TELEPHONE NO., INCLUDING AREA CODE)

              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         COMMON STOCK, $0.001 PAR VALUE

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

YES [X] NO [_]

CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT  FILERS IN RESPONSE TO ITEM 405 OF
REGULATION S-B NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE  WILL BE CONTAINED,
TO THE BEST OF THE  REGISTRANT'S  KNOWLEDGE,  IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS  INCORPORATED  BY  REFERENCE  IN PART III OF THIS FORM  10-KSB OR ANY
AMENDMENT TO THIS FORM 10-KSB. ( )

REVENUES FOR YEAR ENDED DECEMBER 31, 2004: $690,511

AGGREGATE MARKET VALUE OF THE VOTING COMMON STOCK HELD BY  NON-AFFILIATES OF THE
REGISTRANT AS OF APRIL 20, 2005, WAS: $751,275

NUMBER OF SHARES OF THE  REGISTRANT'S  COMMON STOCK  OUTSTANDING AS OF APRIL 20,
2005 IS: 36,106,110

TRANSFER AGENT AS OF APRIL 20, 2005:

                         FLORIDA ATLANTIC STOCK TRANSFER
                               7130 NOB HILL ROAD
                             TAMARAC, FLORIDA 33321

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS - OUR COMPANY

We were  incorporated  as Meridian  Holdings,  Inc.  ("Meridian")  in Florida in
August 1994 for the purpose of merging,  as the  surviving  entity,  with a then
public "shell" entity, MHI Telecommunications, Inc. ("MHI Telecom"). MHI Telecom
was a Delaware  corporation  that had sold  shares to the public  pursuant  to a
Regulation  A  exemption  from  registration  during  1969  under  its  original
corporate name of Pilgrim Mills, Inc. From 1985 through August 1994, MHI Telecom
had not actively been engaged in any business operations.

In August 1994, the  shareholders of MHI Telecom and Meridian  approved a merger
of MHI Telecom into Meridian and a  simultaneous 1 for 40 reverse stock split of
Meridian's   outstanding  shares.  At  the  same  time,  the  shareholders  also
authorized  Meridian to raise working capital through an appropriate  financing,
and to acquire an operating business or otherwise engage in, or conduct,  active
business  operations.  Through the end of 1998,  Meridian  did not engage in any
fund  raising,  other than the  issuance  of shares to certain  shareholders  in
exchange  for  services  and the  advancement  of  minimal  funds on  behalf  of
Meridian.

On December 3, 1999, Meridian changed its name to Meridian USA Holdings, Inc. On
October 1, 2001, we changed our name to ChampionLyte Products, Inc. and on March
7, 2003 we changed our name to Championlyte Holdings, Inc.

In December 2002, a 67% ownership  interest in Old Fashioned was relinquished as
part of a foreclosure  action on a $15,000  advance made to us in November 2002.
As a consequence of losing  control of such business,  we recorded Old Fashioned
as a discontinued business. In July 2003, we entered into a Settlement Agreement
that  returned the 67%  ownership  interest in Old Fashioned to us, which became
effective August 20, 2003 for $135,000.  The acquisition was accounted for under
the purchase method of accounting.

On March 18,  2003,  we amended  our  Articles  of  Incorporation  to change the
authorized  stock structure such that the common stock  authorized was increased
from 40,000,000 to 200,000,000  shares,  and our preferred stock authorized from
100,000 shares to 2,000,000 shares.

On March 25, 2003, we created a  subsidiary,  Championlyte  Beverages,  Inc., to
engage in the production  and sale of the  Championlyte  products.  On March 17,
2004, we created a subsidiary,  Be-Lyte Foods, Inc., to engage in the production
and sale of low  carbohydrate  snacks.  This  subsidiary  has been on hold until
financing is available.

In August 2004,  we signed a $20M Standby  Equity  Distribution  Agreement  with
Cornell Capital  Partners,  L.P. This agreement was terminated in April 2005 and
shares issued to Cornell Capital Partners,  L.P. were cancelled.  The parties to
the agreement are in the process of signing a new agreement.

On April 11, 2005,  David Goldberg  loaned us an additional  $53,058.16 for back
payroll tax liability.

In March  2005,  we  signed a  non-binding  letter of  intent  with  Specialized
Services,  Inc.  ("SSI") whereby we would receive  $500,000 and SSI would become
our wholly owned subsidiary.


PRODUCT OVERVIEW

We created a sugar, carbohydrate,  and calorie free isotonic sports beverage. It
does so without any of the  negative  ingredients  such as sugar,  caffeine,  or
carbonation.  This reformulation has enabled us to produce a product without the
use of  preservatives.  Our  product  is  delivered  in  five  different  flavor
beverages.

We recently  reformulated  the sports drink with the sweetener  Splenda(R),  the
trade name for Sucralose  produced by McNeil  Nutritionals,  a Johnson & Johnson
company. We also switched flavor houses,  reduced sweetener levels, added flavor
and took  out  preservatives.  ChampionLyte(R)  will  continue  to have no label
warnings. The products that currently dominate the market have between 33 and 38
grams of sugar and up to 150  calories  in a 20 ounce  bottle.  ChampionLyte(R),
which is available in lemon-lime,  orange,  fruit punch,  pink lemonade and blue
raspberry,  is a  "no  guilt"  sports  drink  meaning  it  provides  electrolyte
replacement without sugar, fat, calories, preservatives or carbohydrates.

The  major  advantage  of  ChampionLyte(R)  is  that it  replaces  electrolytes,
especially  after exercise,  without the  ingredients,  which would cause weight
gain - particularly  sugar.  For example:  if a man or woman runs on a treadmill
for 30  minutes  they  would burn about 150  calories.  By  drinking  one of the
popular  major brand sports  drinks that contain 33 to 37 grams of sugar (that's
33 to 37 individual one-gram packs of sugar) after working out on the treadmill,
they would either cancel out the calories they just burned off, or actually gain
more calories than burned during the workout.

Our goal is to accelerate our sales efforts to a variety of outlets, both retail
and  institutional,  that have the  capacity to put us in a  cash-flow  positive
situation as quickly and cost efficiently as possible.

The Old Fashioned Syrup Company  manufactures  and sells a sugar-free,  fat-free
syrup in three flavors,  chocolate,  strawberry and vanilla. In October 2004, we
ceased production of the Old Fashioned Syrup Company in order to reformulate the
product.


                                       1
<PAGE>


SUPPLY ARRANGEMENTS

All raw  materials  for our  products  are  purchased  on an as needed  basis to
fulfill  orders.  Terms are net 30 days for all  suppliers.  Each  component  is
purchased  from  different  suppliers.  As our inventory  levels are depleted by
production, we place additional orders with suppliers to keep inventory on hand.

CO-PACKING ARRANGEMENTS

We  have  finalized  agreements  with  co-packers  as of  this  date  and we are
researching  logistics  and  geographics  to determine  where to set  additional
co-packing arrangements.  We commenced our first product run on May 27, 2003 and
continue to produce on a monthly  basis.  The two  co-packers we currently  work
with cover the southeast and northeast of the United States.  As of December 31,
2004,  we  had  $1  million  of  liability  insurance  and  the  co-packers  are
responsible for their own liability  insurance.  The co-packer is paid according
to the work they do for us. Our liability insurance lapsed in early 2005.

We will  continue  to  manufacture  and bottle  our  products  under  co-packing
arrangements.  We are currently  investigating  additional  regional  co-packing
facilities.  This process  involves us providing the co-packers with proprietary
concentrates, formulas, and labels for our products. This work is performed on a
per case basis cost.

We have  chosen  to  operate  through  co-packing  arrangements  to enable us to
produce and deliver our  products  without the capital  costs  required to build
full-time production  facilities.  We need not pay employees during down-time in
production or to invest capital in inventory or equipment.

SALES

Using a distributor network, as well as our in-house sales team, we will utilize
our  relationship  with previous  distributors to recapture lost business due to
lack of  product  availability  to the  market.  We will  aggressively  seek new
distributors to expand our business both nationally and internationally.

In order to attain a solid foundation,  we will maximize our efforts towards the
Southeast  region of the United States.  Once we have achieved this success,  we
can then  replicate  this sales  model into  other  areas such as New York,  New
Jersey and Connecticut (Northeast).  This approach will help us create the model
needed to move forward  towards our  anticipated  national  distribution  of our
products.

Our  product is  distributed  through a series of brokers  and  distributors.  A
broker,   for  a  fee,  will  find  customers  to  purchase  products  from  the
manufacturer.  The  broker  will  not  take in  product,  but is  merely a sales
conduit.  The distributor takes possession of the product and is responsible for
payment of the  product,  whereby the broker,  does not take  possession  of the
product,  nor is he  responsible  for  payment,  as the  customer  will  pay the
manufacturer  directly.  Our in-house sales team is composed of four people with
extensive sales backgrounds.  Our advertising  efforts will be kept to a minimum
until  distribution  is  strengthened  and our  product is visible on shelves to
consumers. Our contracts with distributors are all volumetric/performance  based
contracts.

TARGET CONSUMER

America's number one shopper is "Coach Mom" who buys for herself,  her children,
and her parents which is three generations of consumers.  For Championlyte,  the
target consumer is the actual people involved in sports, and/or everyday outdoor
activities,  as well as all who are concerned  with calorie  intake and those on
sugar  restricted  and/or weight loss diets.  In addition,  we have the diabetic
community with 17 million known diabetics.

Sugar free diet carbonated beverage sales have already escalated to 30% of total
carbonated beverage sales.

The Weston A. Price foundation has encouraged  congress to call for a ban on the
sale of soft  drinks and snack  foods in school  vending  machines.  Soft drinks
contain high levels of sugar or artificial  sweeteners,  caffeine and phosphoric
acid,  that  contribute  to  obesity,  diabetes  and poor bone health in growing
children.  Therefore,  we believe that we can supply a healthful  alternative to
sugar laden beverages.

MARKET

Our  customers  are  supermarket  chains,  convenience  stores,  drug chains and
independent and mass marketers.  In addition, we believe that we will be able to
market  our  product  to food  service  customers  such as  schools,  hospitals,
prisons,  gyms,  and health food  outlets.  We are not dependent on one or a few
major customers.

Our management believes that our products and our network of distributors should
enable us to  penetrate  the retail and food  service  market.  Through our food
brokers,  we are  attempting  to  place  our  product  in  multiple  supermarket
locations,  i.e.  next to  other  sugared  drink  beverages,  as well as  health
sections, dietetic and diabetic sections.

Our  research  indicates  that no  products  exist in the  market  with the same
qualities as Championlyte.  Therefore,  Championlyte  would not destroy existing
marketplace. Our product would increase sales, not replace sales.


                                       2
<PAGE>


MARKETING

Internal  marketing will be done using a grass roots  philosophy,  with on sight
sampling support, in store flyer programs, point of sales print and radio. In an
ongoing  effort to continue  marketing our product,  we will be attending  trade
shows and conventions, conducting in store promos and using collateral materials
such as posters, flyers, sell sheets, etc.

When it becomes  financially  feasible,  we will bolster this marketing  through
increased radio and print  advertising.  This will continue to support our grass
roots sales and marketing effort.

PRODUCTS AND PACKAGING

Our product is a 20 ounce pet bottle with  locking  caps which comes in cases of
12/20 ounce bottles per case. Pet is defined as polyethlyne  terephthablote.  It
is a certain type of plastic. The product is available in 5 flavors: lemon lime,
fruit punch, orange, pink lemonade and blue raspberry.  A clear version of three
of the flavors has also been  developed for a mass  merchandiser.  We anticipate
that in the future 32 ounce  bottles will be produced.  Multiple  bottle  sizes,
including 8 ounce bottles for  multi-pack  options and single serve food service
are in development. New retail and food service packaging applications are being
developed to expand sales and  availability of the product and to increase sales
in all areas of the isotonic sports drink market.

NEW PRODUCT DEVELOPMENT

We are in the process of developing new flavors such as grape,  kiwi strawberry,
peach tea and tropical  citrus.  Using  natural  fruit  flavors,  we are testing
multiple blends to create innovative and delicious  alternatives to the standard
flavors now  produced.  The basis for expanding our product line is to watch for
trends and re-evaluating current flavor sales.

SARA LEE LICENSE AGREEMENT

We have finalized a license agreement with Sara Lee for the use of the "Champion
lyte" name.  A lawsuit was  commenced by Sara Lee against us. The details of the
lawsuit are contained in the "Legal  Proceedings"  section of this document.  On
April 1, 2003,  the  parties to this case  signed a  settlement  agreement.  The
settlement  agreement provides that we will assign the "Champion lyte" trademark
to Sara Lee and Sara Lee will grant us an  exclusive  license  of the  "Champion
lyte" trademark for sugar-free  sports drinks only in the United States,  Canada
and Mexico.  The terms of the license  agreement are for an initial term of five
(5) years and two  renewal  terms of (5) years  each,  subject to us meeting all
minimum sales and royalty  requirements.  If we meet all requirements  after the
first 3 five year terms,  the parties  agree to  negotiate in good faith for two
additional five year terms. Minimum calendar year sales are as follows:

2003  (measured  from  4/1/03 to 3/31/04) -  $500,000;  2004 - $750,000;  2005 -
$1,000,000; 2006 - $1,250,000; 2007 - $1,500,000;  there will be renewal for the
second 5 years if sales in years 2005-2007 average at least  $1,500,000;  2008 -
2,000,000;  2009;  $2,500,000;  2010 -  $3,000,000;  2011 -  $3,500,000;  2012 -
4,000,000;  there  will be  renewal  for the  third 5 years  if  sales  in years
2010-2012  average at least  $5,000,000;  2013 - $5,000,000,  2014 - $6,000,000;
2015 - $7,000,000; 2016 - $8,000,000; and 2017 - $9,000,000. The failure to meet
the minimum sales  requirements  in any year will result in  termination  of the
license  agreement.  The failure to meet average  stated  results will result in
non-renewal.  The royalties for the license agreement are as follows:  3% on all
sales until sales reach $10,000,000  annually; 5% on all sales after sales reach
$10,000,000; and 6% on all sales after sales reach $15,000,000 annually.

OLD FASHIONED SYRUP COMPANY

On January 8, 1999, when we were called Meridian Holdings, Inc., we entered into
an acquisition  agreement with the Old Fashioned Syrup Company, Inc. (The "Syrup
Company"),  under which we issued  3,026,794  shares of our common  stock to the
shareholders of the Syrup Company in a tax-free  exchange of shares. At the same
time, we entered into a stock  purchase  agreement  with one of our founders and
current  directors  whereby we purchased 100,000 shares of our common stock from
him for the sum of $50,000. The shares repurchased were retired by us.

The Syrup  Company,  which was  incorporated  in Florida in November  1996,  was
founded by Alan Posner and Mark Streisfeld to manufacture and sell a sugar-free,
fat-free  chocolate  flavored syrup they had developed.  Commencing in 1998, the
Syrup  Company  sold its  syrup  under its  trademark  the Old  Fashioned  Syrup
Company(R).  Shortly prior to the  acquisition by us, the Syrup Company  entered
into a license  agreement with Cumberland  Packing Corp. For use of the Sweet 'n
Low trademark  for its syrup  product.  The Syrup  Company has two  wholly-owned
subsidiaries,  the Old  Fashioned Egg Cream  Company,  Inc. and the Original Egg
Cream Company, Inc., both of which are Florida corporations.

On November 27, 2002,  Alan Posner,  our previous  chief  executive  officer and
chairman  of our  board  of  directors  entered  into  a  promissory  note  with
Inglobalvest,  Inc. in which we received  $15,000  which was payable on December
13, 2002 at a 10% interest rate.  The  promissory  note was entered into without
the approval of our board of directors and allowed  Inglobalvest to receive a 66
2/3% interest in our wholly owned  subsidiary,  the Old Fashioned Syrup Company,
Inc. We  subsequently  defaulted on the promissory note on or about December 14,
2002 and Inglobalvest  took the shares of the Syrup Company as well as the books
and  records of the Syrup  Company  from our  previous  corporate  counsel.  The
issuance of the promissory  note and  subsequent  release of the interest in the
Syrup  Company  may be deemed  to be a breach  of the  terms of our  outstanding
preferred stock and the terms of the security holder  agreement  attached to our
preferred stock. Such agreement did not allow us to incur indebtedness, the sale
of assets or the  creation  of liens on our assets  without  the  consent of the
holders of our preferred stock.


                                       3
<PAGE>


Since we failed  to  receive  the  consent  of US  Bancorp.,  the  holder of the
preferred  stock at the time the promissory  note was entered into, we may be in
default under the terms of our preferred stock. In addition,  our new management
has been advised that we received offers from several potential investors to pay
this debt and avoid the default of the promissory note. On May 28, 2003 we filed
a complaint  against  Inglobalvest,  Inc., Steve Sherb,  Barry  Patterson,  Uche
Osuji,  John Doe #1,  Alan  Posner  and  Christopher  A.  Valleau  alleging  the
fraudulent conveyance of our Old Fashioned Syrup Company, Inc. subsidiary.  Such
complaint was filed in the circuit court of the 15th judicial circuit in and for
Palm Beach County, Florida and was for monetary damages, injunctive, declaratory
and equitable relief.

The suit alleged the defendants  engaged in a fraudulent scheme to deprive us of
our  principal  asset and  primary  source of  revenue  for  grossly  inadequate
consideration  (only  $15,000)  without  notice  of  approval  of our  board  of
directors,  without notice and approval of U.S. Bancorp  Investments,  Inc. (the
holder of our preferred stock),  as required by the terms of certain  agreements
and our amended  articles of  incorporation,  without notice and approval by the
shareholders  at large as required by Florida  statutes for sales of assets of a
corporation other than in the regular course of business and in violation of the
antifraud provisions of the Florida Securities Investor Protection Act.

On July 21, 2003, we reached a settlement with Inglobelvest,  Inc., Steve Sherb,
Barry  Patterson,  Uche Osuji,  John Doe #1 and  Christopher A. Valleau.  We are
still  attempting  to negotiate a settlement  with Alan Posner.  The  settlement
agreement  provided  that  Inglobelvest  must  deliver  all  shares  of the  Old
Fashioned Syrup Company ("OFSC"),  as well as its books and records to our legal
counsel by August 20, 2003. In  consideration  for this,  we paid  Inglobalvest,
Inc. the sum of $135,000 as follows:  $20,000 upon  execution of the  settlement
agreement  and  $115,000  on August  20,  2003.  The  $135,000  was based on the
settlement  figure of $125,000 plus an  additional  $10,000 paid pursuant to the
section of the settlement  agreement that allowed for a capital call to facilate
the capital  requirements  of the Old Fashioned  Syrup  Company.  As part of the
settlement,  we agreed to the following conditions:  (i) Churchill  Investments,
Inc., which provides  factoring for us, has agreed to assign its UCC-1 financing
statement for the first $50,000 on our accounts receivable, equipment, inventory
and general  intangibles  which it  currently  holds as  security;  (ii) issue a
written  statement  which  exculpates  Inglobalvest,  Inc.,  Steve Sherb,  Barry
Patterson  and Uche  Osuji  from any  fraudulent  acts in the  complaint;  (iii)
payment of $3,000 to Christopher A. Valleau in six equal monthly installments of
$500 each and Mr.  Valleau  will  forfeit the  balance of his unpaid  salary and
retire all stock options.

On August 20, 2003, all terms of the settlement  agreement were satisfied and we
reacquired the Old Fashioned Syrup Company.

On December 1, 2004 our license  agreement with Cumberland  Packing  corporation
for use of their Sweet 'n Low  trademark  was  amicably  terminated.  Cumberland
agreed to waive all of its rights to accrued  and unpaid  royalties  in exchange
for our relinquishing all rights provided for by the license agreement.

We have  currently  reformulated  the syrup and  found a new  co-packer.  We are
currently awaiting financing to commence operations again.


BEVSYSTEMS INTERNATIONAL, INC.

We entered  into a Strategic  Marketing  Agreement  ("SMA") in January 2003 with
BevSystems International,  Inc. ("BEVI"),  another small publicly traded company
in the business of beverage products, whereby BEVI agreed to issue shares of its
common stock to us in an amount equal to $125,000 per month.  We agreed to issue
50,000 shares of our  restricted  stock per month to BEVI under this  agreement.
These  shares  carry  piggyback  registration  rights,  which  do  not  have  an
expiration  date.  We also  agreed  to pay BEVI up to  $100,000  per  month  for
services  rendered by BEVI relating to the use of their  beverage  knowledge and
distribution  resources.  Each entity was entitled to 50% of the profits derived
from  distributing  the other firm's beverage  product.  Such agreement has been
cancelled by the parties with no additional  consideration  due to either party.
The  agreement  was  cancelled on May 20, 2003.  Under the SMA,  Bevsystems  was
issued 50,000 shares of our common stock and we were issued  1,715,000 shares of
Bevsystems common stock, which we subsequently transferred to two consultants in
lieu of cash payment for services  rendered.  No money was exchanged pursuant to
the SMA.

COMPETITION

In the soft drink category, our leading competition account for more than 85% of
the  entire  market.   These  companies  are  substantially  larger  and  better
established  than we are.  This  allows  them not only to commit  more  money to
marketing  and  advertising,  but affords them access to greater shelf space and
prominence in food stores,  which is a key to success in the food  industry.  We
believe  that the  ability  to compete  successfully  with  these  companies  is
dependent primarily upon our ability to produce a tasty,  sugar-free alternative
to the  existing  sugared  drinks and to persuade  food  retailers  to carry our
products.  We  continue  to  refine  the  taste of our  products.  However,  the
competition for shelf space in food retail  establishments  is extremely intense
and the ability to obtain such shelf space is essential to the potential success
of these products.

EMPLOYEES

As of December 31, 2004, we employed three people on a full-time  basis. We will
employ additional people as we continue to implement our plan of operation. None
of our  employees  are  covered by a  collective  bargaining  agreement,  and we
believe that our relationship with our employees is satisfactory.

ITEM 2. DESCRIPTION OF PROPERTY

As of December 31, 2004, we were subleasing  approximately  1,000 square feet of
office space at 3450 Park Central Blvd., N. Pompano Beach, Florida. The lease is
for a 1 year period commencing November 1, 2003. We pay $2,000 a month. In March
2005, we were moved from our office.  We intend to occupy temporary office space
in the future.




                                       4
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

Championlyte Holdings,  Inc. f/k/a Championlyte Products,  Inc. v. Inglobalvest,
Inc., Steve Sherb, Barry Patterson,  Uche Osuji, John Doe No. 1, Alan Posner and
Christopher A. Valleau, Case No.  502003CA005662AFXXOCAF  (Florida Circuit Court
Palm  Beach  County).  On or about May 28,  2003,  we filed a  complaint  in the
Circuit Court for the Fifteenth  Judicial Circuit of Palm Beach County,  Florida
against the above-named defendants for monetary damages, injunctive, declaratory
and other equitable  relief,  and Demand for Jury Trial. The complaint  alleges,
among other things,  that Defendants Alan Posner,  our former Chairman and Chief
Executive  Officer,  Christopher  A.  Valleau,  our former  principal  financial
officer  and  Director,  and the  other  defendants  named  above  engaged  in a
fraudulent scheme to deprive us of our controlling ownership interest in The Old
Fashioned Syrup Company, Inc. ("Syrup") for the grossly inadequate consideration
of $15,000.  After filing the lawsuit,  defendants,  Inglobalvest,  Inc.,  Steve
Sherb,  Barry  Patterson  and Uche  Osuji  worked  with us to achieve a mutually
satisfactory resolution of the dispute that resulted in us reclaiming control of
the Syrup company.  As part of the  settlement  reached with  Inglobalvest,  and
Messrs.  Sherb,  Patterson  and Osuji,  the claims  asserted  against  them were
dismissed,  with prejudice, and we agreed that Inglobalvest,  and Messrs. Sherb,
Patterson and Osuji should be considered fully exonerated from any fraudulent or
wrongful acts or  liabilities in connection  with the complaint.  This statement
does not apply to Messrs.  Valleau and Posner.  While we have agreed, as part of
the settlement  reached with Mr. Valleau,  to dismiss the complaint against him,
without prejudice, the complaint against Mr. Posner is still pending. Posner has
asserted  counterclaims  against us for alleged  conversion  of  securities  and
breach of employment  contract.  We are currently engaged in ongoing  settlement
negotiations  with Posner to resolve all claims  between  the  parties.  We have
reached a verbal  agreement  with  Posner,  in  principle  wherein  Posner shall
execute a stock assignment  separate from certificate to transfer 800,000 shares
of the  Championlyte  shares to us and full general  release and dismissal  with
prejudice  of our claims  against Mr.  Posner.  A draft of a written  settlement
agreement is currently being exchanged between the parties for execution.

Atico  International  USA,  Inc.  ("Atico")  claims  that we owe it a  total  of
approximately at least  $160,873.68  pursuant to an agreement dated February 27,
2002.  We believe that we may have  counterclaims  that are capable of assertion
against  Atico which may  operate as a set off to the claims of Atico.  Although
litigation has been threatened by Atico, we have been engaged with Atico in good
faith  settlement  negotiations  since in or about  September  2003.  Due to the
uncertainty,  risks, and costs associated with a possible contentious litigation
proceeding,  we are currently  attempting to amicably  resolve this dispute with
Atico in a share amount  equivalent to a value of approximately  $90,000.00.  No
definitive settlement agreement has been reached with Atico at this time.

On October 16, 2003, Wainwright,  Inc.  ("Wainwright") obtained a Final Judgment
for $24,000.00  against us in Wainwright,  Inc. v. ChampionLyte  Products,  Inc.
f/k/a Meridian USA Holdings,  Inc., Case No. CA 03-01995 AD (Fla. Cir. Ct., Palm
Beach  County).  We have  engaged in good  faith  settlement  negotiations  with
Wainwright in an attempt to compromise the Final  Judgment.  We settled the case
for $15,000 payable in monthly installments  commencing on May 31, 2004 with the
final payment made on January 31, 2005. We have requested that Wainwright file a
Satisfaction of Judgment with the Circuit Court.

On July 1, 2003,  we received a letter from the attorney  for Diabetes  Research
Institute  Foundation,  Inc. providing formal notice of termination of a license
agreement that The Old Fashioned Syrup Company entered into and claiming that we
owe the  following  pursuant to such  license  agreement:  (i) an  aggregate  of
$30,000 in base  royalties for 2001,  2002 and 2003;  (ii) 0.25% of net sales in
2001;  0.50% of net sales in 2002,  of all  products  using  the mark  "Diabetes
Research Institute," as well as late payment charges,  which are at a rate of 3%
above prime rate. We negotiated a settlement of $17,000, payable in installments
of $1,500 per month.  As of April 13, 2005,  we  presently  still owe the sum of
$3,000.

On or about December 9, 2003, we were served with an Amended  Complaint  seeking
$3,282.30 in damages for alleged breach of contract in Read Exhibition Companies
v.  ChampionLyte,  Inc., Case No. 2003 CC-021380  (County Ct., Palm Beach County
Fla.).  We negotiated a settlement  which resulted in us agreeing to pay a total
of $3,282.30,  in monthly  installments of $1,641.15 each commencing on February
1, 2004 and  concluding on March 1, 2004.  We made all of the required  payments
due  under  the  settlement  agreement  and  this  action  was  dismissed,  with
prejudice, on February 10, 2004.

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

NONE.


                                       5
<PAGE>


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On December 31, 2004, our transfer  agent records  indicated that there were 484
shareholders of record of our common stock owning  44,421,899  shares.  Based on
information  received  from  brokers  and  others in  fiduciary  capacities,  we
estimate that the total number of  shareholders of our common stock exceeds 500.
Our shares of common stock are currently  traded on the OTC Electronic  Bulletin
Board under the symbol "CPLY."


The following  table sets forth the high and low bid prices for the common stock
since the first quarter of 2003.

YEAR     QUARTER                    HIGH             LOW

2003     First                      0.24             0.07
2003     Second                     0.53             0.065
2003     Third                      0.31             0.13
2003     Fourth                     0.30             0.12
2004     First                      0.225            0.136
2004     Second                     0.25             0.111
2004     Third                      0.13             0.06
2004     Fourth                     0.105            0.035

2005     First                      0.06             0.025


The above  quotations  reflect the  inter-dealer  prices without retail mark-up,
mark-down or commissions and may not represent actual transactions.

DIVIDENDS

We paid no  dividends  with  respect to our common stock during 2004 and have no
current intention to pay any dividends.


                                       6
<PAGE>


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

Revenues from  operations  for the year ended  December 31, 2004 were  $690,511,
compared to $410,351 for the year ended December 31, 2003. The increase in sales
was due to our increased sales effort,  as well as reformulating our product and
creating a new marketing and distribution  system. We had nominal  operations as
we were during the first six months of 2003 do to a restructuring which resulted
in limited  sales.  We did not begin shipping  product until June 2003,  when we
reformulated  our products.  The Company had lower then  expected  sales for the
year ended  December  31 2004.  This was mainly do to the  Company  ceasing  the
distribution  of its Old Fashioned Syrup in October 2004. The Company has formed
a new subsidiary called Be-Lyte Foods Inc., and is currently  exploring products
in the low carbohydrate snacks market.

We  reformulated  our  drink  products  by  switching  flavor  houses,  reducing
sweetener  levels,  adding  flavor and taking out  preservatives.  Since we have
reformulated our product, we expect to increase sales in the future.

Our gross profit margin was 14% for the year ended December 31, 2004 compared to
18% for the year ended  December 31, 2003. We shipped only limited  products for
first six months of 2003 due to our  restructuring.  Our gross profit margin has
decreased as a result of increased transportation costs and an inability to take
advantage of manufacturer discounts.

Selling,  general and  administrative  expenses  decreased to $1,532,875 for the
year ended  December 31, 2004 from  $2,631,306  for the year ended  December 31,
2003. The decrease in selling,  general and administrative expenses is primarily
the result of decreased  consulting and professional  fees and of a reduction in
payroll expenses.

The net result of these efforts was to decrease the loss from operations  before
other income  (expense)  to  $1,434,908  for the  year  ended  December 31, 2004
compared to $2,556,954 for the year ended December 31, 2003.

Gain on  forgiveness  of trade  payables  amounted to $34,809 for the year ended
December  31, 2004  compared to $363,877  for the year ended  December 31, 2003.
This relates to several  trade  payables  that were settled for reduced  amounts
then had been  previously  recorded.  We are still in  negotiations  with  other
vendor's in attempts to settle our payables.

Interest and financing  expense amounted to $634,205 for the year ended December
31, 2004 compared to $602,259 for the year ended December 31, 2003.  Included in
interest  expense for the year ended  December 31, 2004 is $ 269,741  related to
the  beneficial  conversion  feature  of the  convertible  promissory  notes and
warrants  entered  into by us and $364,464 in interest  and  financing  expenses
related to various notes payable.

The net effect  resulted in a net loss for the year ended  December  31, 2004 of
$2,034,304  compared to a net loss of $2,898,192 for the year ended December 31,
2003.

Basic and diluted loss per share available to  common shareholders  was $.06 for
the  year ended  December 31, 2004 compared to $.15  for the year ended December
31, 2003.



                                       7
<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

Our available  cash at December 31, 2004 was $0. We received  financing  through
notes  payable of $740,490.   Convertible notes at December 31, 2004, consist of
promissory  notes  to an  investment  fund,  Advantage  Fund I,  LLC,  and  four
investment  companies  Alpha  Capital  AG, ("Alpha") Gamma  Opportunity  Capital
Partners,  L.P. ("Gamma"),  Latitude Asset  Investments  Corp.  ("Latitude") and
Cornell Capital Partners,  LLP. ("Cornell").  The promissory notes are currently
in default since  December 31, 2004. As of today,  none of the  promissory  note
holders have sent default  notices or  attempted  to  accelerate  payment on the
promissory   notes.  Some  of  the  owners  of  the  investment  fund  are  also
shareholders  of the Company.  The  notes  with  Advantage  were for funds to be
disbursed to satisfy our obligations as needed.

Detailed matters regarding the notes payable are as follows:

The note with  Advantage was  originated in January 2003. It bears interest at a
rate of 6.5% per annum and is convertible into shares of our common stock with a
conversion  price per share  equal to the lesser of the average of the lowest of
three day trading prices during the five trading days  immediately  prior to the
conversion  date  multiplied  by .70 or, the  average of the lowest of three day
trading  prices during the five trading dates  immediately  prior to the funding
dates.  The note is  convertible,  in whole or in part,  at any time  after  the
issuance of the note. The  convertible  note with Advantage is $1,250,000 and is
due December 31, 2004.

Advantage is the holder of a Series A Convertible Note from the Company that has
been  amended at various  times from  January 7, 2003 to March 2004 for the full
amount of $1,250,000. Of such amount $50,000 was previously sold by Advantage to
an independent  third party. In August 2004,  Advantage sold a total of $400,000
worth of such convertible note to Cornell. Upon receipt of the funds,  Advantage
immediately  reinvested  $165,000  into the Company.  In  consideration  for the
$165,000 the Company issued a convertible  promissory note dated August 5, 2004.
Pursuant to this Note,  the Company  issued  165,000  shares of the class of its
Preferred Stock known as Series III Preferred  Stock,  par value $1.00 which has
the same rights and  privileges  as the Company's  Series IV Preferred  Stock in
consideration for the satisfaction of the note.

In June 2004, the Company received $50,000 from Triple Crown  Consulting,  Inc.,
and entered into a $50,000 Series B 6.5%  Convertible  Promissory Note. The note
provides  the holder with the right at any time to convert  into common stock of
the Company as  follows:  The  Conversion  Price per share shall be equal to the
lesser of (1) the average of the lowest of three-day  trading  prices during the
five trading days immediately prior to the Conversion Date multiplied by .70, or
(2) the  average  of the  lowest of  three-day  trading  prices  during the five
trading days immediately prior to the funding date(s).

The Company has promissory  notes with two unrelated  third  parties,  Alpha and
Gamma  representing the $250,000  assigned to them. The notes mature on December
31,  2004  and  bear  interest  at a rate of  6.5%  per  annum.  The  notes  are
convertible  into shares of the  Company's  common stock at a  conversion  price
equal to the lesser of (1) the  average  of the lowest of the three day  trading
price during the five trading days  immediately  prior to the  conversion  date,
multiplied by .80%, or (2) the average of the lowest of three day trading prices
during the five trading days immediately  prior to the funding date.  During the
quarter ended March 31, 2004,  Alpha  exercised the conversion of $12,500 of its
note for 178,571 shares of the Company's  common stock.  Towards the end of July
2004 Alpha requested the conversion of $10,000 of its note for 142,857 shares of
the Company's common stock.

In June 2004  amounts owed to an  individual  note  holder,  Joan Ann  Forniero,
aggregating  $30,000 plus $2,238 of accrued interest were converted into 302,251
shares of common stock.

At December 31, 2004 amounts owed to Advantage and Cornell  amounted to $470,002
and $368,169,  respectively.  Triple Crown Consulting,  Inc. aggregated $50,000,
Alpha and Gamma  aggregated  $227,500  and amounts  owed to Latitude  aggregated
$135,000. Accrued interest of $50,203, $10,296 and $14,592 due to the investment
funds,  Triple Crown  Consulting,  Inc., and Alpha and Gamma,  respectively,  is
included in accrued expenses in the accompanying consolidated balance sheet.


                                       8
<PAGE>



The note with  Latitude for $135,000 was  originated on August 15, 2003 in order
to fund the acquisition of Old Fashioned.  The note matures on October 14, 2004,
but was  subsequently  extended to January 15, 2004 and bears interest at a rate
of 6.0% per year.  If the note is still  outstanding  after six months  from the
origination  date, then at the option of the holder,  the principal plus accrued
interest may be converted into 51% of the issued and outstanding common stock of
Old  Fashioned.  In  addition,  until  the note is paid in full,  the  holder is
entitled  to 15% of Old  Fashioned's  cash  flow,  defined as net  income,  plus
depreciation and interest minus capital expenditures. As of December 31, 2004 no
payments  have  been  made to  Latitude,  no  amounts  related  to the cash flow
provision were due and the note holder had not converted  principal in to common
stock of Old  Fashioned.  In  January  2005,  Latitude  holders  of  Convertible
promissory  notes had $135,000  promissory notes converted into 5,500,000 shares
of the Company's common stock.

At December  31, 2004 no amounts  were due to the  financial  services  company,
Churchill  Investments,  Inc. At this time, the Old Fashioned  Syrup Company and
the Company each have $500,000 available based on the above facilities.

On August 9,  2004,  the  Company  entered  into a Standby  Equity  Distribution
Agreement with Cornell.  Pursuant to the Standby Equity Distribution  Agreement,
the Company may, at our  discretion,  periodically  issue and sell shares of our
common stock for a total purchase price of $15 million.  If the Company requests
advances under the Standby Equity Distribution Agreement,  Cornell will purchase
shares of common  stock of the  Company  for 98% of the lowest  volume  weighted
average price on the  Over-the-Counter  Bulletin Board or other principal market
on which our common  stock is traded for the 5 days  immediately  following  the
advance  notice date.  Cornell will retain 5% of each advance  under the Standby
Equity Distribution Agreement. The Company may not request advances in excess of
a total of $15 million.  The maximum of each  advance is equal to  $400,000.  In
connection with the Standby Equity  Distribution  Agreement,  the Company issued
8,315,789  shares  of our  common  stock  valued at  $790,000  to  Cornell  as a
commitment  fee and we issued  105,263  shares  of our  common  stock  valued at
$10,000 to Newbridge Securities as a placement agent fee. Such amounts have been
recorded as deferred offering fees on the consolidated balance sheet at December
31, 2004.  The Agreement  with Cornell was  terminated on April 15, 2005 and the
8,315,789 shares were cancelled.

At this time, we are actively  seeking  additional  sources of capital that will
enable us to achieve  the  long-term  objectives  of  nationally  marketing  the
product lines and new distribution  system.  There can be no assurance that this
additional  funding  will  become  available.  Should  such  funding  not become
available we may have to cease operations and liquidate.

                                       9
<PAGE>


CONVERSION OF NOTES PAYABLE

In March 2004, Alpha, a holder of a convertible  promissory note, had $12,500 of
its promissory note converted into 178,571 shares of the Company's common stock.

In June 2004, an individual,  Joan Ann Forniero,  holding a $30,000  convertible
promissory  note requested that the full note and interest  payable of $2,238 be
converted  into  302,251  shares of common  stock in  accordance  with the notes
provisions.

In July 2004,  Alpha  converted  an  additional  $10,000 of its note for 142,857
shares of the Company's common stock.

In August 2004, Cornell, holders of convertible promissory notes, had $11,831 of
its  promissory  notes  converted  into 188,686  shares of the Company's  common
stock.

In December 2004, Cornell,  holders of convertible  promissory notes,  converted
$20,000 of its promissory notes into 422,466 shares of our common stock.


FUTURE OUTLOOK

We have finalized our corporate  restructure moving Championlyte into a beverage
susidiary.  We have taken all steps to improve our  products and reduce costs by
switching flavor houses,  reducing  sweetener levels,  adding additional flavors
and  removing the  preservatives.  We  reformulated  the new product on July 30,
2003. We will continue to focus on the trends of the industry and continue to be
innovative  to  grow  our  business.   These  additional  changes  will  require
additional  financing for us and there can be no assurances  that we will obtain
any of the additional financing needed to accomplish our plans. If we are unable
to secure  additional  financing to complete our restructuring and implement our
plans, we may be forced to cease operations.

CRITICAL ACCOUNTING POLICIES

We have  identified  the  policies  outlined  below as critical to our  business
operations and an  understanding  of our results of operations.  The list is not
intended to be a comprehensive list of all of our accounting  policies.  In many
cases,  the accounting  treatment of a particular  transaction  is  specifically
dictated by accounting  principles generally accepted in the United States, with
no need for  management's  judgment  in their  application.  The  impact and any
associated  risks  related  to these  policies  on our  business  operations  is
discussed throughout  Management's Discussion and Analysis or Plan of Operations
where such policies affect our reported and expected  financial  results.  For a
detailed  discussion on the application of these and other accounting  policies,
see the Notes to the  December  31,  2004  Financial  Statements.  Note that our
preparation  of the  financial  statements  requires  us to make  estimates  and
assumptions that affect the reported amount of assets, liabilities, revenues and
expenses,  and related disclosure of contingent assets and liabilities.  Certain
of the estimates and assumptions  required to be made relate to matters that are
inherently uncertain as they pertain to future events. While management believes
that the  estimates  and  assumptions  used  were the most  appropriate,  actual
results  could  differ   significantly  from  those  estimates  under  different
assumptions and conditions.  The following is a description of those  accounting
policies  believed by management  to require  subjective  and complex  judgments
which could potentially affect reported results.

REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE

Revenue is recognized on sales of products when the customer  receives  title to
the goods, generally upon delivery.  Revenue is recorded on a gross basis, since
the Company is responsible for fulfillment,  including the  acceptability of the
products and services ordered by the customer. Management believes that adequate
controls  are  in  place  to  ensure  compliance  with  sales  arrangements,   a
substantial  history of such  performance  has been  established  and historical
returns and  allowance  have not been  significant.  If actual sales returns and
allowances  exceed  historical  amounts,  the Company's sales would be adversely
affected.

Accounts receivable are recorded at the outstanding amounts net of the allowance
for doubtful accounts. Estimates are used in determining the Company's allowance
for  doubtful  accounts  based on  historical  collections  experience,  current
economic  trends and a percentage of its accounts  receivable by aging category.
In determining these percentages,  the Company looks at historical write-offs of
its  receivables.  The Company also looks at the credit  quality of its customer
base as  well as  changes  in its  credit  policies.  The  Company  continuously
monitors  collections and payments from its customers.  While credit losses have
historically  been  within  expectations  and the  provisions  established,  the
Company  cannot  guarantee  that it will continue to experience  the same credit
loss  rates  that it has in the past.  The  Company's  net  income  is  directly
affected by management's estimate of the collectibility of accounts receivable.


                                       10
<PAGE>



PROVISION FOR SLOW MOVING OBSOLETE INVENTORY

The  Company  values  inventory  at the  lower  of cost or  market,  cost  being
determined on a first-in, first-out basis. The Company writes down its inventory
for estimated  unmarketable  inventory or  obsolescence  equal to the difference
between  the  cost  of  inventory  and  the  estimated  market  value  based  on
assumptions  about  future  demand  and  market  conditions.  If  actual  market
conditions  are less favorable  then those  projected by management,  additional
inventory write-downs may be required.

LONG-LIVED ASSETS

On a periodic basis,  management  assesses whether there are any indicators that
the  value  of its  long-lived  assets  may be  impaired.  An  asset's  value is
considered  impaired  only if  management's  estimate of current  and  projected
operating cash flows  (undiscounted  and without interest  charges) of the asset
over its remaining useful life is less than the net carrying value of the asset.
Such cash flow  projections  consider  factors such as expected future operating
income, trends and prospects, as well as the effects of demand,  competition and
other factors. To the extent impairment has occurred, the carrying amount of the
asset would be written down to an amount to reflect the fair value of the asset.

The Company is required to make  subjective  assessments as to whether there are
impairments in the value of its  long-lived  assets and other  investments.  The
Company's  net  income  is  directly   affected  by  management's   estimate  of
impairments. In determining impairment, if any, the Company has adopted SFAS No.
144.



                                       11
<PAGE>


ITEM 7. FINANCIAL STATEMENTS


                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                                      INDEX
                              DECEMBER 31, 2004 and 2003


                                                                    Page Number

                                                                    -----------

INDEPENDENT AUDITORS' REPORTS                                          F-1

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets at December 31, 2004                       F-2

Consolidated Statement of Operations
 for the years ended December 31, 2004 and 2003                        F-3

Consolidated Statement of Changes in Stockholders' Deficiency
 for the years ended December 31, 2004 and 2003                        F-4

 Consolidated Statement of Cash Flows
  for the years ended December 31, 2004 and 2003                       F-5

 Notes to Consolidated Financial Statements                        F-7 to F-22
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders of:
ChampionLyte Holdings, Inc. and Subsidiaries
Pompano Beach, FL

We have audited the  accompanying  consolidated  balance  sheet of  ChampionLyte
Holdings,  Inc. and Subsidiaries (the "Company") as of December 31, 2004 and the
related statement of operations,  stockholders'  deficiency,  and cash flows for
the years ended December 31, 2004 and 2003.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
consideration  of  internal  control  over  financial  reporting  as a basis for
designing audit  procedures that are appropriate in the  circumstances,  but not
for the purpose of expressing an opinion on the  effectiveness  of the Company's
internal control over financial reporting. Accordingly we express no opinion. An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  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  financial  position  of  ChampionLyte
Holdings,  Inc. and  Subsidiaries  as of December  31, 2004,  and the results of
their operations and their cash flows for the years then ended December 31, 2004
and 2003 in conformity  with  accounting  principles  generally  accepted in the
United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in Note 3 to the
financial  statements,  the Company has experienced  recurring  losses and has a
working capital deficiency,  which raises substantial doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  3.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

MASSELLA & ASSOCIATES, CPA, PLLC

Syosset, New York
April 15, 2005

                                      F-1
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004

                                     ASSETS

Current assets:

      Accounts receivable, net                                      $     9,553
      Inventory                                                          57,464
                                                                    -----------
           Total current assets                                          67,017

Property and equipment, net                                                  --
                                                                    -----------

           Total assets                                             $    67,017
                                                                    ===========

            LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:

      Cash overdraft                                                $    11,277
      Accounts payable                                                  582,940
      Due to officer                                                      8,088
      Convertible notes payable                                       1,250,672
      Payroll taxes payable                                              74,509
      Accrued expenses and other current liabilities                    421,741
                                                                    -----------
           Total current liabilities                                  2,349,227
                                                                    -----------

Series II redeemable convertible preferred stock,
    par value $.01 - authorized  8,500 shares, 0 shares
    issued and outstanding (liquidation value $0)                            --
                                                                    -----------

Commitments and contingencies

Stockholders' deficiency:

      Series I convertible preferred stock, par value $1.00
            -- authorized 100,000 shares, 0
            shares issued and outstanding                                    --
      Series III convertible preferred stock,  par value $1.00
            -- authorized 500,000 shares, 165,000 shares
            issued and outstanding (liquidated value of $165,000)       165,000
      Series IV convertible preferred stock,  par value $1.00
            -- authorized 250,000 shares, 100,000 shares
            issued and outstanding  (liquidation value $100,000)        100,000
      Common stock, par value $.001 - authorized 200,000,000 shares,
           44,421,899 shares issued and outstanding                      44,422
      Additional paid-in capital                                     17,410,588
      Unearned services                                                 (34,119)
      Deferred compensation                                             (29,250)
      Deferred offering costs                                          (800,000)
      Accumulated deficit                                           (19,138,851)
                                                                    -----------

           Total stockholders' deficiency                            (2,282,210)
                                                                    -----------

           Total liabilities and stockholders' deficiency           $    67,017
                                                                    ===========


        The accompanying notes and independent auditors' report should be
               read in conjunction with the financial statements.

                                      F-2
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                      Years Ended December 31,
                                                   ----------------------------
                                                        2004           2003
                                                   ------------    ------------
Net sales                                          $    690,511    $    410,351

Cost of goods sold                                      592,544         335,999
                                                   ------------    ------------

Gross profit                                             97,967          74,352

Selling, general and administrative                   1,532,875       2,631,306
                                                   ------------    ------------

Loss from operations                                 (1,434,908)     (2,556,954)

Other income (expenses):

Licensing revenue                                            --         157,900
Gain on forgiveness of trade payables                    34,809         363,877
Loss on impairment of intangibles                            --        (233,154)
Loss on disposal of fixed assets                             --         (15,815)
Interest and financing expense                         (634,205)       (602,259)
Other income (expenses)                                      --         (11,787)
                                                   ------------    ------------


Other income (expenses), net                           (599,396)       (341,238)
                                                   ------------    ------------

Net loss from continuing operations
 before income tax expense                           (2,034,304)     (2,898,192)
Income tax expense                                           --              --
                                                   ------------    ------------
Net loss                                           $ (2,034,304)   $ (2,898,192)
                                                   ============    ============


Basic and diluted earnings (loss) per share        $      (0.06)   $      (0.15)
                                                   ============    ============

Weighted average number of common shares
  outstanding - basic and diluted                    36,028,793      19,824,491
                                                   ============    ============


        The accompanying notes and independent auditors' report should be
               read in conjunction with the financial statements.

                                      F-3
<PAGE>

                   CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
                                                                                              Series II           Series III
                                                                                              Convertible         Convertible
                                                                     Common Stock          Preferred Stock      Preferred Stock
                                                                 ---------------------  ---------------------- ------------------
                                                                   Shares     Amount      Shares      Amount    Shares    Amount
                                                                 -----------  --------  ----------  ---------- --------  --------
<S>                                                              <C>          <C>       <C>         <C>        <C>       <C>
December 31, 2002                                                 7,559,399   $ 7,560           -   $       -        -   $     -

Conversion of Series II redeemable convertible preferred stock    5,453,915     5,454           -           -        -         -

Issuance of shares for services rendered                         11,506,585    11,506           -           -        -         -

Issuance of shares for settlements of amounts due                 1,751,125     1,751           -           -        -         -

Issuance of shares for compensation                               2,187,665     2,188           -           -        -         -

Issuance of shares to directors                                     550,000       550           -           -        -         -

Issuance of shares in consideration of convertible note payable     400,000       400           -           -        -         -

Conversion of convertible notes payable to common stock           1,412,122     1,412           -           -        -         -

Exercise of options                                                  50,834        51           -           -        -         -

Issuance of options for services                                          -         -           -           -        -         -

Beneficial conversion feature of convertible notes payable                -         -           -           -        -         -

Amortization of unearned services                                         -         -           -           -        -         -

Amortization of deferred compensation                                     -         -           -           -        -         -

Warrants issued for services rendered                                     -         -           -           -        -         -

Warrants issued in settlement of amounts due                              -         -           -           -        -         -

Conversion of convertible notes payable to preferred stock                -         -           -           -        -         -

Net loss                                                                  -         -           -           -        -         -
                                                                 -----------  --------  ----------  ---------- --------  --------

Balance December 31, 2003                                        30,871,645    30,872           -           -        -         -

Issuance of shares for services rendered                            787,863       788           -           -        -         -

Issuance of shares to directors                                     150,000       150           -           -        -         -

Conversion of convertible notes payable to common stock           1,419,041     1,419           -           -        -         -

Election to repay loan advances from chief executive officer      1,000,000     1,000           -           -        -         -

Beneficial conversion feature of convertible notes payable                -         -           -           -        -         -

Common stock issued for commitment fees                           8,421,052     8,421           -           -        -         -

Common stock issued for accrued expenses payable                  1,266,500     1,266           -           -        -         -

Issuance of options and warrants for services                             -         -           -           -        -         -

Common stock issued for compensation                                163,888       164           -           -        -         -

Cashless exercise of warrants                                       342,160       342           -           -        -         -

Conversion of convertible notes payable to preferred stock                -         -           -           -  165,000   165,000

Amortization of unearned services                                         -         -           -           -        -         -

Amortization of deferred compensation                                     -         -           -           -        -         -

Net loss                                                                  -         -           -           -        -         -

                                                                 -----------  --------  ----------  ---------- --------  --------
Balance December 31, 2004                                        44,421,899   $44,422           -   $       -  165,000  $165,000
                                                                 ===========  ========  ==========  ========== ========  ========


<CAPTION>
                                                                       Series IV
                                                                      Convertible
                                                                    Preferred Stock      Additional
                                                                  --------------------     Paid-in     Deferred     Unearned
                                                                   Shares     Amount       Capital   Compensation   Services
                                                                  ---------  ----------  -----------  -----------  ----------
<S>                                                               <C>        <C>         <C>          <C>          <C>
December 31, 2002                                                        -   $       -   $4,979,550   $        -   $       -

Conversion of Series II redeemable convertible preferred stock           -           -    8,224,273            -           -

Issuance of shares for services rendered                                 -           -    1,100,393            -    (820,348)

Issuance of shares for settlements of amounts due                        -           -      315,660            -           -

Issuance of shares for compensation                                      -           -      201,271     (123,750)          -

Issuance of shares to directors                                          -           -       79,450            -           -

Issuance of shares in consideration of convertible note payable          -           -       61,600            -           -

Conversion of convertible notes payable to common stock                  -           -      210,407            -           -

Exercise of options                                                      -           -        3,283            -           -

Issuance of options for services                                         -           -      108,500     (108,500)          -

Beneficial conversion feature of convertible notes payable               -           -      267,648            -           -

Amortization of unearned services                                        -           -            -            -     666,548

Amortization of deferred compensation                                    -           -            -      125,275           -

Warrants issued for services rendered                                    -           -      150,671            -           -

Warrants issued in settlement of amounts due                             -           -        4,000            -           -

Conversion of convertible notes payable to preferred stock         100,000     100,000            -            -           -

Net loss                                                                 -           -            -            -           -
                                                                  ---------  ----------  -----------  -----------  ----------

Balance December 31, 2003                                          100,000     100,000   15,706,706     (106,975)   (153,800)

Issuance of shares for services rendered                                 -           -      164,245            -    (108,191)

Issuance of shares to directors                                          -           -       31,350            -           -

Conversion of convertible notes payable to common stock                  -           -      128,900            -           -

Election to repay loan advances from chief executive officer             -           -       69,000            -           -

Beneficial conversion feature of convertible notes payable               -           -      313,067            -           -

Common stock issued for commitment fees                                  -           -      791,579            -           -

Common stock issued for accrued expenses payable                         -           -      202,281            -           -

Issuance of options and warrants for services                            -           -       26,000      (14,000)          -

Common stock issued for compensation                                     -           -       24,836            -           -

Cashless exercise of warrants                                            -           -      (47,376)           -           -

Conversion of convertible notes payable to preferred stock               -           -            -            -           -

Amortization of unearned services                                        -           -            -            -     227,872

Amortization of deferred compensation                                    -           -            -       91,725           -

Net loss                                                                 -           -            -            -           -

                                                                  ---------  ----------  -----------  -----------  ----------
Balance December 31, 2004                                          100,000   $ 100,000   $17,410,588  $  (29,250)  $ (34,119)
                                                                  =========  ==========  ===========  ===========  ==========

<CAPTION>
                                                                   Deferred                     Total
                                                                   Offering   Accumulated    Stockholders'
                                                                    Costs       Deficit       Deficiency
                                                                  ----------  -----------    -----------
<S>                                                               <C>         <C>            <C>
December 31, 2002                                                  $         $(14,206,355)  $(9,219,245)

Conversion of Series II redeemable convertible preferred stock                         -      8,229,727

Issuance of shares for services rendered                                               -        291,551

Issuance of shares for settlements of amounts due                                      -        317,411

Issuance of shares for compensation                                                    -         79,709

Issuance of shares to directors                                                        -         80,000

Issuance of shares in consideration of convertible note payable                        -         62,000

Conversion of convertible notes payable to common stock                                -        211,819

Exercise of options                                                                    -          3,334

Issuance of options for services                                                       -              -

Beneficial conversion feature of convertible notes payable                             -        267,648

Amortization of unearned services                                                      -        666,548

Amortization of deferred compensation                                                  -        125,275

Warrants issued for services rendered                                                  -        150,671

Warrants issued in settlement of amounts due                                           -          4,000

Conversion of convertible notes payable to preferred stock                             -        100,000

Net loss                                                                      (2,898,192)    (2,898,192)
                                                                  ----------  -----------    -----------

Balance December 31, 2003                                                 -   (17,104,547)   (1,527,744)

Issuance of shares for services rendered                                  -            -         56,842

Issuance of shares to directors                                           -            -         31,500

Conversion of convertible notes payable to common stock                   -            -        130,319

Election to repay loan advances from chief executive officer              -            -         70,000

Beneficial conversion feature of convertible notes payable                -            -        313,067

Common stock issued for commitment fees                            (800,000)           -              -

Common stock issued for accrued expenses payable                          -            -        203,547

Issuance of options and warrants for services                             -            -         12,000

Common stock issued for compensation                                      -            -         25,000

Cashless exercise of warrants                                             -            -        (47,034)

Conversion of convertible notes payable to preferred stock                -            -        165,000

Amortization of unearned services                                         -            -        227,872

Amortization of deferred compensation                                     -            -         91,725

Net loss                                                                  -   (2,034,304)    (2,034,304)

                                                                  ---------- -------------   ------------
Balance December 31, 2004                                         $(800,000) $(19,138,851)   $(2,282,210)
                                                                  ========== =============   ============
</TABLE>


        The accompanying notes and independent auditors' report should be
               read in conjunction with the financial statements.

                                      F-4
<PAGE>





<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                             ----------------------------
                                                                                 2004            2003
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
Cash flows from operating activities:

     Net loss                                                                $ (2,034,304)   $ (2,898,192)
     Adjustments to reconcile net loss to net cash
        (used in) provided by operating activities:
           Depreciation and amortization                                              957          58,365
           Financing cost related to beneficial conversion value                  269,741              --
           Change in allowance for bad debts                                       54,245              --
           Loss on disposal of equipment                                               --          15,815
           Impairment charges for intangibles                                          --         233,154
           Common stock, options and warrants issued for services and                  --              --
                financing expenses                                                452,220       1,809,225
     Changes in operating assets and liabilities:
        Decrease (Increase) in accounts receivable                                 35,779         (63,959)
        (Increase) in inventory                                                    (9,957)        (47,507)
        (Increase) in prepaid expenses                                                 25          (4,750)
        Increase in cash overdraft                                                 11,277              --
        (Decrease) in accounts payable                                              4,953        (150,514)
        Increase in accrued expenses and other current liabilities                391,760          87,222
        Decrease in due to factor                                                      --         (23,369)
        Increase in payroll taxes payable                                           1,965          72,544
                                                                             ------------    ------------
Net cash (used in) provided by operating activities                              (821,339)       (911,966)
                                                                             ------------    ------------

CASH FLOWS FORM INVESTING ACTIVITIES
     Cash paid for acquisition of Old Fashioned                                        --        (135,000)
                                                                             ------------    ------------
Cash flows from financing activities:

     Proceeds from notes payable                                                       --         549,264
     Operating expenses paid through convertible notes                            740,490         500,392
     Advances from related party                                                   78,088              --
                                                                             ------------    ------------
Net cash provided by financing activities                                         818,578       1,049,656
                                                                             ------------    ------------

Net (decrease) increase in cash                                                    (2,761)          2,690

Cash, beginning of period                                                           2,761              71
                                                                             ------------    ------------

Cash, end of period                                                          $         --    $      2,761
                                                                             ============    ============

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year:

     Interest expense                                                        $         --    $         --
                                                                             ============    ============
     Income taxes                                                            $         --    $         --
                                                                             ============    ============

Noncash investing and financing activities:

     Conversion of redeemable convertible preferred stock to common stock    $         --    $  8,229,727
                                                                             ============    ============
     Issuance of common stock for settlements of amounts due                 $    155,000         299,109
                                                                             ============    ============
     Assets derived through proceeds from notes payable                      $         --         (35,546)
                                                                             ============    ============
     Conversion of convertible notes payable to Series III Preferred Stock   $    165,000    $         --
                                                                             ============    ============
     Conversion of convertible notes payable to Series IV Preferred Stock    $         --    $    100,000
                                                                             ============    ============
     Issuance of common stock for services to be provided                    $    254,565    $    820,348
                                                                             ============    ============
     Issuance of options for services to be provided                         $     37,465    $    232,250
                                                                             ============    ============
     Issuance of common stock due to options exercised                       $         --    $      3,334
                                                                             ============    ============
     Conversion of convertible notes payable to common stock                 $    130,319    $    148,273
                                                                             ============    ============
     Stcok issued for deferred offering cost                                 $    800,000    $         --
                                                                             ============    ============
</TABLE>

       The accompanying notes and independent auditors' report should be
               read in conjunction with the financial statements.

                                       F-5
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

NOTE 1 - ORGANIZATION, HISTORY AND NATURE OF BUSINESS

Championlyte  Holdings,  Inc. (the "Company") markets sugar-free,  calorie-free,
sports  refresher  beverages  under  the  ChampionLyte  brand  name  as  well as
sugar-free, fat-free, cholesterol-free,  flavored syrups through its subsidiary,
The Old Fashioned Syrup Company, Inc. ("Old Fashioned").  Both of these products
are sold to retailers and food service customers throughout the United States.

In December 2002, a 67% ownership  interest in Old Fashioned was relinquished as
part of a  foreclosure  action  on a  $15,000  advance  made to the  Company  in
November  2002. As a consequence  of losing control of such business the Company
recorded Old Fashioned as a  discontinued  business.  In July 2003,  the Company
entered into a Settlement  Agreement that returned the 67% ownership interest in
Old  Fashioned  to the  Company,  which  became  effective  August 20,  2003 for
$135,000.  The  acquisition  was  accounted  for  under the  purchase  method of
accounting (see Note 5).

On March 18, 2003, the Company amended its Articles of  Incorporation  to change
the  authorized  stock  structure  such that the  common  stock  authorized  was
increased  from  40,000,000 to  200,000,000  shares,  and it's  preferred  stock
authorized from 100,000 shares to 2,000,000 shares.

On March 25, 2003,  the Company  created a subsidiary,  Championlyte  Beverages,
Inc., to engage in the production and sale of the Championlyte products.

On March 17, 2004, the Company  created a subsidiary,  Be-Lyte  Foods,  Inc., to
engage In the production and sale of low carbohydrate snacks.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Principles of consolidation - The consolidated  financial  statements include
the  accounts of the Company and its  subsidiaries.  All  material  intercompany
transactions have been eliminated.

b.  Estimates - The  preparation  of financial  statements  in  conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to use judgment in making  estimates and assumptions  that affect the
reported  amounts of assets,  liabilities,  revenues  and  expenses  and related
disclosure of contingent  assets and  liabilities.  Certain of the estimates and
assumptions  required to be made relate to matters that are inherently uncertain
as they pertain to future events.  While management  believes that the estimates
and  assumptions  used were the most  appropriate,  actual  results could differ
significantly from those estimates under different assumptions and conditions.

c. Cash and cash equivalents - The Company considers all highly liquid temporary
cash  investments  with an  original  maturity  of  three  months  or less  when
purchased,  to be cash  equivalents.  There were no cash equivalents at December
31, 2004.

d. Accounts  Receivable - Accounts  receivable  are recorded at the  outstanding
amounts  net of the  allowance  for  doubtful  accounts.  Estimates  are used in
determining  the Company's  allowance for doubtful  accounts based on historical
collections experience, current economic trends and a percentage of its accounts
receivable by aging  category.  In determining  these  percentages,  the Company
looks at historical write-offs of its receivables. The Company also looks at the
credit  quality of its customer base as well as changes in its credit  policies.
The Company  continuously  monitors collections and payments from its customers.
While  credit  losses  have  historically  been  within   expectations  and  the
provisions  established,  the Company cannot  guarantee that it will continue to
experience the same credit loss rates that it has in the past.

e. Inventory - The Company values inventory at the lower of cost or market, cost
being  determined on a first-in,  first-out  basis.  The Company writes down its
inventory  for estimated  unmarketable  inventory or  obsolescence  equal to the
difference between the cost of inventory and the estimated market value based on
assumptions  about  future  demand  and  market  conditions.  If  actual  market
conditions  are less favorable  then those  projected by management,  additional
inventory write-downs may be required. At December 31, 2004, inventory consisted
of finished goods.

f.  Property  and  equipment - Property and  equipment  is stated at cost,  less
accumulated  depreciation  and  amortization.  Expenditures  for maintenance and
repairs are charged to  operations  as  incurred.  Depreciation  of property and
equipment is computed using the  straight-line  method over the estimated useful
lives of the assets. Leasehold improvements are depreciated over the life of the
appropriate lease.

                                      F-6
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

g.  Intangible  assets - Intangible  assets  consisted of goodwill and a license
agreement.  The  capitalized  costs of the assets  were  based on their  current
market value at the time of the  acquisition.  Goodwill was not  amortized.  The
license  agreement  was  amortized  on a  straight-line  basis  over ten  years.
Goodwill  valuations have  historically been calculated using an income approach
based on the present  value of future cash flows of each  reporting  unit.  This
approach  includes many  assumptions  related to future  growth rates,  discount
factors,  future tax rates,  etc.  Changes in economic and operating  conditions
impacting  these  assumptions  could result in a goodwill  impairment  in future
periods.

h. Revenue  recognition  - Revenue is  recognized  according to the terms of the
sale  arrangement,  which is customarily when the customer receives title to the
goods, generally upon delivery.  Revenue is recorded on a gross basis, since the
Company is  responsible  for  fulfillment,  including the  acceptability  of the
products and services ordered by the customer. Management believes that adequate
controls are in place to ensure compliance with sale arrangements, a substantial
history of such  performance  has been  established  and historical  returns and
allowance  have not been  significant.  If actual sales  returns and  allowances
exceed historical amounts, the Company's sales would be adversely affected.

i.  Advertising  costs -  Advertising  costs are  expensed  as  incurred.  Total
advertising  costs charged to operations  for the years ended  December 31, 2004
and 2003 amounted to $43,920 and $201,838, respectively.

j.  Shipping  and  handling  costs - Pursuant  to EITF  00-10,  "Accounting  for
Shipping and Handling Fees and Costs,"  shipping and handling  costs incurred by
the Company are included in cost of sales. For the years ended December 31, 2004
and 2003,  shipping and handling  costs were $64,619 and $33,165,  respectively.
The Company does not currently bill customers for shipping and handling costs.

k. Income taxes - Deferred  income taxes are determined on the liability  method
in  accordance  with  Statement  of  Financial  Accounting  Standards  No.  109,
"Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred tax
assets and  liabilities are determined  based on the difference  between the tax
basis of an asset or  liability  and its  reported  amount  in the  consolidated
financial  statements using enacted tax rates. Future tax benefits  attributable
to these  differences  are  recognized  to the extent that  realization  of such
benefits is more likely than not.

l. Net loss per  share - Basic  earnings  (loss)  per share is  computed  as net
income  (loss)  divided  by  the  weighted   average  number  of  common  shares
outstanding  for the period.  Diluted  earnings  (loss) per share  reflects  the
potential  dilution  that could occur from common stock  issuable  through stock
based compensation including stock options,  restrictive stock awards,  warrants
and other convertible securities.

m.  Concentration of risk - Credit losses, if any, have been provided for in the
financial statements and are based on management's  expectations.  The Company's
accounts receivable are subject to potential  concentrations of credit risk. The
Company does not believe that it is subject to any unusual or significant risks,
in the normal course of business.

n. Fair value of financial  instruments - The carrying  amounts  reported in the
balance  sheet for  cash,  receivables,  inventory,  accounts  payable,  accrued
expenses and debt  approximate  fair value based on the  short-term  maturity of
these instruments or interest rates that approximate market.

o. Long-Lived  Assets - On a periodic basis,  the Company assesses whether there
are any indicators that the value of its long-lived  assets may be impaired.  An
asset's value is considered  impaired only if the Company's  estimate of current
and projected  operating cash flows  (undiscounted and without interest charges)
of the asset over its remaining  useful life is less than the net carrying value
of the asset.  Such cash flow  projections  consider  factors  such as  expected
future operating income,  business plans,  trends and prospects,  as well as the
effects of demand,  competition and other factors.  To the extent impairment has
occurred, the carrying amount of the asset would be written down to an amount to
reflect the fair value of the asset.

p.  Stock-based  compensation - The Company  adopted the fair value  recognition
provisions of Statement of Financial  Accounting  Standards No. 123, "Accounting
for  Stock-Based  Compensation"  (SFAS No.  123),  prospectively  for all awards
granted,  modified,  or settled  during the year ended  December 31,  2002.  The
prospective  method is one of the adoption  methods  provided for under SFAS No.
148, " Accounting for  Stock-Based  Compensation  - Transition  and  Disclosure"
(SFAS No. 148) issued in December 2002. SFAS No. 123 requires that  compensation
cost for all stock awards be calculated and  recognized  over the service period
(generally equal to the vesting period).  This  compensation  cost is determined
using option pricing models intended to estimate the fair value of the awards at
the  grant  date.  Similar  to  Accounting  Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees" (APB No. 25), the alternative  method
of  accounting,  under SFAS No. 123,  an  offsetting  increase to  stockholders'
equity is recorded equal to the amount of compensation expense charged. Earnings
per share dilution is recognized as well.

                                      F-7
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

q.  Comprehensive  income - The  Company  has  adopted  Statement  of  Financial
Accounting Standard No. 130 ("SFAS No. 130"), "Reporting  Comprehensive Income",
which establishes  standards for reporting and display of comprehensive  income,
its  components and  accumulated  balances.  Comprehensive  income is defined to
include all changes in equity except those resulting from  investments by owners
and distributions to owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting  standards
as a component of comprehensive income be reported in a financial statement that
is  displayed  with  the  same   prominence  as  other   financial   statements.
Comprehensive  income is displayed in the statement of stockholders'  deficiency
and in the balance sheet as a component of stockholders' deficiency.

r. Product liability - Accruals for product liability claims are recorded, on an
undiscounted  basis,  when it is probable that a liability has been incurred and
the  amount of the  liability  can be  reasonably  estimated  based on  existing
information.  The accruals are adjusted  periodically as additional  information
becomes  available.  Receivables  for  insurance  recoveries  related to product
liability  related claims are recorded,  on an  undiscounted  basis,  when it is
probable that a recovery will be realized.  At December 31, 2004,  there were no
product liability accruals necessary.

NOTE 3 - GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern,  which  contemplates  continuity  of
operations,  realization of assets, and liquidation of liabilities in the normal
course of business.  The Company has incurred  operating  losses,  negative cash
flows  from  operating   activities,   negative   working   capital  and  has  a
stockholders'  deficit. At December 31, 2004, the Company's  accumulated deficit
was $19,138,851 and its working capital deficiency was $2,282,210. For the years
ended  December 31, 2004 and 2003,  the Company had a net loss of $2,034,304 and
$2,898,192,  respectively.  In  addition,  the Company is in default of all it's
debt obligations.

The Company is aggressively attempting to increase revenues in order to mitigate
future  losses.  Management  is  seeking  to  raise  additional  capital  and to
renegotiate  certain  liabilities  in order to  alleviate  the  working  capital
deficiency.  However, there can be no assurance that it will be able to increase
revenues or to raise additional capital.

These factors raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include adjustments relating to
the  recoverability  and realization of assets and classification of liabilities
that might be necessary  should the Company be unable to continue in  operation.

NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS

The Company does not believe that any recently  issued,  but not yet  effective,
accounting standards would have a material effect on the accompanying  financial
statements.

NOTE 5 - REACQUISITION OF OLD FASHIONED

In  December  2002,  the  Company  had  67% of its  ownership  of Old  Fashioned
relinquished  as part of a foreclosure  action on a $15,000  advance made to the
Company in November 2002,  which matured on December 14, 2002. The remaining 33%
minority  interest in Old  Fashioned was recorded as having no value since there
was no net equity in such business. In addition, due to the lack of control over
the minority  share of Old  Fashioned,  lack of  cooperation  with the successor
management,  the Company and the Old Fashioned  business have not had profitable
operations  in the last four  years,  management  did not expect any future cash
flows from such minority ownership interest in the immediate future.

                                      F-8
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

On May 28, 2003, the Company filed a complaint  against certain parties alleging
the  fraudulent  conveyance  of the  Company's  interest in Old  Fashioned.  The
complaint filed was for monetary damages,  injunctive  declaratory and equitable
relief.  The lawsuit further  claimed that the Company has suffered  irreparable
damage and the Company was seeking to rescind the sale of the  securities in Old
Fashioned  to   InGlobalVest   and  restore  the  Company,   Old  Fashioned  and
InGlobalVest to their respective positions prior to the time the transaction was
entered.  On July 21, 2003, the Company reached a settlement with all but one of
the defendants in this matter.

Pursuant to the terms of a Settlement Agreement,  InGlobalVest agreed to deliver
any and all stock certificates in Old Fashioned as well as all books and records
to the Company's counsel by August 20, 2003. In addition, InGlobalVest agreed to
appoint a  representative  to assist in the change in control and management and
agreed to enter into a non-interference  agreement with the Company with respect
to Old Fashioned. InGlobalVest has warranted and represented to the Company that
the  financial  conditions  depicted  in the books and  records  tendered to the
Company on July 15, 2003 were true, accurate and complete as of that date to the
best of InGlobalVest's knowledge and that no known liabilities were omitted from
disclosure in such records.  In  consideration  for the return of Old Fashioned,
the Company agreed to pay InGlobalVest $135,000.

On August 20,  2003,  the  Settlement  Agreement  was  executed  and the Company
acquired the common stock of Old Fashioned for $135,000,  plus  transaction fees
of $75,617,  making Old Fashioned a wholly-owned  subsidiary of the Company. The
acquisition   was  accounted  for  under  the  purchase  method  of  accounting.
Accordingly,  the Company  recorded  the assets  purchased  and the  liabilities
assumed based upon their  estimated fair values at the date of the  acquisition.
The excess of the purchase price over the fair value of the net assets  acquired
amounted to $133,421, which has been allocated to goodwill. The acquisition cost
was allocated as follows:

           Historical  book value of net assets  acquired $ 77,196 Excess of the
           purchase price over the fair value of the net assets
                                                                      133,421
                                                                     --------
                                                                     $210,617
                                                                     ========

The operating  results of Old Fashioned  have been included in the  consolidated
statements  of  operations  from the  acquisition  date (August 20,  2003).  The
Company's  unaudited  proforma  results for the twelve months ended December 31,
2003 assuming the merger occurred on January 1, 2003 is as follows:

                                           2003

           Net sales                   $    410,351
                                       ============
           Net loss                    $ (2,898,192)
                                       ============
           Basic loss per share        $       (.15)
                                       ============
           Weighted average shares       19,824,491

These unaudited  proforma  results have been prepared for  comparative  purposes
only and do not  purport to be  indicative  of the  results of  operations  that
actually  would have  resulted had the merger been in effect  January 1, 2003 or
the future results of operations.

NOTE 6 - ACCOUNTS RECEIVABLE

Accounts  receivable,  net consists of the following  components at December 31,
2004:

              Trade receivables                         $ 68,801
              Less: Allowance for doubtful accounts      (59,248)
                                                        ---------
                                                        $  9,553
                                                        =========

There was a $54,248  increase in the Company's  allowance for doubtful  accounts
during the year ended  December  31, 2004, which has been recorded as a bad debt
expense.

NOTE 7 - INTANGIBLE ASSETS

Intangible assets consisted of goodwill and a license agreement. The capitalized
costs of the assets were based on their current  market value at the time of the
acquisition  of  Old  Fashioned.  Goodwill  was  not  amortized.  The  licensing
agreement was amortized on a straight-line basis over ten years.

                                   IMPAIRMENT

Subsequent to the acquisition of Old Fashioned, the Company performed its annual
assessment  of its  long-lived  assets  to  determine  whether  there  were  any
indicators that the value of its intangible  assets may be impaired.  Based upon
management's   estimate  of  current   and   projected   operating   cash  flows
(undiscounted  and without interest  charges) of the intangible  assets over its
remaining  useful lives, it was determined that the assets of Old Fashioned as a
reporting unit were impaired. Based upon the assessment,  the Company recorded a
one-time non-cash charge of $233,154 to write off the carrying value of $133,421
for  goodwill  and  $99,733  for the  license  agreement  during  the year ended
December 31, 2003.  Management's  evaluation  reflects that Old Fashioned is not
currently  producing  and has not produced  significant  revenues to sustain its
cost of  operations.  The  impairment  charge  also  reflects  the fact that Old
Fashioned  is not  currently  in  compliance  with the  provision of its license
agreement.  As such,  the  license  agreement  is  subject  to  termination.  In
addition, the Company's lack of working capital may not enable it to support Old
Fashioned cash flows in the future.

                                       F-9
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                LICENSE AGREEMENT

In connection  with the acquisition of Old Fashioned,  the Company  reacquired a
ten year  license  agreement,  effective  January  20,  1999,  and as amended in
September 1999, with Cumberland  Packing Corp.  ("Cumberland")  for the right to
use  their  "Sweet  'N  Low"  trademark  in  order  to  market  Old  Fashioned's
sugar-free,   fat-free,   cholesterol-free  chocolate,  vanilla  and  strawberry
flavored syrup products. The license agreement had an initial term of ten years,
expiring December 31, 2008. The Company had the right to renew the agreement for
two additional seven-year terms, so long as the Company was not in default under
the agreement.  The agreement contains minimum royalties and minimum advertising
capital  requirements  during each year of term as determined on a calendar year
basis.

Cumberland  and the Company  agreed on an immediate  termination  of the amended
license  agreement.  The termination was amicable and Cumberland agreed to waive
its rights to any accrued or unpaid  royalties from the Company.  As a result of
the license  termination,  no  royalties  were owed as of  December  31, 2004 or
included in accrued expenses in the accompanying consolidated balance sheet. The
Company is currently reformulating its syrup to accommodate for this termination
and plans to recommence Old Fashioned operations.

NOTE 8 - PROPERTY AND EQUIPMENT

The property and equipment consists of the following:

                                                  Useful life

               Website                              3 years    $   11,017
               Less: accumulated depreciation                     (11,017)
                                                               ----------
                                                               $        0
                                                               ==========

Total  depreciation  expense for the years ended  December 31, 2004 and 2003 was
$956 and $3,672, respectively.

During the year ended  December 31, 2003,  the Company  disposed of coolers that
were no longer in use.  These assets had a net book value of $15,815 at December
31, 2003. The loss on disposal of assets for $15,815 is included in other income
(expense) on the accompanying consolidated statements of operations for the year
ended December 31, 2003.

NOTE 9 - CONVERTIBLE NOTES PAYABLE

Convertible  notes at December 31,  2004,  consist of  promissory  notes to five
entities.  Some of the  owners  of the  entities  are also  shareholders  of the
Company.  A note exists  Advantage  Fund,  LLC  ("Advantage")  was originated in
January 2003. It bears  interest at a rate of 6.5% per annum and is  convertible
into shares of the  Company's  common  stock with a  conversion  price per share
equal to the lesser of the  average of the  lowest of three day  trading  prices
during the five trading days immediately prior to the conversion date multiplied
by .70 or, the average of the lowest of three day trading prices during the five
trading dates  immediately  prior to the funding dates. The note is convertible,
in whole or in part,  at any time after the issuance of the note.  In July 2003,
the Company  amended its  convertible  note with the Advantage by increasing the
amount of the note to $350,000 and  extending  the maturity  date of the note to
December 31, 2004. All other terms of the note remained unchanged.  The note was
further  amended in October  2003  increasing  the  convertible  note  amount to
$400,000 and extending the date by which the  withdrawn  registration  statement
filed with the SEC needed to become  effective.  The note was further amended in
May 2004 increasing the convertible note amount to $1,250,000 and the investment
fund has agreed to waive any penalties for not meeting the required date for the
registration  statement to be declared  effective.  This is no longer applicable
since the registration statement has been withdrawn. As of December 31, 2004 the
promissory note is in default.  The Company has not been notified of any actions
related to this default from Advantage.

In August 2004,  Advantage  sold a total of $400,000  worth of such  Convertible
Note to Cornell Capital  Partners,  LLP ("Cornell").  Upon receipt of the funds,
Advantage immediately reinvested $165,000 into the Company. In consideration for
th $165,000 the Company issued a convertible promissory note dated August, 2004.
Subsequently, the Company and Advantage agreed to exchange the $165,000 note for
165,000 shares of the class of its Preferred Stock known as Series III Preferred
Stock, par value $1.00 which has the same rights and privileges as the Company's
Series IV Preferred Stock in consideration for the satisfaction of the note.

During the year ended  December 31, 2004,  Advantage  funded the Company and the
note  increased by $405,490.  (See Note 13).  During the year ended December 31,
2004,  Cornell elected to convert  $31,831 of its promissory  notes into 611,152
shares of the Company's common stock.


                                      F-10
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

The Company has promissory  notes with two unrelated  third parties  ("Alpha and
Gamma"),  representing  the  $250,000  assigned  to them.  The  notes  mature on
December 31, 2004 and bear  interest at a rate of 6.5% per annum.  The notes are
convertible  into shares of the  Company's  common stock at a  conversion  price
equal to the lesser of (1) the  average  of the lowest of the three day  trading
price during the five trading days  immediately  prior to the  conversion  date,
multiplied by .80%, or (2) the average of the lowest of three day trading prices
during the five trading days immediately  prior to the funding date.  During the
quarter ended March 31, 2004,  Alpha converted  $12,500 of its note into 178,571
shares of the Company's common stock. In July 2004,  Alpha converted  $10,000 of
its note for 142,857  shares of the Company's  common stock.  As of December 31,
2004 the promissory note is in default. The Company has not been notified of any
action related to this default by either Alpha or Gamma.

Pursuant to the terms of the notes, the Company was to have filed a registration
statement  with the SEC on or before  February 6, 2003 that was required to have
been declared  effective on or before April 6, 2003 and remain  effective  until
the maturity date of the notes. Since the Company defaulted on this provision of
the notes,  the holders  may  accelerate  the due date of the notes.  In October
2003,  in order to  induce  the  Advantage,  Alpha  and  Gamma  to  forego  from
exercising  their rights to accelerate the due date of the notes and as security
for the repayment of the notes,  the Company  entered into a Security  Agreement
with a collateral agent, on behalf of the holders' granting the collateral agent
a  security  interest  in  the  Company's  inventory,  equipment  and  fixtures.
Advantage, Alpha and Gamma agreed to forebear for 180 days from October 16, 2003
the  exercise  of any of their  rights  under  the  notes  with  respect  to the
non-registration,  so long as the Company is not in default under the provisions
of the Security Agreement and the other provisions of the notes. Thereafter, the
Company had decided to withdraw its  Registration  Statement and requested  that
Alpha and Gamma waive any penalties  provided  that the Company's  counsel shall
issue shares  applicable to Rule 144 opinion letters.  This was agreed to by the
parties.

In June 2004, amounts owed to an individual note holder aggregating $30,000 plus
$2,238 of accrued interest were converted into 302,251 shares of common stock.

In June 2004, the Company received $50,000 from Triple Crown  Consulting,  Inc.,
and entered into a $50,000 Series B 6.5%  Convertible  Promissory Note. The note
provides  the holder with the right at any time to convert  into common stock of
the Company as  follows:  The  Conversion  Price per share shall be equal to the
lesser of (1) the average of the lowest of three-day  trading  prices during the
five trading days immediately prior to the Conversion Date multiplied by .70, or
(2) the  average  of the  lowest of  three-day  trading  prices  during the five
trading days immediately prior to the funding date(s).

At December 31, 2004,  amounts owed to Advantage  aggregated  $470,002,  Cornell
Capital aggregated $368,169,  Triple Crown Consulting,  Inc. aggregated $50,000,
Alpha  and  Gamma  aggregated  $228,500  and  amounts  owed  to  Latitude  Asset
Investment Corp. ("Latitude") aggregated $135,000.  Accrued interest of $50,203,
$10,296 and $14,592 due to Advantage,  Triple Crown  Consulting,  Inc. and Alpha
and Gamma,  respectively,  is included in accrued  expenses in the  accompanying
consolidated balance sheet.

The beneficial  conversion  feature of the above  convertible notes for the year
ended  December  31, 2004  amounted to $313,067  and is included in interest and
financing expense in the accompanying consolidated statements of operations.

A note with Latitude for $135,000, was originated on August 15, 2003 in order to
fund the  acquisition of Old Fashioned (see NOTE 5). The note matured on October
14, 2004 but was subsequently extended until January 15, 2005 and bears interest
at a rate of 6.0% per year.  If the note is still  outstanding  after six months
from the origination date, then, at the option of the holder, the principal plus
accrued interest may be converted into 51% of the issued and outstanding  common
stock of Old  Fashioned.  As of  December  31,  2004 the  promissory  note is in
default.  The Company has not been notified of any action related to the default
by Latitude.

The note holder has not executed this provision. In addition,  until the note is
paid in full,  the  holder is  entitled  to 15% of Old  Fashioned's  cash  flow,
defined  as  net  income,   plus   depreciation   and  interest   minus  capital
expenditures.  To date,  no payments  have been made to Latitude  and no amounts
related to the cash flow provision  were due. In connection  with this note, Old
Fashioned entered into a security agreement with the Latitude whereby it pledged
all  assets  and all  issued  and  outstanding  shares  of its  common  stock as
collateral.   Furthermore,  in  consideration  for  the  $135,000  note  to  Old
Fashioned, the Company agreed to issue a total of 1,400,000 shares of its common
stock to Latitude  over the term of the note. In the event that the note is paid
in full prior to the maturity  date of the note,  the balance of the shares will
be returned to the Company.  For the year ended  December 31, 2004,  the Company
has recorded $31,000 as interest and financing expense related to this agreement
and at December  31, 2004,  the balance due on the note is $135,000.  During the
year ended December 31, 2004 and 2003, the Company issued 1,000,000 and 400,000,
shares  respectively  to Latitude  related to this provision which are valued at
$.155 per share.  The issuance of these shares has been recorded as interest and
financing expenses.

                                      F-11
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

In January 2005,  Latitude holders of convertible  promissory notes had $135,000
in promissory notes converted into 5,500,000 shares of the Company's common
stock.

NOTE 10 - FACTORING

On August 20, 2003,  Old  Fashioned  entered into an agreement  with a financial
services  company that has common  management  with the financial  advisory firm
(see Note 13) for the  factoring  of  accounts  receivable  and  purchase  order
financing  services.  The  agreement  states no  limitation on the volume with a
total  facility  available of $500,000.  The  discount  schedule  related to the
factored  receivables  is as  follows:  0-45  days,  4 points;  46-60  days,  an
additional 2 points;  61-75 days,  an  additional 2 points,  and an additional 2
points for each  succeeding 15 days. The agreement  bears an indefinite term and
provides  for a security  interest in the  Company's  accounts  receivables  and
general intangibles.

On July 1, 2003, the Company entered into an agreement with a financial services
company that has common  management  with the financial  advisory firm (see Note
13) for the  factoring  of accounts  receivable  and  purchase  order  financing
services. The agreement states no limitation on the volume with a total facility
available of $500,000. The discount schedule related to the factored receivables
is as follows:  0-45 days, 4 points;  46-60 days, an additional 2 points;  61-75
days, an additional 2 points,  and an additional 2 points for each succeeding 15
days.  The  agreement  bears an  indefinite  term and  provides  for a  security
interest in the Company's accounts receivables and general intangibles.

At December 31, 2004, no amounts were due to the financial services company.

NOTE 11 - ACCRUED EXPENSES

Accrued expenses consist of the following at December 31, 2004:

                         Salaries              $ 68,774
                         Interest               119,840
                         Royalties               31,875
                         Other                  201,252

                                               --------
                                               $421,741
                                               ========

NOTE 12 - COMMITMENTS AND CONTINGENCIES

                                OPERATING LEASES

Prior to  November  2003, the Company  rented and shared  office  space with the
financial  advisory  firm on a  month-to-month  basis at $1,750  per  month.  In
November  2003,  the Company  entered into a new lease  agreement  and relocated
their office space.  The new Agreement  requires  rental  payments of $2,000 per
month beginning  November 2003 for a period of one year.  Total rent expense for
the years ended December 31, 2004 and 2003 were $23,900  respectively.  In March
2005,  the  Company was moved from this office  space and is  currently  seeking
temporary office space.

                                LACK OF INSURANCE

The  Company  has not  maintained  any  workman's  compensation  and  disability
insurance  as of December  31,  2004.  Although  the Company is not aware of any
claims resulting from periods of  non-coverage,  there is no assurance that none
exist. The Company currently does not have product liability insurance. Although
the Company is not aware of any claims  resulting from periods of  non-coverage,
there is no assurance that none exist.

                                  PAYROLL TAXES

As of December 31, 2004, the Company owes approximately $74,509 of payroll taxes
and related  estimated  penalties  and  interest.  Although  the Company has not
entered  into  any  formal   repayment   agreements   with  the  respective  tax
authorities, management plans to make payment as funds become available.

                          CONCENTRATION OF CREDIT RISK

For the year ended December 31, 2004, the Company had two customers  whose sales
represented  8% and  18%  respectively,  of the  Company's  net  sales.  Another
customer  accounted  for more than 10% of the Company's  accounts  receivable at
December 31, 2004.  During the year ended December 31, 2004, all sales generated
by the Company  were from  customers  located  within the United  States and all
assets held by the Company were located within the United States.

                                      F-12
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Two co-packers currently produce all of the Company's products.  If any of these
co-packers  were to terminate or fail to renew the Company's  contract,  or have
difficulties  in producing  beverages  for the  Company,  the ability to produce
products may be temporarily negatively affected.

                                   SETTLEMENTS

During the year ended December 31, 2004 and subsequent to such, various vendors,
consultants  and  professionals  have filed  actions  against the  Company.  The
unsettled  claims  aggregate  approximately  $258,784.  The Company has included
approximately $254,284 in accounts payable at December 31, 2004 as a contingency
related to these unsettled claims,  actions and judgments based on the Company's
and  Counsel's  assessment  and the  remaining  $4,500 is  included  in  accrued
expenses.  During  the year ended  December  31,  2004,  the  Company  made cash
payments of approximately $90,810 in settlement of certain actions.

During the year ended  December 31, 2004,  the Company  entered into  settlement
agreements with certain vendors. In connection with these settlement agreements,
the Company is required to pay approximately $ in cash.

During 2001, a suit was filed  against the Company  alleging  that its trademark
corporate name,  ChampionLyte,  violated the plaintiff's trademark. A settlement
agreement was entered into April 1, 2003 between the Company and the  plaintiff.
The  terms  included  granting  the  Company  an  exclusive  license  to use the
ChampionLyte mark in connection with the sugar-free drinks in the United States,
Mexico and Canada. A licensing agreement providing this mark was established for
an initial five-year term, with two additional  five-year terms at the Company's
option. It does require a royalty of three percent until sales reach $10,000,000
annually.  The royalty  then  increases to five percent on all sales after sales
reach  $10,000,000  annually  and six  percent on all sales  after  sales  reach
$15,000,000 annually. The minimum required sales per year is as follows:

2003 - $500,000 (measured from 4/1/03 to 3/31/04)
2004 - $750,000
2005 - $1,000,000
2006 - $1,250,000
2007 - $1,500,000

(renewal for second five years if sales in years 2005-07
average at least $1,500,000)
2008 - $2,000,000
2009 - $2,500,000
2010 - $3,000,000
2011 - $3,500,000
2012 - $4,000,000

(renewal for third five years if sales in years 2010-12
average at least $5,000,000)
2013 - $5,000,000
2014 - $6,000,000
2015 - $7,000,000
2016 - $8,000,000
2017 - $9,000,000

Royalties  owed as of  December  31,  2004 of $31,875  are  included  in accrued
expenses in the accompanying consolidated balance sheet.

In  addition  to the  aforementioned,  the  Company  is party to  various  legal
proceedings  generally  incidental  to its  business  as is the case with  other
companies in the same industry.

NOTE 13 - STOCKHOLDERS' DEFICIENCY


                           CONVERTIBLE PREFERRED STOCK

On September  12, 2003,  the Company  amended its articles of  incorporation  to
authorize the increase in preferred stock from 1,000,000 to 2,000,000 shares and
to increase  the par value to $1.00,  except for 8,500 shares of Series II which
have a par value of $.01,  the terms of which may be  determined  at the time of
issuance by the Board of Directors without further action by the shareholders.

The Company has designated the preferred stock into the following Series':

                                      F-13
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

(i) Series I: 100,000 shares of convertible  preferred  stock.  Each outstanding
share of Series I  Preferred  Stock was  convertible  into 330  shares of common
stock.  In  December  2001 the  Series I  Preferred  Stock  was  converted  into
1,155,000 shares of the Company's common stock.

(ii)  Series  II:  On June  16,  2000,  the  Company  amended  its  articles  of
incorporation to designate Series II Convertible  Preferred Stock ("Series II").
The Series II preferred  dividends  entitled the holder to a preferred  dividend
based upon 5% per annum of the  liquidation  value.  Initially  the holder could
convert each preferred share into the Company's  common stock based upon a $1.70
conversion  price. The conversion price could be adjusted one year from the date
of issuance.  Subsequent  to the one-year  period,  the holder could convert the
preferred  shares into common stock of the Company at a conversion  price of the
lower of $1.70 or the average of the closing  prices of the common stock for the
ten-day  period ending one year from the date of issuance.  Additionally,  these
shares  had the  right  of  mandatory  redemption  ten  years  from  the date of
issuance.

During the quarter  ended June 30, 2003,  the holders of the Series II preferred
stock  waived all  preferred  dividends  due and in the future,  and agreed to a
fixed  conversion  price of $1.50 to  convert to common  stock.  During the year
ended  December 31, 2003,  all holders of the Series II  redeemable  convertible
preferred  stock  exercised their option and converted 8,229 shares of preferred
stock into  5,453,915  shares of common stock  pursuant to the  preferred  stock
covenants.

(iii) Series III: On September  12,  2003,  the Company  amended its articles of
incorporation  and created  500,000  shares of Blank Check Series III  Preferred
Stock ("Series III"), $1.00 par value.

The Series III  preferred  stock may be issued in one or more  series,  and each
series will be so  designated  as to  distinguish  the shares  thereof  from the
shares of all other series. The Board of Directors has express authority to fix,
before  the  issuance  of  any  shares  of  a  particular  series,  the  number,
designation,  and relative rights,  preferences and limitations of the shares of
such  series.  At December 31,  2004,  there were  165,000  shares of Series III
preferred stock issued and outstanding.  These originated due to a conversion of
a $165,000 convertible note payable to Advantage (see Note 9).

(iv) Series IV: On  September  12,  2003,  the Company  amended its  articles of
incorporation  and created  250,000  shares of Series IV  Convertible  Preferred
Stock  ("Series  IV"),  $1.00 par value.  Each share of the Series IV  preferred
stock is convertible into one share of the Company's  common stock.  Each holder
of the Series IV  preferred  stock has twenty  times that number of votes on all
matters  submitted  to  shareholders  that is equal to the  number  of shares of
common stock into which such  holder's  shares of Series IV preferred  stock are
then convertible.  In addition, the holders of the Series IV preferred stock are
entitled to receive  noncumulative  cash dividends at an annual dividend rate as
determined  by the  Board of  Directors.  The  Series IV  preferred  stock has a
liquidation  price  of  $1.00  per  share  in  the  event  of  any  liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary.  The
Company intends to amend its articles of  incorporation  such that the Series IV
preferred  stock  will be  convertible  into  the  Company's  common  stock at a
conversion  price  equal to the  lesser  of (1) the  average  of the  lowest  of
three-day  trading prices during the five trading days immediately  prior to the
conversion  date  multiplied  by  .70%,  or (2) the  average  of the  lowest  of
three-day  trading prices during the five trading days immediately  prior to the
funding date(s).

During the year ended December 31, 2003, the Company entered into two agreements
with Triple Crown Consulting,  Inc., a partner in Advantage, whereby the Company
agreed to exchange two $50,000  Series B  Convertible  Promissory  Notes between
Triple  Crown  Consulting,  Inc. and the Company for funding  operations  of the
Company.  During the year ended  December 31, 2003, the  convertible  notes were
exchanged for 100,000 shares of Series IV preferred stock, valued at $100,000.

The rights,  preferences,  and privileges of the Series III Preferred  Stock are
relative to those of the Series IV Preferred Stock, par Value $1.00,  designated
to Triple Crown  Consulting,  Inc. At the option of Advantage,  each outstanding
share of Series  III  Preferred  Stock is  convertible  into one share of common
stock.

                               MARKETING AGREEMENT

On January 20, 2003, the Company  entered into a Strategic  Marketing  Agreement
("SMA") with BevSystems  International,  Inc.  ("BEVI"),  another small publicly
traded  company in the  business of beverage  products,  whereby  BEVI agreed to
issue  shares  equal to $125,000  per month of its common  stock to the Company.


                                      F-14
<PAGE>
                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

These shares were to be fully paid and  non-assessable  and bear no  restrictive
legend.  BEVI was to register these shares prior to each issuance on Form S-8 or
some other applicable  registration form. The Company was to issue 50,000 shares
of its  restricted  stock per month to BEVI under this  agreement.  These shares
were to carry piggyback registration rights. The Company was also to pay BEVI up
to $100,000 per month for services rendered by BEVI relating to the use of their
beverage knowledge and distribution  resources.  Each entity was entitled to 50%
of the profits derived from distributing the other firm's beverage product.  The
net  economic  effect of the  revenues  and  expenses  from  this  cross-selling
arrangement  was to be recorded as a cost or other  revenue  each month and each
reporting  period. In February 2003, 50,000 shares of the Company's common stock
were  issued at a value of eleven  cents per share,  resulting  in an expense of
$5,500 to the Company.  In connection with the agreement,  the Company  received
1,715,000 shares of BEVI common stock, valued at $157,900,  which is recorded as
licensing  revenue in the  accompanying  statement  of  operations.  The Company
transferred these shares to two consultants in lieu of cash payment for services
rendered,  valued at $157,900,  which is recorded as  consulting  expense in the
accompanying  statement of  operations.  On May 20,  2003,  the Company and BEVI
mutually agreed to terminate this agreement.

                         ISSUANCE OF STOCK FOR SERVICES

In January 2003,  the Company  retained a financial  advisory firm as a business
consultant to assist in a variety of areas relating to financial,  strategic and
related  development  growth of the Company.  This  financial  advisory firm has
common management with the current Series II Preferred stockholders in that some
of the members of the financial  advisory firm are also holders of the Series II
Preferred  Shares.   The  term  of  the  engagement  is  six  months  and  shall
automatically renew on a month-to-month  basis, subject to termination by either
party  with  a  twenty-four  month  follow  on  period,   whereby   transactions
consummated  within the subsequent  twenty-four months following the termination
of this agreement may have fees due and payable to the financial  advisory firm.
The terms of the agreement, were amended in April 2003 and are as follows; (i) a
monthly payment of $10,000 per month is due the financial  advisory firm,  which
at its  discretion may accept shares of discounted  registered  stock in lieu of
cash, (ii) the Company shall issue a warrant to purchase 2.99% or 526,400 shares
of common stock of the Company at 70% of the closing bid price  exercisable  for
five years, (iii) various sliding scale compensation amounts for equity and debt
financings  consummated  from an  introduction  by the financial  advisory firm,
sliding scale  compensation  amounts due for a merger or  acquisition  candidate
introduced to the Company and (iv) the  reimbursement of out-of-pocket  expenses
not to exceed $500 a month unless agreed upon by the Company. In April 2003, the
agreement  was further  amended to extend the term of the agreement for a period
of twelve months from the original  January 2003 contract date.  During the year
ended December 31, 2003,  the fair value of the warrant using the  Black-Scholes
Option  Pricing Model was $115,808 and has been recorded as consulting  expense.
The  agreement  also  contained  full  ratchet  anti-dilution   provisions.   In
connection  with the  anti-dilution  provisions of the  agreement,  the firm was
issued 526,400 shares of the Company's common stock valued at $36,848.  The firm
subsequently agreed to waive the anti-dilution  provision of the agreement going
forward.  In February 2004, the financial  advisory firm elected to exercise the
cashless  exercise  provision of the warrants.  Based upon this  provision,  the
financial  advisory firm exercised the right to receive 526,400 shares of common
stock,  but  received  342,160  shares due to the cashless  provision.  Upon the
exercise of the warrant, the Company measured the beneficial conversion value of
the warrant and determined that a reversal of consulting  expense of $47,376 was
recorded.  During the year ended  December  31,  2003,  in  accordance  with the
contract,  the firm was also compensated $13,560 for equity and debt financings,
which has been recorded as a financing  expense.  During the year ended December
31, 2004 and 2003,  the  financial  advisory firm has been paid $120,000 for its
management fees.

In January 2003, the Company  engaged a business  consulting firm to assist in a
variety of areas  relating to strategic  and related  development  growth of the
Company.  The term of the engagement is twelve months with a twelve month follow
on period,  whereby fees may be due and payable to the business  consulting firm
for transactions  consummated  within the subsequent twelve months following the
termination of the agreement. The Company issued 400,000 shares of common stock,
valued at $44,000, in lieu of cash compensation.  The agreement was subsequently
amended on April 15, 2003 to extend the term of the  contract  for one year from
the date of  amendment.  In  consideration  for the  additional  services  to be
provided,  the Company  issued an additional  1,000,000  shares of the Company's
common stock,  valued at $90,000.  During the year ended  December 31, 2003, the
Company expensed $104,000 related to these agreements.

In February 2003,  the Company  entered into an agreement with an individual who
is an employee of a shareholder. The agreement is for a term of one year and, as
compensation,  the Company has issued  125,000  shares of the  Company's  common
stock,  valued at $13,750 per share, in  consideration  for consulting  services
provided  and to be  provided.  During the year ended  December  31,  2003,  the
Company expensed $13,750 related to this agreement.

In March 2003, the Company entered into an agreement  wherein the Company agreed
to issue  300,000  shares of the  Company's  common  stock at a market  value of
$21,000,  for legal  services  provided and to be  provided.  As of December 31,
2003, all 300,000 shares have been issued and the Company expensed $21,000.

                                      F-15
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

In April 2003,  the Company  contracted the services of a consultant in order to
facilitate the introduction of professional athletes to the Company in order for
the athletes to act as spokespeople and sponsors for the Company's products. The
term of the agreement is for a period of twelve months. In consideration for the
consultant's  services,  the  Company has issued  warrants  to purchase  150,000
shares of the Company's  common stock with an exercise price of $0.12 per share,
which expire two years from the date of issuance. The fair value of the warrants
using the Black-Scholes  Option Pricing Model was $19,500 and is being amortized
to  consulting  expense  over  the  term  of the  agreement.  Additionally,  the
consultant  shall  receive 10% of any  compensation  given to  spokespersons  or
sponsors that were  introduced to the Company  through the consultant to be paid
in the same form as  payment is made to the  spokesperson/sponsor.  In May 2003,
the consultant  introduced the Company to three professional  athletes with whom
the Company entered into agreements  with (see below).  The consultant  received
15,000  shares  of  the  Company's   common  stock  as   compensation   for  the
introductions  in  accordance  with the  above  described  agreement,  valued at
$3,450.  As of December 31, 2003,  the  consultant is owed an additional  15,000
shares of the Company's  common stock.  The  additional  shares owed,  valued at
$2,850,  are  included  in accrued  expenses  in the  accompanying  consolidated
balance sheet.  During the year ended  December 31, 2003,  the Company  expensed
$12,646 related to the agreement.

In April 2003,  the Company  entered  into an agreement  with a  consultant  for
business planning services.  The term of the agreement is for a one-year period.
As consideration for the consultant's services to be rendered the Company issued
2,000,000  shares of the Company's  common stock valued at $160,000.  During the
years  ended  December  31,  2004 and 2003,  the  Company  expensed  $40,000 and
$120,000, respectively, related to this agreement.

In April 2003,  the Company  entered  into an agreement  with a  consultant  for
corporate planning and business strategies services for a period of one year. In
exchange for the  services to be rendered,  the  consultant  received  1,000,000
shares of the Company's  common stock valued at $70,000.  During the years ended
December  31, 2004  and  2003,   the  Company   expensed  $17,500  and  $52,500,
respectively, related to this agreement.

In April 2003,  the Company  entered  into an agreement  with a  consultant  for
investor  relations   services  for a period of one year.  In  exchange  for the
services to be rendered,  the consultant was to receive  1,000,000 shares of the
Company's  common stock valued at $160,000.  The  agreement  was  terminated  in
August 2003 and the shares  reverted back to the Company,  therefore the Company
recorded no expense related to this agreement.

In April 2003,  the Company  entered  into an agreement  with a  consultant  for
dissemination  of  information  services  for a period of  thirteen  months.  In
exchange for the services to be rendered, the consultant received 600,000 shares
of the  Company's  common stock valued at $48,000.  This resulted in the Company
expensing  $48,000  related to this  agreement  for the year ended  December 31,
2003.

In April 2003,  the Company  entered  into an agreement  with a  consultant  for
business  planning  services for a one-year period. In exchange for the services
to be rendered,  the consultant  received 500,000 shares of the Company's common
stock valued at $80,000.  During the year ended  December 31, 2004 and 2003, the
Company expensed $26,667 and $53,333, respectively, related to this agreement.

In April 2003, the Company  issued 460,000 shares of the Company's  common stock
valued  at  $17,101  for  consideration  of past  employment  services  of a key
employee.  Additionally,  the  individual,  who  is  remaining  in a  consulting
capacity,  was issued an additional 360,000 shares of the Company's common stock
valued at $25,200 per share for future services. The additional shares will vest
in 30,000 share increments per month through March 2004.  During the years ended
December  31,  2004  and  2003,  the  Company   expensed   $6,300  and  $18,900,
respectively.

In April 2003,  the Company  entered  into an agreement  with a  consultant  for
marketing  services  under the 1934  Exchange  Act for a period of one year.  In
exchange for the  services to be rendered,  the  consultant  received  1,000,000
shares  of  the   Company's   common   stock   valued  at  $90,000,   which  was
non-refundable.  During the year ended December 31, 2003,  the Company  expensed
$90,000 related to this agreement.

In  April  2003,  the  Company's  Board of  Directors  passed  a  resolution  to
compensate  its directors  and a certain  officer  150,000  shares of the common
stock on a quarterly  basis.  During the year ended  December 31, 2004 and 2003,
the Company issued 150,000 and 550,000 shares, respectively, of its common stock
as compensation  for services  provided by its directors and the officer.  As of
December 31, 2004,  the directors  and officer are owed an additional  1,193,376
shares of the Company's  common stock.  The  additional  shares owed,  valued at
$103,250,  are  included in accrued  expenses in the  accompanying  consolidated
balance  sheet.  The Company  expensed  $77,000 and  $101,000,  related to these
issuances during the year ended December 31, 2004 and 2003, respectively.

In May 2003,  the  Company  entered  into  agreements  with  three  professional
athletes  to  provide  endorsement  services  to the  Company.  The terms of the
agreements  are for a  period  of one  year.  As  consideration  for the  future
services, each party received 50,000 shares of the Company's common stock valued
at $11,500  for each  party.  As of  December  31,  2004,  each party is owed an
additional  shares of the Company's  common stock.  The additional  shares owed,
valued at $9,500  for each  party,  are  included  in  accrued  expenses  in the
accompanying  consolidated  balance  sheet.  During the years ended December 31,
2004 and 2003 the Company expensed $23,751 and $39,249, respectively, related to
these agreements.

                                      F-16
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

In June 2003,  the Company  issued  10,000 shares of its common stock in lieu of
cash payment for consulting services provided.  The shares were valued at $2,800
and were fully expensed during the year ended December 31, 2003.

In July 2003, the Company entered into a one-year advertising  agreement with an
advertising  firm for  services to be  provided  beginning  August 1, 2003.  The
Company  agreed to an annual fee of $50,000 to be paid in the  Company's  common
stock.  During  the year  ended  December  31,  2003,  the  Company  issued  the
advertising  firm  185,185  shares of its common stock as payment for the annual
fee.  During the year ended  December  31, 2004 and 2003,  the Company  expensed
$33,333 and $16,667, respectively, related to this agreement.

During the year ended December 31, 2003, the Company issued  1,325,000 shares of
its common  stock to two  consultants  in lieu of cash  payment  for  consulting
service  provided.  The shares were valued at $214,750  and were fully  expensed
during the year ended December 31, 2003.

In January  2004,  the Company  entered  into an  agreement  wherein the Company
agreed to issue 200,000  shares of the Company's  common stock at a market value
of $37,000 for legal  services  provided and to be provided.  As of December 31,
2004 all 200,000 shares have been issued and during year ended December 31, 2004
the Company expensed $13,119 related to this agreement.

In January 2004, the Company entered into a twelve-month  agreement  wherein the
Company  agreed to issue  250,000  shares of the  Company's  common stock with a
market value of $48,750 for printing  services  provided and to be provided.  In
addition, the Company agreed to issue warrants to purchase 800,000 shares of the
Company's  common stock.  The terms of the warrants are as follows:  (1) 400,000
warrants are  exercisable  at $0.25 per share and are callable by the Company at
$0.75  and (2)  400,000  warrants  are  exercisable  at $0.30  per share and are
callable by the Company at $1.20 per share.  The shares  underlying the warrants
are restricted. The warrants have a term of twelve months. The fair value of the
800,000 warrants using the Black-Scholes  Option Pricing Model is $12,000 and is
being recorded to selling,  general and administrative expenses over the term of
the  agreement.  During the year ended  December  31, 2004 the Company  expensed
$27,961 related to the agreement.

In January  2004,  the Company  entered into a  twelve-month  agreement  with an
individual  for  marketing  services to be  provided.  The  individual  is to be
compensated  $2,000  per  month,  to be paid in shares of the  Company's  common
stock.  During the year ended  December 31,  2004,  the Company  issued  221,213
shares of its common stock valued at $26,000 for full settlement of amounts owed
to this  individual  for services and future  services in accordance  with a new
contract.  During the year ended December 31, 2004 the Company  expensed $22,000
related to this agreement.

In February 2004, the Company issued 33,000 shares of its common stock valued at
$5,940 for consulting  services  provided by an individual during the year ended
December 31, 2004.

In April 2004,  the Company  issued 100,000 shares of its common stock valued at
$14,500 in full  settlement  of amounts  owed to a former  employee for services
previously rendered.

In May 2004,  the Company  issued  150,000  shares of its common stock valued at
$26,375 for accounting  services provided by an individual,  which were expensed
during the year ended December 31, 2004.

In May 2004, the Company  inadvertently issued 623,958 shares of common stock to
a former  related third party in error.  The Company has  subsequently  received
these shares back in August 2004.

In May 2004,  the Company  issued  200,000  shares of its common stock valued at
$42,000  in  accordance  with its  agreement  with a director  as an  additional
incentive to become a director.  The term of his  directorship  began January 1,
2004 and is for a 24-month  term.  During the year ended  December  31, 2004 the
Company has expensed  $21,000 for  services  rendered and $21,000 is recorded as
unearned services at December 31, 2004

In July 2004,  the Company  issued  1,000,000  shares of its common stock to its
President and CEO in satisfaction of $70,000 of loans to the Company.

                         ISSUANCE AND EXCHANGE AGREEMENT

In April 2003, the Company  entered into an agreement with a corporation,  which
is under the ownership of shareholders of the Company.  The  shareholders of the
corporation  agreed to convert their convertible  preferred stock into 1,500,000
shares of the Company's  common stock valued at $105,000.  The issuance of these
shares  to the  corporation  will be used to  fulfill  past  obligations  of the
Company,  which  required  compensation  in the form of  unrestricted  shares of
common  stock.  The issuance of these shares  resulted in the Company  expensing
$105,000 in consulting fees during the year ended December 31, 2003.

                                      F-17
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                         COMMON STOCK PURCHASE AGREEMENT

In April 2003, a $1,000,000  Common Stock  Purchase  Agreement  was entered into
between the Company and an investment  fund that has common  management with the
financial  advisory  firm ("the  Purchaser").  The Agreement is for an aggregate
installment  payment  purchase  price of  $1,000,000.  The Purchaser  intends on
purchasing  this  common  stock at $.07 per  share in 20 equal  installments  of
$50,000 each. In addition to the purchased  stock,  the Company shall deliver to
the  designated  escrow agent 200% of the number of shares being  purchased with
each $50,000 installment. To date there have been no purchases.

                    ISSUANCE OF STOCK FOR SETTLEMENT OF DEBT

On March 27, 2003, the Company  entered into an agreement to repay a relative of
an employee in the amount of $140,000 in four equal installments with $35,000 of
the Company's  common stock based on a 20% reduction to the then average closing
price of the common stock for the three  trading days prior to the issuance date
of such common stock. The Company,  at its option,  may repay such  indebtedness
with cash for a 20% premium to the face value of such  quarterly  payments  due.
During the year ended  December 31, 2003,  the Company  issued 998,094 shares of
its common  stock as payment on the first  three  installments.  The Company has
recorded  $26,250 as interest  expense related to the note. On July 2, 2003, the
Company  amended  the  settlement  agreement  whereby the  individual  agreed to
conform to Rule 144 leakage  limitations on the timing and amount of shares that
can be sold in the public market per quarter. As a result, the Company issued an
additional  413,958  shares of its common stock valued at $124,187.  The Company
has recorded such amount as interest and financing expense.

In April 2003, the Company  entered into an agreement to settle amounts owed for
services  related to a prior contract and agreed to issue 200,000 shares of it's
common stock,  valued at $16,000,  in  satisfaction  of the  remaining  debt. In
addition, the Company issued warrants to purchase 50,000 shares of the Company's
common stock at an exercise  price of $0.10 per share.  The warrants have a term
of two years.  The fair value of the warrants of $4,000 was calculated using the
Black-Scholes  Option Pricing Model and was accounted for as additional  paid-in
capital and interest and financing  expense  during the year ended  December 31,
2003.

In April 2003, the Company entered into an agreement with a creditor wherein the
debt owed of $42,224 was settled by the issuance of 114,118 restricted shares of
the Company's common stock as full settlement of the debt.

During the year ended December 31, 2003, the Company issued an additional 25,000
shares of its common stock valued at $3,750 for settlement of past payables.

                   ISSUANCE OF STOCK RELATED TO CAPITAL RAISE

On August 9,  2004,  the  Company  entered  into a Standby  Equity  Distribution
Agreement with Cornell.  Pursuant to the Standby Equity Distribution  Agreement,
the Company may, at it's discretion,  periodically  issue and sell shares of our
common stock for a total purchase price of $15 million.  If the Company requests
advances under the Standby Equity Distribution Agreement,  Cornell will purchase
shares of common  stock of the  Company  for 98% of the lowest  volume  weighted
average price on the  Over-the-Counter  Bulletin Board or other principal market
on which the Company common stock is traded for the 5 days immediately following
the  advance  notice  date.  Cornell  will retain 5% of each  advance  under the
Standby Equity Distribution  Agreement.  The Company may not request advances in
excess  of a total of $15  million.  The  maximum  of each  advance  is equal to
$400,000.  In connection  with the Standby Equity  Distribution  Agreement,  the
Company  issued  8,315,789  shares of it's  common  stock  valued at $790,000 to
Cornell as a  commitment  fee and we issued  105,263  shares of our common stock
valued at $10,000 to Newbridge Securities as a placement agent fee. Such amounts
have been recorded as deferred offering costs on the consolidated  balance sheet
at December 31, 2004. In April 2005, the Company and Cornell agreed to terminate
this  agreement and all related shares of common stock are to be returned to the
Company.

                           CONVERSION OF NOTES PAYABLE

In March 2004,  Alpha, a holder of convertible  promissory notes, had $12,500 of
its  promissory  notes  converted  into 178,571  shares of the Company's  common
stock.

In June 2004, an individual  holding a $30,000  convertible  promissory note had
the full note and interest  payable of $2,238  converted  into 302,251 shares of
common stock in accordance with the notes provisions.

In July 2004,  Alpha  converted  an  additional  $10,000 of its note for 142,857
shares of the Company's common stock.


                                      F-18
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

In August 2004, Cornell, holders of convertible promissory notes, had $11,831 of
its  promissory  notes  converted  into 188,686  shares of the Company's  common
stock.

In December 2004, Cornell,  holders of convertible promissory notes, had $20,000
of its promissory  notes  converted into 422,466 shares of the Company's  common
stock.

                                  LEGAL MATTERS

In  January  2004,  the  Senior  Vice  President  ("SVP")  of  the  Company  was
terminated.  Subsequently  the SVP's counsel has  submitted a letter  requesting
that the SVP is owed  $140,000 for the  remainder of the term of his  employment
agreement  which was  alleged to be an  additional  two years.  The  Company and
counsel  believe the employment  agreement is terminable at will by either party
and have offered to settle this matter for two months base salary.

NOTE 14 - STOCK OPTION PLANS

                              STOCK INCENTIVE PLANS

In August 1999, the Company's stockholders approved the adoption of an Incentive
Stock Option Plan ("1999 Option  Plan"),  which allows the Board of Directors to
grant  options to  employees  and  members of the Board of  Directors.  The 1999
Option  Plan  provided  the Board of  Directors  the right to grant  options  to
purchase  up to a total of 100,000  shares of the  Company's  common  stock.  On
August 17, 2000,  with the  approval of the  shareholders  of the  Company,  the
number  of  shares  available  under  the  1999  Option  Plan was  increased  to
1,000,000.  As of December 31, 2004,  220,000 options were outstanding under the
1999 Option Plan.  During the year ended  December 31, 2004,  the Company issued
400,000  shares of its common stock under  non-plan  options in lieu of granting
options. As of December 31, 2004, 1,289,810 non-plan options were outstanding.

The following  information  summarizes  the Company's  stock option  activity at
December 31, 2004:

Stock Options Plans:

                                                             Weighted
                                                              Average
                                                             Exercise
                                                Options        Price
                                               --------      --------
          Outstanding at December 31, 2002      317,500         $1.07
                   Granted                           --            --
                   Exercised                    (17,500)         .001
                   Expired or cancelled         (80,000)          .70
                                               --------      --------

          Outstanding at December 31, 2003      220,000          1.07
                   Granted                           --            --
                   Exercised                         --            --
                   Expired or cancelled              --            --
                                               --------      --------

          Outstanding at December 31, 2004      220,000      $   1.07
                                               ========      ========

                                      F-19
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Non-plan stock options:
                                                             Weighted
                                                             Average
                                                             Exercise
                                                Options       Price
                                                --------     ---------
          Outstanding at December 31, 2002       659,810     $    1.00
                   Granted                       450,000           .22
                   Exercised                    (166,334)          .40
                   Expired or cancelled          (53,666)          .08
                                                --------     ---------

          Outstanding at December 31, 2003       889,810     $     .61

                   Granted                       400,000           .14
                   Exercised                          --            --
                   Expired or cancelled               --            --
                                               ---------      --------
          Outstanding at December 31, 2004     1,289,810           .46
                                               =========      ========


The following table summarizes  information about stock options  outstanding and
exercisable at December 31, 2004:

                                          Outstanding and exercisable
                         ------------------------------------------------------
                                         Weighted
                                          Average      Weighted
                                         Remaining     Average
                            Number         Life        Exercise      Number
                          Outstanding    in Years       Price     Exercisable
                         -------------- ------------  ----------- -------------

Range of exercise price:
     $.001 to $.50           1,026,000     1.81          .32         1,026,000
     $.51 to $1.00             243,810     5.13          .92           243,810
     $1.01 to $1.50            240,000     6.00          1.43          240,000
                         --------------                           -------------
                             1,509,810                               1,509,810
                         ==============                           =============

In February 2003, the Company's  shareholders  approved the adoption of the 2003
Stock  Incentive  Plan ("2003 Plan").  In May 2003,  the Company's  shareholders
approved the adoption of the 2003 Stock  Incentive  Plan #2 ("2003 Plan #2"). In
August 2003, the Company's  shareholders approved the adoption of the 2003 Stock
Incentive   Plan  #3  ("2003  Plan  #3").  In  September   2003,  the  Company's
shareholders  approved the adoption of the 2003 Stock  Incentive  Plan #4 ("2003
Plan #4").  The plans allow the Board of Directors to grant awards to employees,
directors, independent contractors or agents of the Company. Awards may include,
but are not limited to, stock  options,  stock  appreciation  rights,  warrants,
dividend equivalents, stock awards, restricted stock, phantom stock, performance
shares or other  securities or rights that the Board of Directors  determines to
be consistent with the objectives and  limitations of the plans.  The 2003 Plan,
the 2003 Plan #2,  the 2003 Plan #3 and the 2003  Plan #4  provide  the Board of
Directors the right to grant awards up to a total of 1,000,000 shares, 1,500,000
shares,  2,750,000 shares and 2,000,000 shares,  respectively,  of the Company's
common stock. In addition,  the plans provide the Board of Directors the ability
to determine the type,  size,  terms and vesting periods of the awards under the
plans. As of December 31, 2004,  1,000,000 shares,  1,500,000 shares,  2,600,000
shares and 0 shares of the  Company's  common  stock were issued  under the 2003
Plan, 2003 Plan #2, 2003 Plan #3 and 2003 Plan #4, respectively.

NOTE 15 - INCOME TAXES

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
the  recognition  of deferred tax assets and  liabilities  for both the expected
impact of differences  between the financial  statements and tax basis of assets
and liabilities,  and for the expected future tax benefit to be derived from tax
loss  and  tax  credit   carryforwards.   SFAS  109  additionally  requires  the
establishment of a valuation  allowance to reflect the likelihood of realization
of deferred tax assets. At December 31, 2004 a valuation  allowance for the full
amount of the  deferred  tax asset was  recorded  because  of  operating  losses
incurred and the  uncertainties as to the amount of taxable income that would be
generated in the future years.

The Company has a net operating  loss  carry-forward  for tax purposes  totaling
approximately  $13,000,000 at December 31, 2004 expiring  through the year 2004.

                                      F-20
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 15 - INCOME TAXES - (cont'd)

      The tax effects of  temporary  differences,  loss  carry-forwards  and the
      valuation  allowance  that  give rise to  deferred  income  tax  assets at
      December 31, 2004 are as follows:


          Temporary differences:
                Fair value of warrants and options           $   262,000
                Net operating losses                           4,475,000
                Less valuation allowance                      (4,737,000)
                                                             -----------
                  Deferred tax assets                        $        --
                                                             ===========

          The reconciliation of the effective income tax rate to
          the federal statutory rate for the years ended
          December 31, 2004 and 2003 is as follows:
                Federal income tax rate                             34.0
                Change in valuation allowance on net operating
                  loss carry-forwards                              (34.0)
                                                                  ------
                Effective income tax rate                            0.0%
                                                                  ======

NOTE 16 - RELATED PARTY TRANSACTIONS


                             GRANT OF STOCK OPTIONS

During the year ended  December  31,  2003,  the  President  of the  Company was
granted  options  pursuant  to the June 2003 two year  employment  agreement  to
purchase  300,000  shares of the  Company's  common stock which are separated as
follows:  100,000 options are exercisable at $0.25 per share and 200,000 options
are  exercisable  at $0.19 per share.  The  employment  agreement  entitles  the
President,  as long as he is employed  with the  Company,  to  purchase  100,000
shares of the Company's  common stock for each 90-day period through the term of
the employment agreement. All options will have a term of two years. The options
are exercisable at a price equal to 100% of the closing price of the stock as of
the grant  date.  The options  become  fully  exercisable  on the date of grant.
During the year ended  December 31, 2003 the fair value of the options using the
Black-Scholes  Option  Pricing  Model  was  $69,000  and is being  amortized  to
compensation  expense over the term of the employment agreement of which, during
the years ended  December 31, 2004 and 2003,  the Company  expensed  $38,857 and
$13,952 related to these options.

During the year ended  December  31,  2004,  the  President  of the  Company was
granted  options  pursuant  to the June 2003 two year  employment  agreement  to
purchase  100,000  shares of the Company's  common stock at an exercise price of
$0.10 per share.  In addition,  the President was previously  granted options to
purchase 400,000 shares of the Company's common stock,  each option is separated
in 100,000  increments  and are  exercisable  at $.19,  $.14,  $.10 and $.12 per
share. The options become fully exercisable on the date of grant. The fair value
of the options using the  Black-Scholes  Option Pricing Model was $77,000 and is
being  amortized  to  compensation  expense  over  the  term  of the  employment
agreement.  During the year ended December 31, 2004, the Company expensed $6,866
respectively related to these options.

In March  2003,  the  former  President  of  ChampionLyte  Beverages,  Inc.,  as
consideration  for entering into an  employment  agreement,  was granted  50,000
options to purchase  shares of the  Company's  common  stock at $0.10 per share.
Since the employee continued employment with the Company for a period of 90 days
following  the  execution of the  agreement,  the  employee was granted  100,000
additional options to purchase shares of the Company's common stock at $0.33 per
share. The options carry a term of two years and became fully exercisable on the
date of grant.  The fair value of the  options  using the  Black-Scholes  Option
Pricing Model was $39,500 and is being  amortized to  compensation  expense over
the term of the  employment  agreement.  During the year ended December 31, 2004
and 2003, the Company expensed $21,250 and $12,323 related to these options.

                              EMPLOYMENT AGREEMENTS

In April 2003,  the Company  entered into a formal  employment  agreement with a
shareholder  of the  Company  and a key  officer  of the  Company's  subsidiary,
ChampionLyte  Beverages,  Inc. The term of the  agreement is for a period of two
years with a base salary of $96,000 for the period  beginning on the date of the
agreement  through June 14, 2003,  $108,000 for the period beginning on June 15,
2003 through September 14, 2004, and $120,000 for the period beginning September
15, 2004 through March 14, 2005. The employee is entitled to bonuses as follows:
an annual  bonus  equal to 3% of the  Company's  annual net pre-tax  profits,  a
personal  performance  commission  based on sales made as a direct result of the
employees efforts equal to 1% of gross sales, payable on a quarterly basis.


                                      F-21
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

RELATED PARTY TRANSACTIONS

                              EMPLOYMENT AGREEMENTS

In March  2003,  the  former  President  of  ChampionLyte  Beverages,  Inc.,  as
consideration  for entering into an  employment  agreement,  was granted  50,000
options to purchase  shares of the  Company's  common  stock at $0.10 per share.
Since the employee continued employment with the Company for a period of 90 days
following  the  execution of this  agreement,  the employee was granted  100,000
additional options to purchase shares of the Company's common stock at $0.33 per
share. The options carry a term of two years and become fully exercisable on the
date of grant.  The fair  market  value of the options  using the  Black-Scholes
Option Pricing Model was $39,500 and is being amortized to compensation  expense
over the term of the  employment  agreement.  Effective  September 14, 2004, the
Company terminated its President and Secretary of Championlyte Beverages,  Inc.,
our wholly-owned subsidiary.

In  April  2003,  the  Company's  Board of  Directors  passed  a  resolution  to
compensate its directors and certain officer's 150,000 shares of common stock on
a quarterly  basis.  In February 2004, this was amended to 175,000 shares of the
Company's  common stock to reflect the addition of a new member to the Company's
Board of  Directors.  The Board of Directors  also includes the President of the
Company.

In April  2003,  the  Company  amended its  employment  agreement  with its SVP,
whereby the SVP was granted 150,000 shares of the Company's common stock, valued
at $11,250 for past services  provided,  and  1,650,000  shares of the Company's
common  stock  valued at $123,750  for  services to be provided  over ten months
beginning  April 2003.  During the year ended  December  31,  2004,  the Company
expensed  $24,750 related to this agreement.  In April 2004, the Company and the
SVP mutually  terminated their  relationship.  In accordance with the settlement
agreement, the Company issued the SVP 100,000 shares of its common stock, valued
at $14,500, in full satisfaction of any obligations due to him in April 2004. In
addition, the Company was indebted to the SVP in the amount of $44,333. In April
2003,  the Company and the SVP entered into an agreement  whereby the  remaining
debt would be  settled  through  the  issuance  of common  stock in lieu of cash
payments. Monthly issuances valued at $6,333 would be given to the SVP until the
debt has been  satisfied.  During the year ended  December 31, 2003, the Company
issued  237,915  shares of common stock valued at $44,333 in full  settlement of
the debt.

In June 2003, the Company  entered into formal  employment  agreements  with the
President of the  Company.  The  agreement is for a term of two years.  The base
salary for the executive is $3,500 per month paid in the Company's  common stock
in the first year, and $4,000 per month payable in the Company's common stock in
the second year. Should the agreement be renewed,  the base salary will increase
at a rate of 10% per annum.  The employee is also entitled to commissions  based
on sales made as a direct result of the  employee's  efforts in amounts equal to
1% of gross sales payable on a quarterly basis.

During the year ended  December 31, 2004 and 2003 the Company  issued 63,888 and
149,750  shares of common stock,  respectively,  related to the agreement and at
December 31, 2004,  the President is owed 468,375  shares of common stock valued
at $35,000  for  compensation,  which is  included  in accrued  expenses  in the
accompanying consolidated balance sheet.

In  April  2003,  the  Company's  Board of  Directors  passed  a  resolution  to
compensate its directors and certain officer's 150,000 shares of common stock on
a quarterly  basis.  The Board of Directors  also  includes the President of the
Company.

                                      F-22
<PAGE>

                  CHAMPIONLYTE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

               SETTLEMENT AGREEMENT FOR REPAYMENT OF NOTES PAYABLE

On March 27, 2003, the Company  entered into an agreement to repay a relative of
an employee in the amount of $140,000 in four equal installments with $35,000 of
the Company's  common stock based on a 20% reduction to the then average closing
price of the common stock for the three  trading days prior to the issuance date
of such common stock. The Company at its option may repay such indebtedness with
cash for a 20% premium to the face value of such quarterly  payments due. During
the year ended  December  31,  2004 and 2003,  the  Company  issued  184,120 and
998,094   shares  of  its  common  stock,   respectively,   as  payment  on  the
installments.  The Company has recorded  $87,250 and $26,250 as interest expense
related  to the note  during  the  years  ended  December  31,  2004  and  2003,
respectively.  On July 2, 2003,  the Company  amended the  settlement  agreement
whereby the individual agreed to conform to Rule 144 leakage  limitations on the
timing and amount of shares that can be sold in the public  market per  quarter.
As a result, the Company issued an additional 413,958 shares of its common stock
valued at $124,187  during the year ended  December  31,  2003.  The Company has
recorded such amount as interest and financing expense.

NOTE 16 - SUBSEQUENT EVENTS


In January  2005,  the Company  issued  747,044 of common stock to Gamma for the
conversion of $25,000 of its promissory notes as requested in December 2004. The
conversion has been recorded in January 2005.

In January 2005, Cornell,  holders of convertible  promissory notes, had $10,000
of its promissory  notes  converted into 332,226 shares of the Company's  common
stock.

In January 2005, Latitude, holders of convertible promissory notes, had $135,000
promissory notes converted into 5,500,000 shares of the Company's common stock.

In April 2005,  the Company and Cornell  agreed to terminate the Standby  Equity
Distribution Agreement and all related shares of common stock are to be returned
to the Company.


                                      F-23
<PAGE>

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

Our accountant is Massella & Associates,  CPA, PLLC independent certified public
accountants.  At no time has there been any disagreements  with such accountants
regarding any matter of accounting principles or practices,  financial statement
disclosure, or auditing scope or procedure.

a) Previous Independent Auditors:

(i) On June 25, 2003,  Radin Glass & Co, LLP was  dismissed  as our  independent
auditor and Massella Roumbos LLP (now known as Massella & Associates,  CPA, PLLC
was appointed as our new independent auditor.

(ii) During the two most recent  fiscal years and interim  period  subsequent to
December 31, 2002, there have been no disagreements  with Radin Glass & Co., LLP
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure, or auditing scope or procedure.

(iii) Radin Glass & Co, LLP 's report on the financial  statements  for the year
ended  December 31, 2002  contained no adverse  opinion or disclaimer of opinion
and was not qualified or modified as to audit scope or accounting principles but
included  an  explanatory   paragraph  reflecting  an  uncertainty  because  the
realization  of a major portion of our assets was dependent  upon our ability to
meet our future  financing  requirements  and the success of future  operations.
These factors raised  substantial doubt about our ability to continue as a going
concern.

(iv) Radin Glass & Co, LLP furnish us with a letter addressed to the SEC stating
that it agrees with the above statements.  A copy of the letter to the SEC dated
June 25, 2003,  was filed as an Exhibit to our Form 8-K filed on August 13, 2003
(SEC File No. 000-28223).

(v) During the two most recent fiscal years and the interim period subsequent to
December 31, 2002, there have been no reportable  events with Radin Glass & Co.,
LLP as set forth in Item 304(a)(i)(v) of Regulation S-K.

(b) New Independent Accountants:

(i) We engaged,  Massella Roumbos LLP (now known as Massella & Associates,  CPA,
PLLC as our new independent auditors as of June 25, 2003. Prior to such date, we
did not consult with  Massella  Roumbos LLP  regarding  (i) the  application  of
accounting principles,  (ii) the type of audit opinion that might be rendered by
Massella  Roumbos  LLP,  or (iii) any other  matter  that was the  subject  of a
disagreement   between  us  and  our  former   auditor  as   described  in  Item
304(a)(1)(iv) of Regulation S-B.



                                       12
<PAGE>



ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

David Goldberg,  our principal executive officer and principal financial officer
evaluated  the  effectiveness  of our  disclosure  controls and  procedures  (as
defined in rule  13a-15(e) and 15d-15(e)  under the  Securities  Exchange Act of
1934,  as  amended) as of a date within 90 days before the filing of this annual
report (the Evaluation Date). Based on that evaluation,  our principal executive
officer and principal  financial  officer  concluded  that, as of the Evaluation
Date, the disclosure  controls and procedures are effective in ensuring that all
material  information required to be disclosed by us, including our consolidated
subsidiaries,  in reports that we file or submit under the Exchange  Act, is (i)
recorded,  processed,  summarized  and reported on a timely basis in  accordance
with  applicable   Commission  rules  and  regulations;   (ii)  accumulated  and
communicated to our management,  including our principal  executive  officer and
principal financial officer and other persons that perform similar functions, if
any, to allow us to make timely decisions  regarding required  disclosure in our
periodic  filings.  Although  our  principal  executive  officer  and  principal
financial officer believes our existing  disclosure  controls and procedures are
adequate to enable us to comply with our  disclosure  obligations,  we intend to
formalize  and  document  the  procedures  already  in  place  and  establish  a
disclosure committee.

Changes in internal controls

David Goldberg,  our principal executive officer and principal financial officer
has  indicated  that there were no changes  in our  internal  controls  or other
factors that could  affect such  controls  during the  quarterly  period  ending
December  31,  2004,  and there were no such  control  actions  taken during the
quarterly period ending December 31, 2004.


                                       13
<PAGE>


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

Our directors and officers,  as of December 31, 2004,  are set forth below.  The
directors hold office for their  respective term and until their  successors are
duly elected and  qualified.  Vacancies  in the  existing  board are filled by a
majority vote of the remaining directors.  The officers serve at the will of the
board of directors.

NAME                 AGE        DIRECTOR/POSITION

David Goldberg       42         President, Principal Financial Officer,
                                Principal Accounting Officer and Chairman
                                of the Board of Directors; CEO, Championlyte
                                Beverages, Inc. our subsidiary

Steven Field         57         Director

Thad Kaplan          36         Director

Marshall Kanner(2)   48         Director

Eli Greenstein (1)   62         Director

(1) Eli Greenstein resigned as a director on March 29, 2005.
(2) Marshall Kanner resigned as a director on August 31, 2004, prior to our year
    end. Therefore, we have deleted his biographical information.


The following is a biographical summary of our directors and officers:

DAVID  GOLDBERG was appointed to our Board of Directors on February 11, 2003 and
was appointed as our President on April 14, 2003. He was recently  appointed our
Principal  Financial Officer and Principal  Accounting  Officer.  He devotes his
full time to Championlyte.  He is also the CEO of Championlyte Beverages,  Inc.,
our subsidiary.

Mr.  Goldberg has fifteen  years of sales and  marketing  experience in the real
estate and property  management  industry.  From November  1999 to present,  Mr.
Goldberg has been the Vice President of marketing,  sales and  distribution  for
All Star Packaging,  a packaging  company in the poultry and egg industry.  From
May 1996 to May 2000,  Mr.  Goldberg was property  manager and leasing  agent of
Camco Inc. In such  capacity,  he managed and directed all  operations  of Camco
Inc.'s one million  square foot retail  industrial  portfolio.  He also  oversaw
management  of  various  residential  communities  and ran the  company's  daily
operations.  From August 1995 to May 2000, he was the principal  owner of Gold's
Gym  Fitness & Health  Center in  Middletown,  New York.  Mr.  Goldberg  holds a
Bachelor of Science degree in Business  Administration from the State University
of Delhi, New York.

THAD KAPLAN was  appointed  to our Board of  Directors  on January 7, 2003.  Mr.
Kaplan is currently an independent  food & beverage  industry  consultant.  From
1997 to 2002, Mr. Kaplan was the owner of BS Holdings, Inc., a food and beverage
industry holding company.  BS Holdings  acquired a food service business in 1997
that was primarily in the wholesale baking business. He sold the business during
the second  quarter of 2002.  Prior to owning BS  Holdings,  Mr.  Kaplan was the
purchaser and manager for an independent  supermarket  chain in Middletown,  New
York. Mr. Kaplan's responsibilities included purchasing decisions, management of
employees,  marketing  and profit and loss  responsibility.  Mr. Kaplan holds an
Associates degree from Sullivan County Community College,  New York with studies
in Food Service, Restaurant Management and the Culinary Arts.

STEVEN FIELD was  appointed to our Board of Directors on February 11, 2003.  Mr.
Field  has  manufacturing  and  management  experience.  He  is  experienced  in
reorganization  situations.  Mr.  Field's  last  position  from June 2000  until
September  2001  was with  Security  Plastics,  a 43  year-old  company  seeking
bankruptcy  protection  under Chapter 11.  Security  Plastics was in the plastic
injection molding business. It filed for bankruptcy in September 2001. Mr. Field
was  engaged  as  the  Acting  Chief  Operating  Officer  and  Assistant  to the
President,   assisting  in  the  design  and  guiding  the  company   through  a
reorganization.

From 1993 to 1998 he was employed by Serta  Mattress Co. as the  Director,  Vice
President of  Manufacturing.  His  position  with Serta was to  consolidate  the
operations from 25 manufacturing  locations to 17, while increasing productivity
and bringing outsourced products in-house.  He was involved in the packaging and
sale of the company to a Triarc  Group  Subsidiary.  He has sales and  marketing
experience and uses his accounting background to assist in analysis of financial
information and decision-making  processes.  Mr. Field has a Bachelor of Science
degree in Accounting  and has taken  graduate  level  courses in  manufacturing,
management and processes as well as various seminars.

Since Mr. Field left Serta Mattress Co., he has been semi-retired, excluding his
positions set forth above.

                                       14
<PAGE>


MARSHALL KANNER was elected as our Interim Chief Operating Officer, Director and
Chairman of our Board of  Directors  on January 7, 2003.  He resigned as Interim
Chief  Operating  Officer and  Chairman on April 14, 2003 but remains one of our
directors.  Mr. Kanner's career of over 20 years covers  corporate  development,
corporate  finance,  mergers  &  acquisitions,   strategic  planning,  strategic
alliances,  corporate restructuring,  management consulting,  venture financing,
and forming  entrepreneurial  ventures in numerous  industries.  His  experience
includes construction, apparel, transportation, financial consulting, insurance,
real estate brokerage,  logistics and technology and internet  development.  Mr.
Kanner  served  as Chief  Operating  Officer  and  Vice  President  of  Business
Development for MyCity Holdings,  Corp., an internet technology  development and
infrastructure company from January 1997 until March 2002. From April 2002 until
the present,  he  currently  serves as a principal  and Managing  Director of BK
Generalli,  LLC, a financial  consulting  company based in Miami,  Florida.  Mr.
Kanner earned his Bachelor of Science Degree in Economics from the University of
Florida in 1977.

ELI  GREENSTEIN was appointed to our board of directors on December 22, 2003. In
May 2000, Mr. Greenstein founded Alldiet,  Inc., a Great Neck, New York and Boca
Raton,  Florida  based food and beverage  brokerage  firm that sells and markets
sugar-free,  low-carbohydrate  products  to  health  food  and  natural  product
retailers and distributors,  drug stores, supermarket chains and diet plans. Mr.
Greenstein had been retired prior to opening Alldiet,  Inc. after he sold Double
G Foods, a food  distribution  business,  in 1992. Eli Greenstein  resigned as a
director on March 29, 2005.

The  Directors  named  above will  serve  until the next  annual  meeting of our
shareholders  in the year 2005.  Directors will be elected for one year terms at
each  annual  shareholder's  meeting.  Officers  hold  their  positions  at  the
appointment of the Board of Directors.

CERTAIN LEGAL PROCEEDINGS

No  director,  nominee for  director,  or  executive  officer of the Company has
appeared as a party in any legal  proceeding  material to an  evaluation  of his
ability or integrity during the past five years.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

We have not filed Form 5's for the year ending December 31, 2004.

ITEM 10. EXECUTIVE COMPENSATION

The  following  table sets forth  information  concerning  annual and  long-term
compensation,  on an  annualized  basis for the 2004 fiscal year,  for our Chief
Executive  Officer  and for each of our other  executive  officers  (the  "Named
Executive Officers") whose compensation on an annualized basis is anticipated to
exceed $100,000 during fiscal 2004.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                        ANNUAL COMPENSATION                                  LONG TERM COMPENSATION
                                                                              OTHER           RESTRICTED SECURITIES        ALL
NAME AND PRINCIPAL                      FISCAL     ANNUAL                     ANNUAL          STOCK     UNDERLYING        OTHER
POSITION                                 YEAR      SALARY       BONUS      COMPENSATION       AWARDS  OPTIONS/SARS(#)  COMPENSATION
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>         <C>          <C>       <C>                  <C>     <C>               <C>
David Goldberg, President,               2003        (1)          (1)       $  42,000           -0-      200,000           (1)(3)
Principal Financial Officer              2004    $  48,000        (1)         Options           -0-          -0-           (1)(3)
And Principal Accounting Officer

Donna Bimbo, President                   2003    $ 120,000(2)     (2)           (2)             -0-      150,000           (2)
Championlyte Beverage, Inc.(2)           2004    $  86,538        (2)           (2)             -0-          -0-           (2)

Mr. Goldberg and Ms. Bimbo
were not employed by us
prior to January 1, 2003

Mark Streisfeld,
Former President                         2000    $ 133,334          -0-           -0-           -0-       50,000
And Director                             2001    $ 175,000        1,500           -0-           -0-       20,000
                                         2002    $ 175,000          -0-           -0-           -0-          -0-
Marshall Kanner                          2003    $     -0-          -0-        25,000           -0-          -0-
Former Interim Chief Operating
Officer and Director

</TABLE>


(1) Effective June 1, 2003, we entered into a two year employment agreement with
our President,  Principal  Financial Officer and Principal  Accounting  Officer,
David  Goldberg.  Pursuant  to such  agreement,  Mr.  Goldberg is to receive the
following consideration for his services:

(i) $3,500  per month of our common  stock in the first  year;  (ii)  $4,000 per
month of our common stock in the second year;

(iii)  Within  thirty days of  execution  of this  agreement,  Mr Goldberg  will
receive 100,000 options to purchase our common stock with a term of two years at
a price equal to $.25 per share;  (iv) If Mr.  Goldberg is employed  with us for
180 days from the effective date of the Agreement,  he shall receive  options to
purchase an additional 100,000 shares of our common stock and each 90 day period
thereafter, he will receive additional options to purchase 100,000 shares of our
common stock at an exercise  price of 100% of our closing stock price as of such
date. The term of each of these options is two years. (v) Mr. Goldberg will also
receive a personal performance commission based on sales made as a direct result
of his own  efforts,  equal to 1% of our Gross  Sales,  payable  on a  quarterly
basis.

                                       15
<PAGE>

(2) On August 15, 2004,  Ms.  Bimbo's  employment  agreement was  terminated for
non-performance.

Effective April 16, 2003, our wholly owned subsidiary,  ChampionLyte  Beverages,
Inc. entered into a two-year employment agreement with Ms. Bimbo. The employment
agreement provided for the following compensation:

(i) Annual base salary of: $96,000  pro-rated for the period April 16, 2003-June
14, 2003; (ii) Annual base salary of: $108,000 pro-rated for the period June 14,
2003-September 14, 2003; (iii) Annual base salary of: $120,000 pro-rated for the
period September 15, 2003-April 15, 2005; If the employment agreement is renewed
on or before March 14, 2005,  the base salary shall be no Less than $132,000 per
annum. Pursuant to the employment agreement,  Ms. Bimbo shall be entitled to the
following bonuses:

(i) Option  Bonus:  50,000  options to purchase our common stock for a term of 2
years at a price equal to $.10 per share.  If Ms.  Bimbo is employed for 90 days
from execution of the agreement,  which she has been, she is entitled to 100,000
additional options to purchase shares of our stock at an exercise price equal to
100%  of our  closing  stock  price  90 days  after  the  effective  date of her
employment  agreement.  On such date, July 15, 2003, our closing stock price was
$.33.  The options have a 2 year term and piggyback  registration  rights.  (ii)
Stock Bonus:  (a) annual bonus equal to 3% of ChampionLyte  Beverages annual net
pre-tax  profits as reported on its annual report.  The initial bonus is payable
on March 31, 2004; (b) personal performance  commission based on sales made as a
direct result of Ms. Bimbo's efforts,  equal to 1% of Gross Sales,  payable on a
quarterly  basis;  (c) override  commission of sales personnel  reporting to Ms.
Bimbo equal to 1/2% of Gross Sales, payable on a quarterly basis.

(3) Mr. Goldberg  received 113,888 and 225,000 shares  respectively  during 2004
and 2003 based on his position as our Chairman of the Board of Directors.

STOCK OPTIONS

The following table sets forth information with respect to stock options granted
to our named executive officers during fiscal year 2004:

                        OPTION/SAR GRANTS IN FISCAL 2004
                               (INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>

                        NUMBER OF              % OF TOTAL OPTIONS/SARs
                   SECURITIES UNDERLYING         GRANTED TO EMPLOYEES        EXERCISE        EXPIRATION
NAME               OPTIONs/SARs GRANTED          IN FISCAL YEAR 2004           PRICE            DATE
<S>               <C>                         <C>                           <C>           <C>
David Goldberg            400,000                         100%                   (1)       June 30, 2005
</TABLE>


(1) The exercise  prices range between $.10 and $.19 per share.

The following table sets forth  information as to the number of shares of common
stock  underlying  unexercised  stock  options  and  the  value  of  unexercised
in-the-money stock options projected at the 2003 fiscal year end: None

DIRECTORS COMPENSATION

Each  director is  compensated  25,000  shares per  quarter.  In  addition,  the
Chairman of the Board of Directors (presently, David Goldberg) is compensated an
additional 50,000 shares per quarter.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth,  as of December 31, 2004,  certain  information
with respect to the beneficial  ownership of the common stock by (1) each person
known by us to beneficially own more than 5% of our outstanding shares, (2) each
of our directors,  (3) each named executive officer and (4) all of our executive
officers and directors as a group.  Except as otherwise  indicated,  each person
listed below has sole voting and investment  power with respect to the shares of
common stock set forth opposite such person's name.


                                       16
<PAGE>

Name and Address of              Amount and Nature of   Percent of
Beneficial Owner                 Beneficial Ownership   Outstanding Shares(1)
                                 ---------------------  ---------------------
Thad Kaplan                               95,000                  *
David Goldberg                         1,393,638                3.86%
Steven Field                              73,600                  *
Eli Greenstein                           395,000                  *
All Executive Officers and
Directors as a Group                   1,957,238               15.42%
* - Less Than One Percent

(1) Based on 36,106,110  shares issued and  outstanding as of April 20, 2005


SERIES I CONVERTIBLE PREFERRED STOCK

                       Number of
                       Shares of        Percent of        Number of Shares of
                       Series I         Series I          Common Stock Into
                       Convertible      Convertible       Which Series I
                       Preferred Stock  Preferred Stock   Convertible Preferred
                       Beneficially     Beneficially      Stock are
Name of Shareholder    Owned(1)         Owned             Convertible(2)
--------------------- ---------------- ----------------   ----------------------



None

NONE

(1) Unless  otherwise  indicated,  the persons or entities  identified  in these
tables have sole voting and investment power with respect to all shares shown as
beneficially held by them, subject to community property laws where applicable.

(2) As of December 31, 2004

SERIES II CONVERTIBLE PREFERRED STOCK

                       Number of
                       Shares of        Percent of        Number of Shares of
                       Series II        Series II         Common Stock Into
                       Convertible      Convertible       Which Series II
                       Preferred Stock  Preferred Stock   Convertible Preferred
                       Beneficially     Beneficially      Stock are
Name of Shareholder    Owned(1)         Owned             Convertible(2)
---------------------  ---------------- ----------------  ----------------------



NONE

(1) Unless  otherwise  indicated,  the persons or entities  identified  in these
tables have sole voting and investment power with respect to all shares shown as
beneficially held by them, subject to community property laws where applicable.

(2) As of December 31, 2004


                                       17
<PAGE>

SERIES III CONVERTIBLE PREFERRED STOCK

                       Number of
                       Shares of        Percent of        Number of Shares of
                       Series III       Series III        Common Stock Into
                       Convertible      Convertible       Which Series III
                       Preferred Stock  Preferred Stock   Convertible Preferred
                       Beneficially     Beneficially      Stock are
Name of Shareholder    Owned(1)         Owned             Convertible(2)
---------------------  ---------------  ---------------   ----------------------
Advantage Fund I, LLC      165,000           100%            165,000


(1) Unless  otherwise  indicated,  the persons or entities  identified  in these
tables have sole voting and investment power with respect to all shares shown as
beneficially held by them, subject to community property laws where applicable.

(2) As of December 31, 2004

SERIES IV CONVERTIBLE PREFERRED STOCK

                       Number of
                       Shares of        Percent of        Number of Shares of
                       Series II        Series II         Common Stock Into
                       Convertible      Convertible       Which Series II
                       Preferred Stock  Preferred Stock   Convertible Preferred
                       Beneficially     Beneficially      Stock are
Name of Shareholder    Owned(1)         Owned             Convertible(2)
---------------------  ---------------- ----------------  ----------------------
Triple Crown
Consulting, Inc. (3)   100,000           100%              100,000



(1) Unless  otherwise  indicated,  the persons or entities  identified  in these
tables have sole voting and investment power with respect to all shares shown as
beneficially held by them, subject to community property laws where applicable.

(2) As of December 31, 2004

(3) Benjamin Kaplan is the owner of Triple Crown Consulting, Inc.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In January 2003, we retained a financial advisory firm,  Knightsbridge Holdings,
LLC as a business  consultant  to assist in a variety of areas  relating  to our
financial,  strategic and related development growth. The term of the engagement
is six months and shall automatically renew on a month-to-month  basis,  subject
to  termination  by either  party  with a  twenty-four  month  follow on period,
whereby  transactions  consummated  within  the  subsequent  twenty-four  months
following the  termination of this agreement the  transaction  may have fees due
and payable to the financial  advisory  firm.  In April 2003,  the agreement was
amended  to extend  the term of the  agreement  for a period  of 12 months  from
January 6, 2003.  The terms of the  agreement,  as amended in April 2003, are as
follows:  a monthly  payment of $7,500 per month as of April 1, 2003;  a monthly
retainer of $10,000 per month as of September 1, 2003.  We shall issue a warrant
to purchase  2.99% or 526,400  shares of our common  stock at 80% of the closing
bid price on January 6, 2003,  exercisable for five years, various sliding scale
compensation  amounts  for  equity  and  debt  financings  consummated  from  an
introduction by the financial advisory firm, sliding scale compensation  amounts
due for a merger or acquisition candidate introduced to us and the reimbursement
of  out-of-pocket  expenses not to exceed $500 a month unless agreed upon by us.
The sliding  scale  compensation  is as  follows:  Equity  Financing:  (i) up to
$250,000: $10,000 minimum fee; (ii) $250,001-500,000: $20,000 fee; (iii)$500,001
- $5,000,000: 8% of consideration;  and (iv) $5,000,000 plus: $400,000 plus 1.5%
of  consideration in excess of $5,000,000.  Debt Financing:  (i) up to $250,000:
$20,000 fee; (ii) $250,001-500,000:  $30,000 fee; (iii)$500,001 - $5,000,000: 6%
of consideration;  and (iii) $5,000,000 plus:  $300,000 plus 3% of consideration
in excess of $5,000,000. For any securities issued by or to us, 5% consideration
in kind.  For any merger or  acquisition  transaction,  the  compensation  is as
follows: (i) up to $500,000: $30,000 minimum fee; (ii) $500,001 - $5,000,000: 5%
of consideration;  and (iii) $5,000,000 plus:  $250,000 plus 3% of consideration
in excess of  $5,000,000.  If the entity was not  introduced  by  Knightsbridge,
Knightsbridge  shall only receive 50% of such  compensation.  The agreement also
contained  full  rachet  anti-dilution   provisions.  In  connection  with  such
provision , we issued 526,400 shares of our common stock.  Knightsbridge has now
waived such anti-dilution provisions.

In January 2003, we originated a promissory note with the Advantage Fund I, LLC,
that has  common  management  with  Knightsbridge  Holdings,  LLC.  The note was
amended on July 2003 and  October  16, 2003  increasing  the  maximum  borrowing
amount to $350,000, and $400,000,  respectively, and extending the maturity date
to December 31, 2004. On October 20, 2003,  $200,000 of the promissory  note was
assigned to Alpha  Capital  Aktiengesellschaft,  a non-related  third party.  On
November  3,  2003,  $50,000  of the  promissory  note  was  assigned  to  Gamma
Opportunity Partners, L.P., a non-related third party.

In April 2003,  our Board of Directors  passed a resolution  to  compensate  our
directors and officers an amount equal to 150,000  shares of our common stock on
a quarterly basis.


                                       18
<PAGE>

In April 2003, we entered into a $1,000,000 Common Stock Purchase Agreement with
an investment  fund, the Advantage Fund I, LLC, that has common  management with
the financial advisory firm, Knightsbridge Holdings, LLC, ("the Purchaser"). The
sale is for an aggregate  installment payment purchase price of $1,000,000.  The
purchase price of the common stock is $.07 per share.  The Purchaser is required
to  purchase  the common  stock in 20 equal  installments  of $50,000  each.  In
addition to the purchased stock, we shall deliver to the designated escrow agent
200% of the number of shares being purchased with each $50,000 installment.

On April 4, 2003,  Marshall  Kanner  resigned  as our  Chairman  of our Board of
Directors  and Interim  Chief  Operating  Officer and  accepted  the position of
non-executive Vice Chairman and member of our Board of Directors.  We authorized
the issuance of 820,000  shares of our common stock in  recognition  of his past
service and future  services.  Accordingly,  we accrued salary  compensation  of
$32,200 using the stock market and future services value of $.07 per share. Part
of the issuance of the 820,000 shares included the issuance of 360,000 shares of
our common stock to Mr.  Kanner for future  services.  These shares  vestes on a
pro-rata basis in 30,000 share  increments  each month beginning with April 2003
through March 2004.

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial statements;  see index to financial statement and schedules in Item
7 herein.

2.  Financial  statement  schedules;  see  index  to  financial  statements  and
schedules in Item 7 herein.

3. Exhibits:

      3.1(a) Certificate of Incorporation (1)

      3.1(b) Articles of Amendment to Articles of Incorporation (1)

      3.1(c) Articles of Incorporation of Championlyte Beverages, Inc. (1)

      3.2   By-Laws(1)

      4.1   2003 Stock Incentive Plan #4 (1)

      10.1  Agreement  between  Knightsbridge  Holdings,  LLC doing  business as
            Knightsbridge  Capital  and us dated  January 6, 2003 and  amendment
            dated April 7, 2003 (1)

      10.2  Advantage Fund I, LLC $250,000  Promissory  Note dated January 2003;
            amendment dated July 3, 2003 (increase to $350,000); amendment dated
            October 16, 2003  (increase to  $400,000);  $200,000  Assignment  to
            Alpha  Capital   Aktiengesellschaft;   Gamma   Opportunity   $50,000
            Promissory  Note dated  November  3, 2003;  Alpha  Capital  $200,000
            Promissory Note dated October 20, 2003;  $50,000 Assignment to Gamma
            Opportunity Capital Partners, L.P. (1)

      10.3  Triple  Crown  Consulting  Promissory  Notes  each in the  amount of
            $50,000  dated  April  15,  2003 and June 30,  2003;  and  Series IV
            Preferred Stock Letters dated April 18, 2003 and July 2, 2003 (1)

      10.4  Dave Goldberg Employment Agreement effective June 1, 2003 (1)

      10.5  Donna Bimbo Employment  Agreement with Championlyte  Beverages,  Inc
            (our wholly owned subsidiary) effective March 15, 2003 (1)

      10.6  Settlement Agreement with Sara Lee Corporation effective April 1,
            2003 (1)

      10.7  License  Agreement with Sara Lee Global  Finance,  L.L.C.  effective
            April 1, 2003 (not fully executed) (1)

      10.8  Strategic Marketing Agreement between BevSystems International, Inc.
            and us dated January 20, 2003 (1)


                                       19
<PAGE>

      10.9  Inglobalvest, Inc. Lawsuit Settlement Agreement (1)

      10.10 Latitude  Investment Corp. $135,000 Promissory Note dated August 15,
            2003 (1)

      10.11 Churchill Investments,  Inc. Financing Agreement dated June 30, 2003
            with Championlyte Beverages, Inc. (1)

      10.12 Churchill  Investments,  Inc.  Financing  Agreement dated August 20,
            2003 with the Old Fashioned Syrup Company (1)

      14.1  Code of Ethics

      21.1  Subsidiaries of ChampionLyte Holdings, Inc. (1)

(1) Incorporated by reference to Championlyte's SB-2 Registration Statement (SEC
File No. 333-105956).

(a) Reports on Form 8-K.

A Form 8-K was  filed  with the SEC on  November  3,  2004  based on Item  8.01,
announcing  Joseph  Butler as Vice  President  of our  subsidiary,  Championlyte
Beverages, Inc.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES AND AUDIT

For our fiscal  years ended  December  31,  2004,  we were billed  approximately
$40,000 and $53,000  respectively,  for professional  services  rendered for the
audit and review of our financial  statements included in our periodic and other
reports filed with the  Securities  and Exchange  Commission  for our year ended
December 31, 2004.

TAX FEES

For our fiscal year ended December 31, 2004, we were billed $2,500, respectively
for  professional  services  rendered for tax  compliance,  tax advice,  and tax
planning.

ALL OTHER FEES

We incurred other fees related to services rendered by our principal accountants
for the fiscal year ended December 31, 2004 as follows:

Reviews of Form 8-K and Form SB-2 filings and amendments - $9,000.


                                       20
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, there unto duly authorized.

                                   CHAMPIONLYTE HOLDINGS, INC.

                                   By: /s/ David Goldberg
                                       -------------------------------
                                       DAVID GOLDBERG
                                       President, Principal Financial Officer,
                                       Principal Accounting Officer and Chairman
                                       of the Board of Directors

Dated: April 20, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

Name                         TITLE                                                   DATE
----                         -----                                                   ----
<S>                         <C>                                                <C>
/s/ David Goldberg                                                              April 20, 2005
---------------------------  President, Principal Financial Officer,
     DAVID GOLDBERG          Principal Accounting Officer and Chairman
                             of the Board of Directors

/s/ Steven Field             Director                                           April 20, 2005
---------------------------
    STEVEN FIELD

/s/ Thad Kaplan              Director                                           April 20, 2005
--------------------------
    THAD KAPLAN

</TABLE>


                                       21