U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
      10-KSB


Amendment
      1





(Mark
      One)


[X]
            ANNUAL
                REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
                OF
                1934. For the fiscal year ended December 31, 2004.





[
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934. For the transition period from _______ to
                ________





Commission
      file number 0-21384





KAIRE
      HOLDINGS INCORPORATED


(Name
      of
      small business issuer in its charter)








**Delaware**
            **8980**
            **13-3367421**(State
                or other jurisdiction of
            (Primary
                Standard Industrial
            (I.R.S.
                Employerincorporation
                or organization)
            Classification
                Code Number )
            Identification
                No.)








5520
                Sespe Avenue, Suite D, Fillmore , CA
            93015(Address
                of principal executive offices)
            (Zip
                code)




Registrant's
      Telephone number, including area code: (805) 524-0024





Securities
      registered under 12(b) of the Exchange Act:  None





Securities
      registered under Section 12(g) of the Act:  Common
      Stock





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
      ___





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation
      S-B is not contained herein, and will not be contained, to the best of
      Registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB.





The
      issuer had net revenues of $2,218,086 for the fiscal year ended December 31,
      2004.





The
      aggregate market value of the voting stock held by non-affiliates on May 20,
      2005 was approximately $821,438  based
      on
      the average of the bid and asked prices of the issuer’s common stock in the
      over-the-counter market on such date as reported by the OTC Bulletin Board.
      As
      of December 31, 2004, 30,877,252 shares of the issuer’s Common Stock were
      outstanding. As of May 31, 2005, 33,877,252 shares of the issuer’s Common Stock
      were outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE





Transitional
      Small Business Disclosure Format  Yes   No X


1









EXPLANATORY
      NOTE




This
      Amendment No. 1 to this Annual Report on Form 10-KSB/A for the fiscal year
      ended
      December 31, 2004 is being filed in order to correct an error in the previously
      issued historical consolidated financial statements of Kaire Holdings, Inc.
      for
      the year ended December 31, 2004 initially filed with the Securities and
      Exchange Commission (the "SEC") on June 1, 2005 (the "Original Filing"). The
      corrections are to properly state accounts receivable as of December 31, 2004
      and pharmacy revenue for year ended December 31, 2004.





See
      "Restatement and Reclassification of Financial Statements" under Notes to
      Consolidated Financial Statements of this Form 10-KSB/A for additional
      discussion and a summary of the effect of these changes on the Company's
      consolidated financial statements as of December 31, 2004.





This
      Form
      10-KSB/A amends and restates only revenue and accounts receivable and 8A of
      the
      Original Filing to reflect the effects of this restatement of our financial
      statements for the periods presented. The remaining Items contained within
      this
      Amendment No. 1 on Form 10-KSB/A consist of all other Items originally contained
      on Form 10-KSB for the fiscal year ended December 31, 2004. These remaining
      Items are not amended hereby, but are included for the convenience of the
      reader. Except for the forgoing amended information, this Form 10-KSB/A
      continues to describe conditions as of the date of the Original Filing, and
      we
      have not updated the disclosures contained herein to reflect events that
      occurred at a later date.









**PART
      I**





**ITEM
      1. Description of Business**





Business





Present
      Business





Kaire
      provides both retail and long term care pharmacy services. Long term pharmacy
      care services focus on the following: 1) helping chronically ill patients
      residing in assisted living facilities maintain compliance with their medication
      therapies; 2) monitoring any adverse drug reactions and 3) assist the long
      term
      care providers monitor patient progress. Specialized long term care services
      include providing the patients their monthly cycle medications, providing the
      long term care providers with in service training and drug education, including
      providing detailed policies and procedures manuals, provide monthly reviews
      of
      patient drug regimes and processing all patient insurance claims. Specialized
      products include unit dose bubble pack of individual patient’s medication,
      secure mobile medication carts, and emergency medication kits for night or
      weekend patient emergencies.





These
      services are now provided through our subsidiary Effective Health, Inc., which
      on January 26, 2003 acquired certain assets of Sespe Pharmacy, which is located
      in Fillmore, California, and also the location of our corporate office. Sespe
      Pharmacy was strictly a retail pharmacy with a walk-in customer base that
      dispensed approximately 30 to 50 retail prescriptions per day. We purchased
      the
      assets of Sespe Pharmacy with the intention it would serve as our base of
      pharmacy operations for long term care facilities. Though we have maintained
      Sespe Pharmacy’s retail business, we mainly use Sespe Pharmacy as the center for
      disbursing retail and long term care prescriptions, incontinence supplies and
      durable medical equipment required by our client long-term facilities. We
      service approximately 15 medium to small residential board and care facilities
      delivering an average of 80 prescriptions each day. We are not dependent upon
      any one facility for the majority of our revenue. We also continue to fill
      retail prescriptions at Sespe Pharmacy and currently fill approximately 30
      prescriptions a day.





History





Kaire
      Holdings Incorporated (“Kaire”), a Delaware corporation, was incorporated on
      June 2, 1986 as Interactive Medical Technologies, Ltd. (“IMT”). Effective
      February 3, 1998, Kaire changed its name from Interactive Medical Technologies,
      Ltd. to Kaire Holdings Incorporated. Kaire’s headquarters are currently in
      Fillmore, California. Kaire has three subsidiaries, Effective Health, Inc.,
      YesRx.com, Inc. and See Shell Inc, of which only Effective Health Inc. is
      operating. Classic Care, Inc., (d/b/a Classic Pharmacy), a subsidiary of
      YesRx.com, Inc., was dissolved in February 2003 upon the acquisition of Sespe
      Pharmacy.










From
      1986
      through May of 2000, Kaire sold non-radioactive diagnostic imaging microspheres
      and provided quantitative laboratory analysis to customers who used the micro
      sphere products in their research studies. Customers included private and
      government research facilities, academic centers, and hospitals engaged in
      the
      study regional blood flow under laboratory conditions. We discontinued marketing
      these products and services in May 2000.





In
      December 1997, Kaire entered into an agreement to acquire 80% of Kaire
      International, Inc. ("KII"), a network marketing firm based in Longmont,
      Colorado. As part of the proposed acquisition, IMT changed its name to Kaire
      Holdings, Incorporated (“Kaire”). Kaire was unable to raise all the capital
      needed to complete the acquisition and by December 1998, we had to cancel the
      transaction. Any affiliation with Kaire International, Inc. was ended at that
      time.





In
      May of
      1999 Kaire incorporated YesRx.com, Inc., in the state of Delaware and began
      marketing a range of health oriented herbal consumer products through
      Vitaplanet.com, an e-commerce internet site we developed in house. A short
      time
      later we changed the name of Vitaplanet.com with YesRx.com, and upgraded the
      online e-commerce drug store to provide specialized pharmacy services,
      over-the-counter products, nutrition and personal care products supported by
      comprehensive health information to targeted segments of the senior health
      care
      market. The on-line e-commerce drug store business (YesRx.com) was not growing
      as expected and remained unprofitable. This business was phased out during
      2001.





In
      June
      2000, YesRx.com, Inc. acquired a 4-year-old pharmacy, Classic Care, Inc. (d/b/a
      Classic Care Pharmacy), located in Los Angeles, California. Classic Care
      Pharmacy provided specialized pharmacy care to residential board and care
      facilities in southern California. Through Classic Care Pharmacy, we gained
      revenues, increased the total number of patients served and obtained a licensed
      distribution center for pharmacy operations. Kaire retained the existing Classic
      Care Pharmacy management who were responsible for day to day pharmacy
      operations. The acquisition was made with a combination of cash and stock.
      The
      purchase price consisted of (i) cash, (ii) short-term promissory notes, and
      (iii) and the issuance of our common stock. In January 2000, we introduced
      a
      product line we labeled as the HIV health advocate program which was designed
      to
      improve medication compliance for HIV patients who were being treated with
      complex anti-viral medication therapies. This was done through personal
      interaction with each HIV patient. As discussed below, this program was phased
      out in January 2003.





In
      November 2001, we sought to restructure the schedule of remaining payments
      due
      Classic Care, Inc. under the acquisition agreement due to a significant fall
      in
      the market price of our common stock. As an alternative to restructuring, the
      original shareholders of Classic Care, Inc and us agreed to a plan to spin-off
      Classic Care, Inc. On January 31, 2002, at the annual shareholder meeting,
      shareholders approved the spin-off plan.




In
      May
      2002, we abandoned plans to “spin-off” Classic Care Pharmacy due to a notice
      dated April 17, 2002 that we received from State of California Department of
      Health Services (“DHS”) informing us that they were suspending Classic Care
      Pharmacy’s Medi-cal provider number and withholding 100% of Classic Care
      Pharmacy’s Medi-cal payments. The DHS alleged that based on their investigation,
      Classic Care Pharmacy had submitted numerous patients’ claims without proper
      documentation.





Upon
      review of the supporting documentation, Classic Care Pharmacy’s counsel believed
      that the facts presented by the DHS were inaccurate and that its position was
      unfounded and appealed their decision. However, that appeal was ultimately
      rejected.





Given
      these circumstances, we had few choices other than accepting the Classic Care
      shareholders proposal to return that portion of Classic Care Pharmacy’s business
      affected by the DHS action back to the Classic Care shareholders. Kaire
      transferred that business, which amounted to approximately 80% of the total
      revenue, back to the original Classic Care, Inc. shareholders in exchange for
      a
      release from repaying any outstanding amounts due on promissory notes related
      to
      that acquisition. We retained less than 20% of the total business, which
      consisted primarily of the medication sold to HIV patients (Health Advocate
      HIV
      program) which not regulated by the DHS.










Acquisition
      of Sespe Pharmacy





In
      November 2002, Kaire, through its subsidiary Effective Health, Inc., opened
      escrow to purchase certain assets of Sespe Pharmacy, located in the Sespe
      medical clinic in Fillmore, California. Escrow closed on January 26, 2003.
      Sespe
      Pharmacy was a small retail pharmacy that dispensed on approximately 75 retail
      prescriptions per day.





Effective
      Health, Inc., (d/b/a Sespe Pharmacy) serves as our base of pharmacy operations.
      Since acquiring Sespe Pharmacy, we have resumed our board and care marketing
      efforts which has resulted in a number of new facilities becoming customers
      of
      our specialized pharmacy service programs.





As
      part
      of the acquisition, we entered into an operating lease agreement for the
      pharmacy in Fillmore, California which also serves as our corporate
      headquarters. At the time of acquisition, the pharmacy facility was
      approximately 843 square feet with a monthly payment of $1,170. In May 2004
      we
      expanded our space to approximately 1,115 square feet, with a monthly payment
      of
      $1,520 and in March 2005 we expanded our space to approximately 1,800 square
      feet and currently pay $2,245 a month.





In
      January 2003, being unable to rebuild Classic Care Pharmacy, all operations
      at
      Classic Care Pharmacy ceased and Classic Care, Inc was dissolved. Additionally,
      the logistical problems created by our move to Fillmore, California, made it
      difficult to provide the level of personal attention required to service
      individual HIV clients in the Health Advocate HIV program. The combination
      of a
      declining HIV client base due to the logistical problems of provid ing the
      level of personal attention required to service each HIV client (i.e.
      clients were transferring their business to a more conveniently located
      pharmacy) and the little to no gross profit margins provided by servicing those
      clients, lead to the decision to phase out the Health Advocate HIV program.





Entremetrix





On
      March
      18, 2003, YesRx.com, Inc. purchased Entremetrix, a California corporation,
      by
      acquiring all of the outstanding capital stock of EntreMetrix, Inc. for a total
      purchase price of $2,750,000, consisting of a promissory note of $2,500,00
      payable to Richard McKinley, the owner and founder of EntreMetrix plus 1,250,000
      (post split) restricted shares of KAIH Common Stock valued at the time at
      $250,000. Entremetrix provides financial and administrative support for smaller
      medical companies, long term board and care facilities, and pharmacies, to
      their
      administrators, employees, patients, clients and services providers. However,
      after almost a year of the Professional Employer Organization business, we
      felt
      that it was in our best interests to develop our pharmacy business and
      discontinue our employer services business. Therefore, on February 12, 2004
      documents were drafted for the unwinding of the purchase of EntreMetrix which
      occurred on Februray25, 2004. The terms called for 100% of the outstanding
      shares of EntreMetrix held by Kaire Holdings Incorporated to be exchanged for
      the two million five hundred thousand dollars ($2,500,000) note payable to
      Richard McKinley, plus any accrued interest; and (ii) the two hundred fifty
      million (250,000,000) pre-split (1,250,000 post split) shares of common stock
      held by Richard McKinley. There were no outstanding liabilities on either side
      of this transaction. The executed documents were delivered on February 25,
      2004.
      As a result Richard McKinley and EntreMetrix are no longer affiliated with
      Kaire
      Holdings and YesRx.com, Inc.




Reverse
      split





On
      July
      10, 2003, Kaire reverse split its common stock at a 200 to one ratio. As of
      May
      31, 2005 there are 900,000,000 shares of common stock authorized with 33,877,252
      shares issued and outstanding. There are also $1,451,576 in outstanding notes
      that are convertible into approximately 47,855,200 shares of common stock at
      the
      current market price and outstanding warrants exercisable into 8,138,888 shares
      of common stock.










Product
      Liability Insurance





We
      carry
      no direct product liability insurance, relying instead on the coverage
      maintained by our distributors and manufacturing sources from whom we obtains
      product. There is no assurance that this insurance will adequately cover any
      liability claims brought against us. There also can be no assurance that we
      will
      be able to obtain our own liability insurance (should we seek to do so) on
      economically feasible terms. Our failure to maintain our own liability insurance
      could materially adversely affect our ability to sell our products in the
      future. Although no product liability claims have been brought against us to
      date, if there were any such claims brought against us, the cost of defending
      against such claims and any damages paid by us in connection with such claims
      could have a materially adverse impact upon us, including our financial
      position, results of operations and cash flows.





On
      any
      product liability actions sought concerning the quality of the drugs distributed
      by Sespe Pharmacy, we would be indemnified by our distributors and manufacturing
      resources.







Competition





Retail
      and Specialized Pharmacy Services: There is significant competition among the
      retail independent and chain drug stores and pharmacies such as Save-on and
      Rite-Aid. Many of these retail competitors are larger, better-financed companies
      with greater resources. The majority of the larger companies compete for
      individual retail customers on the basis of price and convenience. Few offer
      the
      types of specialized programs and services that we do.





We
      believe that we can successfully compete against larger better-financed
      independent and chain drug stores by delivering high quality products and
      services to select market segments, rather than delivering high volume average
      service. However, this does preclude the possibility that the larger independent
      and chain stores will not introduce their own specialized programs that target
      similar market segments.





Patents,
      Licenses and Trademarks





Not
      Applicable





Royalty
      Agreements





Not
      Applicable





Government
      Regulations





Specialized
      Pharmacy Services: All pharmacies, in every state are subject to the regulations
      of various federal agencies, including the United States Drug Enforcement
      Agency, and by various state agencies, which in our state is the California
      State Board of Pharmacy, and Department of Health Services. Presently, we are
      compliant with all federal and state regulations related to our
      businesses.





Research
      and Development Plan





Not
      Applicable





Employees





Our
      Pharmacy staff includes the manager of pharmacy operations/pharmacist in charge,
      a pharmacy technician, a retail sales clerk, a pharmacy sales manager (board
      & care facilities), and a billing manager and two delivery
      personnel.





There
      is
      one full time employee with Kaire Holdings, Inc.




5











**ITEM
      2. Description of Property**





In
      January 2003, we entered into an operating lease agreement for the pharmacy
      in
      Fillmore, California which serves as our corporate headquarters. At the time
      the
      pharmacy facility was approximately 843 square feet with a monthly payment
      of
      $1,170. In May 2004 we expanded our space to approximately 1,115 square feet,
      with a monthly payment of $1,520 and in March 2005 we expanded our space to
      approximately 1,800 square feet and currently pay $2,245 a month. The lease
      was
      to continue through the original initial lease term of five years. We had
      options to renew the lease for two five-year periods and to purchase the
      facility at its estimated fair market value at any time during the lease term.
      However, Santa Paula Memorial Hospital, the holder of the master lease filed
      for
      chapter 11 Bankruptcy protection and the court rejected including the lease
      in
      bankruptcy. The property owners have approached us with a proposal to takeover
      the master lease. However, we have not made a decision concerning the master
      lease. We have not signed a new lease.





In
      June
      of 2002, we leased a 7,334-square-foot building located at 8135 Clybourne Ave,
      Sun Valley, CA 91352, to serve as our corporate headquarters and storage
      facility. The lease is for a period of two years, ending June 2004, with monthly
      lease payments of $3,420.00. At our request, the landlord found a new tenant
      for
      this property and we vacated it in the month February 2004.





**ITEM
      3. Legal Proceedings**





Breach
      of Contract





In
      2003,
      an individual filed a complaint against us alleging breach of contract and
      fraud
      and related business torts related to certain patents the plaintiff claimed
      we
      transferred to him. We believed that the plaintiff’s claims were without merit.
      Although we reached a tentative settlement in this matter, the Plaintiff failed
      to execute the settlement and the case was dismissed.





Department
      of Health Services - Medi-Cal Action Against Classic Care
      Pharmacy





On
      April
      17, 2002 the Department of Health Services (“DHS”) notified the management of
      Classic Care Pharmacy that the Medi-Cal Program intended to withhold 100% of
      payments and temporarily suspend and deactivate the Classic Care Pharmacy
      Medi-Cal provider number.





The
      Department of Health Services ("DHS") took this action after having reviewed
      the
      prescriptions on record at Classic Care Pharmacy. The DHS stated that they
      had
      reviewed thirty-two prescriptions, and that two of the ten prescribing
      physicians had denied treating the patients and writing the prescriptions.
      The
      DHS cited Classic Care Pharmacy for violations of CCR, Title 22, Sec.51476.1,
      (a) and 51476.1(a)(2), which states that written prescriptions must contain
      the
      name of the prescribing physician and their provider number. Based on its
      findings the DHS and the Medical Program concluded that Classic Care Pharmacy
      might have intentionally committed fraud.





Classic
      Care management retained outside counsel shortly after receiving the DHS notice
      to review the Department of Health Services findings. After reviewing the
      supporting DHS material, outside counsel informed Classic Care management that
      it believed the facts presented by the DHS were inaccurate and that its position
      was unfounded. Classic Care management and its principle shareholders obtained
      written affidavits from most of the physicians whose prescriptions had been
      reviewed by the DHS confirming that they had treated the patients and did
      prescribe the medications.





On
      April
      29, 2002, outside counsel contacted the DHS to discuss its findings and present
      the documentation supporting their position. DHS informed outside counsel that
      they would have to follow the standard appeal process, which normally requires
      two or more months to complete. Classic Care Pharmacy instructed outside counsel
      to seek an ex parte temporary restraining order against the DHS for their
      failure to show cause regarding their actions. On May 8, 2002, in the Superior
      Court for the state of California, the Court granted Classic Care’s ex parte
      request issuing a preliminary injunction against the DHS and reinstated Classic
      Care Pharmacy’s medical provider number. The Court set May 24, 2002 as the date
      for the DHS to show cause. On May 24, 2002, the DHS was still not prepared
      to
      show cause. The court granted a 30-day extension.










Classic
      Care, Inc. and Classic Care Pharmacy administrative appeal failed. Once the
      appeal took place the Superior court could no longer uphold our lack for due
      process claim and the DHS canceled Classic Care Pharmacy’s medical provider
      number. The justice department has not taken any further action against Classic
      Care Pharmacy. Subsequently we dissolved Classic Care, Inc. and Classic Care
      Pharmacy.





Kaire
      believes that it does not have any liability in this matter and has not provided
      any reserve for this matter. The basis for this belief is the following: 1)
      the
      California Department of Health Services (“DHS”) claim is directed to Classic
      Care Pharmacy which was owned by Classic Care, Inc. 2) Classic Care Inc. is
      a
      separate legal entity and was operated by the prior owners, whom Kaire believes
      perpetrated the actions leading to the alleged claims, 3) Kaire was not involved
      nor was Kaire aware of the alleged overpayment to Classic Care Inc., 4) the
      alleged claim includes a period of time before Kaire was involved with Classic
      Care, Inc., thus precluding Kaire of any claim in that time period and 5) Kaire
      did not benefit in any way from the alleged overpayment.











H.D.
      Smith Wholesale Drug Company - Action for breach of contact and other various
      causes of action





On
      April
      2, 2003, H.D. Smith filed a complaint against Classic Care, Inc., Kaire
      Holdings, Inc., Sarit Rubenstein, Steven Oscherowitz and Larisa Vernik for
      various causes of action relating amounts owed for certain drugs that were
      delivered to Classic Care. H.D. Barnes is seeking $430,205 plus interest. On
      December 30, 2004 a settlement was reached where Kaire is obligated to pay
      the
      plaintiff $50,000. Kaire’s payment obligation will mature upon court approval of
      the settlement, with $10,000 due immediately at that time and the balance paid
      based on 12 monthly installments of $3,077.06 (which includes interest of
      7.50%). We expect to obtain court approval within approximately sixty days
      of
      the time of this filing.





McKesson
      Medical - Surgical Inc. v. Effective Health





On
      January 20, 2005, McKesson Medical-Surgical, Inc. (“Plaintiff”) filed a
      complaint against Effective Health, Inc., a subsidiary of Kaire, for failure
      to
      pay the principal sum of $17,466.65 for goods and/or services. We have expressly
      denied any liability although our attorney has not yet undertaken a full
      analysis of the Plaintiff’s claims at this early stage of the
      litigation.





Except
      as
      otherwise specifically indicated above, we believe that we do not have any
      material liability for any lawsuits, settlements, judgments, or fees of defense
      counsel which have not been paid or accrued as of December 31, 2004.





**ITEM
      4.**  **Submission
      of Matters to a Vote of Securities Holders**





On
      June
      20, 2003, a definitive 14C informational proxy was filed with the Securities
      and
      Exchange Commission in lieu of a special meeting of the shareholders, notice
      was
      hereby given that the following actions will be taken pursuant to the written
      consent of a majority of our shareholders. The following actions became
      effective on July 10, 2003:





1.
      amendment of our certificate of incorporation to provide for a stock combination
      (reverse split) of the


Common
      Stock in an exchange ratio to be approved by the Board, ranging from one newly
      issued share for each two outstanding shares of Common Stock to one newly issued
      share for each two hundred outstanding shares of Common Stock.





|2 | the
              ratification of the appointment of Pohl, McNabola & Berg, LLP as our
              independent accountants for the
|- | ------------------------------------------------------------------------------------------------------------------------------------

current
      fiscal year.





7





**PART
      II**





**ITEM
      5.**  **Market
      for Common Equity and Related Shareholder Matters**





Our
      common stock is quoted on the Over-the Counter Bulletin Board, also called
      the
      OTCBB, under the trading symbol “KAIH”. The following table set forth the
      quarterly high and low bid prices per share for our common stock. The bid prices
      reflect inter-dealer prices, without retail markup, markdown, or commission
      and
      may not represent actual transactions.








**<S>****High**
            **Low**Year
                ended December 31, 2002First
                quarter
            $
                0.01
            $
                0.00Second
                quarter
            0.01
            0.00Third
                quarter
            0.00
            0.00Fourth
                quarter
            0.00
            0.00Year
                ended December 31, 2003 *</TABLE>First
                quarter *
            $
                0.56
            $
                0.16Second
                quarter *
            0.80
            0.10Third
                quarter *
            0.28
            0.06Fourth
                quarter *
            0.10
            0.04Year
                ended December 31, 2004First
                quarter
            $
                0.32
            $
                0.05Second
                quarter
            0.19
            0.10Third
                Quarter
            0.15
            0.05Fourth
                Quarter
            0.08
            0.04Year
                ended December 31, 2005First
                quarter
            $
                .
                07
            $
                0.04





*
      adjusted for the 200 to 1 reverse split





As
      of
      April 30, 2005, there were approximately 820 registered shareholders of KAIH’s
      Common Stock.





Dividends





To
      date,
      the Company has not declared or paid dividends on its Common Stock.





Transfer
      Agent and Registrar





KAIH’s
      transfer agent is Jersey Transfer and Trust Company, 201 Bloomfield Avenue,
      Verona, NJ 07044.





Securities
      authorized for issuance under equity compensation plans.





N/A





Recent
      Sales of Unregistered Securities





KAIH
      made
      the following sales of stock without registration using the exceptions available
      under the Securities Act of 1933, as amended, including unregistered sales
      made
      pursuant to Section 4(2) of the Securities Act of 1933, as follows:












On
      September 20, 2002, Matthew Marcus was issued 30,000,000 (pre-split) restricted
      shares for consulting services. The value of the shares was $60,000. The
      issuance of these securities was in a transaction deemed to be exempt under
      Section 4(2) of the Securities Act of 1933 as a sale of securities not involving
      a public offering. We made a determination that the creditors were sophisticated
      investors with enough knowledge and experience in business to evaluate the
      risks
      and merits of the investment.





On
      May
      21, 2003, was issued 250,000,000 (pre-split) Shares relating to the acquisition
      of Entremetrix to Richard R. McKinley. The value of the shares was approximately
      $250,000. The issuance of these securities was in a transaction deemed to be
      exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities
      not involving a public offering. We made a determination that the creditors
      were
      sophisticated investors with enough knowledge and experience in business to
      evaluate the risks and merits of the investment.





On
      October 17, 2003 the following restricted shares were issued:




On
      October 17, 2003, George Lefevre was issued 375,000 restricted shares for
      consulting services. The value of the shares was $22,500. The issuance of these
      securities was in a transaction deemed to be exempt under Section 4(2) of the
      Securities Act of 1933 as a sale of securities not involving a public offering.
      We made a determination that the creditors were sophisticated investors with
      enough knowledge and experience in business to evaluate the risks and merits
      of
      the investment.





On
      October 17, 2003, Scott Absher was issued 375,000 restricted shares for
      consulting services. The value of the shares was $22,500. The issuance of these
      securities was in a transaction deemed to be exempt under Section 4(2) of the
      Securities Act of 1933 as a sale of securities not involving a public offering.
      We made a determination that the creditors were sophisticated investors with
      enough knowledge and experience in business to evaluate the risks and merits
      of
      the investment.





On
      October 17, 2003, Steven Westlund was issued 375,000 restricted shares for
      expenses owed. The value of the shares was $22,500. The issuance of these
      securities was in a transaction deemed to be exempt under Section 4(2) of the
      Securities Act of 1933 as a sale of securities not involving a public offering.
      We made a determination that the creditors were sophisticated investors with
      enough knowledge and experience in business to evaluate the risks and merits
      of
      the investment.





On
      October 17, 2003, Owen Naccarato was issued 375,000 restricted shares for legal
      services. The value of the shares was $22,500. The issuance of these securities
      was in a transaction deemed to be exempt under Section 4(2) of the Securities
      Act of 1933 as a sale of securities not involving a public offering. We made
      a
      determination that the creditors were sophisticated investors with enough
      knowledge and experience in business to evaluate the risks and merits of the
      investment.





On
      October 17, 2003, Joseph Maleki was issued 350,000 restricted shares for legal
      services. The value of the shares was $21,000. The issuance of these securities
      was in a transaction deemed to be exempt under Section 4(2) of the Securities
      Act of 1933 as a sale of securities not involving a public offering. We made
      a
      determination that the creditors were sophisticated investors with enough
      knowledge and experience in business to evaluate the risks and merits of the
      investment.





On
      October 17, 2003, Randy Jones was issued 250,000 restricted shares for
      consulting services. The value of the shares was $15,000. The issuance of these
      securities was in a transaction deemed to be exempt under Section 4(2) of the
      Securities Act of 1933 as a sale of securities not involving a public offering.
      We made a determination that the creditors were sophisticated investors with
      enough knowledge and experience in business to evaluate the risks and merits
      of
      the investment.





On
      October 17, 2003, Jay Isco was issued 200,000 restricted shares for consulting
      services. The value of the shares was $12,000. The issuance of these securities
      was in a transaction deemed to be exempt under Section 4(2) of the Securities
      Act of 1933 as a sale of securities not involving a public offering. We made
      a
      determination that the creditors were sophisticated investors with enough
      knowledge and experience in business to evaluate the risks and merits of the
      investment.










On
      December 27, 2003, KAIH issued $370,000 in Convertible Debentures, 8% annual
      interest rate, pursuant to a Securities Purchase Agreement (the “Agreement”).
      The convertible debentures can be converted into shares


of
      common
      stock with the conversion price per share being the lesser of (i) $.06 (“Maximum
      Base Price”) or


(ii)
      seventy percent (70%) of the average of the three lowest closing bid prices
      for
      the thirty (30) trading days


prior
      to
      but not including the conversion date. The conversion price described above
      shall not be less than


one-half
      of the Maximum Base Price unless the closing price of the common stock is less
      than one-half the Maximum Base Price for any ten (10) consecutive trading days.
      The notes were issued to the following: Alpha Capital Aktiengesellschaf, an
      $111,000 secured convertible debenture, Gamma Opportunity Capital Partners,
      LP,
      a $100,000 secured convertible debenture, Longview Fund, L.P. a $120,000 secured
      convertible debenture and Standard Resources Limited, a $150,000 in secured
      convertible debenture. The underlying shares to these securities were registered
      on February 17, 2004, on Form SB2, File #333-112861





During
      the Quarter ending March 31, 2004, the issuance of these securities was in
      a
      transaction deemed to be exempt under Section 4(2) of the Securities Act of
      1933
      as a sale of securities not involving a public offering. We made a determination
      that the creditors were sophisticated investors with enough knowledge and
      experience in business to evaluate the risks and merits of the investment,
      as
      follows:





1.
      4,812,523 shares of common stock were issued to Alpha Capital Aktiengesellschaft
      pursuant to Rule 144k.


2.
      3,058,035 shares of common stock were issued to Gamma Opportunity Capital
      Partner LP pursuant to Rule 144k.


3.
      4,436,676 shares of common stock were issued to Longview Fund LP pursuant to
      Rule 144k.


4.
      2,678,570 shares of common stock were issued to Churchill Investments, Inc.
      pursuant to Rule 144k.





On
      May 3,
      2004, Kaire issued $650,000 in Convertible Debentures, 8% annual interest rate,
      pursuant to a Securities Purchase Agreement (the “Agreement”). The convertible
      debentures can be converted into shares of common stock with the conversion
      price being the lesser of $0.09 per share, or 85% of the average of the lowest
      three closing bid prices of the common stock during the 15 trading days
      preceding the conversion date.





The
      above
      notes are as follows: Alpha Capital Aktiengesellschaft was issued a $350,000
      in
      secured convertible debenture, Longview Fund, L.P. was issued a $100,000 secured
      convertible debenture, and Gamma Opportunity Capital Partners, LP was issued
      a
      $200,000 secured convertible debenture. In connection with the convertible
      notes, the following common stock issuable upon the exercise of warrants at
      $0.17: 1,944,444 shares of common stock issuable to Alpha Capital
      Aktiengesellschaft, 555,556 shares of common stock issuable to Longview Fund
      LP,
      1,111,111 shares of common stock issuable to Gamma Opportunity Capital Partners,
      LP and 833.333 to Bi-Coastal Consulting Corporation.





The
      holders of the 8% convertible debentures may not convert its securities into
      shares of Kaire’s common stock if after the conversion such holder would
      beneficially own over 9.9% of the outstanding shares of Kaire’s common stock.
      The holder may waive this percent ownership restriction upon not less than
      61
      days notice to Kaire. Since the number of shares of Kaire’s common stock
      issuable upon conversion of the debentures will change based upon fluctuations
      of the market price of Kaire’s common stock prior to a conversion, the actual
      number of shares of Kaire’s common stock that will be issued under the
      debentures owned by the holders is based on a reasonable good faith estimate
      of
      the maximum amount needed.





On
      September 22, 2004, Kaire Holdings, Inc., issued a promissory to the Longview
      Fund LP, a private investment fund, the principal sum of Sixty Thousand Dollars
      with interest of Six Thousand Dollars, which is payable in three equal payments
      within three months with the first payment beginning within thirty days of
      the
      above referenced date. In the event of partial payments, each payment shall
      be
      credited first to accrued interest and then to principal, and thereafter
      interest shall cease to accrue upon the principal so credited. The balance
      as of
      April 30, 2005 is $40,725.





In
      March
      29, 2005, Kaire issued a $125,000, 8% interest per annum, two year convertible
      note to the Longview Fund LP. The Conversion Price per share shall be the lesser
      of (i) $.04 or (ii) eighty-five (85%) of the average of the closing bid prices
      for the fifteen (15) trading days prior to but not including the conversion
      date
      for the common stock. In addition Longview was issued a class A warrant for
      the
      purchase of 694,444 shares of the common stock at a per share purchase price
      of
      $0.042, and a class B warrant for the purchase of 3,000,000 shares of the common
      stock at a per share purchase price of $0.04


10








**ITEM
      6. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





The
      following should be read in conjunction with our consolidated financial
      statements and related notes thereto.






Restatement of
      Financial Statements





We
      had
      previously overstated our pharmacy revenue and the related accounts receivable
      balance at December 31, 2004 by $132,761. We have made the appropriate
      adjustment in our financial statements.





Critical
      Accounting Policies





The
      Company recognizes revenue for pharmacy operations at the time the product
      is
      shipped to the customer or services are rendered. Outbound shipping and handling
      charges are included in net sales.





Professional
      employment services revenue is recognized at the payroll date of the customer
      or
      as services is rendered. The payroll fee is due prior to the payroll date,
      but
      is not considered revenue until the date of the payroll. The company reports
      gross income as the total cost of the invoice for the staffing services rendered
      including gross payroll, payroll taxes, workers compensation, administrative
      fees and delivery fees. Amounts received prior to the payroll payment date
      are
      classified as deferred revenue.





Plan
      of Operation





General





Our
      general operating plan focuses on delivering specialized programs and services
      targeted areas within the senior and chronic health care market. We believe
      this
      approach will help differentiate us from our competitors and establish us as
      a
      senior and chronic health care specialist. We also believe that the size of
      the
      aging baby boomer generation will create the need for numerous additional
      programs and services required to properly care for this group. Kaire will
      continue to position itself to take advantage of future market opportunities
      by
      continuing to develop and market products, programs and services that help
      patients comply with increasingly complex medication therapies including
      programs that help educate patients about their chronic conditions as well
      as
      programs that increase pharmacy operating efficiencies including the processing
      of state and private insurance claims.





Short
      Term Goals





Kaire’s
      main short term goal is to increase sales revenue and achieve profitability
      on
      an operational cash flow basis. We believe that goal will be achieved by second
      quarter 2005. Once achieved, the Company will be able to reduce or eliminate
      the
      need to raise additional working capital to sustain operations. Achieving this
      goal would include accomplishing the following:





·  Increase
      the number of retail and long term care patients served by focusing more of
      our
      resources on targeted sales and marketing programs.


·  Develop
      revenue channels with higher gross profit margins such as medical and
      incontinence supplies, durable medical equipment such as wheel chairs, beds
      and
      walkers, and equipment rentals.


·  Enhancing
      operational efficiencies during this expansion mode such as by installing
      procedures for routine functions and reassign employee functions that fit their
      strengths..





Long
      Term Goals





Our
      long
      term goals would be to expand on our short term goals, i.e. expand our service
      coverage area to increase sales and to introduce service programs that would
      be
      custom tailored to meet the needs of our clients as those needs arise.










Our
      work
      force is expected to stay flat or increase at a rate equal to actual increases
      of our business operations.





Concerning
      working capital, historically the Company revenues have been insufficient to
      cover operations. For the first four month period ending April 30, 2005, Kaire
      has used approximately $89,000 a month in negative cash flow. Consequently,
      the
      Company has relied in part on private placements of common stock securities,
      bank debt, loans from private investors and the exercise of common stock
      warrants to meet operational needs. However, with revenue expected to grow
      steadily in the third and fourth quarter of 2005, we believe that over the
      next
      twelve months there will be sufficient working capital generated from sales
      to
      cover operational needs. This evaluation is based on a result of an increased
      sales effort by Effective Health which is concentrating of facilities within
      a
      50 miles radius of the pharmacy. However, some additional funding will be needed
      to cover operation expenses over the next several months. In the event that
      we
      are unable to obtain additional funding over the next several months, we will
      need to reduce operations to a point where cash outflow will not exceed cash
      inflow. Currently Kaire does not have any excess cash.





In
      the
      event that revenue growth does not meet expectations, the Company may again
      need
      to seek working capital from its normal sources. Historically, the Company
      has
      been successful in its efforts to secure working capital from private placements
      of common stock securities, bank debt, loans from private investors and the
      exercise of warrants for common stock. However, there can be no assurances
      that
      private or other capital will continue to be available, to meet the Company’s
      cash needs, or that a sufficient amount of the Company’s common stock or other
      securities can or will be sold or that any common stock purchase
      options/warrants will be exercised to fund the operating needs of the
      Company








**Results
      of Operations**





Year
      Ended December 31, 2004 Compared to Year Ended December 31, 2003







Net
      revenue from continuing operations for the year ended December 31, 2004 was
      $2,218,086 as compared to $1,256,806 for the same period in 2003, or an increase
      of $961,280 (76.5%). The increase in net revenues was attributable to an
      increase in the number of long term care facilities we are serving.





Gross
      profit for the year ended December 31, 2004 was $231,806 as compared to $371,888
      for the same period in 2003, or a decrease of $140,082 (37.7%). The gross profit
      percentage of 10.5% for the period ended December 31, 2004 decreased from 29.6%
      for the same period in the prior year. The decrease in gross profit was
      attributable to turnover and inexperience in our billing department, resulting
      in lost revenue. This situation has been addressed during the first quarter
      of
      2005 and we should see a return to higher gross margins.





Operating
      expenses for the period ending December 31, 2004 were $1,717,081 compared to
      $1,417,055 for the same period in 2003, or an increase of $300,026 (21.2%).
      The
      increase in operating expenses was mostly attributable the following: 1)
      salaries decreased $3,790, 2) general administration increased $ 327,674, 3)
      depreciation expense decreased $9,696, 4) selling expenses increased $28,605
      and
      5) rent expense decreased $16,398. The $315,421 (35.9%) increase in general
      administration consists primarily of increases in 1) accounting of $57,954
      2)
      contract and outside services of $73,343 ( represents temporary pharmacy support
      - pharmacist and billers), 3) facility marketing of $27,968, 4) Automobile
      expense of $31,310, 5) consulting fees of $110,414 (consists of sales and
      facility support help), and 6) write off of deposits of $45,338, offset by
      decreases in 1) Travel and Entertainment of $18,444, 2) insurances of $4,758,
      3)
      license fees of $1,312, 4) office expenses of $4,170 and 5) miscellaneous items
      of $2,316. Rent expense decreased due to the closing of the Clyborn facility.
      Selling and shipping expenses increased due to the increase in
      sales.





Interest
      expense was $389,991 for the year ended December 31, 2004 as compared to $83,146
      for the same period in 2003, or an increase of $306,843 (369.0%). The interest
      expense increase in 2005 was primarily a result of an increase in the
      amortization of the amount attributable to the beneficial conversion feature
      and
      warrants associated with the convertible debt of $257,288, plus $21,667
      amortization of the issuance costs associated with funding received in 2004,
      plus the increase interest related to the convertible notes of $27,890.










The
      forgiveness of debt of $137,149 represents the write off of old notes over
      five
      years old plus all associated accumulated interest.





The
      gain
      on settlement of litigation of $115, 243 was a result of a settlement being
      reached on the Smith Barnes law suit against Kaire’s discontinued subsidiary
      Classic Care, Inc.





No
      deferred income tax benefit was recognized for Federal and State income tax
      since we have incurred significant net operating losses. We recorded a valuation
      allowance against our deferred tax assets primarily due the substantial doubt
      regarding recoverability of a tax benefit resulting from net operating loss
      carry forwards.





The
      net
      loss on continuing operations increased $529,436 (48.0%) to $1,631,934 for
      the
      year ending December 31, 2004 from $(1,104,098) for the year ending December
      31,
      2003.





The
      net
      loss after discontinued operation was $975,729, a decrease in loss of $442,879
      (24.4%) from the prior year loss of $(1,285,847). The decrease in loss was
      mainly attributable to the gain from the settlement of the lawsuit associated
      with Classic Care, Inc. of $438,048 plus the gain on discontinuation of
      Entremetrix of $276,848.








**Liquidity
      and Capital Losses**







Net
      non-cash items affecting operating activities for the period ending December
      31,
      2004 amounted to $908,366, which mainly consisted of the net loss for the year
      of $973,729 adjusted by the following: 1) the gain on the sale of Entremetrix
      of
      $975,729, 2) the gain on extinguishment of notes payable and related interest
      of
      $137,149, 3)income from discontinued operations - Classic Care of $438,048,
      4)
      gain on legal settlement of $115,243, and 5) other items totaling $10,271,
      offset by the following 1) depreciation and amortization of $28,340, 2) the
      loss
      from operations of discontinued operations - Entremetrix of $55,287, 3) common
      stock issued for professional services and compensation of $658,514, 4)
      amortization of warrant and beneficial conversion feature of $281,114, and
      5)
      amortization of deferred financing costs of $21,667.





Net
      cash
      generated by operating activities for the period ending December 31, 2004
      amounted to $123,042, consisting of: 1) the increase of accounts receivable
      of
      $65,999, 2) the increase in inventories of $64,711, and 3) the decrease in
      income and sales tax payable of $13,853, offset by the following **** 1)
      the
      increase in bank overdraft of $19,931, 2) an increase in accrued interest on
      convertible notes of $51,483, and 3) an increase in accounts payable and accrued
      expenses of $196,191.





Net
      cash
      used in investing activities for the year ended December 31, 2004was $14,712,
      attributable to the Company’s purchase of a delivery vehicle.





On
      December 31, 2004 the Company had total assets of $352,485 compared to $395,176
      on December 31, 2003, a decrease of $42,691 (10.8%). The Company had a total
      stockholder's (deficit) equity of $(1,558,716) on December 31, 2004, compared
      to
      a stockholders deficit of $(2,378,716) on December 31, 2003, an increase of
      $820,000 (34.5%). As of December 31, 2004 the Company's working capital position
      increased by $1,123,934 from a working capital deficit of $2,366,555 at December
      31, 2003 to a working capital deficit of $1,242,621 at December 31, 2004. This
      result was attributed primarily to decreases in 1)accounts payable and accrued
      expenses of $393,152 (46.6%), 2) liabilities of discontinued operations of
      $438,048 (75.1%), 3) income Taxes payable of $13,853 (95.5%), 4) loan payable
      of
      $19,384 (28.3%), 5) accrued interest on convertible debt of $23,517 (10.2%),
      6)
      the current portion of convertible notes of $302,409, plus, increases in 7)
      accounts receivable of $65,999 (98.9%) and 8) inventory of $64,711 (75.9%),
      offset by 100% decreases in cash of ($84,985), deposits ($45,549) and nets
      assets - Entremetrix ($29,839), plus increases in (11) bank overdraft of
      $19,931, (12) notes payable related parties of $7,535 (131.1%), and 12) advances
      form shareholders of $9,900 (15.5%).





Over
      the
      next twelve months, management is of the opinion that sufficient working capital
      will be obtained from operations and external financing to meet our operating
      needs. The following is a discussion of future cash requirements.













The
      fixed
      and ongoing expenses of Kaire are as follows:





Future
      annual maturities of convertible notes payable (including related accrued
      interest) at December 31, 2004 were as follows:


Year
                EndedDecember
                31,
            
            Amount2005
            Convertible
                Notes due on demand
            $
                775,4622006
            Convertible
                Notes Due May 2006
            385,880Total
            
            $
                1,161,342








Accounts Payable and Accrued Liabilities





Accounts
      payable and accrued liabilities at December 31, 2004 consisted of the
      following:


2004Accounts
                payable
            $
                441,661Advances
                from shareholders
            73,607Notes
                Payable - Short Term
            62,281Total
            $
                577,549


Future
      annual minimum lease payments under operating leases with remaining lease terms
      of greater than one year are summarized as follows:





Year
                Ended**December
                31,**2005
            
            $
                9,240Total
            
            $
                9,240








Fixed
      recurring Selling General and Administrative expenses would be as
      follows:





Estimated
      2005


Monthly
      Average


Salaries
      and benefits:   $38,000


Rent:            
      2,255 (increased space in 2005)


Contract
      Labor    15,289


Auto           
      1,250


Telephone
      and


Communications             
      2,250


Bank
      Charger           
      500


Total
      Monthly


Fixed
      SG&A costs      
      $59,544










Estimated
      future cash requirements





Kaire’s
      estimate of net cash requirements for overhead for the next twelve months
      subsequent to April 2005, is approximately $89,877 (includes the above fixed
      cost estimate of $59,444) a month for a twelve total of $1,078,524. The Estimate
      of net cash inflow from operations for that time period is estimated to be
      approximately $1,674,900.





Kaire
      has
      generally financed operations through the sale of its common stock. In order
      to
      sustain operations in the near term, it is anticipated that we will need an
      additional small infusion of funds of approximately $300,000 from outside
      sources. In March 2005, we received some of the needed funds of $125,000 in
      funds pursuant to a subscription agreement. If our projections over the next
      twelve months fall short of expectations, we will have to seek additional equity
      funding. If we are unable to gain access to such funding, Kaire will be forced
      to curtail operations until such funding is obtained.





Subsequent
      Events





Issuance
      of Common Stock for Services





On
      February 3, 2004 the Company issued 3,000,000 shares of common stock to
      employees and consultants, with a market value of $120,000, for consulting
      and
      legal services provided to the Company.





Issuance
      of Convertible Security





In
      March
      29, 2005, Kaire issued a $125,000, 8% interest per annum, two year convertible
      note to the Longview Fund LP. The Conversion Price per share shall be the lesser
      of (i) $.04 or (ii) eighty-five (85%) of the average of the closing bid prices
      for the fifteen (15) trading days prior to but not including the conversion
      date
      for the common stock. In addition Longview was issued a class A warrant for
      the
      purchase of 694,444 shares of the common stock at a per share purchase price
      of
      $0.042, and a class B warrant for the purchase of 3,000,000 shares of the common
      stock at a per share purchase price of $0.04





Settlement





On
      December 30, 2004 a settlement was reached where Kaire is obligated to pay
      the
      plaintiff $50,000. Kaire’s payment obligation will mature upon court approval of
      the settlement, with $10,000 due immediately at that time and the balance paid
      based on 12 monthly installments of $3,077.06 (which includes interest of
      7.50%). The settlement was executed by the parties at the end of Aril 2005.
      Kaire expects to obtain court approval within approximately sixty days of the
      time of this filing.





Employment
      Agreement





On
      April
      5, 2005, the Company agreed to a new three year agreement with Mr. Westlund.
      The
      agreement calls for a monthly salary of $8,333.33 per month, with annual
      increases equaling 15% of the base salary. In addition, he will receive a 5
      year
      option to purchase 12 million shares of the Company’s common stock, at an option
      price of $0.05 per share.








Going
      Concern





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, the Company has experienced net losses
      of
      $836,848 and $1,285,847 for the years ended December 31, 2004 and 2003,
      respectively. The Company also had a net working deficit of $1,103,739 and
      $2,283,142 for the years ended December 31, 2004 and 2003 respectively.
      Additionally, the Company must raise additional capital to meet its working
      capital needs. If the Company is unable to raise sufficient capital to fund
      its
      operations, it might be required to curtail or discontinue its pharmacy
      operations. These factors raise substantial doubt about the Company’s ability to
      continue as a going concern. In view of the matters described above,
      recoverability of a major portion of the recorded asset amounts shown in the
      accompanying balance sheet is dependent upon the Company’s ability to generate
      sufficient sales volume to cover its operating expenses and to raise sufficient
      capital to meet its payment obligations. The financial statements do not include
      any adjustments relating to the recoverability and classification of recorded
      asset amounts, or amounts and classification of liabilities that might be
      necessary should the Company be unable to continue in existence.










Management
      raised an additional $650,000 in debt financing in May 2004 and $125,000 in
      March 2005 and issued a promissory note for $60,000 in September 2004 and the
      Company has previously relied on equity financing sources and debt offerings
      to
      fund operations. The Company's reliance on equity and debt financing will most
      likely continue in the short term.





**ITEM
      7.**  Financial
      Statements





The
      report of independent auditors and financial statements are set forth in this
      report beginning on Page F-1.





**ITEM
      8.**  Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure





None





**ITEM
      8A.**  Controls
      and Procedures.







(a)       
      Our Chief Executive Officer and Chief Financial Officer have evaluated the
      effectiveness of our disclosure controls and procedures (as such term is defined
      in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”)) as of the end of the period ended December 31, 2004, (the
“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and
      the Chief Financial Officer concluded that our disclosure controls and
      procedures were not effective as of the period ended in this report for the
      following reason: In June 2005, we announced that our financial statements
      were
      to be restated, relating to accounts receivable and revenue. Our conclusion
      to
      restate resulted in affecting our assessment regarding our controls, and that
      they were not effective as of the period ended in this report.





(b)        Changes in Internal
      Controls over
      Financial Reporting. In June 2005, the Company remediated the material weakness
      in internal control over financial reporting by having its CEO in addition
      to
      its CFO review in detail all adjustments affecting accounts receivable and
      revenue.





Limitations
      on the Effectiveness of Internal Controls





Disclosure
      controls and procedures, no matter how well designed and implemented, can
      provide only reasonable assurance of achieving an entity's disclosure
      objectives. The likelihood of achieving such objectives is affected by
      limitations inherent in disclosure controls and procedures. These include the
      fact that human judgment in decision-making can be faulty and that breakdowns
      in
      internal control can occur because of human failures such as simple errors
      or
      mistakes or intentional circumvention of the established process.





There
      were no changes in the Company's internal controls over financial reporting,
      known to the Chief Executive Officer or the Chief Financial Officer that
      occurred during the most recent fiscal quarter that have materially affected,
      or
      are reasonably likely to materially affect, the Company's internal control
      over
      financial reporting.








**Item
      8B.**  **Other
      Information.**





None


16


**PART
      III**





**ITEM
      9.**  Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a)
      of the Exchange Act





The
      Company’s current officers and directors consist of the following
      persons:


**Name**
            **Age**
            **Office**
            **Since**Steven
                R. Westlund
            58
            Chairman
                and CEO
            1995





Steven
      Westlund has been the Chief Executive Officer and a director of Kaire since
      May
      1995 and was elected Chairman of the Board in December 1995. Mr. Westlund was
      Chairman of the Board and Chief Executive Officer of Vitafort International
      Corporation from May 1993 through May 1995. Vitafort manufactured and sold
      fat
      free foods. From January 1991 to May 1993, Mr. Westlund was Chief Executive
      Officer of Lorenz/Germaine Incorporated and concurrently from January 1991
      to
      June 1992 he acted as Chairman and Chief Executive Officer of Auto Giant. Mr.
      Westlund specializes in corporate restructuring and the development and
      marketing of specialized products and services.





Directors
      receive no remuneration at this time. All Kaire Directors are entitled to
      reimbursement of funds advanced to pay expenses in connection with our Company's
      business. Our Company has not established specific committees within the Board
      of Directors.





Compliance
      with Section 16(a) of the Securities Exchange Act of 1934





Section
      16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
      and executive officers, and persons who own more than 10% of a registered class
      of the Company’s equity securities to file with the Securities and Exchange
      Commission initial reports of ownership and reports of changes in ownership
      of
      Common Stock and other equity securities of the Company. Officers, directors
      and
      greater than 10% shareholders are required by SEC regulations to furnish the
      Company with copies of all Section 16(a) forms they file.





To
      the
      Company’s knowledge, based solely on its review of the copies of such reports
      furnished to the company and written representations that no other reports
      were
      required during the fiscal year ended December 31, 2004, all Section 16(a)
      filing requirements applicable to its officers, directors and greater than
      10%
      beneficial owners were complied with the exception of its sole officer and
      director which the exception of our CEO and sole director, Mr. Westlund, who
      sold 425,000 shares and our acting CFO, Randall Jones, who sold 80,000 shares
      during the year ending December 31, 2004. We expect the officers to make the
      appropriate filings shortly.





Code
      of Ethics for the Chief Executive Officer and the Principal Financial
      Officer





On
      September 7, 2004, the sole Board of Directors of the Company adopted the Code
      of Ethics for Chief Executive Officer and the Principal Financial Officer,
      which
      is included in Item 13 as an exhibit.








**ITEM
      10.**  Executive
      Compensation





The
      following table sets forth certain summary information regarding compensation
      paid by the Company for services rendered during the fiscal years ended December
      31, 2004, 2003 and 2002, respectively, to the Company’s sole officer, Steve
      Westlund during such periods.



















**Summary
      Compensation Table**





Executive
      Compensation :


Payouts
            Annual
                Compensation
            Long
                Term Compensation Awards(a)
            (b)
            (c)
            (d)
            (e)
            (f)
            (g)
            (h)
            (i)Name
                and Principal Position
            Year
            Salary
            Bonus
            Other
                Annual Compensation ($)
            Restricted
                Stock Awards ($)
            Securities
                Underlying Options/SAR (#)
            LTIP
                Payouts ($)
            All
                Other Compensation ($)Steve
                Westlund CEO
            2004
            100K
            
            
            
            02003
            100K
            
            
            
            29,8332002
            100K
            
            
            
            0








Options/SAR
      Grants in the Last Fiscal Year





Name
            Number
                of Securities Underlying Options/SARS Granted
            %
                of Total Options/SARS Granted to Employees in Fiscal Year
            Exercise
                or Base Price
            Expiration
                DateSteven
                R. Westlund
            0





Employment
      Agreements - need to update





On
      April
      1, 2000, Mr. Westlund signed a three-year employment agreement. The contract
      calls for Mr. Westlund to be paid a base salary of $8,333 per month for the
      first year of the term. Mr. Westlund’s base salary was to increase 15% per year
      for each of the second and third years per this agreement. The current agreement
      has been extended for one year and will continue on a year to year basis, unless
      modified by either party.





On
      October 17, 2003, Mr. Westlund was issued 375,000 shares of the Company’s common
      stock in lieu of $22,500 of the total amount due to him under the above
      compensation agreement. The Company has accrued amounts due to Mr. Westlund
      of
      $317,980 as of December 31, 2003.





During
      2004 Mr. Westlund received 2,000,000 shares of the Company’s common stock in
      lieu of the compensation that was due and accrued to him under the above
      compensation agreement. The Company has $99,700 of accrued compensation due
      to
      Mr. Westlund as of December 31, 2004.





Subsequent
      Event





Effective
      April 1, 2005, Kaire agreed to a new three year agreement with Mr. Westlund.
      The
      agreement calls for a monthly salary of $8,333.33 per month, with annual
      increases equaling 15% of the base salary. In addition, he will receive a 5
      year
      option to purchase 12 million shares of the Company’s common stock, at an option
      price of $0.05 per share.





Mr.
      Westlund also receives a commission of 3% of the merger price for any mergers
      or
      acquisitions completed by the Company during the term of the agreement.





Compensation
      of Directors:










Directors
      receive no remuneration for their services as directors at this time.


The
      Company offers health insurance to all its employees. The Company has adopted
      no
      retirement, pension, profit sharing or other similar programs.





**ITEM
      11.**  Security
      Ownership of Certain Beneficial Owners and Management - Need to
      update





The
      following table sets forth certain information known to the Company with respect
      to the beneficial ownership of the Company’s common stock as of April 30, 2005
      by (i) each person who is known by the Company to own beneficially more than
      5%
      of the Company's common stock and (ii) KAIH's sole director and executive
      officer, and (iii) all officers and directors of KAIH as a group. Except as
      otherwise listed below, the address of each person is c/o Kaire Holdings
      Incorporated, 5520 Sespe Avenue, Suite D, Fillmore CA 93015.








Name
                and Address
              Of
                Beneficial Owner
              Owned
                (1)
            Number
                of Shares
              beneficially
              owned
            Percent
                of
              class
                (2)Steve
                Westlund
              552
                Sespe Avenue, Suite D
              Fillmore,
                CA 93015
            1,664,000
            4.9
                %ALPHA
                Capital Aktiengesellschaft (3)
              Pradafant
              9490
                Furstentums
              Vaduz,
                Liechtenstein
            18,781,944
                (6)
            36
                %Gamma
                Opportunity Capital Partners, LP (4)
              British
                Colonial Centre of Commerce
              One
                Bay Street, Suite 401
              Nassau
                (NP), The Bahamas
            16,899,078(7)
            35
                %Longview
                Fund, L.P. (4)
              1325
                Howard Avenue, #422
              Burlingame,
                CA 94010
            20,010,399(8)
            37
                %Officers
                and Directors as a group
            1,664,000
            4.9
                %








(1)
      Beneficial Ownership is determined in accordance with the rules of the
      Securities and Exchange Commission and generally includes voting or investment
      power with respect to securities. Shares of common stock subject to options
      or
      warrants currently exercisable or convertible, or exercisable or convertible
      within 60 days of April 30, 2005 are deemed outstanding for computing the
      percentage of the person holding such option or warrant but are not deemed
      outstanding for computing the percentage of any other person. Except as pursuant
      to applicable community property laws, the persons named in the table have
      sole
      voting and investment power with respect to all shares of common stock
      beneficially owned.





(2)
      Percentage based on 33,877,252 shares of common stock outstanding as of April
      30, 2005, plus shares underlying each shareholders convertible note and
      warrants.





(3) Alpha
      Capital Aktiengesellschaft: In accordance with Rule 13d-3 under the Securities
      Exchange Act of 1934, Konard Ackerman may be deemed the control person of the
      shares owned by such entity. ALPHA Capital AG is a private investment fund
      that
      is owned by all its investors and managed by Mr. Ackerman.










(4)
      Gamma
      Opportunity Capital Partners, LP: In accordance with Rule 13d-3 under the
      Securities Exchange Act of 1934, Gamma Capital Advisors, Ltd., an Anguilla,
      British West Indies company, is the general partner to the stockholder Gamma
      Opportunity Capital Partners, LP, a Cayman Islands registered limited
      partnership, with the power to vote and dispose of the common shares being
      registered on behalf of the stockholder. As such, Gamma Capital Advisors, Ltd.
      may be deemed to be the beneficial owner of said shares. Christopher Rossman
      and
      Jonathan P. Knight, PhD. are the Directors of Gamma Capital Advisors, Ltd.,
      each
      possessing the power to act on its behalf. Gamma Capital Advisors, Ltd.,
      Christopher Rossman and Jonathan P. Knight, PhD. each disclaim beneficial
      ownership of the shares of common stock being registered hereto





(5)
      Longview Fund, LP is a private investment fund that is in the business of
      investing publicly-traded securities for their own accounts and is structured
      as
      a limited liability company whose members are the investors in the fund. The
      General Partner of the fund is Viking Asset Management, LLC,
      a California limited
      liability company which manages the operations of the fund. Peter T.
      Benz is the managing member of Viking Asset Management, LLC.
      As the
      control person of the shares owned by Longview Fund, LP, Peter T. Benz
      may
      be viewed as the beneficial owner of such shares pursuant to Rule 13d-3 under
      the Securities Exchange Act of 1934.




(6)
      Concerning Alpha Capital Aktiengesellschaft: Assuming $505,125 of funding
      Convertible Debentures converted at $0.03 (market price) plus 1,944,444
      warrants.





(7)
      Concerning Gamma Opportunity Capital Partners, LP: Assuming $473,639 of
      Convertible Debentures converted at $0.03 plus ----------------------1,111,111
      warrants.





(8)
      Concerning Longview Fund, LP: Assuming $472,812 of Convertible Debentures
      converted at $0.03 plus 4,249,999 warrants.








**ITEM
      12.**  Certain
      Relationships and Related Transaction





Source
      One: Kaire out sources its payroll and benefits through Source One, which is
      a
      subsidiary of Dalrada Financial Corporation. Kaire’s CFO, Randy Jones, is also
      the CFO for Dalrada Financial Corporation. The figure for payroll, included
      taxes and insurance that went through Dalrada in the year 2004 was
      $189,181.85.





**ITEM
      13.**  Exhibits,
      List and Reports in Form 8-K


(a)
            Exhibits14.1
            Code
                of Ethics31.1
            Certification
                of the Chief Executive Officer pursuant to Rule 13a-14(a)( Section
                302 of
                the Sarbanes-Oxley Act of 2002)31.2
            Certification
                of the Chief Financial Officer pursuant to Rule 13a-14(a) ( Section
                302 of
                the Sarbanes-Oxley Act of 2002)32.1
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section
                906
                of the Sarbanes-Oxley Act of 2002)32.2
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section
                906
                of the Sarbanes-Oxley Act of 2002)














(b)
            Reports
                on Form 8-KFebruary
                25, 2004
            Items
                2 and 7:reporting
                the sale of the Company’s EntreMetrix subsidiary, which it acquired in
                March 2003, back to the management of EntreMetrix. Under the terms
                of the
                transaction, the Company will return the EntreMetrix shares in exchange
                for the original $2.5 million promissory note payable to EntreMetrix
                and
                the shares issued by the Company.May
                23, 2003
            Item
                7: EntreMetrix Audited FinancialsMarch
                20, 2003
            Item
                2 and 5: Acquisition of EntreMetrixJanuary
                30, 2003
            Items
                2, 5, and 7: Acquisition of Sespe
                Pharmacy





**ITEM
      14.**  Principal
      Accountant Fees and Services





The
      Company paid or accrued the following fees in each of the prior two fiscal
      years
      to its independent certified public accountants, Pohl, McNabola, Berg & Co.,
      LLP:





For
                the Year Ended December 31,2004
            2003Audit
                Fees
            $
                60,000
            $
                42,095Audit-Related
                Fees
            $
                28,621
            $
                39,882Tax
                FeesAll
                Other Fees
            $
                19,612Total
                Fees
            $108,233
            $81,977





"Audit
      Fees" consisted of fees billed for services rendered for the audit of the
      Company’s annual financial statements and audit related fees are for review of
      the financial statements included in the Company’s quarterly reports on Form
      10-QSB.





“Other
      Fees” consisted of fees associated with the SB2 and S-8 filings and work related
      to the production of documents for the H.D. Smith law suit.





**Signatures**





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





Kaire
      Holdings Incorporated





By: /s/  Steven
      R. Westlund


Steven
      R.
      Westlund Chief Executive Officer





Dated:
      June 8, 2005





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





/s/  Steven
      R. Westlund     June
      8,
      2005


Steven
      R.
      Westlund Chief Executive Officer,


Principal
      Financial Officer and Director








/s/  Randall
      Jones     June
      8,
      2005


Randall
      Jones: Acting Chief Financial Officer





21






































**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**





**Consolidated
      Financial Statements**


**for
      the Years Ended**


**December
      31, 2004 and 2003**





22


**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**





**Consolidated
      Financial Statements**





**December
      31, 2004 and 2003**














**C
      O N T E N T S**














Report
                of Independent Registered Public Accountants
            F1Consolidated
                Balance Sheets
            F2
                - F3Consolidated
                Statements of Operations
            F4Consolidated
                Statements of Stockholders’ Equity
            F5Consolidated
                Statements of Cash Flows
            F6
                - F8Notes
                to Consolidated Financial Statements
            F9
                - F41








23




















**Report
      of Independent Registered Public Accountants**














To
      the
      stockholders and Board of Directors of


Kaire
      Holdings Incorporated and Subsidiaries








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





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. 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 audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Kaire Holdings
      Incorporated and Subsidiaries as of December 31, 2004 and 2003, and the
      consolidated results of their operations and their cash flows for the year
      then
      ended, in conformity with U.S. generally accepted accounting principles.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company has incurred substantial net
      losses and utilized substantial amounts of cash in its operating activities
      over
      the past several years and as of December 31, 2004, has an accumulated deficit
      of $41,865,095 and a stockholders’ deficit of $1,558,716. These matters, among
      others, raise substantial doubt about its ability to continue as a going
      concern. Management's plans concerning these matters are described in Note
      2.
      These consolidated financial statements do not include any adjustments relating
      to the recoverability and classification of recorded assets, or the amounts
      and
      classification of liabilities that might be necessary in the event the Company
      cannot continue in existence.





As
      discussed in Note 2 to the financial statements, the Company has restated its
      financial statements for the year ended December 31, 2004 for a correction
      of
      error related to accounts receivable and pharmacy revenue.








*/s/
      Pohl, McNabola, Berg and Company, LLP*


*San
      Francisco, California*


*April
      29, 2005(except Note 2, which is June 7, 2005)*








F1















ASSETS2004
            
            2003Current
                AssetsCash
                and cash equivalents
            $
            -
            
            $
            84,985Accounts
                receivable, trade
            
            132,761
            
            
            66,762Inventory
            
            
            149,939
            
            
            85,228Deposits
            
            
            -
            
            
            45,549Net
                assets of discontinued operations held for sale -
                Entremetrix
            
            -
            
            
            29,239Total
                Current Assets
            
            282,700
            
            
            311,763Other
                AssetsProperty
                and equipment, net of accumulated depreciation
            
            69,785
            
            
            83,413Total
                Other Assets
            
            69,785
            
            
            83,413Total
                Assets
            $
            352,485
            
            $
            395,176





























(continued)








The
            accompanying notes are an integral part of these financial
            statements.
 -
            F2
            -



















LIABILITIES
                AND STOCKHOLDERS' EQUITY2004
            
            2003Current
                LiabilitiesBank
                overdraft
            $
            19,931
            
            $
            -Accounts
                payable and accrued expenses
            
            449,782
            
            
            842,934Income
                tax payable
            
            647
            
            
            14,500Loans
                payable
            
            49,000
            
            
            68,384Notes
                payable - related parties
            
            13,281
            
            
            5,746Advances
                from shareholders
            
            73,607
            
            
            63,707Liabilities
                of discontinued operations - Classic Care
            
            145,611
            
            
            583,659Accrued
                interest - convertible debt
            
            207,304
            
            
            230,821Convertible
                notes - current portion
            
            566,158
            
            
            868,567Total
                Current liabilities
            
            1,525,321
            
            
            2,678,318Long
                term liabilitiesConvertible
                notes payable and debentures
            
            385,880
            
            
            95,574Total
                long term liabilities
            
            385,880
            
            
            95,574Total
                Liabilities
            
            1,911,201
            
            
            2,773,892Stockholders'
                equityCommon
                stock, $0.001 par value900,000,000
                shares authorized; 30,877,252 and 7,393,007shares
                issued and outstanding in 2004 and 2003, respectively
            
            30,878
            
            
            7,393Additional
                paid in capital
            
            40,275,501
            
            
            38,503,257Accumulated
                deficit
            
            (41,865,095)
            
            
            (40,889,366)Total
                Stockholders' Equity
            
            (1,558,716)
            
            
            (2,378,716)Total
                Liabilities and Stockholders' Equity
            $
            352,485
            
            $
            395,176





The
            accompanying notes are an integral part of these financial
            statements.
 -
            F3
            -

















2004
            
            2003Net
                revenues
            $
            2,218,086
            
            $
            1,256,806Cost
                of goods sold
            
            (1,986,280)
            
            
            (884,918)Gross
                Profit
            
            231,806
            
            
            371,888Operating
                ExpensesSalaries
            
            437,400
            
            
            441,190Depreciation
                and amortization
            
            28,340
            
            
            38,036General
                and administrative
            
            1,195,127
            
            
            879,706Selling
                expense
            
            21,064
            
            
            6,575Rent
            
            
            35,150
            
            
            51,548Total
                Operating Expenses
            
            1,717,081
            
            
            1,417,055Loss
                from operations
            
            (1,485,275)
            
            
            (1,045,167)Other
                Income (Expenses)Interest
                expense
            
            (404,743)
            
            
            (83,146)Miscellaneous
                income
            
            5,692
            
            
            27,760Settlement
                of notes payable
            
            137,149
            
            
            10,055Loss
                on disposal of assets
            
            -
            
            
            (12,000)Gain
                on settlement of litigation
            
            115,243
            
            
            -Total
                Other Income (Expenses)
            
            (146,659)
            
            
            (57,331)Loss
                from continuing operations before income taxes
            
            (1,631,934)
            
            
            (1,102,498)Provision
                for income taxes
            
            (3,404)
            
            
            (1,600)Loss
                from continuing operations
            
            (1,635,338)
            
            
            (1,104,098)Discontinued
                operationsIncome
                from operations of discontinued segment (Classic Care)net
                of income tax expense of $800 in 2003
            
            438,048
            
            
            15,313Loss
                from operations of discontinued segment (Entremetrix), netof
                income tax expense of $800 for the year ended December 31,
                2003
            
            (55,287)
            
            
            (239,055)Gain
                on sale discontinued segment (Entremetrix)
            
            276,848
            
            
            -Gain
                on disposal of assets of discontinued segment (Classic
                Care)
            
            -
            
            
            41,993Gain/(Loss)
                from Discontinued Operations
            
            659,609
            
            
            (181,749)Net
                Loss
            
            $
            (975,729)
            
            $
            (1,285,847)(Loss)
                earnings per weighted average share ofcommon
                stock outstanding - basic and dilutedFrom
                continuing operations
            $
            (0.06)
            
            $
            (0.25)From
                discontinued operations
            
            0.01
            
            
            (0.04)Total
                (loss) earnings per share - basic and diluted
            $
            (0.05)
            
            $
            (0.29)Weighted-average
                shares outstanding - basic and diluted
            
            26,501,514
            
            
            4,453,420





The
            accompanying notes are an integral part of these financial
            statements.
 -
            F4
            -

















AdditionalCommon
                Stock
            
            Paid-In
            
            AccumulatedShares
            
            
            Amount
            
            Capital
            
            Deficit
            
            TotalBalance,
                December 31, 2002
            2,163,691
            
            $
            2,163
            
            $
            37,462,910
            
            $
            (39,603,519)
            
            $
            (2,138,446)Issued
                for conversion of notes payable
            615,000
            
            
            615
            
            
            21,485
            
            
            -
            
            
            22,100Bond
                discount
            -
            
            
            -
            
            
            158,571
            
            
            -
            
            
            158,571Warrant
                issuance
            -
            
            
            -
            
            
            127,600
            
            
            -
            
            
            127,600Issued
                for professional services and compensation
            3,363,733
            
            
            3,364
            
            
            483,941
            
            
            -
            
            
            487,305Acquisition
                of Entremetrix
            1,250,000
            
            
            1,250
            
            
            248,750
            
            
            -
            
            
            250,000Other
            583
            
            
            1
            
            
            -
            
            
            -
            
            
            1Net
                loss
            -
            
            
            -
            
            
            -
            
            
            (1,285,847)
            
            
            (1,285,847)Balance,
                December 31, 2003
            7,393,007
            
            $
            7,393
            
            $
            38,503,257
            
            $
            (40,889,366)
            
            $
            (2,378,716)Issued
                for conversion of notes payable
            13,752,948
            
            
            13,753
            
            
            450,588
            
            
            -
            
            
            464,341Issued
                for conversion of accrued interest
            2,678,570
            
            
            2,679
            
            
            72,321
            
            
            -
            
            
            75,000Exercise
                of warrants
            2,200,000
            
            
            2,200
            
            
            129,800
            
            
            -
            
            
            132,000Bond
                discount
            -
            
            
            -
            
            
            337,894
            
            
            -
            
            
            337,894Issued
                for professional services and compensation
            4,296,227
            
            
            4,296
            
            
            654,218
            
            
            -
            
            
            658,514Issued
                for prior years' compensation
            1,806,500
            
            
            1,807
            
            
            376,173
            
            
            -
            
            
            377,980Cancellation
                of Entremetrix
            (1,250,000)
            
            
            (1,250)
            
            
            (248,750)
            
            
            -
            
            
            (250,000)Net
                loss
            -
            
            
            -
            
            
            -
            
            
            (975,729)
            
            
            (975,729)Balance,
                December 31, 2004
            30,877,252
            
            $
            30,878
            
            $
            40,275,501
            
            $
            (41,865,095)
            
            $
            (1,558,716)


























The
            accompanying notes are an integral part of these financial
            statements.
 -
            F5
            -











2004
            
            2003Increase
                (decrease) in cash and cash equivalentsNet
                loss
            $
            (975,729)
            
            $
            (1,285,847)Adjustments
                to reconcile net loss to net cash usedin
                operating activitiesDepreciation
                and amortization
            
            28,340
            
            
            38,036Amortization
                of warrant and beneficial conversion feature
            
            281,114
            
            
            23,826Common
                stock issued for professional services and compensation
            
            658,514
            
            
            487,305Common
                stock issued for payment of interest
            
            -
            
            
            324Gain
                on extinguishment of notes payable and related interest
            
            (137,149)
            
            
            -Loss
                on disposal of assets
            
            -
            
            
            12,000(Income)
                loss from operations of discontinued operations - Classic
                Care
            
            (438,048)
            
            
            (15,313)(Gain)
                loss on disposition of assets of discontinued operations - Classic
                Care
            
            -
            
            
            (41,993)Gain
                on sale of discontinued operations - EntreMetrix
            
            (276,848)
            
            
            -Gain
                on settlement
            
            (115,243)
            
            
            -Amortization
                of deferred financing costs
            
            21,667Debt
                issuance costs
            
            -
            
            
            -(Income)
                loss from operations of discontinued operations -
                entreMetrix
            
            55,287
            
            
            239,055Change
                in net assets and liabilities of discontinued operations - Classic
                Care
            
            -
            
            
            54,499Change
                in net assets and liabilities of discontinued operations -
                entreMetrix
            
            -
            
            
            (29,239)Other
            
            (10,271)
            
            
            7,258Total
                adjustments to net income
            $
            (908,366)
            
            $
            (510,089)Cash
                flow from operating activities:Changes
                in operating assets and liabilities:Increase
                in trade accounts receivable
            $
            (65,999)
            
            $
            (44,495)Increase
                in bank overdraft
            
            19,931
            
            
            -Decrease
                in deposits
            
            -
            
            
            8,370Increase
                in inventory
            
            (64,711)
            
            
            (69,160)Increase
                (decrease) in income and sales tax payable
            
            (13,853)
            
            
            4,000Increase
                in accrued interest on convertible notes
            
            51,483
            
            
            55,477Increase
                in accounts payable and accrued expenses
            
            196,191
            
            
            269,102Cash
                flow generated by (used in) operating activities
            $
            123,042
            
            $
            223,294Cash
                flow from investing activities:Purchase
                of property and equipment
            $
            (14,712)
            
            $
            (40,303)Cash
                acquired in acquisition of entreMetrix, Inc.
            
            -
            
            
            27,576Net
                cash generated by (used in) investing activities
            $
            (14,712)
            
            $
            (12,727)

















(continued)





The
            accompanying notes are an integral part of these financial
            statements.
 -
            F6
            -














2004
            
            2003Cash
                flow from financing activities:Proceeds
                from notes payable - shareholders
            $
            9,900
            
            $
            38,089Payments
                on notes payable - shareholders
            
            -
            
            
            (2,000)Proceeds
                from notes payable - related parties
            
            9,525
            
            
            5,746Payments
                on notes payable - related parties
            
            (1,990)
            
            
            -Proceeds
                from loans
            
            60,000
            
            
            -Payments
                on loans
            
            (79,384)
            
            
            (47,684)Deferred
                financing costs
            
            (65,000)
            
            
            -Proceeds
                from convertible notes payable
            
            650,000
            
            
            -Proceeds
                from conversion of warrants
            
            132,000
            
            
            370,000Net
                cash generated by (used in) financing activities
            $
            715,051
            
            $
            364,151Net
                (decrease) increase in cash and cash equivalents
            $
            (84,985)
            
            $
            64,629Cash
                and cash equivalents at beginning of year
            
            84,985
            
            
            20,356Cash
                and cash equivalents at end of period
            $
            -
            
            $
            84,985**Supplementary
                disclosures of cash flow information**Cash
                paid during the year forInterest
            $
            2,561
            
            $
            4,463Taxes
            $
            12,399
            
            $
            3,200**Supplemental
                schedule of non-cash investing and financing
                activities:**During
                the twelve months ended December 31, 2004, the Company entered into
                the
                following non-cash transactions:Gain
                on extinguishment of note payables and related accrued interest of
                $137,482Gain
                on settlement of litigation of $115,243Issued
                4,296,227 shares of common stock for consulting services and compensation
                valued at $658,515Issued
                16,431,518 shares of common stock for conversion of $539,341 of notes
                payable and interest.Issued
                1,806,500 shares of common stock to an officer and employees for
                prior
                year compensation valued at $377,980Retired
                1,250,000 shares of commons stock valued at $250,000.The
                sale of entreMetrix resulted in a non-cash gain of $276,848.











(continued)


The
            accompanying notes are an integral part of these financial
            statements.
 -
            F7
            -














**Supplemental
                schedule of non-cash investing and financing
                activities:**During
                the year ended December 31, 2003, the Company entered into the followingnon-cash
                transactions:Issued
                615,000 shares of common stock for conversion of $21,776 of principal
                on
                notes payable, and $628 of accrued interest.Issued
                3,363,733 shares of common stock for legal and consulting services
                valued
                at $487,305In
                March 2003, the Company returned $26,625 of vehicles under capital
                leases
                to the lessors.In
                January 2003, the Company acquired assets ofSespe
                PharmacyInventory
            $
            81,068Property
                and equipment
            
            100,000Assets
                acquired
            
            181,068Cash
                paid
            
            (65,000)Notes
                payable
            
            (116,068)Net
            $
            -In
                March 2003, the Company acquired entreMetrix, Inc. for 1,250,000
                sharesof
                common stock and a note payable for $2.5 millionCash
                acquired in transaction
            $
            27,576Accounts
                receivable
            
            958Prepaid
                expenses and other assets
            
            135,253Goodwill
            
            2,906,985Property
                and equipment
            
            51,323Accounts
                payable and accrued expenses
            
            (262,620)Notes
                payable
            
            (109,475)Issuance
                of common stock - acquisition
            
            (250,000)Note
                payable - acquisition
            
            (2,500,000)$
            -





-F
            8
            -








**1.**  **Summary
      of Significant Accounting Policies**





Organization
      and Line of Business





Kaire
      Holdings Incorporated (“Kaire” or "the Company"), a Delaware corporation, was
      incorporated on June 2, 1986. Effective February 3, 1998, Kaire changed its
      name
      to Kaire Holdings Incorporated from Interactive Medical Technologies, Ltd.
      In
      November 2002, the Company, through its subsidiary Effective Health, Inc.,
      purchased certain assets of Sespe Pharmacy, a privately held company located
      in
      Fillmore, California. The asset acquisition was concluded on January 26,
      2003.








History





In
      1999,
      the Company formed YesRx.Com, Inc., an Internet drugstore focused on
      pharmaceuticals, health, wellness and beauty products. The Company focuses
      on
      selling drugs for chronic care as opposed to emergency needs and works mainly
      with the patient who has regular medication needs and requires multiple refills.





In
      May
      2000, the Company acquired Classic Care, Inc. (“Classic Care”), which was
      organized as a corporation in April 1997, under the Laws of the State of
      California. Classic Care operated as an agency distributor of pharmaceutical
      products, via a unique prescription packaging system for consumers at senior
      assisted living and retirement centers in the Los Angeles area. Classic Care
      purchased prescription drugs in bulk and filled prescriptions for individuals
      living in the aforementioned facilities. Primary sales were to individuals
      and
      consist of packaged prescription drugs in prescribed dosages. These packaged
      drug sales were primarily paid for by Medi-Cal, and the balances of the sales
      that are not covered by Medi-Cal were paid directly by individuals. Classic
      Care
      billed Medi-Cal and other third-party payors on behalf of the customer and
      receives payment directly from Medi-Cal.





On
      April
      17, 2002, Classic Care received notice from the State of California Department
      of Health Services (“DHS”) that they were suspending Classic Care Pharmacy’s
      Medi-cal provider number and withholding 100% of Classic Care Pharmacy’s
      Medi-cal payments, alleging Classic Care Pharmacy had submitted numerous
      patients’ claims without proper documentation.





As
      a
      result of the DHS claim, on May 20, 2002, the Company and the original Classic
      Care Shareholders reached an agreement to settle all amounts due them. This
      agreement resulted in the Company selling the long-term services business
      clients to the original Classic Care shareholders and relinquishing all rights
      in the long-term services business in return for a release from repaying the
      promissory notes and contingent payments resulting from the original
      acquisition. In December 2002, the Company was informed by the Department of
      Health Services (“DHS”) that the Medi-Cal Program was taking the following
      actions against Classic Care: 1) withholding 100 percent of payment to Classic
      Care; and 2) temporarily suspending and deactivating Classic Care’s Medi-Cal
      provider number. In January 2003, the Company’s management decided to start the
      process of a voluntary dissolution of Classic Care.


-
            F9 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Principles
      of Consolidation




The
      consolidated financial statements include the accounts of Kaire and its wholly
      owned subsidiaries (collectively the "Company"). The Company's subsidiaries
      include See/Shell Biotechnology, Inc.., EFFECTIVE Health, Inc. (dba Sespe
      Pharmacy), and YesRx.com. Intercompany accounts and transactions have been
      eliminated upon consolidation.








Estimates




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and the disclosures of
      contingent assets and liabilities at the date of the financial statements,
      as
      well as the reported amounts of revenues and expenses during the reporting
      period. Actual results could differ from those estimates. Significant estimates
      include valuation of goodwill, allowance for doubtful accounts and third-party
      contractual agreements, and the net realizable value of assets of discontinued
      operations.







Cash
      and Cash Equivalents




For
      purpose of the statements of cash flows, cash equivalents include amounts
      invested in a money market account with a financial institution. The Company
      considers all highly liquid investments with an original maturity of three
      months or less to be cash equivalents. Cash equivalents are carried at cost,
      which approximates market.








Concentration
      of Cash





The
      Company at times during the year maintained cash balances in excess of the
      federally insured limit of $100,000 per institution. There were no uninsured
      balances as of December 31, 2004 and 2003.








Revenue
      Recognition




The
      Company recognizes revenue at the time the product is shipped to the customer
      or
      services are rendered. Outbound shipping and handling charges are included
      in
      net sales.








Net
      Client Revenue





Net
      client revenue represents the estimated net realizable amounts from clients,
      third-party payors and others for sale of products or services rendered. For
      revenue recognition, revenue is recorded when the prescription is filled or
      when
      services are performed. A significant portion of revenue is from federal and
      state reimbursement programs.





-
            F10 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Third-Party
      Contractual Adjustments





Contractual
      adjustments represent the difference between the pharmacy’s established billing
      rate for covered products and services and amounts reimbursed by third-party
      payors, pursuant to reimbursement agreements.





For
      the
      year ended December 31, 2004, gross revenues were approximately $2,850,000,
      less
      approximately $650,000 of contractual adjustments based on reimbursement
      contracts, resulting in net revenues of approximately 2,200,000








Net
      Loss per Share





Loss
      per
      common share is computed on the weighted average number of common shares
      outstanding during each year. Basic loss per share is computed as net loss
      applicable to common stockholders divided by the weighted average number of
      common shares outstanding for the period. Diluted loss per share reflects the
      potential dilution that could occur from common shares issuable through stock
      options, warrants and other convertible securities when the effect would be
      dilutive.





Effective
      August 25, 2003, the Company concluded a reverse split at a ratio of 1-for-200.
      All loss per share calculations and shares issued were retroactively adjusted
      to
      reflect the reverse stock split.








Inventory





Inventory
      consists primarily of pharmaceuticals and health care products and is stated
      at
      the lower of cost or market on a first-in-first-out basis.








Property
      and Equipment




Property
      and equipment are stated at cost. Depreciation is computed for financial
      reporting purposes using the straight-line method over the estimated useful
      lives of the assets. Amortization of leasehold improvements is computed using
      the straight-line method over the shorter of the remaining lease term or the
      estimated useful lives of the improvements. The Company uses other depreciation
      methods (generally accelerated) for tax purposes. Repairs and maintenance that
      do not extend the useful life of property and equipment are charged to expense
      as incurred. When property and equipment are retired or otherwise disposed
      of,
      the asset and its accumulated depreciation are removed from the accounts and
      the
      resulting profit or loss is reflected in income.


-
            F11 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Property
      and Equipment (continued)





The
      estimated service lives of property and equipment are principally as
      follows:





Leasehold
                improvements
            3-7
                yearsComputers
                and equipment
            3-5
                yearsFurniture
                & Fixtures
            5-7
                yearsSoftware
            3-5
                years








Assets
      held under capital leases are recorded at the lower of the net present value
      of
      the minimum lease payments or the fair value of the leased asset at the
      inception of the lease. Amortization expense is computed using the straight-line
      method over the shorter of the estimated useful lives of the assets or the
      period of the related lease.








Goodwill





The
      Company capitalizes as goodwill the excess acquisition costs over the fair
      value
      of net assets acquired, in connection with business acquisitions, which costs
      were being amortized on a straight-line method over 20 years. In 2002, the
      Company adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible
      Assets”, and accordingly goodwill and intangible assets with indefinite lives
      are no longer amortized but instead tested for impairment at least annually.
      The
      carrying amount of goodwill will be reviewed periodically based on the
      undiscounted cash flows of the entities acquired over the remaining amortization
      period.








Income
      Taxes





The
      Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
      the
      recognition of deferred tax assets and liabilities for the expected future
      tax
      consequences of events that have been included in the financial statements
      or
      tax returns. Under this method, deferred income taxes are recognized for the
      tax
      consequences in future years of differences between the tax bases of assets
      and
      liabilities and their financial reporting amounts at each period end based
      on
      enacted tax laws and statutory tax rates applicable to the periods in which
      the
      differences are expected to affect taxable income. Valuation allowances are
      established, when necessary, to reduce deferred tax assets to the amount
      expected to be realized. The provision for income taxes represents the tax
      payable for the period and the change during the period in deferred tax assets
      and liabilities.








-
            F12 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Fair
      Value of Financial Instruments





The
      Company measures its financial assets and liabilities in accordance with
      generally accepted accounting principles. SFAS NO. 107, “Disclosure about Fair
      Value of Financial Instruments,” requires certain disclosures regarding the fair
      value of financial instruments. For certain of the Company's financial
      instruments, including cash and cash equivalents and accounts payable and
      accrued liabilities, the carrying amounts approximate fair value due to their
      short maturities. The amounts shown for notes payable also approximate fair
      value because current interest rates offered to the Company for debt of similar
      maturities are substantially the same.








Stock-Based
      Compensation





SFAS
      No.
      123, "Accounting for Stock-Based Compensation," establishes and encourages
      the
      use of the fair value based method of accounting for stock-based compensation
      arrangements under which compensation cost is determined using the fair value
      of
      stock-based compensation determined as of the date of grant and is recognized
      over the periods in which the related services are rendered. The statement
      also
      permits companies to elect to continue using the current implicit value
      accounting method specified in Accounting Principles Bulletin (“APB”) Opinion
      No. 25, “Accounting for Stock Issued to Employees,” to account for stock-based
      compensation.





In
      2004
      and 2003, the Company determined that it will not change to the fair value
      method and will continue to use the implicit value based method for stock
      options issued to employees. In December 2002, the FASB issued SFAS No.148,
      "Accounting for Stock-Based Compensation - Transition and Disclosure." This
      statement amends SFAS No.123, "Accounting for Stock-Based Compensation," to
      provide alternative methods of transition for a voluntary change to the fair
      value-based method of accounting for stock-based employee compensation. Pursuant
      to SFAS No.123, the Company will continue to show pro forma disclosure related
      to the expense attributable to the fair market value of stock options granted
      to
      employees.








The
      FASB
      released Interpretation No.44, "Accounting for Certain Transactions Involving
      Stock Compensation.” This Interpretation addresses certain practice issues
      related to APB Opinion No.25. The provisions of this Interpretation are applied
      to awards, exchanges of awards in business combinations, modifications to an
      outstanding award, and exchanges in grantee status that occur.





The
      Company did not issue any options or warrants to employees or consultants during
      the years ended December 31, 2004 and 2003.








-
            F13 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Comprehensive
      Income (Loss)





Statement
      of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”
      (SFAS 130) established standards for reporting and display of comprehensive
      income (loss) and its components in a full set of general-purpose financial
      statements. Comprehensive income consists of net income and unrealized gains
      (losses) on available-for-sale securities; foreign currency translation
      adjustments; changes in market values of future contracts that qualify as a
      hedge; and negative equity adjustments recognized in accordance with SFAS No.
      87. The Company, however, does not have any components of comprehensive income
      (loss) as defined by SFAS 130 and therefore, for the years ended December 31,
      2004 and 2003, comprehensive loss is equivalent to the Company’s net
      loss.








Long-Lived
      Assets





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” the Company
      periodically evaluates the carrying value of long-lived assets to be held and
      used, including intangible assets, when events and circumstances warrant such
      a
      review. The carrying value of a long-lived asset is considered impaired when
      the
      anticipated discounted cash flow from such asset is separately identifiable
      and
      is less than its carrying value. In that event, a loss is recognized based
      on
      the amount by which the carrying value exceeds the fair market value of the
      long-lived asset. Fair market value is determined primarily using the
      anticipated cash flows discounted at a rate commensurate with the risk involved.
      Losses on long-lived assets to be disposed of are determined in a similar
      manner, except that fair market values are reduced for the cost to
      dispose.








Advertising
      Costs





The
      Company expenses advertising and marketing costs as they are incurred.
      Advertising and marketing costs for the years ended December 31, 2004 and 2003
      were $1,365 and $1,973, respectively.








Reclassifications





Certain
      amounts in the 2003 financial statements have been reclassified to conform
      to
      the 2004 presentations. These reclassifications had no effect on previously
      reported results of operations or retained earnings.








Segment
      and Geographic Information





The
      FASB
      issued SFAS No. 131 on “Disclosures about Segments of an Enterprise and Related
      Information” effective in 1998. SFAS 131 requires enterprises to report
      information about operating segments in annual financial statements and selected
      information about reportable segments in interim financial reports issued to
      shareholders, on the basis that is used internally for evaluating segment
      performance and deciding how to allocate resources to segments. It also
      established standards for related disclosures about products and services,
      geographic areas and major customers.


-
            F14 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Segment
      and Geographic Information (continued)





The
      Company managed its operations through two business segments: professional
      employment organization and pharmacy operations. The Company entered the
      professional employment business as a result of the Entremetrix, Inc.,
      acquisition in March 2003. However, the Company sold Entremetrix, Inc., back
      to
      its original shareholder in February 2004.





The  Company  evaluated  performance  based  on  net  operating  profit.
      The  operating  segments  do  not  share  staff  or  facilities.
      Payroll  services  were  provided  by
      Entremetrix, Inc., to the pharmacy business unit. The  costs  of  operating  each
      segment  are  captured  discretely  within  each  segment.
      The  Company’s  property  and  equipment,  inventory,  and  accounts  receivable  are  captured  and  reported  discretely  within e ach  operating  segment.





The
      operating results of Entremetrix, Inc. are shown as discontinued operations
      in
      the financial statements. Due to the sale of Entremetrix, Inc. the Company
      operates in only one segment.








Accounting
      for Derivative Instruments and Hedging Activities





The
      Financial Accounting Standard Board (FASB) issued SFAS No. 133, “Accounting for
      Derivative Instruments and Hedging Activities”. SFAS No. 133 requires that an
      enterprise recognize all derivatives as either assets or liabilities in the
      statement of financial position and measure those instruments at fair value.
      This statement is effective for fiscal years beginning after June 15, 2000,
      and
      has been adopted by the Company for the year ending December 31, 2000. SFAS
      No.
      133 does not have a material impact on its financial position or results of
      operations, as the Company does not have any derivative
      instruments.





The
      Financial Accounting Standards Board issued SFAS No. 137, “Accounting for
      Derivative Instruments and Hedging Activities-Deferral of the effective Date
      of
      FASB Statement No. 133,” The statement is effective for periods beginning after
      June 1999 and amends paragraph 48 of SFAS No. 133 and supersedes paragraph
      50 of
      SFAS No. 133. SFAS No. 137 does not have a material impact on its financial
      position or results of operations.





The
      Financial Accounting Standards Board issued SFAS No. 138, “Accounting for
      Certain Derivative Instruments and Certain Hedging Activities-an amendment
      of
      FASB Statement No. 133,” The Statement is effective for all fiscal quarters of
      all fiscal years beginning after June 15, 2000. SFAS No. 138 does not have
      a
      material impact on its financial position or results of operations.








-
            F15 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**1.**  **Summary
      of Significant Accounting Policies (continued)**





Recent
      Accounting Pronouncements





During
      May 2003, the FASB issued SFAS 150 - “Accounting for Certain Financial
      Instruments with Characteristics of both Liabilities and Equity”, effective for
      financial instruments entered into or modified after May 31, 2003, and otherwise
      is effective for public entities at the beginning of the first interim period
      beginning after June 15, 2003. This Statement establishes standards for how
      an
      issuer classifies and measures certain financial instruments with
      characteristics of both liabilities and equity. It requires that an issuer
      classify a freestanding financial instrument that is within its scope as a
      liability (or an asset in some circumstances). Many of those instruments were
      previously classified as equity. Some of the provisions of this Statement are
      consistent with the current definition of liabilities in FASB Concepts Statement
      No. 6, Elements of Consolidated Financial Statements. The adoption of this
      statement had no impact on the Company’s consolidated financial
      statements.





In
      December 2003, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition.” SAB 104
      supersedes SAB 101, “Revenue Recognition in Consolidated Financial
      Statements.” SAB 104’s primary purpose is to rescind accounting guidance
      contained in SAB 101 related to multiple element revenue arrangements,
      superseded as a result of the issuance of EITF 00-21, “Accounting for
      Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104
      rescinds the SEC’s Revenue Recognition in Consolidated Financial Statements
      Frequently Asked Questions and Answers (“the FAQ”) issued with SAB 101 that
      had been codified in SEC Topic 13, Revenue Recognition. Selected portions of
      the
      FAQ have been incorporated into SAB 104. While the wording of SAB 104
      has changed to reflect the issuance of EITF 00-21, the revenue recognition
      principles of SAB 101 remain largely unchanged by the issuance of
      SAB 104, which was effective upon issuance. The adoption of SAB 104
      did not impact the consolidated financial statements.





In
      March
      2004, the FASB approved the consensus reached on the Emerging Issues Task Force
      (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and
      Its
      Application to Certain Investments.” The objective of this Issue is to provide
      guidance for identifying impaired investments. EITF 03-1 also provides new
      disclosure requirements for investments that are deemed to be temporarily
      impaired. In September 2004, the FASB issued a FASB Staff Position (FSP) EITF
      03-1-1 that delays the effective date of the measurement and recognition
      guidance in EITF 03-1 until after further deliberations by the FASB. The
      disclosure requirements are effective only for annual periods ending after
      June
      15, 2004. The Company has evaluated the impact of the adoption of the disclosure
      requirements of EITF 03-1 and does not believe it will have an impact to the
      Company's overall consolidated results of operations or consolidated financial
      position. Once the FASB reaches a final decision on the measurement and
      recognition provisions, the Company will evaluate the impact of the adoption
      of
      EITF 03-1.





In
      July
      2004, the EITF issued a draft abstract for EITF Issue No. 04-08, "The Effect
      of
      Contingently Convertible Debt on Diluted Earnings per Share" ("EITF 04-08").
      EITF 04-08 reflects the Task Force's tentative conclusion that contingently
      convertible debt should be included in diluted earnings per share computations
      regardless of whether the market price trigger has been met. If adopted, the
      consensus reached by the Task Force in this Issue will be effective for
      reporting periods ending after December 15, 2004. Prior period earnings per
      share amounts presented for comparative purposes would be required to be
      restated to conform to this consensus and the Company would be required to
      include the shares issuable upon the conversion of the Notes in the diluted
      earnings per share computation for all periods during which the Notes are
      outstanding Management does not expect the implementation of this new standard
      to have a material impact on its computation of diluted earnings per share.




F16





**1.**  **Summary
      of Significant Accounting Policies (continued)**





Recent
      Accounting Pronouncements (continued)





In
      September 2004, the EITF delayed the effective date for the recognition and
      measurement guidance previously discussed under EITF Issue No. 03-01, "The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments" ("EITF 03-01") as included in paragraphs 10-20 of the proposed
      statement. The proposed statement will clarify the meaning of
      other-than-temporary impairment and its application to investments in debt
      and
      equity securities, in particular investments within the scope of FASB Statement
      No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
      and
      investments accounted for under the cost method. The Company is currently
      evaluating the effect of this proposed statement on its financial position
      and
      results of operations.





In
      November 2004, the Financial Accounting Standards Board Statement issued SFAS
      No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4", which
      clarifies the accounting for abnormal amounts of idle facility expense, freight,
      handling costs, and charges regardless of whether they meet the criterion of
      "so
      abnormal" that was originally stated in Accounting Research Bulletin No. 43,
      chapter 4. In addition, SFAS No. 151 requires that the allocation of fixed
      production overheads to conversion costs be based on the normal capacity of
      the
      production facilities. SFAS No. 151 is effective for inventory costs incurred
      during fiscal years beginning after June 15, 2005. Management does not expect
      the implementation of this new standard to have a material impact on its
      financial position, results of operations and cash flows.





In
      December 2004, the FASB issued a revision to SFAS 123, "Share-Based Payment,
      an
      amendment of FASB Statements Nos. 123 and 95," that addresses the accounting
      for
      share-based payment transactions in which a Company receives employee services
      in exchange for either equity instruments of the Company or liabilities that
      are
      based on the fair value of the Company's equity instruments or that may be
      settled by the issuance of such equity instruments. This statement would
      eliminate the ability to account for share-based compensation transactions
      using
      the intrinsic method that the Company currently uses and generally would require
      that such transactions be accounted for using a fair-value-based method and
      recognized as expense in the consolidated statement of operations. The effective
      date of this standard is for periods beginning after June 15, 2005. The Company
      has determined that the adoption of SFAS 123R will result in the Company having
      to recognize additional compensation expense related to the options or warrants
      granted to employees, and it will have an impact on the Company’s net earnings
      in the future. This standard requires expensing the fair value of stock option
      grants and stock purchases under employee stock purchase plan.





In
      December 2004, the Financial Accounting Standards Board Statement issued SFAS
      No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
      29",
      which amends Opinion 29 by eliminating the exception for nonmonetary exchanges
      of similar productive assets and replaces it with a general exception for
      exchanges of nonmonetary assets that do not have commercial substance. A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. SFAS
      No. 151 is effective for a fiscal year beginning after June 15, 2005, and
      implementation is done prospectively. Management does not expect the
      implementation of this new standard to have a material impact on its financial
      position, results of operations and cash flows.


-
            F17 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**2.**  **Restatement
      of Prior Financial Information**





The
      Company previously overstated its Accounts Receivable and Revenues by $132,761.
      The Company has determined the effect of the correction on its previously issued
      financial statements and has restated the accompanying financial statements
      for
      the year ended December 31, 2004.





As
                Originally
              Reported
            
            Restatement
              Adjustments
            
            As
                RestatedAccounts
                receivable, trade
            $
            265,522
            
            $
            (132,761)
            
            $
            132,761Total
                Current Assets
            $
            415,461
            
            $
            (132,761)
            
            $
            282,700Total
                Assets
            $
            485,246
            
            $
            (132,761)
            
            $
            352,485Accumulated
                deficit
            $
            (41,732,334)
            
            $
            (132,761)
            
            $
            (41,865,095)Total
                Stockholders' Equity
            $
            (1,425,955)
            
            $
            (132,761)
            
            $
            (1,558,716)Total
                Liabilities and Stockholders' Equity
            $
            485,246
            
            $
            (132,761)
            
            $
            352,485Net
                revenues
            $
            2,350,847
            
            $
            (132,761)
            
            $
            2,218,086Gross
                Profit
            $
            364,567
            
            $
            (132,761)
            
            $
            231,806Loss
                from operations
            $
            (1,352,514)
            
            $
            (132,761)
            
            $
            (1,485,275)Loss
                from continuing operations before income taxes
            $
            (1,499,173)
            
            $
            (132,761)
            
            $
            (1,631,934)Loss
                from continuing operations
            $
            (1,502,577)
            
            $
            (132,761)
            
            $
            (1,635,338)Net
                Loss
            $
            (842,968)
            
            $
            (132,761)
            
            $
            (975,729)(Loss)
                earnings per weighted average share ofcommon
                stock outstanding - basic and dilutedFrom
                continuing operations
            $
            (0.06)
            
            $
            0.00
            
            $
            (0.06)From
                discontinued operations
            
            0.01
            
            
            0.00
            
            
            0.01Total
                (loss) earnings per share - basic and diluted
            $
            (0.05)
            
            $
            0.00
            
            $
            (0.05)





The
      restatement did affect net loss, but did not affect earnings (loss) per share.
      The financial results presented in this report reflect the restatement of the
      Company's financial results. Based on the substantial work done to date, the
      Company does not expect any further restatements as a result of its review.











**3.**  **Going
      Concern**





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, the Company has experienced net losses
      of
      $975,729 and $1,285,847 for the years ended December 31, 2004 and 2003,
      respectively. The Company also had a net working deficit of $1,242,621 and
      $2,366,555 for the years ended December 31, 2004 and 2003 respectively.
      Additionally, the Company must raise additional capital to meet its working
      capital needs. If the Company is unable to raise sufficient capital to fund
      its
      operations for the Health Advocacy program, it might be required to discontinue
      its pharmacy operations. These factors raise substantial doubt about the
      Company’s ability to continue as a going concern. In view of the matters
      described above, recoverability of a major portion of the recorded asset amounts
      shown in the accompanying balance sheet is dependent upon the Company’s ability
      to generate sufficient sales volume to cover its operating expenses and to
      raise
      sufficient capital to meet its payment obligations. The financial statements
      do
      not include any adjustments relating to the recoverability and classification
      of
      recorded asset amounts, or amounts and classification of liabilities that might
      be necessary should the Company be unable to continue in existence.


-
            F18 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**3.**  **Going
      Concern (continued)**





Management
      has previously relied on equity financing sources and debt offerings to fund
      operations. The Company's reliance on equity and debt financing will continue,
      and the Company will continue to seek to enter into strategic acquisitions.
      The
      Company has obtained additional debt financing subsequent to December 31,
      2004.











**4.**  **Acquisition
      of Sespe Pharmacy**





Effective
      January 26, 2003, the Company concluded its agreement to purchase certain
      tangible and intangible assets of Sespe Pharmacy, a privately held company,
      for
      a total cost of $181,068. The Company had opened escrow in 2002, and made a
      deposit of $40,000. The agreed purchase price consists of (i)) a short-term
      promissory note in the amount of $81,000 due 120 days after, and (ii) a cash
      payment of $100,068. Under the terms of the agreement, the Company purchased
      the
      Sespe Pharmacy name, all inventory, office and pharmacy equipment, furniture
      and
      fixtures.





The
      acquisition was recorded using the purchase method of accounting. Accordingly,
      the purchase price has been allocated to the assets acquired based on the
      estimated fair values at the date of acquisition. The operating results of
      this
      acquisition are included in the Company’s Consolidated Results of Operations
      from the date of acquisition.





The
      following table presents the allocation of the purchase price, including related
      acquisition costs, to the assets and liabilities acquired:





Inventory
            $
            81,068Property
                and equipment
            
            100,000Total
                purchase price
            $
            181,068











**5.**  **Accounts
      Receivable - Trade**





In
      2004
      and 2003, approximately 85% and 94% of net revenues of continuing operations
      were derived under federal, state and third-party insurance reimbursement
      programs.





Medi-Cal
            65%Private
                Party
            15%Other
                third-parties
            20%





These
      revenues are based, in part, on cost reimbursement principles and are subject
      to
      audit and retroactive adjustment by the respective third-party fiscal
      intermediaries. In the opinion of management, retroactive adjustments, if any
      would not be material to the financial position, results of operations or cash
      flows of the Company.


-
            F19 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**5.**  **Accounts
      Receivable - Trade (continued)**





The
      Company provides an allowance for doubtful accounts based upon its estimation
      of
      uncollectible accounts. The Company bases this estimate on historical collection
      experience and a review of the current status of trade accounts receivable.
      The
      Company determined that no allowance for doubtful accounts as of December 31,
      2004 and 2003 was necessary.











**6.**  **Intangible
      Assets**





The
      Company initially recorded goodwill attributable to Entremetrix of $2,906,985.
      In February 2004, the Company decided to sell Entremetrix back to its original
      shareholder for a return of the original consideration paid by the Company.
      In
      2003, the amount of goodwill is classified in the Balance Sheet as a component
      of assets of discontinued operations. The Company has no intangible assets
      as of
      December 31, 2004.











**7.**  **Common
      Stock Transactions**





Authorization
      to Effect a Reverse Stock Split





On
      March
      28, 2003, the Company obtained a written consent of a majority of its
      shareholders to amend the Certificate of Incorporation to effect up to a
      one-for-200 reverse split of common stock. The exchange ratio was approved
      by
      the Board of Directors. The exchange ratio was one newly issued share for each
      two hundred shares of common stock. As per a Board of Directors resolution,
      this
      Amendment will have no effect on the par value of the common stock, which will
      remain at $0.001. The reverse stock split was effective August 25,
      2003.





Pursuant
      to the Reverse Stock Split, each holder of shares of Common Stock (the "Old
      Common Stock") immediately prior to the effectiveness of the Reverse Stock
      Split
      will become the holder of fewer shares of Common Stock (the "New Common Stock")
      after consummation of the Reverse Stock Split. Although the Reverse Stock Split,
      did not, by itself, impact the Company's assets or properties, the Reverse
      Stock
      Split could result in a decrease in the Company's aggregate market value. The
      Reverse Stock Split did not result in some stockholders owning "odd-lots.” All
      fractional share holdings were rounded up to whole shares. For example, if
      a
      shareholder owns 350 shares of Old Common Stock, after a 1 for 200 Reverse
      Stock
      Split, that shareholder now owns 2 shares of New Common Stock, not 1 3/4 shares
      of New Common Stock.





Based
      on
      approximately 898,484,863 shares of Common Stock issued and outstanding as
      of
      August 25, 2003, the following table reflects a range of the approximate
      percentage reduction in the outstanding shares of Common Stock and the
      approximate number of shares of Common Stock that are outstanding as a result
      of
      the Reverse Stock Split (not accounting for any proposed increase in authorized
      shares as described above):


Reverse
            
            Percentage
            
            Shares
                To BeStock
                Split
            
            Reduction
            
            Outstanding1
                for 200
            
            99.5%
            
            4,492,425





-
            F20 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**7.**  **Common
      Stock Transactions (continued)**





Authorization
      to Effect a Reverse Stock Split (continued)





All
      outstanding options, warrants, rights and convertible securities were
      appropriately adjusted for the Reverse Stock Split automatically on the
      effective date of the Reverse Stock Split. The Reverse Stock Split affected
      all
      stockholders equally and did not affect any stockholder's proportionate equity
      interest in the Company except for those stockholders whose fractional shares
      were rounded up.





None
      of
      the rights currently accruing to holders of the Common Stock, options or
      warrants to purchase Common Stock or securities convertible into Common Stock
      were affected by the Reverse Stock Split. Following the Reverse Stock Split,
      each share of New Common Stock entitles the holder thereof to one vote per
      share
      and was otherwise be identical to one share of the Old Common Stock.





The
      percentage ownership of management, the number of stockholders or any aspect
      of
      the Company's business did not change materially because of the Reverse Stock
      Split.








Common
      stock transactions during 2004





|· | The
              Company converted $464,341 in 8% convertible notes payable into 13,752,948
              shares of its common stock.
|- | --------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company converted $75,000 in convertible accrued interest into 2,678,570
              shares of its common stock.
|- | ------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 3,897,727 shares of its common stock with a market value
              of
              $615,248 for consulting services provided to the Company.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company converted warrants issued to note holders into 2,200,000 shares
              of
              its common stock for $132,000.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 205,000 shares of its common stock with a market value
              of
              $51,247 to employees in lieu of current and prior year
              compensation.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 2,000,000 shares of its common stock to its CEO for
              current
              and prior year compensation totaling $370,000.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company retired 1,250,000 shares of its common stock as result of the
              sale
              of entreMetrix, Inc. back to its original shareholder.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




-
            F21 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**7.**  **Common
      Stock Transactions (continued)**





Common
      stock transactions during 2003





|· | On
              March 21, 2003, a holder of the Company’s 8% convertible debentures
              elected to convert an aggregate of $1,776 principal amount of the
              debentures and $324 of related interest into 15,000 shares of the
              Company’s common stock.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | On
              December 26, 2003, a holder of the Company’s 8% convertible debentures
              elected to convert an aggregate of $20,000 principal amount of the
              debentures into 600,000 shares of the Company’s common stock.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 2,375,000 shares of its common stock to a consultant
              for
              providing management and financial consulting services. The market
              value
              of the services received was $204,685.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 288,733 shares of its common stock to various consultants
              in lieu of cash payments for services rendered. The aggregate value
              of
              services was $86,620.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 700,000 shares of its common stock under the terms of
              the
              2003 Legal and Consulting Services Plan. The common stock issued had
              an
              aggregate market value of $196,000.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | The
              Company issued 1,250,000 shares of its common stock, which had an
              approximate market value of $250,000, in connection with the acquisition
              of Entremetrix, Inc.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







2003
      Consulting and Legal Services Plan





In
      March
      2003, the Board of Directors approved the 2003 Consulting and Legal Services
      Plan. The purpose of the 2003 Consulting and Legal Services Plan (“Plan”) is to
      provide the Company with a means of compensating selected key consultants and
      legal service providers to the Company and its subsidiaries for their services
      rendered with shares of Common Stock of the Company. The Plan will be
      administered by the Company’s Board of Directors (the “Board”). The Company’s
      Board shall (a) select those consultants legal service providers to whom shares
      of the Company’s Common Stock shall be awarded or sold, and (b) determine the
      number of shares to be awarded or sold; the time or times at which shares shall
      be awarded or sold; whether the shares to be awarded or sold will be registered
      with the Securities and Exchange Commission; and such conditions, rights of
      repurchase, rights of first refusal or other transfer restrictions as the Board
      may determine. Each award or sale of shares under the Plan may or may not be
      evidenced by a written agreement between the Company and the persons to whom
      shares of the Company’s Common Stock are awarded or sold. From time to time, the
      Board may make such changes in or additions to the Plan as it may deem proper
      and in the best interests of the Company and its Stockholders. The Board may
      also suspend or terminate the Plan at any time, without notice, and in its
      sole
      discretion.





For
      purposes of the Plan, the Board of Directors is authorized to sell or award
      up
      to 700,000 shares and/or options of the Company’s Common Stock at $0.001 par
      value per share (“Common Stock”).


-
            F22 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**7.**  **Common
      Stock Transactions (continued)**





2003
      Consulting and Legal Services Plan (continued)





All
      key
      consultants and qualified legal service providers to the Company and any of
      its
      subsidiaries are eligible to participate in the Plan.





The
      Board
      approved the issuance of 700,000 shares to various consultants under the terms
      of the Plan.





The
      Plan
      was amended on December 30, 2003 pursuant to a Board of Directors resolution
      to
      increase the number of shares issuable under the Plan by 4,000,000 shares.





The
      Plan
      was amended on June 2, 2004 pursuant to a Board of Directors resolution to
      increase the number of shares issuable under the Plan by another 3,950,000
      shares.











**8.**  **Related
      Party Transactions**





The
      following transactions occurred between the Company and certain related
      parties:





Source
      One Group





The
      Company’s chief financial officer also serves as the chief financial officer of
      Dalrada Financial Corporation (Dalrada). Dalrada through its subsidiary Source
      One Group (SOG) operates a professional employment organization. SOG provides
      services for the Company as its professional employment organization. The
      Company entered into an Employment Services Agreement with SOG pursuant to
      which
      SOG has agreed to render professional employment and related services to the
      Company for a fee. The Company paid fees to SOG totaling $9,459 in 2004 and
      none
      in 2003, respectively. The fees charged by SOG to the Company are at the
      prevailing rate that SOG charges others.











**9.**  **Property
      and Equipment**





Property
      and equipment at December 31, 2004 and 2003 consisted of the
      following:





2004
            
            2003Furniture
                and fixtures
            $
            85,000
            
            $
            85,000Vehicles
            
            14,712
            
            
            -Computers
                and equipment
            
            21,144
            
            
            21,144120,856
            
            
            106,144Less
                accumulated depreciation and amortization
            
            (51,071)
            
            
            (22,731)Total
            $
            69,785
            
            $
            83,413





-
            F23 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**9.**  **Property
      and Equipment (continued)**





Depreciation
      and amortization expense for the years ended December 31, 2004 and 2003 was
      $28,340 and $38,036, respectively.











**10.**  **Accounts
      Payable and Accrued Expenses**





Accounts
      payable and accrued expenses at December 31, 2004 and 2003 consisted of the
      following:





2004
            
            2003Accounts
                payable
            $
            356,696
            
            $
            325,748Accrued
                professional and related fees
            
            90,000
            
            
            134,250Accrued
                compensation and related payroll taxes
            
            -
            
            
            324,380Accrued
                interest payable
            
            2,000
            
            
            41,807Other
                accrued expenses
            
            689
            
            
            16,749Total
            $
            449,385
            
            
            842,934





-
            F24 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**11.**  **Convertible
      Notes Payable and Debentures**





Convertible
      debentures consist of the following at December 31, 2004 and 2003:





2004
            
            20038%
                convertible subordinated debentures, originally due in October 2002
                and
                now on demand. Interest is payable quarterly, and principal is due
                at
                maturity.
            $
            38,547
            
            $
            365,6418%
                convertible subordinated debentures, originally due in January 2003
                and
                now on demand. Interest is payable quarterly, and principal is due
                at
                maturity.
            
            196,103
            
            
            283,3508%
                convertible subordinated debentures, originally due in August 2003
                and now
                on demand. Interest is payable quarterly, and principal is due at
                maturity.
            
            121,926
            
            
            121,9268%
                convertible subordinated debentures, due in December 2005. Interest
                is
                payable quarterly, and principal is due at maturity.
            
            320,000
            
            
            370,0008%
                convertible subordinated debentures, due in April 2006. Interest
                is
                payable quarterly, and principal is due at maturity.
            
            650,000
            
            
            -8%
                convertible subordinated debentures, originally due in May 2002 and
                now on
                demand. Interest is payable quarterly, and principal is due at
                maturity.
            
            -
            
            
            26,65010%
                convertible subordinated debentures, due on demand. Interest is payable
                semi-annually, and principal is due at maturity.
            
            -
            
            
            71,0001,326,576
            
            
            1,238,567Less:
                Unamortized Bond Discount and Unamortized Debt Issuance
                Costs
            
            (374,538)
            
            
            (274,426)Total
                debt
            
            952,038
            
            
            964,141Less:
                current portion
            
            (566,158)
            
            
            (868,567)Convertible
                debentures, less current portion
            $
            385,880
            
            $
            95,574





-
            F25 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**11.**  **Convertible
      Notes Payable and Debentures (continued)**





10%
      Convertible Debentures





During
      January through May 1997, the Company issued convertible notes aggregating
      to
      $479,655, which were due in the same months in 2000. The notes have a stated
      interest rate of 10% per annum, and interest is payable semi-annually. The
      notes
      are convertible at $9.38 per share, which approximated the average trading
      price
      of the Company's common stock. $71,000 of these notes was still outstanding
      as
      of December 31, 2003. The Company has not been contacted nor been able to
      contact these notes holders for over four years. Accordingly, these notes were
      written off as of December 31, 2004, based on the advice of counsel.
      .








8%
      Convertible Debentures





During
      2000, the Company issued convertible notes that were due in October 2002. The
      notes have a stated interest rate of 8% per annum, and interest is payable
      quarterly and the principal balance is due at maturity. In 2004, the noteholders
      converted $327,094 of the outstanding principal into the Company’s common stock.
      $38,547 and $365,641 of these notes was still outstanding as of December 31,
      2004 and 2003 respectively.





In
      2001,
      the Company obtained additional capital financing of $1,200,000 through the
      issuance of convertible notes payable. The Company also issued warrants to
      purchase 20,000 shares of the Company’s common stock to various parties as part
      of these financing agreements.





Total
      funds received of $1,200,000 were allocated as follows: $760,000 to 8%
      convertible notes; $140,000 to the note warrants; and $300,000 to convertible
      benefit feature. The value allocated to the note warrants and the beneficial
      conversion feature was amortized to interest expense over the term of the
      notes.





The
      8%
      convertible debentures have a conversion price that is the lesser of (1) 80%
      of
      the average of the three lowest closing prices out of the thirty closing prices
      prior to the closing date and (2) 80% of the lowest three closing prices during
      the sixty trading days, as reported on the NASD OTC Bulletin Board, immediately
      preceding the purchase date. Thus, the debentures will be converted at prices
      below the current market price on the conversion date. If conversions of the
      debentures occur, shareholders may be subject to an immediate dilution in their
      per share net tangible book value. The current convertible debentures may be
      converted into common stock at any time.





During
      January 2001, the Company issued convertible notes aggregating to $500,000,
      which were due in January 2003. The notes have a stated interest rate of 8%
      per
      annum, and interest is payable quarterly and the principal balance is due at
      maturity. As of December 31, 2003, the Company had converted $196,650 into
      its
      common stock. In 2004, the Company converted an additional $87,247 into common
      stock. The Company has an outstanding principal balance of $196,103 and 283,350
      on these notes as of December 31, 2004 and December 31, 2003,
      respectively.


-
            F26 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**11.**  **Convertible
      Notes Payable and Debentures (continued)**





8%
      Convertible Debentures (continued)





During
      August 2001, the Company issued a convertible note aggregating to $300,000,
      which is due in August 2002. The note has a stated interest rate of 8% per
      annum, and interest is payable quarterly and the principal balance is due at
      maturity. In 2003, 2002 and 2001, the noteholders converted $1,776, $31,651
      and
      $144,647, respectively, into the Company’s common stock, and the principal
      balance of $121,926 on this note was still outstanding as of December 31, 2004
      and 2003.





In
      November 2003, the Company obtained debt financing of $370,000 through the
      issuance of convertible notes payable. The Company also issued warrants to
      purchase 2,200,000 shares of the Company’s common stock to various parties as
      part of these financing agreements.





Total
      funds received of $370,000 were allocated $83,829 to the 8% convertible notes,
      $127,600 to the note warrants and $158,571 to the beneficial conversion feature.
      The value allocated to the note warrants and the beneficial conversion feature
      is being amortized to interest expense over the term of the notes.





The
      8%
      convertible debentures issued in November 2003 have a conversion price that
      is
      the lesser of (1) 70% of the average of the three lowest closing prices out
      of
      the thirty closing prices prior to the closing date and (2) 80% of the lowest
      three closing prices during the sixty trading days, as reported on the NASD
      OTC
      Bulletin Board, immediately preceding the purchase date. Thus, the debentures
      will be converted at prices below the current market price on the conversion
      date. If conversions of the debentures occur, shareholders may be subject to
      an
      immediate dilution in their per share net tangible book value. The current
      convertible debentures may be converted into common stock at any time.





The
      warrants issued are convertible into 2,200,000 shares common stock at an
      exercise price of $0.06 per share, which is based upon the lowest closing price
      for the five days preceding the date of grant. The exercise price can be
      adjusted down by the Company, and the Company did not reprice any warrants
      in
      2004. In February and March 2004, the warrant holders exercised all the
      outstanding warrants.





In
      May
      2004, the Company concluded debt financing for $650,000, whereby the following
      8% convertible debentures were issued: $350,000 to Alpha Capital
      Aktiengesellschaft; $200,000 to Gamma Opportunity Capital Partners, LP; and
      $100,000 to Longview Fund, LP. Additionally, in conjunction with these
      convertible debentures, the Company issued detachable warrants to purchase
      4,444,444 shares of common stock in conjunction with the convertible notes.
      The
      exercise price of the warrants is $0.17 per share, and the warrants mature
      in
      five years.





The
      conversion price per share of the above debentures shall be equal to the lesser
      of (i) $.09 or (ii) eighty-five (85%) of the average of the closing bid prices
      for the fifteen (15) trading days prior to but not including the Conversion
      Date
      for the Common Stock. Closing bid price shall mean the last closing bid price
      as
      reported by Bloomberg LP. The Conversion Price shall be $.09 per share unless
      at
      any time after the closing price of the Common Stock as reported by Bloomberg
      LP
      for the Principal Market is less than $0.09 per share for fifteen (15)
      consecutive trading days.





Total
      funds received of $650,000 were allocated $312,108 to the 8% convertible notes,
      $240,834 to the note warrants and $97,059 to the beneficial conversion feature.
      The value allocated to the note warrants and the beneficial conversion feature
      is being amortized to interest expense over the term of the
      notes.


-
            F27 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**11.**  **Convertible
      Notes Payable and Debentures (continued)**





Debt
      Assignment





On
      December 12, 2003, the holders of three outstanding convertible notes assigned
      their rights to three other third party entities. The notes were assigned are
      as
      follows:







**ISSUE
                DATE**
            
            **ORIGINAL
                HOLDER**
            
            **ORIGINAL**
              **PRINCIPAL**
            
            **CURRENT
                PRINCIPAL AMOUNT**10/26/2000
            
            Keshet
                Fund, L.P.
            
            $
            390,000
            
            $
            385,6431/10/2001
            
            Keshet,
                L.P.
            
            $
            283,350
            
            
            283,3508/17/2001
            
            Keshet
                Fund, L.P.
            
            $
            300,000
            
            
            121,927$
            790,920





The
      convertible notes were assigned as follows:





**NEW
                ASSIGNED NOTE HOLDER**
            
            **ALLOCATION
                OF 10/26/2000 NOTE**
            
            **ALLOCATION
                OF 1/10/2001 NOTE**
            
            **ALLOCATION
                OF 8/17/2001 NOTE**ALPHA
                CAPITAL AKTIENGESELLSCHAFT
              Pradafant
                7
              9490
                Furstentums
              Vaduz,
                Lichtenstein
              Fax:
                011-42-32323196
            
            $
            128,547
            
            $
            94,450
            
            $
            40,642GAMMA
                OPPORTUNITY CAPITAL PARTNERS, LP
              British
                Colonial Centre of Commerce
              One
                Bay Street, Suite 401
              Nassau
                (NP), The Bahamas
              Fax:
                (242) 322-6657
            
            
            128,547
            
            
            94,450
            
            
            40,642CAMDEN
                INTERNATIONAL LTD.
              Charlotte
                House, Charlotte Street
              P.O.
                Box N9204
              Nassau,
                Bahamas
              Fax:
                415-835-8320
            
            
            128,547
            
            
            94,450
            
            
            40,643TOTAL
            
            $
            385,641
            
            $
            283,350
            
            $
            121,927








The
      original convertible note holders waived any or all potential liquidated
      damages. The terms on the assigned notes are identical to the original notes.
      Additionally, the original detachable warrants issued in conjunction with the
      debentures were cancelled.


-
            F28 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**12.**  **Notes
      Payable**





The
      current note payable of $49,000 at December 31, 2004, is a note payable to
      a
      shareholder and bears a fixed interest rate of $6,000. The note is due on
      January 2, 2005. In February 2005, the holder of the note extended the terms
      of
      the notes ten months and adjusted the interest rate to 10% per
      annum.











**13.**  **Gain
      on Extinguishment of Notes Payable**





In
      September 2004, the Company wrote off 10% notes payable with a principal balance
      of $71,000 and related interest of $33,192. The note holders are not currently
      in business. These notes were over five years old and the Company has not been
      contacted by the note holders regarding payment for over five years. The Company
      engaged its counsel to contact these note holders to resolve these outstanding
      amounts. Through these efforts to contact the note holders, the Company learned
      that the note holder had filed for bankruptcy, and is no longer in business.
      The
      Company’s counsel further advised that the Company is no longer liable for these
      amounts. In December 2004, the holder of an 8% note payable with a principal
      balance of $26,650 and related interest of $6,307 forgave the debt. Thus, the
      Company recorded a gain of $137,149 on the extinguishment of these notes and
      their related interest, and the gain is included in the Statement of Operations
      for year ended December 31, 2004.











**14.**  **Income
      Taxes**





Significant
      components of the provision for taxes based on income for the years ended
      December 31 are as follows:





2004
            
            2003CurrentFederal
            $
            -
            
            $
            -State
            
            3,404
            
            
            1,6001,600DeferredFederal
            
            -
            
            
            -State
            
            -
            
            
            -Provision
                for income taxes
            $
            3,404
            
            $
            1,600





-
            F29 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**14.**  **Income
      Taxes (continued)**





A
      reconciliation of the provision for income tax expense with the expected income
      tax computed by applying the federal statutory income tax rate to income before
      provision for (benefit from) income taxes for the years ended December 31 is
      as
      follows:





2004
            
            2003Income
                tax provisions (benefit) computedat
                federal statutory rate
            (35.00%)
            
            (35.00%)State
                taxes
            (3.00%)
            
            (5.40%)Effect
                of discontinued operations
            (16.80%)
            
            (6.70%)Reduction
                of NOL carryforward relatingrelating
                to discontinued operations
            60.30%
            
            0.00%Change
                in the valuation allowance
            (5.30%)
            
            47.30%Total
            0.20%
            
            0.20%








Significant
      components of the Company's deferred tax assets and liabilities for income
      taxes
      consist of the following:





2004
            
            2003Deferred
                tax assetNet
                operating loss carryforwards
            $
            8,899,277
            
            $
            10,411,896Impairment
                of assets
            
            -
            
            
            120,000Options/warrants
            
            -
            
            
            45,217Discontinued
                operations
            
            -
            
            
            200,0008,899,277
            
            
            10,777,113Deferred
                tax liabilityState
                income taxes
            
            -
            
            
            (1,799,127)Net
                deferred tax asset
            
            8,899,277
            
            
            8,977,986Valuation
                allowance
            
            (8,899,277)
            
            
            (8,977,986)$
            -
            
            $
            -





At
      December 31, 2004, the Company has available approximately $8,364,701 and
      $1,078,727 in Federal and State net operating loss carryforwards available
      to
      offset future federal and state income taxes, respectively, which begin to
      expire in 2022.


-
            F30 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**14.**  **Income
      Taxes (continued)**





Tax
      rules
      impose limitations on the use of net operating losses following certain changes
      in ownership. Such a change occurred in 1999 and 2000, which will limit the
      utilization of the net operating losses in subsequent years.











**15.**  **Commitments
      and Contingencies**





Litigation





*Department
      of Health Services*





The
      Company is a provider of services under California’s Medicaid program
      (“Medi-Cal”), which is administered by the Department of Health Services
      (“DHS”). DHS served notice to the Company that the Company received overpayment
      of claims submitted by the Company for certain drugs, based on alleged
      violations of the California Code of Regulations. The Company has provided
      documentary evidence to contest and rebut DHS’s allegations and received an
      extension to provide evidence to the contrary. In December 2002, DHS informed
      the Company that it was suspending Classic Care’s Medi-Cal license, and that it
      was withholding all further payments until its investigation is complete.
      Classic Care could not successfully operate without a Medi-Cal license. Thus,
      the Company has decided to cease operations of Classic Care. Management has
      fully reserved the accounts receivable balance regarding these
      allegations.





Additionally,
      DHS has alleged that Classic Care was overpaid in 1998, 1999 and 2000, and
      has
      requested a refund. The Company believes that all reimbursements received were
      appropriate, and management believes that it does not have a liability to the
      DHS.





Except
      as
      otherwise specifically indicated above, management believes that the Company
      does not have any material liability for any lawsuits, settlements, judgments,
      or fees of defense counsel which have not been paid or accrued as of December
      31, 2004. However, there can be no assurance that the Company will prevail
      in
      the above proceedings. In addition, the Company may be required to continue
      to
      defend it resulting in substantial additional expense. In the event the Company
      is unable to pay the defense costs associated with the foregoing, an unfavorable
      settlement or judgment could be awarded against the Company, which might have
      a
      material adverse effect upon the Company.





Kaire
      believes that it does not have any liability in this matter and has not provided
      any reserve for this matter. The basis for this belief is the following: 1)
      the
      California Department of Health Services (“DHS”) claim is directed to Classic
      Care Pharmacy which was owned by Classic Care, Inc. 2) Classic Care Inc. is
      a
      separate legal entity and was operated by the prior owners, whom Kaire believes
      perpetrated the actions leading to the alleged claims, 3) Kaire was not involved
      nor was Kaire aware of the alleged overpayment to Classic Care Inc., 4) the
      alleged claim includes a period of time before Kaire was involved with Classic
      Care, Inc. thus precluding Kaire any claim in that time period and 5) Kaire
      did
      not benefit in any way from the alleged overpayment.





The
      DHS
      estimates the claim at around $1,566,396. An estimate of how much the claim
      would relate to Classic Care, Inc. cannot be made since the alleged claim
      includes a time period that begins over a year prior to Kaire’s involvement with
      Classic Care, Inc. and that information is not available to Kaire.


-
            F31 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**15.**  **Commitments
      and Contingencies**





Litigation
      (continued)





*Company
      Is in Dispute with a Vendor*





The
      Company is in dispute over the amounts due this vendor for purchases of
      pharmaceuticals in 2001 and 2002 by its subsidiary, Classic Care, in the
      approximate amount of $550,000. The Vendor has filed a lawsuit naming the
      Company as a co-defendant. The Company with the advice of its counsel has
      evaluated these claims and vigorously defended itself in this litigation.





On
      December 30, 2004 a settlement was reached where Kaire is obligated to pay
      the
      vendor $50,000. Kaire’s payment obligation will mature upon court approval of
      the settlement, with $10,000 due immediately at that time and the balance paid
      based on 12 monthly installments of $3,077.06 (which includes interest of
      7.50%). The settlement was executed by the parties at the end of April 2005.
      Kaire expects to obtain court approval within approximately sixty days of the
      time of this filing.








*McKesson
      Medical - Surgical Inc. v. Effective Health*





On
      January 20, 2005, McKesson Medical-Surgical, Inc. (“Plaintiff”) filed a
      complaint against Effective Health, Inc., a subsidiary of Kaire, for failure
      to
      pay the principal sum of $17,467 for goods and/or services. The Company has
      expressly denied any liability although the Company’s attorney has not yet
      undertaken a full analysis of the Plaintiff’s claims at this early stage of the
      litigation.








Leases





*Operating
      leases*





In
      June
      of 2002, the Company leased a 7,334-square-foot building located at 8135
      Clybourne Ave, Sun Valley, CA 91352, to serve as their corporate headquarters
      and storage facility. The lease is for a period of two years, ending June 2004,
      with monthly lease payments of $3,420. The Company subleases on a month-to-month
      basis approximately one half of the facility to Digital Media Group, Inc, a
      related company that is owned by the Company’s CEO and Chairman, Steve Westlund.
      The Company vacated this facility in March 2004.





In
      January 2003, Kaire entered into an operating lease agreement for the pharmacy
      in Fillmore, California which serves as its corporate headquarters. At the
      time
      the pharmacy facility was approximately 843 square feet with a monthly payment
      of $1,170. In May 2004 Kaire expanded its space to approximately 1,115 square
      feet, with a monthly payment of $1,520 and in March 2005 Kaire expanded its
      space to approximately 1,800 square feet and currently pay $2,245 a month.
      The
      lease was to continue through the original initial lease term of five years.
      Kaire has options to renew the lease for two five-year periods and to purchase
      the facility at its estimated fair market value at any time during the lease
      term. However, Santa Paula Memorial Hospital, the holder of the master lease,
      filed for chapter 11 Bankruptcy protection and the court rejected including
      the
      lease in bankruptcy. The property owners have approached Kaire with a proposal
      to takeover the master lease. However, Kaire has not made a decision concerning
      the master lease. Kaire also has not received a new lease with the increase
      lease payments. Kaire is assuming the lease is now a month to month
      lease.













**15.**  **Commitments
      and Contingencies (continued)**





Leases
      (continued)





*Operating
      leases (continued)*





The
      Company leased an automobile under a 39-month operating lease that was scheduled
      to expire in February 2005 with monthly payments of $415. The automobile was
      returned and the lease cancelled in April 2003.





Future
      minimum lease payments due under non-cancelable operating leases consist of
      the
      following as of December 31, 2004:


2005
            $
            26,9402006
            
            -2007
            
            -2008
            
            -2009
                and later
            
            -Future
                minimum lease payments
            $
            26,940





Rent
      expense for the years ended December 31, 2004 and 2003 was $35,150 and $51,548,
      respectively.








Employment
      Agreements





*Chief
      Executive Officer Compensation*





On
      April
      1, 2000, Mr. Westlund signed a three-year employment agreement. The contract
      calls for Mr. Westlund to be paid a base salary of $8,333 per month for the
      first year of the term. Mr. Westlund’s base salary was to increase 15% per year
      for each of the second and third years per this agreement.





Although
      Mr. Westlund’s employment agreement states that his salary is to be $8,333 per
      month, his actual cash pay has been $20,000 and $4,000 for the years ended
      December 31, 2004 and 2003, respectively. Mr. Westlund is entitled to be paid
      the balance of his monthly compensation in either cash or equity. Additionally,
      Mr. Westlund has been granted an option to purchase up to 30,000 shares of
      Kaire
      common stock over the next 5 years at an option price of $0.05 per share. To
      date, Mr. Westlund has exercised options to purchase 29,833 shares of common
      stock during the year ended December 31, 2003, and the remaining options expired
      in 2004.





During
      2004 Mr. Westlund received 2,000,000 shares of the Company’s common stock in
      lieu of $370,000 of accrued and current compensation due him under the above
      compensation agreement. The Company had no accrued compensation due to Mr.
      Westlund as of December 31, 2004.





On
      October 17, 2003, Mr. Westlund was issued 375,000 shares of the Company’s common
      stock in lieu of $22,500 of the total amount due to him under the above
      compensation agreement. The Company has accrued amounts due to Mr. Westlund
      of
      $317,980 as of December 31, 2003.


-
            F33 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**15.**  **Commitments
      and Contingencies (continued)**





Employment
      Agreements (continued)





*Chief
      Executive Officer Compensation (continued)*





Subsequent
      to December 31, 2004, the Company agreed to a new three year agreement with
      Mr.
      Westlund. The agreement calls for a monthly salary of $8,333.33 per month,
      with
      annual increases equaling 15% of the base salary. In addition, he will receive
      a
      5 year option to purchase 12 million shares of the Company’s common stock, at an
      option price of $0.05 per share. This new agreement was effective April 5,
      2005.








Consulting
      Agreements





The
      Company has various consulting agreements that provide for issuance of the
      Company’s common stock and/or stock options/stock purchase warrants in exchange
      for services rendered by the consultants. These agreements relate primarily
      to
      raising of capital, accounting services, legal services, and professional
      services rendered in connection with the Company’s acquisition efforts. The
      Company has no amounts due under these agreements as of December 31, 2004.
      The
      Company had accrued $60,000 for amounts due under such agreements as of December
      31, 2003.











**16.**  **Stock
      Options and Warrants**





The
      Company has adopted the provisions of Financial Interpretation No. 44.
      Accordingly, the Company applies APB Opinion No. 25 and related interpretations
      in accounting for its plans for employees. If the Company had elected to
      recognize compensation expense based upon the fair value at the grant date
      for
      awards under this plan consistent with the methodology prescribed by SFAS No.
      123, the Company's net loss and loss per share would be reduced to the pro
      forma
      amounts indicated below for the years ended December 31:





2004
            
            2003Net
                lossAs
                reported
            $
            (975,729)
            
            $
            (1,285,847)Pro
                forma
            $
            (975,729)
            
            $
            (1,285,847)Basic
                and diluted loss per common shareAs
                reported
            $
            (0.06)
            
            $
            (0.29)Pro
                forma
            $
            (0.06)
            
            $
            (0.29)








The
      Company did not grant any options to employees in 2004 and 2003. Options and
      warrants are granted at prices that are equal to the current fair value of
      the
      Company’s common stock at the date of grant. The Company records compensation
      expense on options granted at prices below the current fair market value. The
      vesting period is usually related to the length of employment or consulting
      contract period. In 2004 and 2003, the Company granted warrants convertible
      into
      the Company’s common stock pursuant to the issuance of convertible debentures.


-
            F34 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**16.**  **Stock
      Options and Warrants (continued)**





The
      fair
      value of these warrants was estimated at the date of grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions for the years ended December 31, 2004; dividend yield of 0%;
      expected volatility of 250%; risk-free interest rate of 5.5%; and expected
      life
      of 5 years. December 31, 2003; dividend yield of 0%; expected volatility of
      250%; risk-free interest rate of 5.5%; and expected life of 3 years.





The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options, which have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions including the expected stock price volatility. Because
      the Company's employee stock options have characteristics significantly
      different from those of traded options, and because changes in the subjective
      input assumptions can materially affect the fair value estimate, in management's
      opinion, the existing models do not necessarily provide a reliable single
      measure of the fair value of its stock options. The weighted-average fair value
      of options and warrants granted during the year ended December 31, 2004 and
      2003, were $0.12 and $0.06, respectively.





No
      stock
      options were outstanding or exercisable at December 31, 2004.





The
      following table summarizes information with respect to stock warrants
      outstanding and exercisable at December 31, 2004:





Warrants
                Outstanding
            
            Warrants
                ExercisableRange
                of Exercise
              Prices
            
            Number
              Outstanding
                as of December 31, 2004
            
            Weighted
              Average
              Remaining
                Contractual Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                Exercisable as of December 31, 2004
            
            Weighted
              Average
              Exercise
              Price$0.17
            
            4,444,444
            
            4.4
            
            $
            0.17
            
            4,444,444
            
            $
            0.174,444,444
            
            4.4
            
            $
            0.17
            
            4,444,444
            
            $
            0.17








The
      following tables summarize information with respect to stock options and
      warrants outstanding and exercisable at December 31, 2003:


Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise
              Prices
            
            Number
              Outstanding
                as of December 31, 2003
            
            Weighted
              Average
              Remaining
                Contractual Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                Exercisable as of December 31, 2003
            
            Weighted
              Average
              Exercise
              Price$10.00
            
            10,167
            
            0.46
            
            $
            $10.00
            
            10,167
            
            $
            $10.0010,167
            
            0.46
            
            $
            $10.00
            
            10,167
            
            $
            $10.00





-
            F35 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**16.**  **Stock
      Options and Warrants (continued)**





Warrants
                Outstanding
            
            Warrants
                ExercisableRange
                of Exercise
              Prices
            
            Number
              Outstanding
                as of December 31, 2003
            
            Weighted
              Average
              Remaining
                Contractual Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                Exercisable as of December 31, 2003
            
            Weighted
              Average
              Exercise
              Price$0.06
            
            2,200,000
            
            2.91
            
            $
            0.06
            
            2,200,000
            
            $
            0.062,200,000
            
            2.91
            
            $
            0.06
            
            2,200,000
            
            $
            0.06








The
      following summarizes the Company's stock option and warrants
      activity:





Warrants
              And
              Stock
                Options
              Outstanding
            
            Weighted
              Average
              Exercise
              PriceOutstanding
                December 31, 2002
            37,667
            
            $
            10.00Granted
            2,200,000
            
            $
            0.06Exercised
            -
            
            $
            -Expired/Cancelled
            (27,500)
            
            $
            16.00Outstanding
                December 31, 2003
            2,210,167
            
            $
            0.06Granted
            4,444,444
            
            $
            0.17Exercised
            (2,200,000)
            
            $
            0.06Expired/Cancelled
            (10,167)
            
            $
            10.00Outstanding
                December 31, 2004
            4,444,444
            
            $
            0.17








The
      Company has and 4,444,444 warrants outstanding as of December 31, 2004 and
      2,200,000 as of December 31, 2003. The exercise price of the outstanding
      warrants as of December 31, 2004 is $0.17. The outstanding warrants have a
      clause that causes the exercise price can be adjusted down by the Company upon
      certain company actions. The warrants expire 5 years from the original date
      of
      grant. The Company has not repriced any warrants as of December 31,
      2004.


-
            F36 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**17.**  **Earnings
      per Share**





Earnings
      per share have been calculated using the weighted average number of shares
      outstanding during each period. As of December 31, 2004, potentially dilutive
      securities consist of convertible debentures convertible into 44,219,200 common
      shares and warrants convertible into 4,444,444 shares. Earnings per
      share-dilutive does not include the effect of potentially dilutive securities
      for the years ended December 31, 2004 and 2003 respectively. The loss from
      operations and the net loss for the years ended December 31, 2004 and 2003
      make
      these securities anti-dilutive.





Effective
      August 25, 2003, the Company concluded a reverse split at a ratio of 1-for-200.
      All EPS calculations and shares issued were retroactively adjusted to reflect
      the reverse stock split.











**18.**  **Discontinued
      Operations - Classic Care, Inc.**





In
      December 2002, the Company decided to voluntarily dissolve Classic Care, Inc.
      dba Classic Care Pharmacy as a result of sanctions by the pharmacy management
      of
      the Department of Health Services and the subsequent suspension of the Medi-Cal
      license. The Company ceased all operations of Classic Care effective January
      2003 and the disposal date of Classic Care was May 2003. Classic Care’s sales
      for the years ended December 31, 2004, and December 31, 2003, were none and
      $8,266, respectively. The results of Classic Care’s operations have been
      reported separately as discontinued operations in the Statements of
      Operations.





In
      January 2003, after a failed effort to rebuild Classic Care Pharmacy, all
      operations at Classic Care Pharmacy ceased and Classic Care, Inc was dissolved.
      Additionally, the logistical issues created by moving the pharmacy operations
      to
      Fillmore, California, made it difficult to provide the level of personal
      attention required to service individual HIV clients in the Health Advocate
      HIV
      program. The combination of a declining HIV client base due to the logistical
      problems of providing the level of personal attention required to service each
      HIV client (i.e. clients were transferring their business to a more conveniently
      located pharmacy) lead to the decision to phase out the Health Advocate HIV
      program.





The  net  assets
      (liabilities)  of  the  discontinued  operations  have  been  recorded  at  their  estimated  net  realizable  value  under  the  caption  “Net  assets
      (liabilities)  of  discontinued  operations
      - Classic Care”  in  the  accompanying  Balance  Sheets  at  December
      31, 2004 and 2003,  and  consist  of  the  following:





2004
            
            2003Non-trade
                receivable
            
            -
            
            
            415,157Total
                Assets
            $
            -
            
            $
            415,157Accounts
                payable
            
            (131,845)
            
            
            (685,050)Accrued
                liabilities
            
            (13,766)
            
            
            (13,766)Reserve
                for litigation
            
            -
            
            
            (300,000)Total
                liabilities
            
            (145,611)
            
            
            (998,816)Net
                assets (liabilities) of discontinued operations
            $
            (145,611)
            
            $
            (583,659)





-
            F37 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**18.**  **Discontinued
      Operations - Classic Care, Inc. (continued)**





The
      following is a breakdown of the operations of Classic Care discontinued
      operations for the years ended December 31, 2004 and 2003:





2004
            
            2003Revenues
            $
            -
            
            $
            8,266Cost
                of sales
            
            -
            
            
            (7,626)Operating
                expenses
            
            -
            
            
            (21,202)Gain
                on settlement
            
            438,048
            
            
            -Other
                income
            
            -
            
            
            78,668Income
                tax
            
            -
            
            
            (800)Net
                income
            
            438,048
            
            
            77,868Disposal
            
            -
            
            
            (41,993)Net
            $
            438,048
            
            $
            15,313











**19.**  **Acquisition
      and Disposition of Entremetrix, Inc.**





Acquisition
      of Entremetrix, Inc *.*





In
      March
      2003, the Company through its subsidiary completed the acquisition of all the
      outstanding common shares of Entremetrix, Inc., a Nevada corporation, for
      $2,750,000. The agreed purchase price consists of (i) a 4% promissory note
      in
      the amount of $2.5 million due four years after closing, and (ii) the issuance
      of 1,250,000 shares of the Company’s common stock having a market value of
      approximately $250,000.





Entremetrix
      is a Southern California-based company, and is a national provider of
      administrative employer and financial support services to small businesses
      primarily operating in the medical, life sciences and high-technology
      industries. Additionally, Entremetrix provides outsourced human resources and
      financial support staff. The acquisition will be accounted for under the
      purchase method, whereby the purchase price will be allocated to the underlying
      assets and liabilities based on their estimated fair values. The resulting
      goodwill from this transaction is currently estimated at $2,906,985. Entremetrix
      commenced operations in July 2002.


-
            F38 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**19.**  **Acquisition
      and Disposition of Entremetrix, Inc. (continued)**





Acquisition
      of Entremetrix, Inc. (continued)





The
      following table presents the allocation of the acquisition cost, including
      professional fees and other related acquisition costs, to the assets acquired
      and liabilities assumed:





Cash
                and cash equivalents
            $
            27,576Accounts
                receivable
            
            958Other
                current assets
            
            134,608Property
                and equipment
            
            51,323Goodwill
            
            2,906,985Other
                non-current assets
            
            645Total
                assets
            $
            3,122,095Accounts
                payable and accrued expenses
            $
            262,620Notes
                payable
            
            109,475Total
                liabilities
            $
            372,095Total
                acquisition cost
            $
            2,750,000








The
      pro
      forma consolidated results of operations have not been presented as if the
      acquisition of Entremetrix, Inc. had occurred at January 1, 2002, due to the
      sale of Entremetrix back to its original shareholder in February 2004. The
      pro
      forma information is not meaningful due to sale of Entremetrix, and the Company
      not pursuing any future business opportunities in the professional employment
      line.








Disposition
      of Entremetrix, Inc.





In
      February 2004, the Company signed a definitive agreement to sell Entremetrix,
      Inc., (Entremetrix), its professional employment organization business unit,
      back to its original shareholder. The Company had purchased Entremetrix in
      March
      2003 for common stock and a note payable to the shareholder of Entremetrix.
      The
      results of operations of Entremetrix have been reported separately as
      discontinued operations. The transaction was in essence a recession of the
      original purchase. The Company received back the shares, 1,250,000 shares of
      its
      common stock, it had issued to the original shareholder and the note payable
      to
      the shareholder in the amount of $2,500,000 plus any accrued interest to date
      was cancelled. Entremetrix’s revenues were $399,643 for the period starting
      March 18, 2003 (acquisition date) to December 31, 2003.


-
            F39 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**19.**  **Acquisition
      and Disposition of Entremetrix, Inc. (continued)**





Disposition
      of Entremetrix, Inc. (continued)





For  financial  reporting  purposes,  the  assets  and  liabilities  of  Entremetrix
      have been classified in the accompanying Balance Sheets  as  of  December
      31, 2004 and 2003,  under  “Assets
      of  discontinued  operations  held  for  sale”  and  comprise  the  following:





2004
            
            2003Assets:Accounts
                receivable
            $
            -
            
            $
            60,557Other
                current assets
            
            -
            
            
            70,428Property
                and equipment, net
            
            -
            
            
            48,435Other
                assets
            
            -
            
            
            2,946,784Total
                assets
            $
            -
            
            $
            3,126,204Liabilities:Accounts
                payable
            $
            -
            
            $
            165,837Accrued
                liabilities
            
            -
            
            
            238,796Other
                non-current liabilities
            
            -
            
            
            2,692,332Total
                liabilities
            $
            -
            
            $
            3,096,965Net
                assets of discontinued operationsheld
                for sale
            $
            -
            
            $
            29,239





The
      following is a breakdown of the operations of Entremetrix discontinued
      operations for the years ended December 31, 2004 and 2003:





2004
            
            2003Revenues
            $
            25,860
            
            $
            399,643Operating
                expenses
            
            (79,796)
            
            
            (570,228)Other
                expense
            
            (1,351)
            
            
            (67,670)Income
                tax
            
            -
            
            
            (800)Net
                loss
            
            (55,287)
            
            
            (239,055)Disposal
            
            -
            
            
            -Net
            $
            (55,287)
            
            $
            (239,055)











**20.**  **Subsequent
      Events**





Issuance
      of Common Stock for Services





On
      February 3, 2005 the Company issued 3,000,000 shares of common stock to
      employees and consultants, with a market value of $120,000, for consulting
      and
      legal services provided to the Company.


-
            F40 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2004 and 2003**


**20.**  **Subsequent
      Events (continued)**





Issuance
      of Convertible Security





In
      March
      29, 2005, Kaire issued a $125,000, 8% interest per annum, two year convertible
      note to the Longview Fund LP. The Conversion Price per share shall be the lesser
      of (i) $.04 or (ii) eighty-five (85%) of the average of the closing bid prices
      for the fifteen (15) trading days prior to but not including the conversion
      date
      for the common stock. In addition Longview was issued a class A warrant for
      the
      purchase of 694,444 shares of the common stock at a per share purchase price
      of
      $0.042, and a class B warrant for the purchase of 3,000,000 shares of the common
      stock at a per share purchase price of $0.04








Settlement





On
      December 30, 2004, a settlement was reached where Kaire is obligated to pay
      the
      plaintiff $50,000. Kaire’s payment obligation will mature upon court approval of
      the settlement, with $10,000 due immediately at that time and the balance paid
      based on 12 monthly installments of $3,077.06 (which includes interest of
      7.50%). The settlement was executed by the parties at the end of Aril 2005.
      Kaire expects to obtain court approval within approximately sixty days of the
      time of this filing.








Employment
      Agreement





On
      April
      5, 2005, the Company agreed to a new three year agreement with Mr. Westlund.
      The
      agreement calls for a monthly salary of $8,333.33 per month, with annual
      increases equaling 15% of the base salary. In addition, he will receive a 5
      year
      option to purchase 12 million shares of the Company’s common stock, at an option
      price of $0.05 per share.