U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
      10-KSB





(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, 2006.





[
                ]
            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.)





7700
                Irvine Center Drive, suite 870, Irvine, California
            92618(Address
                of principal executive offices)
            (Zip
                code)





Registrant's
      Telephone number, including area code: (949) 861-3560





552
                Sespe Avenue, Suite D, Fillmore , CA
            93015




(Former
      name, former address and former fiscal year, if changed since last
      report)





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
      ࿴





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 Regulation
      S-B is not contained in this form, and no disclosure will be contained, to
      the
      best of Registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. ⁯





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
⁯
No
      [x]





The
      issuer had net revenues of $0 for the fiscal year ended December 31,
      2006.





The
      aggregate market value of the voting stock held by non-affiliates on March
      31,
      2007 was approximately $573,000  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, 2006, 42,616,806 shares of the issuer’s Common Stock were
      outstanding. As of March 31, 2007, 42,616,806 shares of the issuer’s Common
      Stock were outstanding.








1





DOCUMENTS
      INCORPORATED BY REFERENCE





The
      Company’s report on Form S-8 dated February 1, 2006: Items 1.01


The
      Company’s report on Form S-8 dated April 17, 2006: Items 4.02 and 7


The
      Company’s report on Form 8-K dated February 5, 2007: Items 4.01 and
      9.01


The
      Company’s report on Form 8-K dated February 6, 2007: Items 2.01 and
      9.01


The
      Company’s report on Form 8-K dated February 23, 2007: Items 5.01 and
      9.01





Transitional
      Small Business Disclosure Format  Yes   No X


2


**PART
      I**





**ITEM
      1. Description of Business**





Business





Present
      Business





We
      provide distribution services of glass imported from Asia and exported to North
      America due to a change of business direction whereby Kaire Holdings, Inc.
      (“Kaire”) acquired H&H Glass in January of 2007. Kaire closed its pharmacy
      business in February 2007.





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
      Irvine, California. Kaire has two subsidiaries, Effective Health, Inc. and
      YesRx.com, Inc. Yes Rx.com Inc, acquired H&H Glass, an Illinois corporation
      on January 23, 2007and Effective Health Inc., was shut down in February 4,
      2007.
      H&H Glass was formed in 1989 and distributes Asian glass to North America.





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. We discontinued marketing these
      products and services in May 2000.





In
      May of
      1999 Kaire incorporated YesRx.com, Inc., in the state of Delaware and, began
      marketing health oriented herbal consumer products through an e-commerce
      internet site we developed called Vitaplanet.com. We changed the name of
      Vitaplanet.com to YesRx.com. 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. On April 17, 2002 that we received notice 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.





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 administrative appeal was ultimately rejected.





Given
      these circumstances, Kaire accepted 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.





3


Acquisition
      of Sespe Pharmacy





On
      January 26, 2003, Kaire, through its subsidiary Effective Health, Inc.,
      purchased certain assets of Sespe Pharmacy, located in the Sespe medical clinic
      in Fillmore, California. Sespe Pharmacy was a small retail pharmacy that
      serviced the local community.





Effective
      Health, Inc., (d/b/a Sespe Pharmacy) served as our base of pharmacy operations.
      Sespe Pharmacy was a vehicle to resume our board and care marketing efforts
      and
      to continue offering specialized pharmacy service programs.





On
      February 4, 2007, all pharmaceutical operations ceased and operations were
      discontinued and we vacated the facility in Fillmore, California which was
      on a
      month to month lease. Kaire’s corporate headquarters is now located at its
      subsidiary YesRx.com (“H&H Glass”) in Irvine California.





Acquisition
      of H&H Glass





On
      January 23, 2007, Kaire, through its subsidiary YesRx.com, signed a Letter
      of
      Intent to acquire H&H Glass. Upon consummation of this transaction,
      YesRx.com will acquire 100% of H&H Glass outstanding common shares in
      exchange for a combination of convertible debentures plus ninety two percent
      (92%) of the to be issued and outstanding KAIH common shares.





This
      amounts to approximately a payment of approximately $8 million in common stock.
      In addition, as part of the transaction, all current convertible note holders
      have agreed to restructure their debt into zero coupon fixed rate convertible
      preferred shares with a two year hold on any conversions.





H&H
      Glass will serve as a base business for Kaire Holdings, Inc. All pharmacy
      operations have been discontinued. We will now be focused on providing
      distribution services, specifically glass packaging, globally.





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 obtain
      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.





Competition





Not
      Applicable (operations discontinued)








Patents,
      Licenses and Trademarks





Not
      Applicable





Royalty
      Agreements





Not
      Applicable





Government
      Regulations





Not
      Applicable





4


Research
      and Development Plan





Not
      Applicable





Employees








**ITEM
      2. Description of Property**





In
      January 2003, Kaire entered into an operating lease agreement for the pharmacy
      in Fillmore, California, which served 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 pays $2,245 a month.
      The
      lease expired in 2005 and Kaire stayed on a month to month lease. As of February
      4, 2007, Kaire vacated this facility.





Kaire’s
      new corporate headquarters are now located in the H&H Glass’s offices
      located at 7700 Irvine Center Drive, Suite 870, Irvine California, 92618.
      H&H lease is 2,887 Square
      Feet and runs through 8/31/08. The rate per square foot is currently $2.20
      and
      increases to $2.24 on September 1, 2007.





**ITEM
      3. Legal Proceedings**





Litigation





*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.


5


10.  Commitments
      and Contingencies (continued)





Litigation
      (continued)





*Department
      of Health Services - Medi-Cal Action against Classic Care Pharmacy
      (continued)*





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 took no further action against Classic Care
      Pharmacy. The Company 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. Smith was seeking $430,205 plus interest. On
      December 30, 2004, a settlement was reached where Kaire is obligated to pay
      the
      plaintiff $50,000. The court approved of the settlement, with $10,000 due
      immediately (paid July 8, 2005) and the balance paid based on 12 monthly
      installments of $3,077 (which includes interest of 7.50%) to commence shortly
      thereafter. The balance owed as of December 31, 2006 was $25,692. Kaire is
      currently in breach under this settlement agreement.


6


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





Litigation
      (continued)





*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 for goods and/or services. A settlement was
      reached in October 2005 calling for Effective Health to pay $2,000 upon
      execution and $1,300 a month until the balance is paid off. The balance owed
      as
      of December 31, 2005 was $10,401. The balance owed as of December 31, 2006
      was
      $1,375, and is included in the accompanying financial statements as a component
      of “Liabilities of discontinued operations - Sespe” (see Note 14).





*Ventura
      County Superior Court, Case No. CIV234713*





On
      June
      27, 2005, Independent Pharmacy Cooperative (“IPC”) filed a complaint in the
      Superior Court of California, County of Ventura, Case No. CIV234713, against
      EHI. IPC alleged that EHI failed to pay the principal sum of $12,587 for
      staffing services rendered.





The
      parties to that action entered into a settlement and mutual release agreement
      in
      October 2005, wherein EHI agreed to pay the aggregate sum of $12,587 in
      accordance with structured terms spanning over approximately eight (8) months.
      Although most of that sum has been paid, EHI defaulted and, on or about October
      5, 2006, IPC obtained a default judgment against EHI for the principal sum.
      The
      balance owed as of December 31, 2006 was $5,649, and is included in the
      accompanying financial statements as a component of “Liabilities of discontinued
      operations - Sespe” (see Note 14).





*Medical
      License*





The
      Department of Health Services (“DHS”) denied Sespe’s application (including a
      subsequent appeal) for a MediCal provider number and on February 22, 2006.
      Sespe
      billed MediCal using the prior owner’s provider number pursuant through a power
      of attorney.  The prior owner’s number
      was cancelled on May 1, 2006. Going forward, Kaire focused on signing up non
      Medi-Cal clients. However, ramping sales up to a breakeven point was taking
      too
      long, and management decided to take Kaire in a new direction. The pharmacy’s
      operations were shut down on February 4, 2007.





*Pharm-Aid,
      Inc. v. Effective Health, Inc., et al.*





On
      October 2, 2006, Pharm-Aid, Inc. (“Pharm-Aid”) filed a complaint in the Superior
      Court of California, County of San Diego, Case No. GIN056019, against
      EHI.





Pharm-Aid
      alleges that EHI has failed to pay the principal sum of $25,279 for staffing
      services rendered. Given the fact that EHI was served on October 26, 2006,
      the
      Company’s counsel feels that they have not gathered sufficient facts in order to
      render an opinion as to the validity of Pharm-Aid’s claim. The Company has
      recorded a liability which is included in the accompanying financial statements
      as a component of “Liabilities of discontinued operations - Sespe” (see Note
      14).





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, 2006.








7





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





On
      January 31, 2007, the Board of Directors of YesRx.com, Inc. (“YRX”), approved
      the purchase by YRX by to acquire H&H Glass in a reverse triangular
      acquisition whereby YRX acquires 100% of H&H Glass in exchange of
      approximately 85% of KAIH’s stock.








8


**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.








High
            LowYear
                ended December 31, 2005First
                quarter
            $
                0.07
            $
                0.04Second
                quarter
            $
                0.04
            $
                0.02Third
                quarter
            $
                0.03
            $
                0.02Fourth
                quarter
            $
                0.03
            $
                0.01Year
                ended December 31, 2006First
                quarter
            $
                0.03
            $
                0.02Second
                quarter
            $
                0.029
            $
                0.007Third
                quarter
            $
                0.018
            $
                0.004Fourth
                quarter
            $
                0.012
            $
                0.006Year
                ended December 31, 2006First
                Quarter
            $0.024
            $0.007







As
      of
      March 31, 2007, there were approximately 821 registered shareholders of KAIH’s
      Common Stock with 42,616,806 shares issues and outstanding.





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:





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





9


On
      June
      23, 2005, Kaire issued $350,000 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 $0.03 per share, or 80% of the average
      of
      the lowest five closing bid prices of the common stock during the 20 trading
      days preceding the conversion date. These notes mature in two years. Longview
      Fund was issued a $100,000 in secured convertible debenture, Longview Equity
      Fund, L.P. was issued a $175,000 secured convertible debenture, and Longview
      International Equity Fund, LP was issued a $75,000 secured convertible
      debenture. In connection with the convertible notes, the following common stock
      issuable upon the exercise of warrants at $0.04: 1,291,667 shares of common
      stock issuable to Longview Fund LP, 875,000 shares of common stock issuable
      to
      Longview Equity Fund LP, and 875,000 shares of common stock issuable to Longview
      International Equity Fund, LP.





On
      December 13, 2005, Kaire entered into a subscription agreement with the Longview
      Fund LP to issue $350,000 in convertible debentures, 12% annual interest rate
      in
      three traunches. The first traunch, a convertible debenture for $150,000, was
      issued on December 13, 2005 and its underlying shares are being registered
      through this document.





On
      March
      13, 2006, the second traunch of $100,000 was issued and the third traunch of
      $100,000 is to be issued on or about April 15, 2006. The convertible debentures
      can be converted into shares of common stock with the conversion price being
      70%
      of the average of the lowest five closing bid prices of the common stock during
      the 20 trading days preceding the conversion date.





The
      holders of the above 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 KAIH. Since the number of shares of KAIH’s common stock issuable
      upon conversion of the debentures will change based upon fluctuations of the
      market price of KAIH’s common stock prior to a conversion, the actual number of
      shares of KAIH’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.








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





Plan
      of Operation





Our
      general operating plan up until December 31, 2006 was focused on delivering
      specialized programs and services targeted areas within the senior and chronic
      health care market. However, the loss of our Medi-Cal provider number and the
      inability to ramp up non medical business to a level that would sustain a
      publicly traded entity, we decided that in 2007 we needed to change the
      direction of the business. Therefore, in 2007 we have done the following to
      date:




|· | On
              January 23, 2007, Kaire Holdings, Inc., through its subsidiary YesRx.com,
              acquired H&H Glass, an Illinois corporation which wasformed
              in1989
              and distributes Asian glass to North America. In fiscal year December
              31,
              2005, H&H Glass had net revenues of approximately $13.5 millionand
              net earnings of approximately $0.5
              million.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | On
              February 4, 2007, Kaire Holdings, Inc. discontinued its pharmacy business
              and voluntarily terminated its Effective Health, Inc. subsidiary.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | On
              February 21, 2007, Kaire Holdings, Inc., appointed two members to its
              Board of Directors who have the credentials to guide Kaire Holdings,
              Inc.
              in its new direction.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Based
      on
      the above three factors, management will be proceeding with the following plan:











10


Short
      Term





|· | Continue
              growing revenue and profits through the existing
              business;
|- | -----------------------------------------------------------------------------------------------




|· | Expand
              the current business model to include other areas that fall within
              our
              distribution expertise;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------




Long
      Term





|· | Once
              our business model is in place and successful, use it to attract other
              successful China companies as acquisition
              candidates.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Concerning
      working capital, historically our revenues have been insufficient to cover
      the
      cost of running Kaire Holdings operations and pay its non-operational costs.
      However as of February 4, 2007, the pharmacy operation was shut down and all
      costs related to that operation were also discontinued. We estimated that an
      additional $250,000 in funds would be needed to carry us through the year end
      audit and the first quarter at which time the acquisition should be in place.
      Two promissory notes were issued on February 15, 2007 for an aggregate of
      $250,000 to cover those needs.








**Results
      of Operations**





Year
      Ended December 31, 2006 Compared to Year Ended December 31, 2005








Revenue:





Revenue
      is part of discontinued operations which are discussed below.







Cost
      of
      Goods Sold:





Cost
      of
      goods sold is part of discontinued operation which are discussed
      below.








Gross
      Profit:




Gross
      profit is part of discontinued operation which are discussed below.








Operating
      Expenses:





The
      pharmacy’s operating expenses are part of discontinued operations and will be
      shown below.





Operating
      expenses for the period ending December 31, 2006 was $522,854 compared to
      $728,723 for the same period in 2005, or a decrease of $205,869 (28.3%). The
      decrease in operating expenses was mostly attributable to decreases in the
      following: 1) general administration of $25,169 (5.8%) and 2) Salaries and
      related expenses of $180,700 (61.9%).







11


Other
      Income (Expense):





Interest
      expense for the period ending December 31, 2006 was $168,433 compared to
      $160,703 for the same period in 2005, for an increase of $7,730 (4.8%). Gain
      from
      the change in warrant liability for the periods ending December 31, 2006 and
      2005 was $211,243 and $105,771 respectively for a gain of $105,472 (99.7%).
      This
      gain was a result of a decrease in the valuation of the warrant liability.
      Derivative liability expense for the periods ending December 31, 2006 and 2005
      was $101,797 and $510,143 for a decrease of $408,346 (80.0%). This decrease
      in
      expense was a result of an increase in the valuation of the derivative
      liability. . Accretion of convertible debt discount expense for the periods
      ending December 31, 2006 and 2005 was $474,325 and 455,249 respectively for
      an
      increase of $19,076 (4.2%). The increase is a result of the issuance of
      additional debt during this period. Debt issuance costs for the period ending
      December 31, 2006 and 2005 was $37,423 and $42,638 respectively for a decrease
      of $5,215 (12.2%) which is a result of the costs associated with the issuance
      of
      additional debt subsequent to June 30, 2005.





Discontinued
      Operations:





Classic
      Care:





Income
      from Classic Care discontinued operations for the year ended December 31, 2006
      was $146,411 as compared to $nil for the same period in 2005. The
      increase is a result of the write-off of liabilities over four years old.




Sespe
      Pharmacy (Effective Health, Inc.):





Revenue





Net
      revenue from Sespe Pharmacy discontinued operations for the year ended December
      31, 2006 was $468,197 as compared to $1,252,958 for the same period in 2005,
      or
      a decrease of $787,761 (62.6%). The
      decrease in sales is a result of the pharmacy’s Medi-Cal provider number being
      turned off around May 1, 2006 and the loss of business from a major client.





Cost
      of
      Goods Sold





Cost
      of
      goods sold from Sespe Pharmacy discontinued operations
      for the year ended December 31, 2006 was $323,882 as compared to $900,983 for
      the same period in 2005, or a decrease of $577,101 (64.1%). This
      decrease is a direct result of the fall in sales.





Gross
      Profit:





Gross
      Profit from Sespe Pharmacy discontinued operations
      for the year ended December 31, 2006 was $144,315 as compared to $351,975 for
      the same period in 2005, or a decrease of $207,660 (59.0%). The
      gross
      profit percentage from discontinued operations
      for the year ended December 31, 2006 was 30.8% as compared to 28.1% for the
      same
      period in 2005, or a decrease of 2.7%. This
      small decrease in gross margin percentage is a result of the product mix.





Operating
      Expenses:





Operating
      expenses from Sespe Pharmacy discontinued operations for the period ending
      December 31, 2006 were $492,765 compared to $691,214 for the same period in
      2005, or a decrease of $198,449 (28.7%). The decrease in operating expenses
      was
      mostly attributable to the following: 1) an increase in General and
      Administrative expense of $60,139 (17.8%), 2) a decrease in Rent of $1,325
      (4.0%), 3) an increase in shipping expense of $1,541 (94.7%), and 4) a decrease
      in Salaries and related expenses of $258,804 (80.0%).








Other
      Expense:





Other
      expenses from Sespe Pharmacy discontinued operations for the period ending
      December 31, 2006 were $41,545 compared to $29,199 for the same period in 2005,
      or an increase of $12,346 (42.3%). This was primarily attributable to an $18,087
      write-off of assets abandoned in the discontinuation of operations (no
      equivalent expense in 2005), offset by a decrease in depreciation expense of
      $5,741 (19.7%).




12





Federal
      Income Tax





No
      provision was made for Federal income tax since the Company has incurred
      significant net operating losses from inception. Through December 31, 2006,
      the
      Company incurred a net operating loss for tax purposes of approximately
      $1,313,551. The net operating loss carry forward may be used to reduce taxable
      income through the year 2014. The Company's tax returns have not been audited
      by
      the Internal Revenue Service. The carry forward amounts may therefore be subject
      to audit and adjustment. As a result of the Tax Reform Act, the availability
      of
      net operating loss carry forwards can be deferred, reduced or eliminated under
      certain circumstances. Net operating losses in the State of California were
      not
      available for use during 1992 and the carry forward period has generally been
      reduced from fifteen years to five years





The
      decision to discontinue operations was based on our inability to adequately
      grow
      revenues through none Medi-Cal clients. That being the case, we decided to
      change business directions in 2007 in an industry that had less road block.
      That
      decision resulted in the acquisition of H&H Glass by our YesRx.com
      subsidiary.





**Liquidity
      and Capital Losses**





Cash
      flow
      used in operations for the period ending December 31, 2006 amounted to $210,792,
      which mainly consisted of the net loss for the twelve months ending December
      31,
      2006 of $1,313,551 plus 1) the gain from change in warrant liability of $221,243
      and 2) the gain from discontinued operations - Classic Care of $146,411 offset
      by the following: 1) accretion of convertible debt discount of $474,325, 2)
      loss
      from change in derivative liability of $101,797, 3) warrants issued for
      consulting expense of $222,606, 4) common stock issued for payment of interest
      of $14,977, 5) common stock issued for professional services of $139,659, 6)
      loss from discontinued operations - Sespe of $146,545, 7) amortization of
      deferred financing costs of $37,423, 8) increase in accrued interest on
      convertible notes of $153,456, 9) increase in accounts payable and accrued
      expenses of $65,644, and 10) increase in liabilities of discontinued operations
      - Sespe of $103,981.




No
      cash
      was used in investing activities for the period ending December 31,
      2006.




Net
      cash
      generated from financing activities for the period ending December 31, 2006
      was
      $210,792 which consisted primarily of the following: 1) proceeds from notes
      payable - shareholder of $45,930 and proceeds from convertible notes payable
      of
      $200,000, offset by payments on notes payable - shareholders of $32,125 and
      an
      increase in deferred financing costs of $3,013 associated with the funding
      received during the period ended December 31, 2006.


On
      December 31, 2006 the Company had total assets of $6,906 compared to $41,317
      on
      December 31, 2005, a decrease of $34,411 or 83.3%. The Company had a total
      stockholder's deficit of $5,014,791 on December 31, 2006, compared to a
      stockholders deficit of $3,855,876 on December 31, 2005, an increase of
      $1,158,915 or 30.1%. As of December 3, 2006 the Company's working capital
      position decreased by $1,158,915 (30.1%) from a working capital deficit of
      $3,855,976 at December 31, 2005 to a working capital deficit of $5,014,791
      at
      December 31, 2006. This result was attributed primarily to increases in 1)
      convertible notes of $573,369 (41.7%), 2) warrant liability of $11,363 (9.0%),
      3) derivative liability of $202,753 (13.5%), 4) accrued interest on notes of
      $153,456 (48.1%), 5) advances from shareholder of $13,804 (16.2%), 6) increase
      in liabilities from discontinued operations - Sespe of $250,526 (339.9%) 7)
      a
      decrease in deferred financing costs of $34,411 (83.3%) and 8) an increase
      in
      accounts payable and accrued expenses of $65,644 (24.4%) , offset by a decrease
      in liabilities of discontinued operations - Classic Care of $146,411 (100%).





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.





Estimated
      future cash requirements





We
      estimated that an additional $250,000 in funds would be needed to carry us
      through the year end audit and the first quarter at which time the acquisition
      should be in place. Two promissory notes were issued on February 15, 2007 for
      an
      aggregate of $250,000 to cover those needs. The acquired company H&H Glass
      is profitable and has a positive cash flow.





13


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
      $1,313,551 and $2,160,123 for the years ended December 31, 2006 and 2005,
      respectively. The Company also had a net working deficit of $5,014,791 and
      $3,855,876 for the years ended December 31, 2006 and 2005 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.





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.
      On
      March 29, 2005, Kaire issued a $125,000, 8% interest per annum, one-year
      convertible note to the Longview Fund LP. On June 23, 2005, Kaire issued three
      two-year convertible notes for an aggregate of a $350,000, 8% interest per
      annum, to the following: 1) $100,000 to the Longview Fund LP., 2) $175,000
      to
      the Longview Equity Fund LP, and 3) $75,000 to the Longview International Equity
      Fund, LP. On December 13, 2005 Kaire issued a $150,000, 12% interest per annum,
      two-year convertible note to the Longview Fund LP. Kaire also issued the
      following: 1) On March 13, 2006 Kaire issued a $100,000, 12% interest per annum,
      two-year convertible note to the Longview Fund LP, and 2) On April 11, 2006
      Kaire issued a $100,000, 12% interest per annum, two-year convertible note
      to
      the Longview Fund LP.





Subsequent
      to December 31, 2006, Kaire issued two promissory notes, 8% interest per annum
      on February 16, 2007 to the following: 1) $200,000 to the Longview Fund LP,
      and
      2) $50,000 to Naccarato & Associates. These notes mature on October 1, 2007.





Kaire
      is
      also in the process of being acquired by H&H Glass, an Illinois Corporation
      through a reverse merger with Kaire’s wholly-owned subsidiary, YesRx.com.





**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.





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 covered by this quarterly report
      (the “Evaluation Date”). Based on such evaluation, such officers have concluded
      that, as of the Evaluation Date, our disclosure controls and procedures are
      effective in ensuring that all information required to be disclosed in reports
      that we file or submit to under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission rules and forms. In June 2005, we announced that our year
      end 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.





14


Changes
      in Internal Controls over Financial Reporting. During the most recent fiscal
      quarter, there have not been any changes in our internal controls over financial
      reporting or in other factors that have materially affected, or are reasonably
      likely to materially affect, our internal controls over financial reporting.





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.








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





N/A


15


**PART
      III**





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





The
      Company has a sole director and executive officer, and his age and position
      with
      the Company as of December 31, 2006 is as follows:


<TABLE><CAPTION>





**Name**
            **Age**
            **Office**
            **Since**Steven
                R. Westlund
            59
            Chairman
                and CEO
            1995Randall
                Jones *
            52
            Chief
                Financial Officer
            June
                2004





Randall
      Jones was Terminated as Chief Financial Officer as of April 9, 2007. Mr.
      Westlund will act as temporary CFO until a replacement is found.


<TABLE><CAPTION><BTB>


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, 2006, all Section 16(a)
      filing requirements applicable to its officers, directors and greater than
      10%
      beneficial owners were complied with..





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
      was included as exhibit 14.1 with the December 31, 2004 Form 10KSB.








**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, 2006, 2005 and 2004, respectively, to the Company’s sole officer, Steve
      Westlund during such periods.





16


**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
            2006
            111K
            
            
            
            02005
            100K
            
            
            
            12,000,0002004
            100K
            
            
            
            0Randall
                Jones, CFO *
            2006
            $0
            
            $84K
            
            02005
            $0
            
            $58K
            
            0





*
      Randall
      Jones was terminated as Chief Financial Officer as off April 9, 2007. Mr.
      Westlund will act as temporary CFO until a replacement is found.





During
      2004 Mr. Westlund received 2,000,000 shares of the Company’s common stock which
      paid the $317,980 of accrued but unpaid compensation from years prior to 2004
      and $52,020 of compensation for fiscal 2004. The remainder of Mr. Westlund’s
      fiscal 2004 compensation of $100,000 less the $53,020 paid in stock, or $47,980,
      was paid in cash.





During
      2005 Mr. Westlund was paid $65,482 in cash with the remaining $34,514 of
      compensation being accrued. Mr. Westlund was also granted a 5 year option to
      purchase 12 million shares of the Company’s common stock, at an option price of
      $0.05 per share.





During
      2006, Mr. Westlund was paid $27,625 in cash, with the remaining $83,625 of
      compensation being accrued.




During
      2005 Mr. Jones received 1,000,000 shares of the Company’s common stock which
      paid the $50,000 of accrued but unpaid fees for the year 2005 and Mr. Jones
      also
      received $8,500 of compensation in cash.





During
      2006 Mr. Jones received 3,600,000 shares of the Company’s common stock valued at
      $61,200 which paid a portion of his fees for the year 2006.




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
            
            $0











17








Employment
      Agreements -





Steven
      Westlund





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





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 December 31,
      2006 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.








Shares
                beneficially ownedNumber
                of shares
            Percentage
                of class (2)Steve
                Westlund
              552
                Sespe Avenue, Suite D
              Fillmore,
                CA 93015
            1,664,000
            3.8%Alpha
                Capital Aktiengesellschaft (3)
              Pradafant
              9490
                Furstentums
              Vaduz,
                Liechtenstein
            52,456,944
                (8)
            55.2%Longview
                Fund, LP (4)
              600
                Montgomery Street 44th floor
              San
                Francisco, CA 94111
            143,672,877
                (9)
            77.1%Longview
                Equity Fund, LP (5)
              600
                Montgomery Street 44th floor
              San
                Francisco, CA 94111
            20,416,000
                (10)
            32.4%Longview
                Int’l Equity Fund, LP (6)
              600
                Montgomery Street 44th floor
              San
                Francisco, CA 94111
            8,750,000
                (11)
            17.0%Bi
                Coastal Consulting Group (7)
              25
                Longview Court
              Hillsborough,
                CA 94010
            3,833,333
            8.3%Officers
                and Directors as a group
            1,664,000
            3.8%





(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 December 31, 2006 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.





18


(2)
      Percentage based on 42,616,806 shares of common stock outstanding as of December
      31, 2006, plus shares underlying each shareholder’s 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)
      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.




(5)
      Longview Equity Fund, L.P. 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 Equity 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)  Longview
      International Equity Fund, L.P. 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 International Equity 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.





(7)
      Bi
      Coastal Consulting Group is a California Corporation whose control person is
      Peter Benz who may
      be
      viewed as the beneficial owner of such shares pursuant to Rule 13d-3 under
      the
      Securities Exchange Act of 1934.





(8)
      Concerning Alpha Capital Aktiengesellschaft: $505,125 in existing convertible
      debentures using an estimated conversion price of $0.01 plus 1,944,444 warrants,
      i.e. 50,512,500 shares underlying the convertible notes plus 1,944,444
      warrants.





(9)
      Concerning Longview Fund, LP: $1,396,451 in existing convertible debentures
      using an estimated conversion price of $0.01 plus 4,027,777 warrants, i.e.
      139,645,100 shares underlying the convertible notes plus 4,027,777
      warrants.





(10)
      Concerning Longview Equity Fund, LP: $175,000 in existing convertible debentures
      using an estimated conversion price of $0.01 plus 2,916,000 warrants, i.e.
      17,500,000 shares underlying the convertible notes plus 2,916,000
      warrants.





(11)
      Concerning Longview International Equity Fund, LP: $75,000 in existing
      Convertible Debentures using an estimated conversion price of $0.01 plus
      1,250,000 warrants, i.e. 7,500,000 shares underlying the convertible notes
      plus
      1,250,000 warrants.











19





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





Source
      One Group





The
      Company’s chief financial officer served as the chief financial officer of
      Dalrada Financial Corporation (Dalrada) until May 5, 2006, when he resigned
      from
      that position. Dalrada, through its subsidiary Source One Group (“SOG”),
      operates a professional employment organization. SOG provided services for
      the
      Company as its professional employment organization. The Company entered into
      an
      Employment Services Agreement with SOG, pursuant to which SOG agreed to render
      professional employment and related services to the Company for a fee. The
      Company terminated its contract with SOG in January 2006. The Company paid
      fees
      to SOG totaling $281 and $13,046 for the years ended December 31, 2006 and
      2005,
      respectively. The fees charged by SOG to the Company were at the prevailing
      rate
      that SOG charges others.








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






(a)
            Exhibits31.1
            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
                1, 2006
            Items
                1.01: reporting the issuance of convertible debentures in 2005.April
                17, 2006
            Items
                4.02 and 7: Restatement of 12-31-04 audited Financial
                StatementsFebruary
                5, 2007
            Items
                4.01 and 9.01: Change in registered certified
                accountantFebruary
                6, 2007
            Items
                2.01 and 9.01: Acquisition of H&H Glass by
                YesRx.comFebruary
                23, 2007
            Items
                5.01 and 9.01: Appointment of two new
                Directors





20








**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, PMB Helin Donovan,
      LLP:





For
                the Year Ended December 31,2006
            2005Audit
                Fees
            $
                53,165
            $
                45,000Audit-Related
                Fees
            $
                30,406
            $ 20,094Tax
                Fees
            $0
            $0All
                Other Fees
            $
                9,548
            $20
                ,000Total
                Fees
            $93,119
            $85,094





"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:
      April 16, 2007





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     April
      16,
      2007


Steven
      R.
      Westlund Chief Executive Officer,


Principal
      Financial Officer and Director














21

































































**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**





**Consolidated
      Financial Statements**


**for
      the Years Ended**


**December
      31, 2006 and 2005**





**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**





**Consolidated
      Financial Statements**


**for
      the Years Ended**


**December
      31, 2006 and 2005**











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











Report
                of Independent Registered Public Accountants
            F1Consolidated
                Balance Sheets
            F2Consolidated
                Statements of Operations
            F3Consolidated
                Statements of Stockholders’ Equity
            F4Consolidated
                Statements of Cash Flows
            F5
                -F 6Notes
                to Consolidated Financial Statements
            F7
                -F 37











**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, Inc.,
      a
      Delaware Corporation, as of December 31, 2006 and 2005, and the related
      consolidated statements of operations and comprehensive loss, changes in
      shareholders’ equity (deficit) and cash flows for each of the fiscal years then
      ended. These consolidated financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      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 audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Kaire Holdings, Inc., as of
      December 31, 2006 and 2005, and the results of its operations and its cash
      flows
      for the years then ended in conformity with accounting principles generally
      accepted in the United States.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company experienced a significant net loss in the years ending
      December 31, 2006 and 2005, with losses incurred subsequently, and generated
      negative cash flows from operating activities and as of December 31, 2006,
      has
      an accumulated deficit of $45,196,639 and a working capital deficit of
      $5,014,791. These matters raise substantial doubt about the Company’s ability to
      continue as a going concern. Management’s plans in regard to these matters are
      also described in Note 2. In the event additional funds are raised, continuation
      of the business thereafter is dependent upon the ability of the Company to
      achieve sufficient cash flow. The accompanying financial statements do not
      include any adjustments relating to the recoverability and classification of
      recorded asset amounts or the amounts and classification of liabilities that
      might be necessary should the Company be unable to continue as a going concern.








*/s/PMB
      Helin Donovan LLP*


San
      Francisco, California


March
      30,
      2007








F1




















2006
            
            2005ASSETSDeferred
                financing costs (net of amortization)
            $
            6,906
            
            $
            41,317Total
                Assets
            $
            6,906
            
            $
            41,317LIABILITIES
                AND STOCKHOLDERS’ DEFICITCurrent
                LiabilitiesAccounts
                payable and accrued expenses
            $
            334,767
            
            $
            269,123Advances
                from shareholders
            
            99,266
            
            
            85,462Notes
                payable - related parties
            
            6,021
            
            
            6,021Convertible
                notes
            
            1,946,939
            
            
            1,373,570Derivative
                liability
            
            1,700,412
            
            
            1,497,659Warrant
                liability
            
            137,458
            
            
            126,095Accrued
                interest - convertible notes
            
            472,594
            
            
            319,138Net
                liabilities of discontinued operations (Classic Care)
            
            -
            
            
            146,411Net
                liabilities of discontinued operations (Sespe)
            
            324,240
            
            
            73,714Total
                Current Liabilities
            
            5,021,697
            
            
            3,897,193Total
                Liabilities
            
            5,021,697
            
            
            3,897,193Stockholders’
                DeficitCommon
                stock, $0.001 par value, 900,000,000 sharesauthorized;
                42,616,806 and 35,453,897 shares issuedand
                outstanding in 2006 and 2005, respectively
            
            42,617
            
            
            35,454Additional
                paid in capital
            
            40,139,231
            
            
            39,991,758Accumulated
                deficit
            
            (45,196,639)
            
            
            (43,883,088)Total
                Stockholders’ Deficit
            
            (5,014,791)
            
            
            (3,855,876)Total
                Liabilities and Stockholders’ Deficit
            $
            6,906
            
            $
            41,317











F2













2006
            
            2005Net
                revenues
            $
            -
            
            $
            -Cost
                of goods sold
            
            -
            
            
            -Gross
                Profit
            
            -
            
            
            -Operating
                ExpensesSalaries
                and related expenses
            
            111,250
            
            
            291,950General
                and administrative
            
            411,604
            
            
            436,773Total
                Operating Expenses
            
            522,854
            
            
            728,723Loss
                from Operations
            
            (522,854)
            
            
            (728,723)Other
                Income (Expense)Interest
                expense
            
            (168,433)
            
            
            (160,703)Gain
                from change in warrant liability
            
            211,243
            
            
            105,771Gain/(loss)
                from change in derivative liability
            
            (101,797)
            
            
            (510,143)Other
                income
            
            21,091
            
            
            -Accretion
                of convertible debt discount
            
            (474,325)
            
            
            (455,249)Debt
                issuance costs
            
            (37,423)
            
            
            (42,638)Total
                Other Income (Expense)
            
            (549,644)
            
            
            (1,062,962)Loss
                from continuing operations before income taxes
            
            (1,072,498)
            
            
            (1,791,685)Provision
                for income taxes
            
            -
            
            
            -Net
                loss from continuing operations
            
            (1,072,498)
            
            
            (1,791,685)Discontinued
                OperationsIncome
                from discontinued operations (ClassicCare)
                - gain from extinguishment of debt
            
            146,411
            
            
            -Loss
                from discontinued operations (Sespe)
            
            (387,464)
            
            
            (368,438)Loss
                from Discontinued Operations
            
            (241,053)
            
            
            (368,438)Net
                Loss
            $
            (1,313,551)
            
            $
            (2,160,123)Loss
                per weighted average share ofcommon
                stock outstanding (basic and diluted)From
                continuing operations
            $
            (0.03)
            
            $
            (0.05)From
                discontinued operations
            
            0.00
            
            
            (0.01)Total
                loss per share (basic and diluted)
            $
            (0.03)
            
            $
            (0.06)Weighted-average
                shares outstanding (basic and diluted)
            
            40,794,276
            
            
            33,727,387














F3













AdditionalCommon
                Stock
            
            Paid-In
            
            AccumulatedShares
            
            
            Amount
            
            Capital
            
            Deficit
            
            TotalBalance
                at December 31, 2004, as restated
            30,877,252
            
            $
            30,878
            
            $
            39,639,356
            
            $
            (41,722,965)
            
            $
            (2,052,731)Issued
                for professional services and compensation
            3,000,000
            
            
            3,000
            
            
            147,000
            
            
            -
            
            
            150,000Issued
                for conversion of convertible interest
            1,576,645
            
            
            1,576
            
            
            13,402
            
            
            -
            
            
            14,978Warrants
                issued to officer
            -
            
            
            -
            
            
            192,000
            
            
            -
            
            
            192,000Net
                loss
            -
            
            
            -
            
            
            -
            
            
            (2,160,123)
            
            
            (2,160,123)Balance,
                December 31, 2005
            35,453,897
            
            $
            35,454
            
            $
            39,991,758
            
            $
            (43,883,088)
            
            $
            (3,855,876)Issued
                for professional services and compensation
            5,586,364
            
            
            5,586
            
            
            134,073
            
            
            -
            
            
            139,659Issued
                for conversion of convertible interest
            1,576,545
            
            
            1,577
            
            
            13,400
            
            
            -
            
            
            14,977Net
                loss
            -
            
            
            -
            
            
            -
            
            
            (1,313,551)
            
            
            (1,313,551)Balance,
                December 31, 2006
            42,616,806
            
            $
            42,617
            
            $
            40,139,231
            
            $
            (45,196,639)
            
            $
            (5,014,791)





F4







2006
            
            2005Increase
                (decrease) in cash and cash equivalents:Net
                loss
            $
            (1,313,551)
            
            $
            (2,160,123)Adjustments
                to reconcile net loss to net cash usedin
                operating activities:Accretion
                of convertible debt discount
            
            474,325
            
            
            455,249Loss
                from change in derivative liability
            
            101,797
            
            
            510,143Gain
                from change in warrant liability
            
            (211,243)
            
            
            (105,771)Non-cash
                interest associated with derivative liabilities
            
            -
            
            
            23,317Compensation
                expense related to warrants granted to officer
            
            -
            
            
            192,000Consulting
                expense related to warrants granted
            
            222,606
            
            
            -Common
                stock issued for payment of interest
            
            14,977
            
            
            14,977Common
                stock issued for professional services and compensation
            
            139,659
            
            
            150,000Gain
                from discontinued operations (Classic Care)
            
            (146,411)
            
            
            -Loss
                from discontinued operations (Sespe)
            
            146,545
            
            
            84,190Amortization
                of deferred financing costs
            
            37,423
            
            
            42,638Changes
                in operating assets and liabilities:Increase
                in accrued interest on convertible notes
            
            153,456
            
            
            111,834Increase
                in accounts payable and accrued expenses
            
            65,644
            
            
            107,026Increase
                in liabilities of discontinued (Sespe)
            
            103,981
            
            
            17,386Net
                cash used in operating activities
            
            (210,792)
            
            
            (557,134)Cash
                flow from investing activities:Purchase
                of property and equipment
            
            -
            
            
            -Net
                cash used in investing activities
            
            -
            
            
            -Cash
                flow from financing activities:Proceeds
                from notes payable - shareholders
            
            45,930
            
            
            31,756Payments
                on notes payable - shareholders
            
            (32,125)
            
            
            (10,000)Payments
                on loans
            
            -
            
            
            (49,000)Proceeds
                from convertible notes payable
            
            200,000
            
            
            625,000Increase
                in deferred financing costs
            
            (3,013)
            
            
            (40,622)Net
                cash generated by financing activities
            
            210,792
            
            
            557,134Net
                increase in cash and cash equivalents
            
            -
            
            
            -Cash
                and cash equivalents at beginning of year
            
            -
            
            
            -Cash
                and cash equivalents at end of period
            $
            -
            
            $
            -











(continued)








F5











2006
            
            2005**Supplementary
                disclosures of cash flow information**Cash
                paid during the year forInterest
            $
            -
            
            $
            12,574Taxes
            $
            2,400
            
            $
            -











During
      the year ended December 30, 2006, the Company entered into the following
      non-cash transactions:


|· | Issued
              1,576,545 shares of common stock for the payment of interest on a
              convertible note, valued at $14,977;
|- | -----------------------------------------------------------------------------------------------------------------------------------------

|· | Issued
              5,586,364 shares of common stock for professional services valued at
              $139,659;
|- | -----------------------------------------------------------------------------------------------------------------

|· | Issued
              a warrant to purchase 12,000,000 shares of the Company's common stock
              in
              exchange forprofessional
              services valued at $222,606.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







During
      the year ended December 30, 2005, the Company entered into the following
      non-cash transactions:


|· | Issued
              3,000,000 shares of common stock for professional services valued at
              $150,000;
|- | -----------------------------------------------------------------------------------------------------------------

|· | Issued
              1,576,545 shares of common stock for the payment of interest on a
              convertible note, valued at $14,977.
|- | -----------------------------------------------------------------------------------------------------------------------------------------










F6







**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.





On
      January 23, 2007, Kaire Holdings Corporation and its wholly-owned subsidiary
      YesRx.com executed a Letter of Intent whereby YesRx.com will acquire all of
      the
      outstanding stock of H&H Glass Corporation, an Illinois corporation. As
      part
      of its change in business direction, on February 4, 2007, Kaire Holdings
      discontinued its pharmacy business, and Effective Health, Inc. has been
      voluntarily shut down.








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.
      This business was phased out during the year ended December 31,
      2001.





In
      May
      2000, the Company acquired Classic Care, Inc. (“Classic Care”), a California
      company, organized in April 1997. Classic Care was a distributor of
      pharmaceutical products and prescription drugs to consumers at senior assisted
      living and retirement centers in the Los Angeles area. These drug sales were
      primarily paid for and billed to Medi-Cal, and the balances of the sales that
      were not covered by Medi-Cal were paid directly by individuals. In January
      2003,
      the Company voluntarily dissolved Classic Care.







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 Effective Health, Inc. (dba Sespe Pharmacy), and YesRx.com. Intercompany
      accounts and transactions have been eliminated upon consolidation.








Basis
      of Presentation





The
      accompanying audited consolidated financial statements represent the financial
      activity of Kaire Holdings Incorporated and its subsidiaries. The consolidated
      financial statements have been prepared in accordance with generally accepted
      accounting principles in the US. The Company’s fiscal year ends on December 31
      each year. The financial statements and notes are representations of the
      management and the Board of Directors, who are responsible for their integrity
      and objectivity.


F7














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





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 those estimates. Significant estimates include valuation of
      derivative and warrant liabilities, 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.








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 insurance
      carriers and from federal and state reimbursement programs.








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, 2006, gross revenues of discontinued operations (Sespe)
      were $537,568 less approximately $69,477 of contractual adjustments based on
      reimbursement contracts, resulting in net third-party contract revenues of
      approximately $468,091.





For
      the
      year ended December 31, 2005, gross revenues of discontinued operations (Sespe)
      were $1,587,341 less approximately $358,673 of contractual adjustments based
      on
      reimbursement contracts, resulting in net third-party contract revenues of
      approximately $1,228,668.





All
      revenues of Sespe Pharmacy are reported in the accompanying financial statements
      as components of “Net loss from discontinued operations (Sespe)” (see Note
      14).


F8










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





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.








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. Inventory is reported
      in the accompanying financial statements as a component of “Liabilities of
      discontinued operations (Sespe)” (see Note 14).








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.





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.





Property
      and equipment are reported in the accompanying financial statements as a
      component of “Liabilities of discontinued operations (Sespe)” (see Note
      14).


F9










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





Stock
      Warrants Issued to Third Parties





The
      Company accounts for stock warrants issued to third parties, including
      customers, in accordance with the provisions of the Emerging Issues Task Force
      (EITF) Issue No. 96-18, *Accounting
      for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling Goods or Services* ,
      and
      EITF 01-9, *Accounting
      for Consideration Given by a Vendor to a Customer (Including a Reseller of
      the
      Vendor’s Products)* .
      Under
      the provisions of EITF 96-18, because none of the Company’s agreements have a
      disincentive for nonperformance, the Company records a charge for the fair
      value
      of the portion of the warrants earned from the point in time when vesting of
      the
      warrants becomes probable. Final determination of fair value of the warrants
      occurs upon actual vesting. EITF 01-9 requires that the fair value of certain
      types of warrants issued to customers be recorded as a reduction of revenue
      to
      the extent of cumulative revenue recorded from that customer.








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.








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.








**Convertible
      Debt Financing and Derivative Liabilities**





The
      Company has issued convertible debt securities with non-detachable conversion
      features and detachable warrants. The Company accounts for such securities
      in
      accordance with Emerging Issues Task Force Issue Nos. 98-5, 00-19, 00-27, 05-02,
      05-04 and 05-08, and Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS
      133”).


F10










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





**Convertible
      Debt Financing and Derivative Liabilities (continued)**





In
      accordance with SFAS 133, the holder’s conversion right provision, interest rate
      adjustment provision, liquidated damages clause, cash premium option, and the
      redemption option (collectively, the debt features) contained in the terms
      governing the Notes are not clearly and closely related to the characteristics
      of the Notes. Accordingly, the features qualified as embedded derivative
      instruments at issuance and, because they do not qualify for any scope exception
      within SFAS 133, they were required by SFAS 133 to be accounted for separately
      from the debt instrument and recorded as derivative financial
      instruments.





At
      each
      balance sheet date, the Company adjusts the derivative financial instruments
      to
      their estimated fair value and analyzes the instruments to determine their
      classification as a liability or equity. As of December 31, 2006, the estimated
      fair value of the Company’s derivative liability was $1,700,412, as well as a
      warrant liability of $137,458. As of December 31, 2005, the estimated fair
      value
      of the Company’s derivative liability was $1,497,659, as well as a warrant
      liability of $126,095. The estimated fair value of the debt features was
      determined using the probability weighted averaged expected cash flows / Lattice
      Model. The model uses several assumptions including: historical stock price
      volatility (utilizing a rolling 120 day period), risk-free interest rate
      (3.50%), remaining maturity, and the closing price of the Company’s common stock
      to determine estimated fair value of the derivative asset. In valuing the debt
      features at December 31, 2005, the Company used the closing price of $0.025
      and
      the respective conversion and exercise prices for the warrants. For the year
      ended December 31, 2006, there was a decrease in the market value of the
      Company’s common stock to $0.010 from $0.025 at December 31, 2005.








Deferred
      Financing Costs





Costs
      relating to obtaining debt financing are capitalized and amortized over the
      term
      of the related debt using the effective interest method. When a loan is paid
      in
      full, any unamortized financing costs are removed from the related accounts
      and
      charged to operations.








Reclassifications





Certain
      reclassifications have been made to the 2005 financial statements to conform
      to
      the 2006 presentation. The reclassifications did not have any impact on
      previously reported results from operations or shareholders’
deficit.








Stock-Based
      Compensation





Effective
      January 1, 2005, the Company has adopted the fair value based method of
      accounting prescribed in Financial Accounting Standards Board Statement No.
      123R
      (Accounting for Stock-Based Compensation) for its employee stock option plans.





F11










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





Stock-Based
      Compensation (continued)





Specifically,
      the Company adopted SFAS No. 123R using the “prospective method” This statement
      replaced FAS-123, *Accounting
      for Stock-Based Compensation* ,
      supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      amends FAS-95, *Statement
      of Cash Flows* .
      FAS-123R requires companies to apply a fair-value-based measurement method
      in
      accounting for shared-based payment transactions with employees and to record
      compensation cost for all stock awards granted after the required effective
      date
      and for awards modified, repurchased or cancelled after that date. The scope
      of
      FAS-123R encompasses a wide range of share-based compensation arrangements,
      including share options, restricted share plans, performance-based awards,
      share
      appreciation rights, and employee share purchase plans. All employee stock
      option grants made since the beginning of fiscal 2005 have been expensed over
      the related stock option vesting period based on the fair value at the date
      the
      options are granted. Prior to fiscal 2005, the Company applied Accounting
      Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to
      Employees,” and related interpretations in accounting for stock options. The
      Company did not have any unvested employee stock options or warrants outstanding
      as of December 31, 2006.





The
      Company issued a warrant to purchase 12,000,000 shares of the Company’s common
      stock to a consultant during the year ended December 31, 2006, which had an
      estimated aggregate fair value of $222,606, and was immediately vested. The
      warrant is a five year warrant with an exercise price of $0.05 per
      share.





The
      Company issued a warrant to purchase 12,000,000 shares of the Company’s common
      stock to its Chairman and CEO, Steve Westlund, during the year ended December
      31, 2005, which had an estimated aggregate fair value of $192,000, and was
      immediately vested. The warrant is a five year warrant with an exercise price
      of
      $0.05 per share.








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,
      2006 and 2005, comprehensive loss is equivalent to the Company’s net
      loss.








Advertising
      Costs





The
      Company expenses advertising and marketing costs as they are incurred. There
      were no advertising and marketing costs for the years ended December 31, 2006
      and 2005.


F12










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





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.








Recent
      Accounting Pronouncements





In
      March
      2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based Payment”
(“SAB 107”), which provides interpretive guidance related to the interaction
      between SFAS 123(R) and certain SEC rules and regulations. It also provides
      the
      SEC staff’s views regarding valuation of share-based payment arrangements. In
      April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow
      companies to implement the standard at the beginning of their next fiscal year,
      instead of the next reporting period beginning after June 15, 2005. Management
      has implemented the provisions of SFAS 123(R) effective January 1, 2005.





SFAS 154
      replaces APB Opinion No. 20 and SFAS 3 and became effective in the first
      quarter of 2006. The standard introduces a new requirement to retrospectively
      apply accounting principle changes to prior years’ comparative financial
      statements as if the Company had always applied the newly adopted accounting
      principle. Changes in depreciation, amortization and depletion methods
      previously considered a change in accounting principle are now considered a
      change in estimate under SFAS 154, requiring prospective adoption. New
      pronouncements may contain specific implementation guidance which would
      supersede the requirements of SFAS 154. The adoption of SFAS 154 did not
      have an impact on the consolidated financial statements included
      herein.





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”.  SFAS No. 155, permits fair value remeasurement for any
      hybrid financial instrument that contains an embedded derivative that otherwise
      would require bifurcation, clarifies which interest-only strips and
      principal-only strips are not subject to the requirements of SFAS No. 133,
      establishes a requirement to evaluate interest in securitized financial assets
      to identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring bifurcation,
      clarifies that concentrations of credit risk in the form of subordination are
      not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
      on the qualifying special-purpose entity from holding a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument.  This statement is effective for all financial
      instruments acquired or issued after the beginning of the Company’s first fiscal
      year that begins after September 15, 2006.


F13










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





Recent
      Accounting Pronouncements (continued)





In
      June
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* (FIN
      48). FIN 48 provides guidance for the recognition, derecognition and measurement
      in financial statements of tax positions taken in previously filed tax returns
      or tax positions expected to be taken in tax returns. FIN 48 requires an entity
      to recognize the financial statement impact of a tax position when it is more
      likely than not that the position will be sustained upon examination. If the
      tax
      position meets the more-likely-than-not recognition threshold, the tax effect
      is
      recognized at the largest amount of the benefit that is greater than fifty
      percent likely of being realized upon ultimate settlement. The Company will
      be
      required to adopt FIN 48 as of January 1, 2007, with any cumulative effect
      of
      the change in accounting principle recorded as an adjustment to opening retained
      earnings. The Company is currently evaluating the impact of FIN 48 and has
      not
      yet determined the effect on its earnings or financial position.





In
      March
      2006, the FASB issued SFAS No. 156, *Accounting
      for Servicing of Financial Assets—an amendment of FASB Statement No.
      140.* Companies are required to apply SFAS No. 156 as of the first annual reporting
      period that begins after September 15, 2006. The Company does not believe
      adoption of SFAS No. 156 will have a material effect on its unaudited condensed
      consolidated financial position, results of operations or cash
      flows.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”
which defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 does not require any new fair value
      measurements, but provides guidance on how to measure fair value by providing
      a
      fair value hierarchy used to classify the source of the information. This
      statement is effective on the Company beginning July 1, 2008. The Company
      is currently assessing the potential impact that the adoption of SFAS
      No. 157 will have on its financial statements.





In
      September 2006, the FASB issued SFAS No. 158, Employer’s Accounting
      for Defined Benefit Pension and Other Postretirement Plans, an Amendment of
      FASB
      Statements No. 87, 88, 106 and 132(R), which applies to all plan sponsors
      who offer defined benefit postretirement plans. SFAS No. 158 requires
      recognition of the funded status of a defined benefit postretirement plan in
      the
      statement of financial position and expanded disclosures in the notes to
      financial statements. The Company adopted this provision for the year ended
      December 31, 2006 and the adoption did not have a material impact on its
      consolidated financial position. In addition, SFAS No. 158 requires
      measurement of plan assets and benefit obligations as of the date of the plan
      sponsor’s fiscal year end. The Company is required to adopt the measurement
      provision of SFAS No. 158 for its fiscal year ending December 31,
      2008. The Company is in the process of evaluating the impact of the measurement
      provision of SFAS No. 158 on its 2008 consolidated financial position,
      operations and cash flows. The
      Company is currently assessing the potential impact that the adoption of SFAS
      158 will have on its financial statements; however, the impact is not expected
      to be material.


F14










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





Recent
      Accounting Pronouncements (continued)





In
      June
      2006, the FASB ratified the consensus on Emerging Issues Task Force
      (“EITF”) Issue No. 06-3, “How Taxes Collected from Customers and
      Remitted to Governmental Authorities Should Be Presented in the Income
      Statement” (“EITF No. 06-3”). The scope of EITF No. 06-3 includes any
      tax assessed by a governmental authority that is directly imposed on a
      revenue-producing transaction between a seller and a customer and may include,
      but is not limited to, sales, use, value added, Universal Service Fund
      (“USF”) contributions and some excise taxes.  The Task Force affirmed
      its conclusion that entities should present these taxes in the income statement
      on either a gross or a net basis, based on their accounting policy, which should
      be disclosed pursuant to APB Opinion No. 22, “Disclosure of Accounting
      Policies.”  If such taxes are significant and are presented on a gross
      basis, the amounts of those taxes should be disclosed.  The consensus on
      EITF No. 06-3 will be effective for interim and annual reporting periods
      beginning after December 15, 2006.  The Company currently does not
      show sales tax billed to its customers on the income statement but records
      the
      same as a liability.





In
      September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108
      was issued in order to eliminate the diversity of practice surrounding how
      public companies quantify financial statement misstatements. In SAB 108, the
      SEC
      staff established an approach that requires quantification of financial
      statement misstatements based on the effects of the misstatements on each of
      the
      company’s financial statements and the related financial statement disclosures.
      This model is commonly referred to as a “dual approach” because it requires
      quantification of errors under both the iron curtain and the roll-over methods.
      The Company currently uses, and has historically applied, the dual method for
      quantifying identified financial statement misstatements. The Company will
      initially apply the provisions of SAB 108 in connection with the preparation
      of
      the annual financial statements for the year ending December 31, 2006. The
      Company is currently evaluating SAB 108, but does not expect the adoption of
      SAB
      108 to have a significant effect on its financial position, results of
      operations, or cash flows.





In
      February 2007, the FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities—Including an
      amendment of FASB Statement No. 115”* (“SFAS
      159”). SFAS 159 expands the use of fair value accounting but does not affect
      existing standards which require assets or liabilities to be carried at fair
      value. Under SFAS 159, a company may elect to use fair value to measure accounts
      and loans receivable, available-for-sale and held-to-maturity securities, equity
      method investments, accounts payable, guarantees and issued debt. Other eligible
      items include firm commitments for financial instruments that otherwise would
      not be recognized at inception and non-cash warranty obligations where a
      warrantor is permitted to pay a third party to provide the warranty goods or
      services. If the use of fair value is elected, any upfront costs and fees
      related to the item must be recognized in earnings and cannot be deferred,
      e.g.,
      debt issue costs. The fair value election is irrevocable and generally made
      on
      an instrument-by-instrument basis, even if a company has similar instruments
      that it elects not to measure based on fair value. At the adoption date,
      unrealized gains and losses on existing items for which fair value has been
      elected are reported as a cumulative adjustment to beginning retained earnings.
      Subsequent to the adoption of SFAS 159, changes in fair value are recognized
      in
      earnings. SFAS 159 is effective for fiscal years beginning after
      November 15, 2007 and is required to be adopted by the Company in the first
      quarter of fiscal 2009. The Company is currently is determining whether fair
      value accounting is appropriate for any of its eligible items and cannot
      estimate the impact, if any, which SFAS 159 will have on its consolidated
      results of operations and financial condition.





F15









**2.**  **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
      $1,313,551 and $2,160,123 for the years ended December 31, 2006 and 2005,
      respectively. The Company also had a net working deficit of $5,014,791 and
      $3,855,876 for the years ended December 31, 2006 and 2005 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.





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.
      On
      March 29, 2005, Kaire issued a $125,000, 8% interest per annum, one-year
      convertible note to the Longview Fund LP. On
      June
      23, 2005, Kaire issued three two-year convertible notes for an aggregate of
      a
      $350,000, 8% interest per annum, to the following: 1) $100,000 to the Longview
      Fund LP., $175,000 to the Longview Equity Fund LP, and 3) $75,000 to the
      Longview International Equity Fund, LP. On December 13, 2005 Kaire
      issued a $150,000, 12% interest per annum, two-year convertible note to the
      Longview Fund LP. Kaire also issued the following: 1) On
      March
      13, 2006 Kaire
      issued a $100,000, 12% interest per annum, two-year convertible note to the
      Longview Fund LP, and 2) On
      April
      11, 2006 Kaire
      issued a $100,000, 12% interest per annum, two-year convertible note to the
      Longview Fund LP.





Subsequent
      to December 31, 2006, Kaire issued two promissory notes, 8% interest per annum
      on February 16, 2007 to the following: 1) $200,000 to the Longview Fund LP,
      and
      2) $50,000 to Naccarato & Associates. These notes mature on October 1, 2007.





Kaire
      is
      also in the process of being acquired by H&H Glass, an Illinois Corporation
      through a reverse merger with Kaire’s wholly-owned subsidiary, YesRx.com.





F16










**3.**  **Accounts
      Receivable - Trade**





In
      2006
      and 2005, approximately 70% and 89% of net revenues from discontinued operations
      were derived under federal, state and third-party insurance reimbursement
      programs. For the three- and twelve-month periods ending December 31, 2006
      the
      breakout is as follows:





December
                31, 2006Three
                Months
            
            Twelve
                MonthsMedi-Cal
            0.0%
            
            26.29%Medi-Care
            0.0%
            
            0.00%Private
                Party
            100.0%
            
            43.18%Other
                third-parties
            0.0%
            
            30.53%








For
      the
      three- and twelve-month periods ending December 31, 2005 the breakout is as
      follows:





December
                31, 2005Three
                Months
            
            Twelve
                MonthsMedi-Cal
            56.8%
            
            68.3%Medi-Care
            1.3%
            
            1.4%Private
                Party
            19.0%
            
            10.0%Other
                third-parties
            22.9%
            
            20.3%








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.





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 a $160,000 allowance for doubtful accounts was needed
      as
      of December 31, 2006, and a $55,000 allowance for doubtful accounts was needed
      as of 31, 2005.





Accounts
      receivable, net of Reserve for doubtful accounts, are reported as components
      of
“Liabilities of discontinued operations (Sespe)” in the accompanying financial
      statements (see Note 14).











F17










**4.**  **Convertible
      Notes Payable**





During
      the year ended December 31, 2006, 2005, 2004 and 2003, the Company issued
      convertible notes to third parties. As part of the several of the financing
      transactions, the Company also issued warrants to purchase shares of stock
      at
      various exercise prices.





Date
                of Note
            
            Amount
                of Notes
            
            Conversion
                Price(1)
            
            Term
                of NoteDecember
                12, 2003 (2)
            
            $
            676,576
            
            $
                0.04 or 70%
            
            3
                yearsMay
                3, 2004
            
            
            650,000
            
            $
                0.09 or 85%
            
            3
                yearsMarch
                29, 2005
            
            
            125,000
            
            $
                0.04 or 85%
            
            1
                yearJune
                23, 2005
            
            
            350,000
            
            $
                0.03 or 80%
            
            2
                yearsDecember
                13, 2005 (2)
            
            
            150,000
            
            70%
            
            2
                yearsMarch
                13, 2006 (2)
            
            
            100,000
            
            70%
            
            2
                yearsApril
                11, 2006 (2)
            
            
            100,000
            
            70%
            
            2
                yearsTotal
                convertible notes
            
            
            2,151,576Less
                unamortized bond discount
            
            
            (204,637)Net
                convertible notes
            
            $
            1,946,939





Date
                of Warrants Issued
            
            Number
                of Warrants
            
            Exercise
                Price
            
            Term
                of WarrantsMay
                3, 2004
            
            1,666,667
            
            $
            0.147
            
            5
                yearsMarch
                29, 2005
            
            694,444
            
            $
            0.042
            
            5
                yearsMarch
                29, 2005
            
            3,000,000
            
            $
            0.040
            
            5
                yearsJune
                23, 2005
            
            1,666,667
            
            $
            0.040
            
            5
                years





(1)  the
      conversion price is the lower of the set price or the % of market closing
      price.


(2)  no
      warrants issued with this financing transaction.




The
      Company determined that the appropriate method of accounting for these notes
      is
      to include the entire debt as a current liability on the balance sheet, since
      the debt is immediately convertible at the option of the holder.





The
      Company filed the convertible note and warrant documents for the May 3, 2004
      funding in the Form SB-2, on June 21, 2004, which was declared effective on
      February 14, 2006. The Notes were entered into pursuant to the terms of a
      subscription agreement between the Company and the Holders, which was also
      included in the respective filings.





The
      notes
      contain provisions on interest accrual at the “prime rate” published in The Wall
      Street Journal from time to time, plus three percent (3%). The Interest Rate
      shall not be less than eight percent (8%). Interest shall be calculated on
      a 360
      day year. Interest on the Principal Amount shall be payable monthly, commencing
      120 days from the closing and on the first day of each consecutive calendar
      month thereafter (each, a “Repayment Date”) and on the Maturity
      Date.





Following
      the occurrence and during the continuance of an Event of Default (as discussed
      in the Note), the annual interest rate on the Note shall automatically be
      increased by two percent (2%) per month until such Event of Default is
      cured.


F18










**4.**  **Convertible
      Notes Payable (continued)**





The
      Notes
      also provide for liquidated damages on the occurrence of several events. As
      of
      December 31, 2006, no liquidating damages have been incurred by the
      Company.





*Redemption
      Option -* The
      Company will have the option of prepaying the outstanding Principal Amount
      (“Optional Redemption”), in whole or in part, by paying to the Holder a sum of
      money equal to one hundred twenty percent (120%) of the Principal Amount to
      be
      redeemed, together with accrued but unpaid interest thereon





*Debt
      features -* The
      Holder shall have the right, but not the obligation, to convert all or any
      portion of the then aggregate outstanding Principal Amount of this Note,
      together with interest and fees due hereon, into shares of Common Stock.





The
      proceeds from the financing transactions were allocated to the debt features
      and
      to the warrants based upon their fair values. After the latter allocations,
      the
      remaining value, if any, is allocated to the Note on the financial statements.





The
      debt
      discount is being accreted using the effective interest method over the term
      of
      the note. The value of the discount on the converted notes on the books is
      being
      accreted over the term of the note (three years). For the years ended December
      31, 2006 and 2005, the Company accreted $474,325 and $455,249, respectively,
      of
      debt discount related to the Notes.





Warrants
      Issued





The
      estimated fair values of the warrants at issuance were as follows:





Date
                of Warrants Issued
            
            Number
                of Warrants
            
            Value
                at Issuance
            
            Initial
                Volatility FactorMay
                3, 2004
            
            1,666,667
            
            $
            92,711
            
            188
            %March
                29, 2005
            
            694,444
            
            $
            21,387
            
            104
            %March
                29, 2005
            
            3,000,000
            
            $
            93,080
            
            104
            %June
                23, 2005
            
            1,666,667
            
            $
            49,340
            
            101
            %February
                28, 2006
            
            12,000,000
            
            $
            222,606
            
            122
            %








These
      amounts have been classified as a derivative instrument and recorded as a
      liability on the Company’s balance sheet in accordance with current
      authoritative guidance. The estimated fair value of the warrants was determined
      using the Black-Scholes option-pricing model with a closing price of on the
      date
      of issuance and the respective exercise price, a 5 year term, and the volatility
      factor relative to the date of issuance. The model uses several assumptions
      including: historical stock price volatility (utilizing a rolling 120 day
      period), risk-free interest rate (3.50%), remaining time till maturity, and
      the
      closing price of the Company’s common stock to determine estimated fair value of
      the derivative liability. In valuing the warrants at December 31, 2005, the
      Company used the closing price of $0.025, the respective exercise price, the
      remaining term on each warrant, and a volatility of 113%. In accordance with
      the
      provisions of SFAS No. 133, Accounting for Derivative Instruments, the Company
      is required to adjust the carrying value of the instrument to its
      fair


F19










**4** **.**  **Convertible
      Notes Payable (continued)**





Warrants
      Issued (continued)





value
      at
      each balance sheet date and recognize any change since the prior balance sheet
      date as a component of Other Income (Expense). The warrant derivative liability
      at December 31, 2005, had increased to a fair value of $126,095, due in part
      to
      a decrease in the market value of the Company’s common stock to $0.025 from
      $0.055 at December 31, 2004 which resulted in Other Income of $105,771 on the
      Company’s books.





On
      February 28, 2006, the Company granted a five-year warrant to purchase up to
      12,000,000 shares of the Company’s common stock at an exercise price of $0.05.
      The warrant was issued to a consultant as compensation for certain functions
      to
      be performed. The Company recorded $222,606 of consulting expense in connection
      with this warrant. The warrant was cancelled on January 9, 2007. The fair value
      of this warrant was estimated at the date of grant using the Black-Scholes
      option-pricing model with the following weighted-average assumptions; dividend
      yield of 0%; expected volatility of 153%; risk-free interest rate of 3.5%;
      and
      expected life of 5 years.





For
      the
      year ended December 31, 2006, the warrant derivative liability had increased
      to
      a value of $137,458, due to the issuance of a warrant in February 2006 with
      a
      valuation at issuance of $222,606 offset by a decrease in warrant values due
      to
      a decrease in the market value of the Company’s common stock to $0.010 from
      $0.025 at December 31, 2005, which resulted in an “Other Income” item of
      $211,243 for the year ended December 31, 2006. The Company used a closing price
      of $0.010, the respective exercise prices, remaining time till maturity and
      a
      153% volatility factor.





The
      recorded value of such warrants can fluctuate significantly based on
      fluctuations in the market value of the underlying securities of the issuer
      of
      the warrants, as well as in the volatility of the stock price during the term
      used for observation and the term remaining for the warrants.








Debt
      Features





In
      accordance with Statement of Financial Accounting Standards No. 133, “Accounting
      for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), the
      debt features provision (collectively, the features) contained in the terms
      governing the Notes are not clearly and closely related to the characteristics
      of the Notes. Accordingly, the features qualified as embedded derivative
      instruments at issuance and, because they do not qualify for any scope exception
      within SFAS 133, they were required by SFAS 133 to be accounted for separately
      from the debt instrument and recorded as derivative financial instruments.





Pursuant
      to the terms of the Notes, these notes are convertible at the option of the
      holder, at anytime on or prior to maturity. There is an additional interest
      rate
      adjustment feature, a liquidated damages clause, a cash premium option as well
      as the redemption option. The debt features represents an embedded derivative
      that is required to be accounted for apart from the underlying Notes. At
      issuance of the Notes, the debt features had an estimated initial fair value
      as
      follows, which was recorded as a discount to the Notes and a derivative
      liability on the consolidated balance sheet.


F20










**4** **.**  **Convertible
      Notes Payable (continued)**





Debt
      Features (continued)





Date
                of Note
            
            Amount
                of Notes
            
            Debt
                Features Value at Issuance
            
            Initial
                Carrying ValueDecember
                12, 2003
            
            $
            676,576
            
            $
            338,642
            
            $
            337,934May
                3, 2004
            
            $
            650,000
            
            $
            516,920
            
            $
            -March
                29, 2005
            
            $
            125,000
            
            $
            33,850
            
            $
            -June
                23, 2005
            
            $
            350,000
            
            $
            73,964
            
            $
            226,696December
                13, 2005
            
            $
            150,000
            
            $
            76,150
            
            $
            73,850March
                13, 2006
            
            $
            100,000
            
            $
            50,767
            
            $
            49,233April
                11, 2006
            
            $
            100,000
            
            $
            50,189
            
            $
            49,811








In
      subsequent periods, if the price of the security changes, the embedded
      derivative financial instrument related to the debt features will be adjusted
      to
      the fair value with the corresponding charge or credit to Other Expense or
      Income. The estimated fair value of the debt features was determined using
      the
      probability weighted averaged expected cash flows / Lattice Model with the
      closing price on original date of issuance, a conversion price based on the
      terms of the respective contract, a period based on the terms of the notes,
      and
      a volatility factor on the date of issuance. The model uses several assumptions
      including: historical stock price volatility (utilizing a rolling 120 day
      period), risk-free interest rate (3.50%), remaining maturity, and the closing
      price of the Company’s common stock to determine estimated fair value of the
      derivative liability. For the year ended December 31, 2005, the estimated value
      of the debt features increased to $1,497,659, plus the Company recorded Other
      Expense on the consolidated statement of operations for the change in fair
      value
      of the debt features related to these notes of $510,143 for the year ended
      December 31, 2005.





For
      the
      year ended December 31, 2006, the estimated value of the debt features increased
      to $1,700,412, phus the Company recorded Other Expense on the consolidated
      statement of operations for the change in fair value of the debt features
      related to these notes of $101,797 for the year ended December 31,
      2006.





Pursuant
      to the terms of the Notes, the Company has the option of prepaying the
      outstanding Principal Amount in whole or in part, by paying to the Holder a
      sum
      of money equal to one hundred twenty percent (120%) of the Principal Amount
      to
      be redeemed, together with accrued but unpaid interest thereon and any and
      all
      other sums due.





The
      recorded value of the debt features related to the Notes can fluctuate
      significantly based on fluctuations in the fair value of the Company’s common
      stock, as well as in the volatility of the stock price during the term used
      for
      observation and the term remaining for the warrants.





The
      significant fluctuations can create significant income and expense items on
      the
      financial statements of the Company.


F21










**4** **.**  **Convertible
      Notes Payable (continued)**





Debt
      Features (continued)





Because
      the terms of the 2003 - 2006 convertible notes (“notes”) require such
      classification, the accounting rules required additional convertible notes
      and
      non-employee warrants to also be classified as liabilities, regardless of the
      terms of the new notes and / or warrants. This presumption has been made due
      to
      the Company no longer having the control to physical or net share settle
      subsequent convertible instruments because it is tainted by the terms of the
      notes. Were the notes to not have contained those terms or even if the
      transactions were not entered into, it could have altered the treatment of
      the
      other notes and the conversion features of the latter agreement may have
      resulted in a different accounting treatment from the liability classification.
      The 2006 notes and warrants, as well as any subsequent convertible notes or
      warrants, will be treated as derivative liabilities until all such provisions
      are settled.





For
      the
      year ended December 31, 2005, the Company recorded Other Expense of $510,143
      and
      Other Income of $105,771, related to the increase in value of the debt features
      and decrease in value of the warrants. A tabular reconciliation of this
      adjustment follows:





For
      the
      year ended December 31, 2005:





$
            105,771
            income,
                decrease in value of 2003, 2004 and 2005 warrant
                liability(510,143)
            expense,
                increase in value of 2003, 2004, and 2005 derivative
                liability$
            (404,372)
            other
                expense related to convertible debt








For
      the
      year ended December 31, 2006, the Company recorded Other Expense of $101,797
      and
      Other Income of $211,243, related to the increase in value of the debt features
      and decrease in value of the warrants. A tabular reconciliation of this
      adjustment follows:





For
      the
      year ended December 31, 2006:





$
            211,243
            income,
                decrease in value of 2003, 2004, 2005 and 2006 warrant
                liability(101,797)
            expense,
                increase in value of 2003, 2004, 2005 and 2006 derivative
                liability$
            109,446
            other
                income related to convertible debt








For
      the
      year ended December 31, 2005, the Company recorded $455,249 of interest expense
      related to the accretion of debt related to the convertible
      financing.





For
      the
      year ended December 31, 2005:





$
            109,327
            of
                interest expense related to accretion of 2003 convertible
                debt215,991
            of
                interest expense related to accretion of 2004 convertible
                debt129,931
            of
                interest expense related to accretion of 2005 convertible
                debt$
            455,249
            of
                interest expense related to convertible
                debt


F22










**4** **.**  **Convertible
      Notes Payable (continued)**





Debt
      Features (continued)





For
      the
      year ended December 31, 2006, the Company recorded $474,325 of interest expense
      related to the accretion of debt related to the convertible
      financing.





For
      the
      year ended December 31, 2006:





$
            102,009
            of
                interest expense related to accretion of 2003 convertible
                debt201,536
            of
                interest expense related to accretion of 2004 convertible
                debt131,365
            of
                interest expense related to accretion of 2005 convertible
                debt39,415
            of
                interest expense related to accretion of 2006 convertible
                debt$
            474,325
            of
                interest expense related to convertible debt








The
      balance of the carrying value of the convertible debt as of December 31, 2005
      and 2006 is:





$
            617,775
            December
                31, 2004 value300,546
            original
                carrying value on 2005 convertible debt455,249
            accretion
                of convertible debt - 2005$
            1,373,570
            December
                31, 2005 carrying value of debt








$
            1,373,570
            December
                31, 2005 value99,044
            original
                carrying value on 2006 convertible debt474,325
            accretion
                of convertible debt$
            1,946,939
            December
                31, 2006 carrying value of debt








The
      balance of the carrying value of the derivative liability as of December 31,
      2005 and 2006 is:








$
            803,552
            December
                31, 2004 value of derivative liability183,965
            original
                values of 2005 derivative liability201,764
            increase
                in values of 2003 derivative liability184,050
            increase
                in values of 2004 derivative liability124,328
            increase
                in values of 2005 derivative liability$
            1,497,659
            December
                31, 2005 value of derivative
                liability








$
            1,497,659
            December
                31, 2005 value of derivative liability100,956
            original
                values of 2006 derivative liability44,454
            increase
                in values of 2003 derivative liability(11,470)
            increase
                in values of 2004 derivative liability64,090
            increase
                in values of 2005 derivative liability4,723
            increase
                in values of 2006 derivative liability$
            1,700,412
            December
                31, 2006 value of derivative
                liability









F23









**4** **.**  **Convertible
      Notes Payable (continued)**





Debt
      Features (continued)








The
      balance of the carrying value of the warrant liability as of December 31, 2005
      and 2006 is:








$
            68,059
            December
                31, 2004 value of warrant liability163,807
            original
                carrying values of 2005 warrant liability(50,275)
            income,
                decrease in value of 2004 warrant liability(55,496)
            income,
                decrease in values of 2005 warrant liability$
            126,095
            December
                31, 2005 value of warrant liability





$
            126,095
            December
                31, 2005 value of warrant liability222,606
            original
                carrying values of 2006 warrant liability(11,302)
            income,
                decrease in value of 2004 warrant liability(70,038)
            income,
                decrease in value of 2005 warrant liability(129,903)
            income,
                decrease in values of 2006 warrant liability$
            137,458
            December
                31, 2006 value of warrant liability











5.  Common
      Stock Transactions





Common
      stock transactions during 2006





|· | The
              Company issued 5,586,364 shares of common stock for consulting services
              and compensation valued at $139,659.
|- | --------------------------------------------------------------------------------------------------------------------------------------------

|· | The
              Company issued 1,576,645 shares of common stock for conversion of $14,977
              of note interest.
|- | ---------------------------------------------------------------------------------------------------------------------------







Common
      stock transactions during 2005





|· | The
              Company issued 3,000,000 shares of common stock for consulting services
              and compensation valued at $150,000.
|- | --------------------------------------------------------------------------------------------------------------------------------------------

|· | The
              Company issued 1,576,645 shares of common stock for conversion of $14,978
              of note interest.
|- | ---------------------------------------------------------------------------------------------------------------------------










F24










**6.**  **Related
      Party Transactions**





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





Source
      One Group





The
      Company’s chief financial officer served as the chief financial officer of
      Dalrada Financial Corporation (Dalrada) until May 5, 2006, when he resigned
      from
      that position. Dalrada, through its subsidiary Source One Group (“SOG”),
      operates a professional employment organization. SOG provided services for
      the
      Company as its professional employment organization. The Company entered into
      an
      Employment Services Agreement with SOG, pursuant to which SOG agreed to render
      professional employment and related services to the Company for a fee. The
      Company terminated its contract with SOG in January 2006. The Company paid
      fees
      to SOG totaling $281 and $13,046 for the years ended December 31, 2006 and
      2005,
      respectively. The fees charged by SOG to the Company were at the prevailing
      rate
      that SOG charges others.











**7.**  **Property
      and Equipment**





Property
      and equipment included in discontinued operations at December 31, 2006 and
      2005
      consisted of the following:





2006
            
            2005Furniture
                and fixtures
            $
            85,000
            
            $
            85,000Vehicles
            
            14,712
            
            
            14,712Computers
                and equipment
            
            22,094
            
            
            22,094121,806
            
            
            121,806Less
                accumulated depreciation and amortization
            
            (103,719)
            
            
            (80,260)Total
            $
            18,087
            
            $
            41,546








Depreciation
      and amortization expense for the years ended December 31, 2006 and 2005, was
      $23,459 and $29,190, respectively.





The
      Company abandoned all property and equipment in the discontinuation of
      operations at Sespe Pharmacy and recorded $18,087 expense in connection with
      the
      disposal of these assets.





Depreciation
      and disposal expenses related to property and equipment are reported as Other
      Expenses in “Loss from discontinued operations (Sespe)” in the accompanying
      financial statements (see Note 14).











F25







**8.**  **Accounts
      Payable and Accrued Expenses**





Accounts
      payable and accrued expenses at December 31, 2006 and 2005 consisted of the
      following:





2006
            
            2005Accounts
                payable
            $
            75,982
            
            $
            56,841Accrued
                professional and related fees
            
            114,950
            
            
            150,072Accrued
                officer’s compensation
            
            118,143
            
            
            34,518Accrued
                settlements
            
            25,692
            
            
            27,692Total
            $
            334,767
            
            $
            269,123





Accounts
      payable and accrued expenses of Sespe are reported as components of “Liabilities
      of discontinued operations (Sespe)” in the accompanying financial statements
      (see Note 14) and consisted of the following:.





2006
            
            2005Accounts
                payable
            $
            327,963
            
            $
            222,797Accrued
                liabilities
            
            1,175
            
            
            1,400Accrued
                payroll and related liabilities
            
            37,340
            
            
            15,646Accrued
                settlements
            
            7,024
            
            
            17,400Sales
                tax payable
            
            43
            
            
            107Total
            $
            373,545
            
            $
            257,350











9.  Income
      Taxes





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





2006
            
            2005CurrentFederal
            $
            -
            
            $
            -State
            
            -
            
            
            --
            
            
            -DeferredFederal
            
            -
            
            
            -State
            
            -
            
            
            -Provision
                for income taxes
            $
            -
            
            $
            -





K26







9.  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 is as follows for the years ended
      December 31:





2006
            
            2005Amount
            
            %
            
            Amount
            
            %Income
                tax benefit at federal statutory rate
            $
            375,374
            
            35.0
            %
            
            $
            627,090
            
            35.0
            %Effect
                of state income taxes
            
            32,073
            
            3.0
            %
            
            
            71,000
            
            4.0
            %Non-deductible
                interest expense
            
            (132,950)
            
            (12.4)
            %
            
            
            (261,374)
            
            (14.6)
            %Non-deductible
                compensation
            
            (126,792)
            
            (11.8)
            %
            
            
            -
            
            0.0
            %Effect
                of discontinued operations
            
            84,369
            
            7.8
            %
            
            
            128,953
            
            7.2
            %Reduction
                of NOL carryforward relatingto
                discontinued operations and expirationNOLs
                for state tax purposes
            
            (266,278)
            
            (24.8)
            %
            
            
            -
            
            0.0
            %Change
                in valuation allowance
            
            34,204
            
            3.2
            %
            
            
            (565,669)
            
            (31.6)
            %Income
                tax provision
            $
            -
            
            0.0
            %
            
            $
            -
            
            0.0
            %








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





2006
            
            2005Deferred
                tax assetsFederal
                net operating loss carryforwards
            $
            8,544,471
            
            $
            8,335,903State
                net operating loss carryforwards
            
            565,097
            
            
            1,119,245Allowance
                for doubtful accounts
            
            -
            
            
            22,484Total
                deferred tax asset
            
            9,443,428
            
            
            9,477,632Less
                valuation allowance
            
            (9,443,428)
            
            
            (9,477,632)$
            -
            
            $
            -








K27







9.  Income
      Taxes (continued)





At
      December 31, 2006, the Company has available approximately $8,544,471 and
      $565,097 in Federal and State net operating loss carryforwards available to
      offset future federal and state income taxes, respectively, which begin to
      expire in 2022.





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.











10.  Commitments
      and Contingencies





Litigation





*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.





F28







10.  Commitments
      and Contingencies (continued)





Litigation
      (continued)





*Department
      of Health Services - Medi-Cal Action against Classic Care Pharmacy
      (continued)*





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 took no further action against Classic Care
      Pharmacy. The Company 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. Smith was 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 (paid July 8, 2005) and the balance
      paid based on 12 monthly installments of $3,077 (which includes interest of
      7.50%) to commence shortly thereafter. The balance owed as of December 31,
      2006
      was $25,692. Kaire is currently in breach under this settlement agreement.








*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 for goods and/or services. A settlement was
      reached in October 2005 calling for Effective Health to pay $2,000 upon
      execution and $1,300 a month until the balance is paid off. The balance owed
      as
      of December 31, 2005 was $10,401. The balance owed as of December 31, 2006
      was
      $1,375, and is included in the accompanying financial statements as a component
      of “Liabilities of discontinued operations (Sespe)” (see Note 14).








F29










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





Litigation
      (continued)





*Ventura
      County Superior Court, Case No. CIV234713*





On
      June
      27, 2005, Independent Pharmacy Cooperative (“IPC”) filed a complaint in the
      Superior Court of California, County of Ventura, Case No. CIV234713, against
      EHI. IPC alleged that EHI failed to pay the principal sum of $12,587 for
      staffing services rendered.





The
      parties to that action entered into a settlement and mutual release agreement
      in
      October 2005, wherein EHI agreed to pay the aggregate sum of $12,587 in
      accordance with structured terms spanning over approximately eight (8) months.
      Although most of that sum has been paid, EHI defaulted and, on or about October
      5, 2006, IPC obtained a default judgment against EHI for the principal sum.
      The
      balance owed as of December 31, 2006 was $5,649, and is included in the
      accompanying financial statements as a component of “Liabilities of discontinued
      operations (Sespe)” (see Note 14).








*Medical
      License*





The
      Department of Health Services (“DHS”) denied Sespe’s application (including a
      subsequent appeal) for a MediCal provider number and on February 22, 2006.
      Sespe
      billed MediCal using the prior owner’s provider number pursuant through a power
      of attorney.  The prior owner’s number
      was cancelled on May 1, 2006. Going forward, Kaire focused on signing up non
      Medi-Cal clients. However, ramping sales up to a break-even point was taking
      too
      long and management decided to take Kaire in a new direction. The pharmacy’s
      operations were shut down on February 4, 2007.








*Pharm-Aid,
      Inc. v. Effective Health, Inc., et al.*





On
      October 2, 2006, Pharm-Aid, Inc. (“Pharm-Aid”) filed a complaint in the Superior
      Court of California, County of San Diego, Case No. GIN056019, against
      EHI.





Pharm-Aid
      alleges that EHI has failed to pay the principal sum of $25,279 for staffing
      services rendered. Given the fact that EHI was served on October 26, 2006,
      the
      Company’s counsel feels that they have not gathered sufficient facts in order to
      render an opinion as to the validity of Pharm-Aid’s claim. The Company has
      recorded a liability which is included in the accompanying financial statements
      as a component of “Liabilities of discontinued operations (Sespe)” (see Note
      14).





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, 2006.








F30









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





Leases





***Operating
      leases***





In
      January 2003, Kaire entered into an operating lease agreement for the pharmacy
      in Fillmore, California, which served 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, with a monthly payment of $2,245
      a
      month. The lease was to continue through the original initial lease term of
      five
      years. Kaire 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. Kaire decided not to sign a new lease and
      assumed a month-to-month lease. As of February 4, 2007, Kaire has vacated this
      facility.





Rent
      expense for the years ended December 31, 2006 and 2005 was $32,092 and $33,417,
      respectively, and is included in the accompanying financial statements as a
      component of “Loss from discontinued operations (Sespe)” (see Note
      14).








Employment
      Agreements





***Chief
      Executive Officer Compensation***





Effective
      April 1, 2005, Kaire agreed to a new three year agreement with its Chief
      Executive Officer, Mr. Steven 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, on November 1, 2005 he received 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.








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, 2006 and
      2005.











F31










11.  Stock
      Options and Warrants





In
      January 2005, the Company adopted the provisions of SFAS Nos. 123R using the
      prospective method.





The
      Company did not grant any options to employees in 2006 or 2005. No employee
      stock options were outstanding or exercisable at December 31, 2006 or
      2005.





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
      2005
      the Company granted warrants convertible into the Company’s common stock
      pursuant to the issuance of convertible debentures. 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, 2006; dividend yield of 0%; expected volatility of
      250%; risk-free interest rate of 5.5%; and expected life of 5 years. December
      31, 2005; dividend yield of 0%; expected volatility of 250%; risk-free interest
      rate of 5.5%; and expected life of 5 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 warrants granted during the year ended December 31, 2006 and 2005, were
      $0.06
      and $0.06, respectively.





In
      February 2006, the Company granted a five-year warrant to purchase up to
      12,000,000 shares of the Company’s common stock at an exercise price of $0.05.
      The warrant was issued to a consultant as compensation for certain functions
      to
      be performed. The Company recorded $222,606 of consulting expense in connection
      with this warrant. The warrant was cancelled on January 9, 2007. The fair value
      of this warrant was estimated at the date of grant using the Black-Scholes
      option-pricing model with the following weighted-average assumptions; dividend
      yield of 0%; expected volatility of 153%; risk-free interest rate of 3.5%;
      and
      expected life of 5 years.


F32










11.  Stock
      Options and Warrants (continued)





The
      following table summarizes information with respect to stock warrants
      outstanding and exercisable at December 31, 2006:





Warrants
                Outstanding
            
            Warrants
                ExercisableRange
                of Exercise
              Prices
            
            Number
              Outstanding
                as of December 31, 2006
            
            Weighted
              Average
              Remaining
                Contractual Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                Exercisable as of December 31, 2006
            
            Weighted
              Average
              Exercise
              Price$0.03
                - $0.17
            
            37,972,221
            
            3.21
            
            $
            0.06
            
            37,972,221
            
            $
            0.0637,972,221
            
            3.21
            
            $
            0.06
            
            37,972,221
            
            $
            0.06








The
      following table summarizes information with respect to stock warrants
      outstanding and exercisable at December 31, 2005:





Warrants
                Outstanding
            
            Warrants
                ExercisableRange
                of Exercise
              Prices
            
            Number
              Outstanding
                as of December 31, 2005
            
            Weighted
              Average
              Remaining
                Contractual Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                Exercisable as of December 31, 2005
            
            Weighted
              Average
              Exercise
              Price$0.03
                - $0.17
            
            25,972,221
            
            4.3
            
            $
            0.06
            
            25,972,221
            
            $
            0.0625,972,221
            
            4.3
            
            $
            0.06
            
            25,972,221
            
            $
            0.06


F33










11.  Stock
      Options and Warrants (continued)





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





Warrants
              And
              Stock
                Options
              Outstanding
            
            Weighted
              Average
              Exercise
              PriceOutstanding
                December 31, 2004
            4,444,444
            
            $
            0.17Granted
                March 29, 2005
            3,694,444
            
            $
            0.04Granted
                June 22, 2005
            5,833,333
            
            $
            0.03Granted
                November 1, 2005
            12,000,000
            
            $
            0.05Exercised
            -
            
            $
            -Expired/Cancelled
            -
            
            $
            -Outstanding
                December 31, 2005
            25,972,221
            
            $
            0.06Granted
                February 28, 2006
            12,000,000
            
            $
            0.05Exercised
            -
            
            $
            -Expired/Cancelled
            -
            
            $
            -Outstanding
                December 31, 2005
            37,972,221
            
            $
            0.06








The
      Company has 37,972,221 warrants outstanding as of December 31, 2006, and
      25,972,221 as of December 31, 2005. The weighted exercise price of the
      outstanding warrants as of December 31, 2006 is $0.06. 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,
      2006.











**12.**  **Loss
      per Share**





Earnings
      per share have been calculated using the weighted average number of shares
      outstanding during each period. As of December 31, 2006 and 2005, potentially
      dilutive securities consist of convertible debentures convertible into
      239,064,000 and 162,631,333 common shares and warrants convertible into
      37,972,221 and 25,971,221 shares respectively. Earnings per share-dilutive
      does
      not include the effect of potentially dilutive securities for the years ended
      December 31, 2006 and 2005. The loss from operations and the net loss for the
      years ended December 31, 2006 and 2005 make these securities
      anti-dilutive.





F34










**13.**  **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. 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 “Liabilities of discontinued
      operations (Classic Care)” in the accompanying Balance Sheets at December 31,
      2006 and 2005, and consist of the following:





2006
            
            2005Accounts
                payable
            
            -
            
            
            (132,645)Accrued
                liabilities
            
            -
            
            
            (13,766)Total
                liabilities
            
            -
            
            
            (146,411)Net
                assets (liabilities) of discontinued operations
            $
            -
            
            $
            (146,411)








The
      following is a breakdown of the operations of Classic Care discontinued
      operations for the years ended December 31, 2006 and 2005:





2006
            
            2005Gain
                on write-off of liabilities
            $
            146,411
            
            $
            -Net
                income
            $
            146,411
            
            $
            -








The
      Company obtained a legal opinion that the statute of limitations had run on
      the
      outstanding liabilities of Classic Care and wrote off the remaining liabilities
      during 2006. The Company believes that there are no other costs associated
      with
      the cessation of activities for Classic Care.


F35










**14.**  **Discontinued
      Operations - Sespe Pharmacy (Effective Health, Inc.)**





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.
      In February 2007, the Company decided to voluntarily dissolve Sespe Pharmacy.
      The Company ceased all operations of Sespe effective February 4, 2007. The
      results of operations of Sespe have been reported separately as discontinued
      operations. For  financial  reporting  purposes,  the  assets  and  liabilities  of Sespe have
      been classified in the accompanying Balance Sheets  as  of  December
      31, 2006 and 2005,  under  “Liabilities
      of  discontinued  operations
      (Sespe)”  and  comprise  the  following:





2006
            
            2005Assets:Cash
            $
            43
            
            $
            -Accounts
                receivable
            
            7,168
            
            
            95,854Inventory
            
            46,454
            
            
            67,705Property
                and equipment, net
            
            -
            
            
            41,546Total
                assets
            $
            53,665
            
            $
            205,105Liabilities:Bank
                overdraft
            $
            -
            
            $
            (4,634)Accounts
                payable and accrued expenses
            
            (373,545)
            
            
            (257,350)Note
                payable - related party
            
            (4,360)
            
            
            (4,360)Note
                payable - shareholder
            
            -
            
            
            (12,475)Total
                liabilities
            $
            (377,905)
            
            $
            (278,819)Net
                Assets (liabilities) of Discontinued Operations
            $
            (324,240)
            
            $
            (73,714)








The
      following is a breakdown of the operations of Sespe Pharmacy discontinued
      operations for the years ended December 31, 2006 and 2005:





2006
            
            2005Revenues
            $
            468,197
            
            $
            1,252,958Cost
                of sales
            
            (323,882)
            
            
            (900,983)Operating
                expenses
            
            (492,765)
            
            
            (691,214)Other
                income
            
            2,532
            
            
            -Other
                expense
            
            (41,545)
            
            
            (29,199)Net
                loss
            $
            (387,463)
            
            $
            (368,438)











F36










**15.**  **Subsequent
      Events**





Merger
      with H&H Glass Corporation





On
      January 23, 2007, Kaire Holdings Corporation’s and its wholly owned subsidiary
      YesRx.com executed a Letter of Intent whereby YesRx.com will acquire all of
      the
      outstanding Stock of H&H Glass Corporation, an Illinois corporation. The
      terms of the acquisition includes the issuance of approximately $8 million
      in
      the common stock of the Company. In addition, as part of the transaction, all
      current convertible note holders have agreed to restructure their debt into
      zero
      coupon fixed rate convertible preferred shares with a two year hold on any
      conversions.








Appointment
      of New Directors





Allen
      Lin, President of H&H Glass Corporation, and Bill Gresher, Chief Financial
      Officer of The Mexmil Company, were appointed as directors of the company.








Departure
      of Chief Financial Officer





In
      April
      2007, Randall Jones was terminated as Chief Financial Officer. The Company’s
      Chief Executive Officer will act as temporary CFO until a replacement is
      found.








F37