<PAGE>

                    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, 2000.

     [_]  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)

<TABLE>
<S>                                   <C>                              <C>
             Delaware                             8980                       13-3367421
---------------------------------     ----------------------------     ----------------------
 (State or other jurisdiction of      (Primary Standard Industrial     (I.R.S. employer
  incorporation or organization)      Classification Code Number)      identification number)
</TABLE>

7348 Bellaire Avenue, North Hollywood, CA                                  91605
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                              (Zip Code)

      Registrant's Telephone number, including area code: (818) 255-4996

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes  X  No ___
                                         ---

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

The issuer had revenues of $5,707,700 for the fiscal year ended December 31,
2000.

The aggregate market value of the voting stock held by non-affiliates on
December 31, 2000 was approximately $8,377,399 (based on the average of the bid
and ask prices of the issuer's common stock in the over-the-counter market on
such date as reported by the OTC Bulletin

                                      -1-
<PAGE>

Board). As of December 31, 2000, 117,765,033 shares of the issuer's
Common Stock were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

The Company's report on Form 8-K dated June 22, 2000: Items 6 and 7
The Company's report on Form S-8 dated May 26, 2000: Part III
The Company's report on Form S-8 dated February 11, 2000: Part III

The Company's report on Form 8-K dated April 8, 1999: Items 6 and 7
The Company's report on Form S-8 dated March 19, 1999: Part II

The Company's report on Form 8-K dated March 23, 1998: Items 4, 5 and 7
The Company's report on Form S-8 dated January 9, 1998: Part II

Transitional Small Business Disclosure Format  Yes   No  X
                                                        ---

                                      -2-
<PAGE>

                                    PART I

ITEM 1.    Description of Business

Business Development

Kaire Holdings, Incorporated ("Kaire"), formerly known as Interactive Medical
Technologies Ltd. ("IMT"), was incorporated in Delaware in 1986.

From its inception through 1994, Kaire was principally engaged in the discovery
and commercialization of non-radioactive micro spheres for use in non-invasive
diagnostic imaging procedures.  In 1992 Kaire began marketing EZ-Trac
Microspheres, a non-radio active diagnostic imaging product-utilizing micron
sized particles labeled with fluorescent contrast media.  EZ-Trac Microspheres
were used in non-human laboratory studies by research facilities, academic
centers, and pharmaceutical companies engaged in the development of new
pharmaceutical drugs. To support its marketing efforts Kaire developed a
laboratory procedure intended to educate EZ-Trac customers about the use and
benefits of the micro sphere products. At that time a majority of researchers
engaged in regional blood flow studies used radioactive materials as contrast
indicators to determine drug performance of a new drug in their blood flow
studies. Typically, these studies were funded through private and government
research grants. From 1992 to 1998, Kaire marketed its EZ-Trac Microspheres
products and Investigator Partner Services achieving a reasonable degree of
success when compared to the overall market. However, long-term growth
opportunities were limited by the size of the market for micro sphere products
and the uncertain nature of the funding process.

On February 19, 1998, we did the following three things:

  1.   We changed the name of the Company to Kaire Holdings, Inc. from
       Interactive Medical Technologies, Ltd.;
  2.   We changed our NASDAQ OTCBB symbol to "KAHI" from "NONI"; and
  3.   We reverse split our common stock at a ratio of seventy-five (75) to one
       (1).

From 1986 through May of 1999, Kaire's business operations consisted of the sale
of EZ-TRAC non-radioactive diagnostic imaging microspheres along with the
companion Investigator Partner Service (IPS) that provided quantitative
laboratory analysis to customers who use the EZ-Trac microsphere products in
their research studies.  Customers included private and government research
facilities, academic centers, and hospitals engaged in the study regional blood
flow under laboratory conditions. The majority of customers relied on research
grants to fund their blood flow studies, which ultimately limited the size and
opportunity of that market.

In May 1999, Kaire introduced VitaPlanet.com, which was an e-commerce consumer
health oriented Internet business. VitaPlanet.com marketed herbal and natural
health products through the Internet. Seeing a larger opportunity,
VitaPlanet.com was expanded and re-launched YesRx.com in November 1999.
YesRx.com operated as an e-commerce online pharmacy and drugstore providing
specialized pharmacy care, over the counter health and wellness and personal
care products to targeted segments of the senior health care market.

                                      -3-
<PAGE>

Early in 2000, we entered into a strategic relationship Stason Pharmaceuticals
USA (Stason) in Irvine California. As the US subsidiary of Standard Chemical
Company of Taiwan, Stason is a pharmaceutical company that specializes in
product development, pilot scale production, technology transfer and management
of technical information and resources for the development of prescription drugs
in solid form.

In March of 2000, Kaire entered into a Letter of Intent with Stason
Pharmaceuticals USA. The Letter of Intent concerned Stason making a $175,000.00
cash investment in YesRx and providing a physical space to build a YesRx.com
fulfillment center.  In consideration of the investment, Stason was to receive
11% of the initial common stock allocation of YesRx, Inc.  Stason made the
$175,000 investment; however, Kaire and Stason deemed it in the best interests
of both companies to secure fulfillment from an established operating pharmacy.

In May of 2000, we signed an additional letter of intent with Stason
Pharmaceuticals USA that outlined a plan to merge our EZ-Trac and Investigator
Partner Service (IPS) with Stason laboratory business creating a new corporate
entity. In merging our businesses, Kaire would move the EZ-Trac and IPS business
to Stason's larger and better-equipped facilities in Irvine, California.  In May
2000, we completed the move of our EZ-Trac and IPS laboratory business to
Stason's Irvine facilities.

In January of 2001, Kaire finalized the Merger Agreement with Stason USA, Inc.
Based on the second Letter of Intent; Kaire contributed its EZ-Trac Microspheres
and IPS business in exchange for 40% of the newly formed entity.

In February 2001, we formed the new Stason Biotech entity, which contains the
merged laboratory businesses.  Initially, the new entity will be engaged in the
research and development of compounds and testing measures for the treatment of
pathogenic viral infections and other medical applications related to solid form
prescription drug formation as well as providing contract research and
development services to manufacturers of pharmaceutical drugs.  It is Stason's
and our intent to make Stason Biotech a publicly reporting entity during
calendar year 2001.

In June of 2000, we acquired three-year-old Classic Care Pharmacy based in Los
Angeles, California. Classic Care provides specialized pharmacy care to retired
persons living in extended care facilities throughout Los Angeles and Orange
Counties in California. The acquisition expanded our specialized pharmacy care
for seniors while providing a company owned pharmacy to service our other
pharmacy customers. Classic Care has increased the number of patients since the
acquisition.

Also, in June of 2000, Kaire introduced the Health Advocate Program. The Health
Advocate Program provides specialized pharmacy care, health and disease
information and education, and individual patient counseling along with
customizable medication compliance program for HIV patients. The program can be
easily adapted to service other chronically ill patient communities as well as
expanded into new geographic areas.

                                      -4-
<PAGE>

In July of 2000, we acquired the rights to the NETFAME.com domain intending to
develop an interactive online exchange to facilitate communication between a
planned subscriber base consisting of emerging actors, models, and musicians,
with established entertainment industry agents.  We completed research and
content development for the site, however, due to current market conditions and
the unsuccessful attempts by potential NetFame competitors, we have decided to
postpone the release of NETFAME.com indefinitely.

Business of Kaire Holdings Incorporated

Headquartered in North Hollywood, California, Kaire's principle business is
providing specialized pharmacy care to seniors living in extended care
facilities and HIV patients.

Kaire principally has interests in four companies:

 .  YesRx
 .  Classic Care
 .  Stason Biotech
 .  NetFame (non operation)

YesRx:

YesRx.com began operations in November 1999 as an Internet based pharmacy that
provided a full range of pharmacy services combined with over the counter drug
store products and extensive health related information and content directed at
the senior market segment.

In November of 2000, YesRx introduced the Health Advocate Program.  The program
targets the special pharmacy needs of specific chronic care communities. The
program currently provides specialized pharmacy care to seniors living in
extended care facilities and HIV patients. The key point of the program is the
service each patient receives from our Health Advocate team. Health Advocate
team members perform a range of service well beyond that of an average pharmacy.
HIV Health Advocates typically come from the communities they serve and process
a comprehensive working knowledge of the disease and its treatments. Services
include, personal delivery of medications, counseling, facilitating
communication between patients and their physicians, medication compliance,
managing patient insurance claims and more. Many times an individual Health
Advocate becomes a valued member of a patient's family

The Health Advocate program is based at Classic Care Pharmacy in Los Angeles.
From that location the program serves HIV patients in Los Angeles and Orange
counties in Southern California.

Classic Care Pharmacy:

In 1997, Classic Care Pharmacy began operations as a provider of specialized
pharmacy care for retired seniors.  Since that time, Classic Care has steadily
increased the number of facilities and patients it serves.

                                      -5-
<PAGE>

Classic Care provides specialized services for seniors managing complex
medication regimes and chronic health conditions.  Many times, the elderly are
required to take numerous medications daily.  In those cases, compliance becomes
a crucial matter for the patient as well as the facility caring for the patient.
Classic Care fills prescriptions utilizing a computerized system which labels
and codes individual patient medications that are then sealed in single dose
packets.  This system helps reduce the chance of a patient experiencing an
adverse drug reaction due to non-compliance while also increasing the time
facility care providers have to spend with their patients.  Services include
daily delivery and management all patient insurance billing claims.  Classic
Care serves southern California facilities in Los Angeles, Hollywood, Long
Beach, Ventura, North Hollywood, Van Nuys, Reseda, Oxnard and other locations.
Classic Care serves as the primary fulfillment center for all of Kaire's
specialized pharmacy care operations.

Stason Biotech:

In May of 2000, we signed a letter of intent with Stason USA, Inc, which
outlined a plan to merge our EZ-TRAC/IPS laboratory business with a similar
business of Stason's. The plan also called for the relocation of our laboratory
operations to Stason's facilities in Irvine, California.  We completed the move
of our laboratory business in May 2000 and have subsequently integrated those
operations with Stason's.

In February 2001, we formed the new Stason Biotech entity, which contains the
merged laboratory businesses. Initially, the new entity will be engaged in the
research and development of compounds and testing measures for the treatment of
pathogenic viral infections and other medical applications related to solid form
prescription drug formation as well as providing contract research and
development services to manufacturers of pharmaceutical drugs.

It is Stason's and our intent to make Stason Biotech a publicly reporting entity
during calendar year 2001.  Both Kaire and Stason have reached an agreement
regarding the final terms of the Stason Biotech agreement and are now in the
process of making strategic development decisions for the new company.

In January of 2001, Kaire finalized the agreement with Stason USA, Inc., which
contributed its EZ Trac lab business in exchange for 40% of the newly formed
entity.  This divestiture was in furtherance of Kaire's focus on its niche
pharmaceutical business

In consideration of Kaire's investment, Kaire received 40% of the initial stock
allocation for Stason Biotech.  Because the EZ TRAC operation was a net
liability, Kaire will show a net gain on the transfer of assets.  Any subsequent
gain or loss on the Stason Biotech investment will be shown as an adjustment in
the investment.

In the first half of 2001, Stason Biotech will focus on two tasks:

 .  Stason Biotech will complete an independent audit of its operations.
 .  Stason Biotech will develop the products and services offered by the Company,
   including pursuing pharmaceutical research contracts and development of
   strategic relationships overseas.

                                      -6-
<PAGE>

Stason Pharmaceuticals USA, Inc. is a pharmaceutical company that specializes in
product development, pilot scale production, technology transfer and management
of technical information and resources for the development of prescription drugs
in solid form.

NetFame:

In July 2000, Kaire acquired the rights to the domain name "NetFame.com."  Kaire
purchased the netfame.com domain address with the intention of developing an
interactive online exchange to facilitate communication between the planned
subscriber base consisting of emerging actors, models, and musicians, with
established industry agents.  We have completed research and content development
for the site, however, due to current market conditions and the unsuccessful
attempts by potential NetFame competitors, we recently decided to indefinitely
postpone the release of NETFAME.com until such time as market conditions become
more favorable.

Important Events and Accomplishments

Some events have occurred over the past year, which Kaire believes will have a
positive effect on Kaire's business.  These favorable events, starting from the
most recent, are the following:

 .  January 2001:  Kaire finalized the agreement with Stason USA, Inc. that
   ------------
   divested its EZ Trac lab business in exchange for 40% of the newly formed
   company called Stason Biotech.
 .  November 30, 2000:  Kaire finalized the purchase of Classic Care Pharmacy
   -----------------
   amending the letter of intent signed in June 2000. The Amendment sets the
   purchase price at $9,500,000 to be paid in a combination of cash and stock.
   The Amended Agreement calls for an initial cash payment of $1,000,000 plus an
   additional $2,000,000 to be paid in cash payments of $250,000 each beginning
   in March 2001 through October 2001. The required amounts are to be funded
   through outside financing. Thus far, $1,699,000 of the $3,000,000 has been
   paid. Kaire has issued 15,499,999 common shares as the initial stock portion
   of the Amended Agreement. The value of the 15,499,999 shares is required to
   be no less than the balance of the cash owed or at least $.42 per share in
   order to meet the target price of $9,500,000. If the price of the stock is
   not equal to or greater than $.42 per share during the period ended October
   31, 2001, the Company will be required to issue sufficient additional shares
   of common stock or pay additional cash to insure that the total consideration
   paid for the acquisition is $9,500,000. The additional stock must be issued
   or cash must be paid by November 30, 2001.

   Kaire intends to pay the balance of this liability through equity fundraising
   and by using profits from Classic Care Pharmacy. Should either of these
   sources of funds fail to produce adequate capital for the payment of the
   Classic Care liability, it is possible that Kaire may have to sell Classic
   Care Pharmacy in order to pay off this debt.

 .  November 13, 2000:  Kaire Holdings, Inc. announces record third quarter sales
   -----------------
   and posted it's first ever-quarterly profit.
 .  November 11, 2000:  YesRx launched the Health Advocate Program.  Along with
   -----------------
   the Health Advocate Program, YesRx debuted a new and improved internet site
   which incorporates over

                                      -7-
<PAGE>

   20,000 additional over the counter products as well as new integrated health
   community destinations for HIV, Senior, Diabetic and Disabled individuals.
 .  June 26, 2000:  Kaire announced that it had completed the first stage of the
   -------------
   strategic agreement with Stason USA. In doing so, Kaire completed the
   training of Stason technicians and physically relocated the EZ-Trac lab to
   Stason's Irvine, California facility.
 .  April 19, 2000:  Kaire Holdings, Inc. executed the documents related to the
   --------------
   Classic Care Pharmacy acquisition. Classic Care will serve as a distribution
   center for YesRx and will aid the Company in developing the targeted Health
   Advocate program.

Competition

There is significant competition in the health care market segment as well as
government regulations which effect companies providing products and services.
Many of our competitors are larger, better-financed companies and possess
greater access to necessary resources. Although we are attempting to establish
ourselves as a provider of specialized pharmacy care products and services to
selected niche markets, no assurance can be given that our competitors will not
use their advantages over us, and more directly pursue the customers we are
attempting to acquire and those who we have already acquired, thereby enhancing
their respective share of the specialty pharmaceutical market.

Patents, Licenses and Trademarks

Not Applicable

Royalty Agreements

Not Applicable

Government Regulations

All pharmaceutical retailers are subject to extensive regulation by various
federal agencies, including the United States Food and Drug Administration
("FDA"), and by various state agencies, including California Board of Pharmacy.
Presently, the Company is compliant with all federal and state regulations
related to it's businesses.

Product Liability Insurance

Although the Company believes its products are safe, it may be subject to
product liability claims from persons injured through the use of the Company's
marketed products or services.  The Company carries no direct product liability
insurance, relying instead on the coverage maintained by its distributors and
manufacturing sources from which it obtains product.  There is no assurance that
this insurance will adequately cover any liability claims brought against the
Company.  There also can be no assurance that the Company will be able to obtain
its own liability insurance (should it seek to do so) on economically feasible
terms.  The Company's failure to maintain its own liability insurance could
materially adversely affect its ability to sell

                                      -8-
<PAGE>

its products in the future. Although no product liability claims have been
brought against the Company to date, if there were any such claims brought
against the Company, the cost of defending against such claims and any damages
paid by the Company in connection with such claims could have a materially
adverse impact upon the company, including its financial position, results of
operations and cashflows.

Research and Development

Not Applicable

Employees

Kaire currently has 33 full-time employees.

ITEM 2.  Description of Property

Kaire Holdings Inc. corporate operations are conducted in a leased facility
located in North Hollywood, California. The facility is approximately 1,986
square feet at $1,600 per month. The lease expires in May 2001. Classic Care
operations are currently located in a leased facility located in Los Angeles,
California. The facility is approximately 3,200 square feet at $4,000.00 per
month.

ITEM 3.  Legal Proceedings

Our Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened

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

On or about October 1, 1997, a proposal to increase the number of authorized
shares to 400,000,000 for the purpose to provide for the merger with Kaire
International, Inc. was voted upon and authorized by a majority of Kaire
Holdings, Inc. shareholders.

On or about January 30, 1998, a proposal to 1) reverse split the Company's
common stock up to and not to exceed a reverse ratio of seventy-five to one, 2)
amend the Company's Articles of Incorporation changing the Company name to Kaire
Holdings Incorporated and 3) changing the Company's NASDAQ symbol to KAHI was
voted and authorized by a majority of Kaire Holdings, Inc. shareholders.  These
changes became effective on February 19, 1998.


                                      -9-
<PAGE>

                                    PART II

ITEM 5.  Market for Common Equity and Related Shareholder Matters

The Company's Common Stock is quoted on the over - the - counter market and
quoted on the National Association of Securities Dealers Electronic Bulletin
Board ("OTC Bulletin Board") under the symbol "KAHI".  The high and low bid
prices for the Common Stock, as reported by the National Quotation Bureau, Inc.,
are indicated for the periods described below.  Such prices are inter-dealer
prices without retail markups, markdowns or commissions, and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
             1999                             Low                             High
------------------------------------------------------------------------------------------------
<S>                                           <C>                             <C>
First Quarter                                               .16                              .55
------------------------------------------------------------------------------------------------
Second Quarter                                              .03                              .16
------------------------------------------------------------------------------------------------
Third Quarter                                              .081                             .136
------------------------------------------------------------------------------------------------
Fourth Quarter                                             .058                              .14
------------------------------------------------------------------------------------------------

<CAPTION>
------------------------------------------------------------------------------------------------
             2000                             Low                             High
------------------------------------------------------------------------------------------------
<S>                                           <C>                             <C>
First Quarter                                               .11                             1.00
------------------------------------------------------------------------------------------------
Second Quarter                                              .16                              .60
------------------------------------------------------------------------------------------------
Third Quarter                                               .13                              .22
------------------------------------------------------------------------------------------------
Fourth Quarter                                            .0625                              .30
------------------------------------------------------------------------------------------------
</TABLE>

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

As of December 31, 2000, there were approximately 664 shareholders of record of
the company's Common Stock.

Recent Sales of Unregistered Securities
---------------------------------------

During the fiscal year ended December 31, 2000, the Company issued securities
using the exceptions available under the Securities Act of 1933 including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933,
as follows: (1) 560,000 shares of common stock were issued for services valued
at $75,000; and (2) 15,499,999 shares of common stock were issued as part of the
acquisition of Classic Care Pharmacy.

During the fiscal year ended December 31, 1999, the Company issued securities
using the exceptions available under the Securities Act of 1933 including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933
and pursuant to Regulation S, as follows: (1) 34,393,524 shares of common stock
were issued for conversion of $1,367,402 of notes payable and $5,104 of interest
incurred on these notes, (2) 817,610 shares of common stock were issued for
services valued at $65,000. And the Company issued 335,000 shares of common
stock for professional fees valued at $19,500, (3) 18,510,000 shares of common
stock were issued for options exercised valued $880,500, and (4) 1,275,000
shares of common stock were issued for other compensation valued at $63,750.

                                      -10-
<PAGE>

     During the fiscal year ended December 31, 1998, to raise capital, the
     Company issued securities using the exceptions available under the
     Securities Act of 1933 including unregistered sales made pursuant to
     Section 4(2) of the Securities Act of 1933 and pursuant to Regulation S, as
     follows: (1) 11,106,602 shares of common stock were issued for conversion
     of $795,000 of notes payable and $80,051 of interest incurred on these
     notes, (2) 186,806 shares of common stock were issued for services valued
     at $1,372,229. Some of these expenses were recognized in the prior year,
     (3) 461,437 share of common stock were issued for conversion of debt valued
     at $142,266, and (4) 337,153 shares of common stock were issued for sale of
     stock valued at $43,552.

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

     Plan of Operation

     Short-term Objectives:

          .  Continue the regional expansion of the Health Advocate Program.
          .  Continue the regional expansion of Classic Care's business.
          .  Make acquisitions of strategic competitors.
          .  Develop strategic Joint Venture relationships.
          .  Execute a "Contract Management Agreement" with Stason Biotech.

     Kaire recently made the decision to eliminate certain YesRx.com e-commerce
     operations to focus more of its resources on its Classic Care and Health
     Advocate operations. The decision was based on a number of factors
     including the poor performance of the online retail pharmacy, the general
     slow growth projections for the next few years, the high cost of customer
     acquisition and retention and the ongoing costs associated with maintaining
     YesRx.com at a competitive level. YesRx.com did expand its customer base of
     retail Internet customers, however, that growth fell far below
     expectations. We anticipate that these actions will reduce operating
     expenses with a nominal impact on revenues. Going forward, YesRx.com will
     serve as a marketing and organizational platform for the Health Advocate
     program.

     Long-term Objectives:

          .  Expand the Health Advocate Program to a national level.
          .  Secure development products and business-opportunities for Stason
             Biotech.

     There is no expected or planned sale of significant equipment by Kaire.

     Excluding any potential acquisition, the Company's work force is expected
     to increase at a rate equal to actual increases of our business operations.

     Management is of the opinion that sufficient working capital will be
     available from internal operations and from outside sources during the next
     twelve months thereby enabling Kaire to meet its obligations and
     commitments as they become payable. Historically, Kaire has been

                                      -11-
<PAGE>

     successful in its efforts to secure working capital from private placements
     of common stock securities, bank debt, loans from private investors and the
     exercise of common stock warrants.

     Results of Operations
     ---------------------

     For Years Ended December 31, 2000 and December 31, 1999
     -------------------------------------------------------

     Net revenue for the year ended December 31, 2000 was $5,707,700 as compared
     to $259,545 for the same period in 1999, or an increase of $5,448,155. The
     increase in net revenues was due to the inclusion of the third and forth
     quarter revenues of Classic Care Pharmacy.

     Gross profit for the year ended December 31, 2000 was $1,651,069 as
     compared to $170,300 for the same period in 1999, or an increase of
     $1,480,769. This increase in gross profit was attributable to Classic Care
     Pharmacy.

     Selling, general and administrative expense ("SG&A") for the period ending
     December 31, 2000 was $3,949,357 as compared $1,005,367 for the same period
     in 1999, or an increase of $2,943,990. Of this increase in SG&A,
     approximately $685,000 was attributable to gross wages for Classic Care
     Pharmacy and Kaire Holdings employees and $1,577,265 was attributable to
     compensation expense relating to the grant of stock options to employees
     and consultants. The remainder of the increase was attributable to
     accounting, advertising, consultants, printing and promotional materials
     for Classic Care Pharmacy and the Health Advocate Program.

     Interest expense was $32,506 for the year ended December 31, 2000 as
     compared to $82,250 for the same period in 1999, or a decrease of $49,774.
     The December 31, 2000 interest expense decrease is primarily a result of
     retiring debt accounts incurred prior to fiscal year 2000, offset by
     interest incurred on 10% convertible notes issued in October of 2000.

     Other income was $251,243 as compared to $457,309 for the same period in
     1999, or a decrease of $206,066.

     No provision was made for Federal income tax since the Company has incurred
     significant net operating losses from inception.

     Liquidity and Capital Losses

     The Company's revenues have been insufficient to cover acquisition costs,
     cost of revenues and operating expenses. Therefore, the Company has been
     dependent on private placements of common stock securities, bank debt,
     loans from private investors and the exercise of common stock warrants in
     order to sustain operations. In addition, there can be no assurances that
     private or other capital will continue to be available, or that revenues
     will increase to meet the Company's cash needs, or that a sufficient amount
     of the Company's common stock or other securities can or will be sold or
     that any common stock purchase options/warrants will be exercised to fund
     the operating needs of the Company.

     December 31, 2000

                                      -12-
<PAGE>

     On December 31, 2000 the Company had assets of $11,635,029 compared to
     $160,000 on December 31, 1999. The Company had a total stockholder's equity
     of $7,171,164 on December 31, 2000 compared to a deficit of $586,426 on
     December 31, 1999, an increase of $7,757,590. This increase for the year
     ended December 31, 2000 was the result of asset acquired in the Classic
     Care Pharmacy transaction.

     As of December 31, 2000 the Company's working capital position decreased
     $1,251,046 from a negative $505,426 at December 31, 1999 to a negative
     $1,756,472 at December 31, 2000. This result was attributed to a $2,853,592
     increase in accounts payable and accrued expenses, offset by a $1,017,350
     increase in accounts receivable, a $385,219 increase in inventories, a
     $181,048 increase in cash, and the remainder due to an increase in other
     current assets over the same period in 1999.

     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 $2,413,175 and $472,537 for the years ended December 31, 2000 and
     1999, respectively. The Company also had a net working deficit of
     $1,756,472 and $505,426 for the years ended December 31, 2000 and 1999
     respectively. Additionally, the Company must raise additional capital to
     meet its funding commitments for the acquisition of Classic Care, Inc.
     These factors raise 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.

     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

     Not Applicable.

                                      -13-
<PAGE>

     PART III

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

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

     ---------------------------------------------------------------------------
      Name                      Age       Office                          Since
     ---------------------------------------------------------------------------
      Steven R. Westlund        54        Chairman and CEO                1995
     ---------------------------------------------------------------------------
      Owen M. Naccarato         51        Secretary, Director and CFO     1997
     ---------------------------------------------------------------------------
      Mark L. Baum              28        President                       1999
     ---------------------------------------------------------------------------
      Asher Gottesman           27        Director                        2000
     ---------------------------------------------------------------------------

     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.

     Owen Naccarato Joined Kaire in July 1997 as Chief Financial Officer and
     Secretary on a one- year renewable contract and was elected to the board of
     directors in January 1998. Mr. Naccarato has held various operating
     positions, most recently as Chief Financial Officer for Bikers Dream, Inc.
     a NASDAQ traded motorcycle assembler and parts distributor and divisional
     vice president/controller for Baxter Healthcare, Inc., a NYSE traded health
     care manufacturer and distributor. Mr. Naccarato is a licensed attorney and
     is a member of the California State Bar Association. He is also a Certified
     Public Accountant.

     Mark Baum joined Kaire in July of 1999 as the President. Mr. Baum has
     several years of experience in creating and developing start-up enterprises
     -from retail to manufacturing to internet-based businesses. Mr. Baum holds
     a BA from the University of Texas at Arlington, and a Juris Doctorate from
     California Western School of Law. Mr. Baum is a member of the America Bar
     Association and is a licensed attorney in the State of California.

     Asher Gottesman joined Kaire as a Director in August of 2000. Mr. Gottesman
     served as a Partner of Amazing Savings Outlet Stores, a 40-unit retail
     business with sales of more than 60 million dollars per year. Mr. Gottesman
     is currently a partner in a real estate and investment trust, which
     controls more than 50 million dollars in assets. Mr. Gottesman joined the
     Kaire Board of Directors through his association with Classic Care
     Pharmacy. In 1993, Mr. Gottesman earned a BA in Economics from Yeshiva
     University.

     On May 26, 2000, Asher Gottesman was granted an option to purchase
     2,000,000 shares of common stock at an option price of $.05 for work
     perform in connection with a consulting

                                      -14-
<PAGE>

     agreement. Subsequent to this date, Mr. Gottesman became a director of
     Kaire Holdings. These options were granted prior to Mr. Gottesman becoming
     a director.


     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, 1998,
     all Section 16(a) filing requirements applicable to its officers, directors
     and greater than 10% beneficial owners were complied with.

     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, 2000 and 1999, respectively, to the Company's
     Chief Executive Officer, President and Chief Financial Officer during such
     period.

     Summary Executive Compensation Table

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Payouts                   Annual Compensation                                 Long Term Compensation Awards
--------------------------------------------------------------------------------------------------------------------------
(a)           (b)       (c)        (d)            (e)             (f)             (g)            (h)             (i)
--------------------------------------------------------------------------------------------------------------------------
Name and     Year     Salary      Bonus      Other Annual      Restricted      Securities        LTIP         All Other
Principal                                   Compensation ($)      Stock        Underlying       Payouts     Compensation ($)
Position                                                       Awards ($)     Options/SAR (#)     ($)
<S>        <C>        <C>         <C>      <C>                 <C>            <C>               <C>         <C>
--------------------------------------------------------------------------------------------------------------------------
CEO           2000   100K                                                         4,833,333
--------------------------------------------------------------------------------------------------------------------------
President     2000   75K                                                          3,333,333
--------------------------------------------------------------------------------------------------------------------------
CFO           2000   87K                                                          3,333,333
--------------------------------------------------------------------------------------------------------------------------
Total:               262K
--------------------------------------------------------------------------------------------------------------------------
Directors            187K
as a Group
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Options/SAR Grants in the Last Fiscal Year

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Name                  Number of Securities     % of Total Options/SARS     Exercise or   Expiration Date
                    Underlying Options/SARS    Granted to Employees in     Base Price
                            Granted                  Fiscal Year
---------------------------------------------------------------------------------------------------------
<S>                 <C>                       <C>                         <C>            <C>
Steven R. Westlund                 6,000,000                          40           $.05  April 2005
---------------------------------------------------------------------------------------------------------
</TABLE>

                                      -15-
<PAGE>

<TABLE>
<S>                               <C>                                <C>           <C>
---------------------------------------------------------------------------------------------------------
Owen M. Naccarato                  4,500,000                          30           $.05  April 2005
---------------------------------------------------------------------------------------------------------
Mark L. Baum                       4,500,000                          30           $.05  April 2005
---------------------------------------------------------------------------------------------------------
</TABLE>

     Employment Agreements
     ---------------------

     Chief Executives Officer's compensation
     ---------------------------------------

     On April 1, 2000, Mr. Westlund signed a three-year employment agreement
     (attached hereto as Exhibit 10.36). The contract calls for Mr. Westlund to
     be paid a base salary of $8,333.33 per month for the first year of the
     term. Mr. Westlund's base salary shall increase 15 % per year for the
     second year and third years, respectively, per the agreement.

     Although Mr. Westlund's Employment Agreement states that his salary is to
     be $8,333.33 per month, his actual pay has been $ 4,000.00 per month. Mr.
     Westlund is entitled to be paid the balance of his monthly compensation in
     either cash or equity. Additionally, Mr. Westlund has been granted an
     option to purchase up to 6 million shares of Kaire Common Stock over the
     next 5 years at an option price of 5 cents ($ 0.05) per share. To date, Mr.
     Westlund has exercised 1,166,667 shares of the Company's Common Stock.

     Chief Financial Officer Compensation:
     ------------------------------------

     On April 1, 2000, Mr. Naccarato signed a three-year employment agreement
     (attached hereto as Exhibit 10.37). The agreement calls for Mr. Naccarato
     to be paid a base salary of $ 7,250.00 per month for the first year of the
     term. Mr. Naccarato's base salary shall increase 15 % per year for the
     second year and third years, respectively, per the agreement.

     Although Mr. Naccarato's Employment Agreement states that his salary is to
     be $7,250.00 per month, his actual pay has been $ 4,000.00 per month. Mr.
     is entitled to be paid the balance of his monthly compensation in either
     cash or equity. Additionally, Mr. Naccarato has been granted an option to
     purchase up to 4.5 million shares of Kaire Common Stock over the next 5
     years at an option price of 5 cents ($ 0.05) per share. To date, Mr.
     Naccarato has exercised 1,166,667 shares of the Company's Common Stock.

     President's Compensation:
     ------------------------

     On April 1, 2000, Mr. Baum signed a three-year employment agreement
     (attached hereto as Exhibit 10.35). The agreement calls for Mr. Baum to be
     paid a base salary of $ 6,250.00 per month for the first year of the term.
     Mr. Baum's base salary shall increase 15 % per year for the second year and
     third years, respectively, per the agreement.

     Although Mr. Baum's Employment Agreement states that his salary is to be
     $6,250.00 per month, his actual pay has been $ 4,000.00 per month. Mr. is
     entitled to be paid the balance of his monthly compensation in either cash
     or equity. Additionally, Mr. Baum has been granted an option to purchase up
     to 4.5 million shares of Kaire Common Stock over the next 5 years at an
     option price of 5 cents ($ 0.05) per share. To date, Mr. Baum has exercised
     1,166,667 shares of the Company's Common Stock.

                                      -16-
<PAGE>

     Compensation of Directors:
     --------------------------

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

     The Company offers disability insurance to all its employees and health
     insurance to certain 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 regarding the beneficial
     ownership of the Company's Common Stock as of December 31, 2000 based on
     information available to the Company by (I) each person who is known by the
     Company to own more than 5% of the outstanding Common Stock based upon
     reports filed by such persons within the Securities and Exchange
     Commission; (ii) each of the Company's directors; (iii) each of the Named
     Executive Officers; and (iv) all officers and directors of the Company as a
     group.

<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------------
     Name and Address                Shares Beneficially Owned (1)          Percent of Class
     ------------------------------------------------------------------------------------------
     <S>                              <C>                                   <C>
     Steven R. Westlund               4,833,333                             4.10 %
     7348 Bellaire Avenue
     North Hollywood, CA  91605
     ------------------------------------------------------------------------------------------
     Owen M. Naccarato                3,333,333                             2.83 %
     7348 Bellaire Avenue
     North Hollywood, CA  91605
     ------------------------------------------------------------------------------------------
     Mark L. Baum                     3,333,333                             2.83 %
     7348 Bellaire Avenue
     North Hollywood, CA  91605
     ------------------------------------------------------------------------------------------
</TABLE>

     (1)  A person is deemed to be the beneficial owner of securities that can
     be acquired by such person within 60 days from the date of the registration
     statement upon the exercise of options or warrants. Each beneficial owner's
     percentage ownership is determined by assuming that options or warrants
     that are held by such person and which are exercisable within 60 days of
     the date of this registration statement have been exercised. Unless
     otherwise indicated, the company believes that all persons named in the
     table have voting and investment power with respect to all shares of common
     stock beneficially owned by them.

     ITEM 12.  Certain Relationships and Related Transaction

          The Company's Audit committee currently consists of Owen Naccarato,
     the Company's Chief Financial Officer and Asher Gottesman, an outside
     director.

          The company's Audit Committee will review any transactions with
     affiliates and make its

                                      -17-
<PAGE>

     recommendation to the Board of Directors to ensure such transactions are at
     arms length.

          The company's Board will follow the advice of the Audit committee on
     transactions that could have the potential appearance of not being at arms
     length transaction.

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

          (a) Exhibits

           3.     Articles of Incorporation and bylaws of the Company, as
                  amended. (1)
           4.1    Form of Warrant Agreement between the Company and Jersey Stock
                  Transfer and Trust Company, including the Form of Warrant (as
                  modified). (4)
           4.2    Form of Stock Purchase Warrant (issued with promissory note).
                  (2)
           10.1   License Agreement between F.A.T. Co. Research, Inc. and
                  Dynamic Products, Inc. (1)
           10.2   Agreements between F.A.T. Co. Research, Inc. and Dr. Shell and
                  Jackie See for Development and Exploitation of Patented
                  Invention. (1)
           10.3   Consulting Agreements between See/Shell and Drs. Dr. Shell and
                  Jackie See. (1)
           10.4   Original Equipment Manufacturing Agreement between Olympus
                  Corporation and E-Z Trac, Inc. (3)
           10.5   Distribution Agreement between E-Z Trac Inc., and Triton
                  Technology, Inc. (3)
           10.6   Employment Agreement between the Company and William Peizer,
                  Jr. dated December 24, 1992. (4)
           10.7   Agreement between William Peizer, Jr. and Clark M. Holcomb
                  dated February 1, 1993. (4)
           10.8   Exchange of Stock Agreement and Plan of Reorganization among
                  the Company, Venus Management, Inc. and the stockholders of
                  Venus Management, Inc. (4)
           10.9   Co-Management Agreements dated June 30, 1993 between Venus
                  Management, Inc. and Medical Funding of America, Inc. (4)
           10.10  Agreement dated June 30, 1993 between Venus Management, Inc.
                  and Medical Funding of America, Inc. (4)
           10.11  Letter dated August 20, 1993 between the Company and Lewis,
                  D'Amato, Brisbois & Bisgaard re Debt Conversion Agreement. (4)
           10.12  Letter agreement dated March 13, 1993 between the Company and
                  Clark M. Holcomb; Sale of Stock Agreement, dated November 1,
                  1992 by and between the Company and Clark M. Holcomb; and
                  related Promissory Note from Clark M. Holcomb to the Company.
                  (4)
           10.13  Agreement concerning MRI System, dated as of February 10, 1994
                  by and between Siemens Credit Corporation, Venus Management,
                  Inc., the Company, Medical Funding of America, Inc. and Tri-
                  County Mobile MRI, L.P. and related Transfer of Interest
                  Agreement, Corporate Guaranty by the Company, Amendment to
                  Promissory Note of Medical Funding of America, Inc. payable to
                  Siemens Credit Corporation and Agreement concerning Lease
                  Payment between Venus Management, Inc. and Tri-County Mobile
                  MRI, L.P. (4)

                                      -18-
<PAGE>

           10.14   Agreement dated August 27, 1992 by and between Dr. William
                   Shell and Clark M. Holcomb related to shares of the
                   Company's Common Stock owned by Dr. Shell. (4)
           10.15   Agreement dated September 23, 1993 by and between
                   Ladenburg, Thalmann Co., Inc. and the Company. (4)
           10.16   Consulting Agreement for Financial Public Relations dated
                   as of February 25, 1994 by and between the Company and
                   Robert Bienstock and Richard Washor. (4)
           10.17   License Agreement, dated March 23, 1994 by and between
                   Effective Health, Inc. and KCD Incorporated. (4)
           10.18   Professional Services Agreement, dated April 15, 1994 by
                   and between RAI Finanz, and the Company. (4)
           10.19   Consulting Agreement and Stock Plan dated as of August 25,
                   1994 by and between the Company and Hy Ochberg. (4)
           10.20   Memorandum of Understanding dated as of August 16,1994 by
                   and between the Company and Raifinanz (USA), Inc. (4)
           10.21   Resonex Equipment Lease as of June 30, 1993 between Venus
                   Management Company and Medical Funding of America. (4)
           10.22   Becton Dickenson Supply Agreement dated November 2, 1994. (4)
           10.23   Number skipped
           10.24   2nd & Final Revised Proposal to Acquire Pastels
                   International, Incorporated (6)
           10.25   Revised Proposed Acquisition of Nutra Quest, Incorporated (6)
           10.26   Number skipped
           10.27   The 1998 Stock Compensation Plan (7)
           10.28   The Amendment to the 1998 Stock Compensation Plan (8)
           22.1    Subsidiaries of the Company & See/Shell Biotechnology, Inc.
                   (1)
           22.2    Subsidiaries of the Company & E-Z Trac, Inc.-Articles of
                   Incorporation, Amendments and By-Laws. (1)
           22.3    Subsidiaries of the Company & Effective Health, Inc.-Articles
                   of Incorporation, Amendments and By-Laws. (1)
           22.4    Subsidiaries of the Company & Venus Management, Inc.
                   Certificate of Incorporation, Amendments and By-Laws.
                   (Included in Exhibit 10.9.)
            ________________________________________
                   (1)  Previously filed as an exhibit to the Company's
                        registration statement on Form S-18, file number 33-
                        17548-NY, as amended on August 7, 1990, and incorporated
                        herein by reference.
                   (2)  Previously filed as an exhibit to the Company's
                        registration statement on Form S-18, file number 33-
                        17548-NY, as amended on February 12, 1991, and
                        incorporated herein by reference.
                   (3)  Previously filed as an exhibit to the Company's
                        registration statement on Form S-1 8, file number 33-
                        17548-NY, as amended on June 24, 1991, and incorporated
                        herein by reference.

                                      -19-
<PAGE>

          (4)  Previously filed as an exhibit to the Company's Registration
               Statement on Form SB-2, file number 33-51684-NY, as amended on
               September 19, 1994, and incorporated herein by reference.
          (5)  Previously filed as an exhibit to the Company's Form 10-QSB filed
               for the quarterly period ended September 30, 1996.
          (6)  Previously filed as an exhibit to the Company's Form 10-KSB filed
               for the period ended December 31, 1996.
          (7)  Incorporated by reference to the Company's Form S-8 dated January
               9, 1998 and filed with the Commission on January 9, 1998.
          (8)  Incorporated by reference to the Company's Form S-8 dated March
               25, 1998 and filed with the Commission on March 25, 1998.

     (b)  Reports on Form 8-K:

     The company filed the following reports on Form 8-K during the quarters
ended June 30, 2000 and September 31, 2000:

     1.   Form 8-K dated June 22, 2000 reporting the acquisition of
          Classic Care Pharmacy.

     2.   Form 8-K dated April 9, 1999 reporting a change in the Company's
          independent account and the resignation of Peter Benz as the Company's
          President and Board member.

     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 13, 2001

     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 13, 2001
----------------------------------------------
Steven R. Westlund Chief Executive Officer and
Director


/s/  Owen M. Naccarato                                      April 13, 2001
----------------------------------------------
Owen M. Naccarato Chief Financial Officer and
Director

/s/  Asher Gottesman                                        April 13, 2001
----------------------------------------------
Asher Gottesman, Director

                                      -20-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS
                              FOR THE YEARS ENDED
                          DECEMBER 31, 2000 AND 1999
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES

                              Financial Statements

                           December 31, 2000 and 1999

<TABLE>
<S>                                                     <C>
Report of Independent Certified Public Accountants                F-1

Consolidated Balance Sheets                                 F-2 - F-3

Consolidated Statements of Operations                             F-4

Consolidated Statements of Stockholders' Deficit                  F-5

Consolidated Statements of Cash Flows                       F-6 - F-8

Notes to Consolidated Financial Statements                 F-9 - F-32
</TABLE>
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
Kaire Holdings Incorporated

We have audited the accompanying consolidated balance sheets of Kaire Holdings
Incorporated and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the years then ended. These 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 generally accepted auditing
standards. 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 consolidated financial position of Kaire Holdings
Incorporated and subsidiaries as of December 31, 2000 and 1999, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with generally accepted accounting
principles.

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 has suffered recurring losses from operations
and has a net capital deficiency, which raise doubts about its ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




Pohl, McNabola, Berg & Company LLP
March 27, 2001

                                     -F-1-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        As of December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                     ASSETS
                                                                 2000            1999
                                                           -------------     ------------
<S>                                                       <C>               <C>
Current assets
   Cash and cash equivalents                               $    311,716      $    130,668
   Accounts receivable, net of allowance of doubtful
   accounts of $397,362 and $1,000 respectively               1,046,682            29,332
   Inventory                                                    385,219                 -
   Deposits                                                       4,750                 -
   Other current asset                                           14,179                 -
                                                           -------------     ------------
     Total current assets                                     1,762,546           160,000
                                                           -------------     ------------

Noncurrent assets
   Debt issuance costs                                           76,541                 -
   Property and Equipment, net of accumulated depreciation      278,147                 -
   Note Receivable-related party                                280,500                 -
   Investments                                                   30,028                 -
   Other non-current assets                                       5,000
   Goodwill, net of accumulated amortization                  9,202,267                 -
                                                           -------------     ------------
     Total noncurrent assets                                  9,872,483                 -
                                                           -------------     ------------
          Total assets                                     $ 11,635,029      $    160,000
                                                           =============     ============
</TABLE>


                                   (continued)

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

                                     -F-2-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                     Consolidated Balance Sheets (continued)
                        As of December 31, 2000 and 1999

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' DEFICIT
<S>                                                             <C>              <C>
 Current Liabilities
   Notes payable                                                 $          -     $     25,000
   Accounts payable and accrued expense                             1,960,029          640,426
   Income tax payable                                                   4,000                -
   Due to Stason Biotech                                              175,000                -
   Sales tax payable                                                    5,727                -
   Note payable-Acquisition                                         1,301,000                -
   Capital leases-short term                                           73,262                -
                                                                 ------------     ------------

     Total current liabilities                                      3,519,018          665,426

  Long term liabilities
   Convertible notes payable and debentures                           821,000           81,000
   Capital leases-long term                                           123,847                -
                                                                 ------------     ------------

     Total long term liabilities                                      944,847           81,000
                                                                 ------------     ------------

       Total liabilities                                            4,463,865          746,426
                                                                 ------------     ------------

Stockholders' deficit
   Common stock, $0.001 par value
     400,000,000 shares authorized; 117,765,033
     And 77,197,000 shares issued and outstanding, respectively       117,765           77,197
   Common Stock Subscriptions Receivable                              (20,000)               -
   Additional paid in capital                                      40,671,855       30,521,658
   Accumulated deficit                                            (33,598,456)     (31,185,281)
                                                                 ------------     ------------

       Total stockholders' deficit                                  7,171,164         (586,426)
                                                                 ------------     ------------
          Total liabilities and stockholders' deficit            $ 11,635,029     $    160,000
                                                                 ============     ============
</TABLE>

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

                                     -F-3-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                      Consolidated Statements of Operations
                For the Periods Ending December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                           2000           1999
                                                      --------------  -------------
<S>                                                   <C>            <C>
      Revenues                                        $   5,707,700        259,545

      Cost of goods sold                                  4,056,631         89,245
                                                      --------------  -------------

      Gross Profit                                        1,651,069        170,300
                                                      --------------  -------------

      Operating expenses
       Research and development                                   -            153
       Depreciation and Amortization                        329,625          8,776
       Selling, general, and administrative expenses      3,949,357      1,005,367
                                                      --------------  -------------

        Total operating expenses                          4,278,982      1,014,296
                                                      --------------  -------------

      Loss from operations                               (2,627,913)      (843,996)
                                                      --------------  -------------

      Other income (expenses)
       Interest expense                                     (32,506)       (82,250)
       Other income (expense)                                     -        354,479
       Non-cash miscellaneous income                        185,403         27,326
       Write-down of accounts payable                        60,812         75,504
       Equity in earnings of Stason Biotech                   5,028              -
                                                      --------------  -------------
        Total other income (expenses)                       218,738        375,059
                                                      --------------  -------------
      Loss before provision for income taxes             (2,409,175)      (468,937)

      Provision for income taxes                              4,000          3,600
                                                      --------------  -------------
      Net loss                                        $  (2,413,175)      (472,537)
                                                      ==============  =============
      Basic loss per share                            $      (0.023)        (0.013)
                                                      ==============  =============
      Diluted loss per share                          $      (0.023)        (0.013)
                                                      ==============  =============
      Weighted-average shares outstanding - basic       104,953,458     36,251,628
                                                      ==============  =============
      Weighted-average shares outstanding - diluted     104,953,458     36,736,986
                                                      ==============  =============
</TABLE>

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

                                     -F-4-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                Consolidated Statements of Stockholders' Equity
               For the Periods Ending December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                 Common stock     Additional
                                          Common Stock           Subscription       Paid-In      Accumulated
                                    -------------------------
                                       Shares        Amount       Receivable        Capital         Deficit         Total
                                    ------------   ----------   --------------   -------------  -------------   -------------
<S>                                 <C>            <C>          <C>              <C>            <C>             <C>
Balance, December 31, 1998            15,387,384   $   15,387   $            -   $  28,086,764  $ (30,712,744)  $  (2,610,593)

Issued for conversion                 32,866,250       32,866                        1,281,784                      1,314,650
of notes payable

Issued for convertible note
interest                                 208,482          208                            4,896                          5,104

Issued for professional services         335,000          335                           19,165                         19,500

Issued for services                      817,610          818                           64,182                         65,000

Issued for conversion of debt          7,678,708        7,679                          162,769                        170,448

Issued for options exercised          17,310,000       17,310                          788,190                        805,500

Issued for other compensation          1,275,000        1,275                           62,475                         63,750

Beneficial Conversion                  1,318,792        1,319                           51,433                         52,752

Net loss                                                                                             (472,537)       (472,537)
                                    ------------   ----------   --------------   -------------  -------------   -------------

Balance, December 31, 1999            77,197,226   $   77,197   $            -   $  30,521,658  $ (31,185,281)  $    (586,426)
                                    ------------   ----------   --------------   -------------  -------------   -------------

Issued for conversion
of notes payable                         200,000          200                            9,800                         10,000

Issued for convertible note
interest                                 389,110          389                           17,611                         18,000

Issued for professional services       2,123,168        2,123                           91,933                         94,056

Issued for services                    4,140,000        4,140                          305,860                        310,000

Issued for investment-NetFame             50,000           50                            4,950                          5,000

Issued for conversion of debt            596,550          597                           26,248                         26,845

Issued for options exercised          16,456,980       16,457                        1,633,142                      1,649,599

Issued for Lost certificates           1,112,000        1,112                           (1,112)                             -

Shares issued for Acquisition         15,499,999       15,500                        6,484,500                      6,500,000

Deferred compensation expense                               -                -        (463,135)                      (463,135)

Issued for employee compensation               -            -                        2,040,400                      2,040,400

Stock Subscriptions receivable                 -            -          (20,000)                                       (20,000)

Net loss                                                                                           (2,413,175)     (2,413,175)
                                    ------------   ----------   --------------   -------------  -------------   -------------

Balance, December 31, 2000           117,765,033   $  117,765   $      (20,000)  $  40,671,855  $ (33,598,456)  $   7,171,164
                                    ============   ==========   ==============   =============  =============   =============
</TABLE>

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

                                     -F-5-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                       As of December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                                        2000            1999
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>
Increase (decrease) in cash and cash equivalents
 Net (loss)                                                                         $ (2,413,175)   $   (472,537)
 Adjustments to reconcile net loss to net cash used
 in operating activities
  Depreciation and amortization                                                           53,160          16,035
  Amortization of goodwill                                                               276,465               -
  Allowance for bad debts                                                                324,648
  Common stock issued for services                                                       310,000          65,000
  Common stock issued for conversion of debt                                                   -         170,448
  Common stock issued for conversion of note payable                                           -       1,314,650
  Common stock issued for professional services                                           94,056          19,500
  Common stock issued in payment of interest                                              13,099           5,104
  Common stock issued for other compensation                                                   -          63,750
  Charge related to beneficial conversion feature of convertible debentures                    -          52,752
  Stock options issued for services at below the fair market
   value of the stock on the date of the grant                                         1,577,265               -
  Non-cash other expenses (Income)                                                        (5,028)        (34,087)
                                                                                    ------------    ------------

  Total adjustments to net income                                                   $    230,490    $  1,200,615
                                                                                    ------------    ------------

Cash flow from operating activities:
 Changes in assets and liabilities
  Trade accounts receivable                                                         $ (1,413,712)   $     32,689
  Inventories                                                                           (385,219)         98,446
  Deposits                                                                                     -           9,500
  Prepaid expenses and other current assets                                              (14,179)              -
  Debt Issuance cost                                                                     (76,541)              -
  Income and Sales tax payable                                                             9,727               -
  Accrued interest on convertible notes                                                   14,602               -
  Accounts payable and accrued expenses                                                1,319,604        (863,313)
                                                                                    ------------    ------------

  Cash flow generated by (used in) operating activities                             $   (315,228)   $    477,937
                                                                                    ------------    ------------

Cash flow from investing activities:
  Purchase of property, equipment and leaseholds                                    $    (48,823)   $          -
  Note Receivable - related party                                                       (280,500)              -
  Other Investments                                                                      (25,000)
  Investment in Classic Care                                                          (1,112,500)              -
  Due to Stason Biotech                                                                  175,000               -
                                                                                    ------------    ------------

  Net cash generated by (used in) investing activities                              $ (1,291,823)   $          -
                                                                                    ------------    ------------
</TABLE>

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

                                     -F-6-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
               Consolidated Statements of Cash Flows (continued)
                       As of December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                                 2000            1999
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
Cash flow from financing activities:
    Change in Notes Payable                                                  $    (25,000)   $ (1,159,100)
    Payment on Note payable - Classic Care                                       (586,500)              -
    Common stock issued for options exercised for cash                          1,649,599         805,500
    Proceeds from convertible debenture                                           750,000
                                                                             ------------    ------------

            Net cash generated by (used in) financing activities             $  1,788,099    $   (353,600)
                                                                             ------------    ------------

            Net (decrease) increase in cash
            and cash equivalents                                             $    181,048    $    124,337
                                                                             ------------    ------------

            Cash and cash equivalents at beginning of year                        130,668           6,331
                                                                             ------------    ------------

            Cash and cash equivalents at end of year                         $    311,716    $    130,668
                                                                             ============    ============

Supplementary disclosures of cash flow information
    Cash paid during the year for

      Interest                                                               $          -    $     13,912
      Income taxes                                                           $      7,264    $      1,600
</TABLE>

Supplemental schedule of non-cash investing and financing activities: During the
year ended December 31, 2000, the Company entered into the following non-cash
transactions:

    Issued 589,110 shares of common stock for conversion of $10,000 of notes
    payable, and $18,000 of accrued interest.

    Issued 4,140,000 shares of common stock for services valued at $310,000

    Issued 2,123,168 shares of common stock for professional fees valued at
    $94,056

    Issued 596,550 shares of common stock for conversion of debt valued at
    $26,845.

    Issued 15,499,999 shares of common stock for acquisition of Classic Care
    Pharmacy valued at $6,500,000

    Issued 50,000 shares of common stock for investment in NetFame.com valued at
    $5,000

The accompanying notes are an integral part of these financial statements

                                     -F-7-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
               Consolidated Statements of Cash Flows (continued)
                       As of December 31, 2000 and 1999


Supplemental schedule of non-cash investing and financing activities:
(continued)

     In May 2000, the Company acquired 100% of stock of Classic Care Pharmacy

<TABLE>
          <S>                                                                      <C>
          Assets acquired:
             Non-cash working capital assets                                       $     471,960
             Property & Equipment, net of accumulated depreciation of $107,348           282,485
             Goodwill                                                                  9,478,732
                                                                                   -------------
                                                                                      10,233,177
          Liabilities assumed:
             Accounts payable                                                            486,427
             Long term liabilities                                                       246,750
                                                                                   -------------
                                                                                         733,177

          Cost of net assets acquired                                              $   9,500,000
                                                                                   =============

          Payment for net assets acquired:
             Cash paid at closing                                                  $   1,112,500
             Notes issued to stockholders of acquired company                          1,887,500
             15,499,999 shares issued for the acquisition                              6,500,000
                                                                                   -------------
                                                                                   $   9,500,000
                                                                                   =============
</TABLE>

  The accompanying notes are an integral part of these financial statements

                                     -F-8-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                December 31, 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     Organization and Line of Business
     ---------------------------------

     Kaire Holdings Incorporated ("Kaire"), 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 connection with its investment in Kaire International, Inc.
     ("KII").

     In 1999, the Company formed YesRx.com, Inc., an Internet drugstore focused
     on pharmaceuticals, health, wellness and beauty products. The Internet web
     site targets Internet shoppers and in particular, the senior citizen.
     YesRx.com focuses on chronic care as opposed to emergency needs and works
     mainly with the patient who has regular medication needs and multiple
     refills.

     During 2000, the Company completed a reorganization of the Company, which
     included the transfer of the assets of EZ TRAC, Inc. to a new corporation,
     Stason Biotech, Inc., in exchange for 40% of the outstanding common stock
     of the new corporation and the acquisition of Classic Care Pharmacy, which
     provides prescription medication services to seniors living in extended
     care facilities in Southern California. These transactions reflected
     management's strategic plan to move the Company from providing medical
     testing and laboratory analysis to becoming a provider of prescription
     medication and supplies to senior citizens and individuals needing chronic
     care.

     In November of 2000, the Company advanced its business strategy with the
     introduction of the YesRx Health Advocate Program. The Health Advocate
     Program provides medication compliance programs to HIV/AIDS, diabetic and
     senior health communities.


     Principles of Consolidation
     ---------------------------

     The consolidated financial statements include the accounts of Kaire and its
     wholly owned subsidiaries (collectively the "Company"). The Company's
     subsidiaries include See/Shell Biotechnology, Inc., E-Z TRAC, Inc., Venus
     Management, Inc., EFFECTIVE Health, Inc, and Classic Care Pharmacy, Inc.
     Only Classic Care Pharmacy, Inc, has current operations; the remaining
     subsidiaries are dormant. Intercompany accounts and transactions have been
     eliminated upon consolidation.

                                     -F-9-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                December 31, 2000


NOTE 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 reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     Cash and Cash Equivalents
     -------------------------

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

     Concentration of cash
     ---------------------

     The Company at times maintains cash balances in excess of the federally
     insured limit of $100,000 per institution. Uninsured balances as of
     December 31, 2000 were $11,907.

     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. A significant portion of the Company's sales is
     within the United States. International sales are minimal.

     Net Loss Per Share
     ------------------

     Income (loss) per common share is computed on the weighted average number
     of common shares outstanding during each year. Basic EPS is computed as net
     income (loss) applicable to common stockholders divided by the weighted
     average number of common shares outstanding for the period. Diluted EPS
     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.

                                     -F-10-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                December 31, 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Inventory
     ---------

     Inventory consists primarily of pharmaceuticals and health care products
     and is stated at the lower of cost or market (First-in, First-out, basis).

     Property and Equipment
     ----------------------

     Furniture and equipment are recorded at cost less accumulated depreciation
     and amortization. Depreciation and amortization are provided using the
     straight-line method over estimated useful lives of three to seven years.
     Amortization of leasehold improvements and assets financed under capital
     leases is computed using the straight-line method over the shorter of the
     useful life of the asset or the life of the respective lease.

     Expenditures for additions and major improvements are capitalized.
     Maintenance and minor replacements are charged to expense as incurred.
     Gains and losses on disposals are included in the results of operations.

     Goodwill
     --------

     The Company capitalized as goodwill the excess acquisition costs over the
     fair value of net assets acquired, in connection with business
     acquisitions, which costs were being amortized on a straight-line method
     over 20 years. The carrying amount of goodwill will be reviewed
     periodically based on the undiscounted cash flows of the entities acquired
     over the remaining amortization period.

     Research and Development
     ------------------------

     Research and development expenses consist principally of payroll and
     related expenses for development of the contrast microspheres. All research
     and development costs are expensed as incurred.

     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

                                     -F-11-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                December 31, 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Income Taxes (continued)
     ------------------------

     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.

     Stock-Based Compensation
     ------------------------

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

     The Company determined that it will not change to the fair value method and
     will continue to use the implicit value based method and has disclosed the
     pro forma effect of using the fair value based method to account for its
     stock-based compensation.

                                     -F-12-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                December 31, 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Comprehensive Income (Loss):
     ---------------------------

     In June 1999, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
     (SFAS 130), which is effective for financial statements for periods
     beginning after December 15, 1997. This pronouncement establishes 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, 2000
     and 1999, comprehensive loss is equivalent to the Company's net loss.

     Long -lived assets
     ------------------

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

     Advertising Costs
     -----------------

     The Company expenses advertising costs as they are incurred. Advertising
     costs for the year ended December 31, 2000 were $19,600.

     Reclassifications
     -----------------

     Certain amounts in the 1999 financial statements have been reclassified to
     conform to the 2000 presentations.

                                     -F-13-
<PAGE>

                           KAIRE HOLDINGS INCORPORATED
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                December 31, 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Segment and Geographic Information
     ----------------------------------

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

     Other Accounting Pronouncements
     -------------------------------

     In June 1998, the Financial Accounting Standard Board (FASB) issued SFAS
     No. 133, "Accounting for Derivative Instruments and Hedging Activities".
     SFAS No. 133 requires that an enterprise recognize all derivatives as
     either assets or liabilities in the statement of financial position and
     measure those instruments at fair value. This statement is effective for
     fiscal years beginning after June 15, 2000, and has been adopted by the
     Company for the year ending December 31, 2000. The Company does not believe
     that the adoption of the provisions of SFAS No. 133 will have a material
     impact on its financial position or results of operations, as the Company
     does not have any derivative instruments.

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

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

                                     -F-14-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Other Accounting Pronouncements (continued)
         -------------------------------------------

         In March 2000, the FASB released Interpretation No.44, " Accounting for
         Certain Transactions Involving Stock Compensation." This Interpretation
         addresses certain practice issues related to APB Opinion No.25. The
         provisions of this Interpretation are effective July 1, 2000, and,
         except for specific transactions noted in paragraphs 94-96 of this
         Interpretation, shall be applied prospectively to new awards, exchanges
         of awards in business combinations, modifications to an outstanding
         award, and exchanges in grantee status that occur on or after that
         date.

         Certain events and practices covered in Interpretation No. 44 have
         different application dates, and events that occur after an application
         date but prior to July 1, 2000, shall be recognized only on a
         prospective basis. Accordingly, no adjustment shall be made upon
         initial application of the Interpretation to financial statements for
         periods prior to July 1, 2000. Thus, any compensation cost measured
         upon initial application of this Interpretation that is attributed to
         periods prior to July 1, 2000 shall not be recognized. The Company has
         adopted the provisions of this Interpretation starting July 1, 2000.


NOTE 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 $2,413,175 and $472,537 for the years
         ended December 31, 2000 and 1999, respectively. The Company also had a
         net working deficit of $1,756,472 and $505,426 for the years ended
         December 31, 2000 and 1999 respectively. Additionally, the Company must
         raise additional capital to meet its funding commitments for the
         acquisition of Classic Care, Inc. These factors raise 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.

                                     -F-15-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000

NOTE 3 - INVESTMENTS

         Investments as of December 31, 2000 consist of the following:

                             Stason Biotech, Inc. $             5,028
                             Ebility, Inc.                     25,000
                                                  --------------------
                                                  $            30,028
                                                  ====================

         The investment in Stason Biotech, made during 2000, represents the
         Company's 40% share of earnings in this company for the year ended
         December 31, 2000 as recorded under the equity method of accounting.
         The investment in Ebility, made during 2000, is recorded under the cost
         method of accounting.

         The Company's investment in KII, Inc., a multi-level marketing company,
         was written off during 1999.


NOTE 4 - NOTES RECEIVABLE--RELATED PARTY

         As of December 31, 2000, the Company holds a $280,000 note receivable
         from one of its shareholders. The note is due upon demand and bears no
         interest.


NOTE 5 - PROPERTY AND EQUIPMENT

         Property and equipment at December 31, 2000 and 1999 consisted of the
         following:

                                                           2000         1999
                                                        ----------   ----------
         Furniture and equipment                        $  675,945   $  460,076
         Leasehold improvements                                  -      431,397
                                                        ----------   ----------
                                                           675,945      891,473
         Less accumulated depreciation and
          amortization                                     397,798      891,473
                                                        ----------   ----------
                  Total                                 $  278,147   $        -
                                                        ==========   ==========

         Depreciation and amortization expense for the years ended December 31,
         2000 and 1999 was $53,160 and $16,035, respectively.

                                     -F-16-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000

NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses at December 31, 2000 and 1999
         consisted of the following:

                                                             2000          1999
                                                         ------------ ----------
         Accounts payable                                $ 1,480,216  $ 126,200
         Accrued professional and related fees                43,000    108,091
         Accrued compensation and related payroll taxes      170,617      2,928
         Accrued interest payable                            236,233    221,631
         Other accrued expenses                               29,963    181,576
                                                         ------------ ----------
                    Total                                $ 1,960,029  $ 640,426
                                                         ============ ==========


NOTE 7 - NOTE PAYABLE -ACQUISITION

         As of December 31, 2000, the Company owed $1,301,000 for the cash
         portion of the acquisition price of Classic Care Pharmacy, Inc. This
         interest free note is payable in installments through October 1, 2001.


NOTE 8 - CONVERTIBLE NOTES PAYABLE AND DEBENTURES

         During January through May 1997, the Company issued convertible notes
         aggregating to $479,655, which are due in, the same months in 2000. The
         notes have a stated interest rate of 10% per annum, which interest is
         payable semi-annually. The notes are convertible at $9.38 per share,
         which approximated the average trading price of the Company's common
         stock. $10,000 of these notes were converted into common stock in 2000
         and $71,000 of these notes were still outstanding as of December 31,
         2000. During October 2000, the company issued convertible notes
         aggregating to $750,000, which are due in October 2002. The notes have
         a stated interest rate of 8% per annum, which interest is payable
         quarterly and the principal balance is due at maturity.
         The total notes outstanding at December 31, 2000, and 1999, amounted to
         $821,000 and $81,000 respectively.

         The convertible debentures amounting to $750,000, which were issued
         during 2000, have a conversion price that is the lesser of (1) 80% of
         the average of the three lowest closing prices out of the thirty
         closing prices prior to the closing date and (2) 80% of the lowest
         three closing prices during the sixty trading days, as reported on the
         NASD OTC

                                     -F-17-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000

NOTE 8 - CONVERTIBLE NOTES PAYABLE AND DEBENTURES (continued)

         Bulletin Board, immediately preceding the purchase date. Thus, the
         debentures will be converted at prices below the current market price
         on the conversion date. If conversions of the debentures occur,
         shareholders may be subject to an immediate dilution in their per share
         net tangible book value. The current convertible debentures may be
         converted into common stock at any time prior to their maturity date of
         October 25, 2002.


NOTE 9 - INCOME TAXES

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

                                                            2000         999
                                                        ------------ -----------
              Current
                   Federal                              $         -  $        -
                   State                                      4,000       3,600
                                                        ------------ -----------
                                                              4,000       3,600
                                                        ------------ -----------
              Deferred
                   Federal                                        -           -
                   State                                          -           -
                                                        ------------ -----------

                             Provision for income taxes $     4,000  $    3,600
                                                        ============ ===========

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

                                                               2000     1999
                                                             -------- ---------
                    Income tax provisions (benefit) computed
                            at federal statutory rate          34.0%     34.0%

                    State taxes, net of federal benefit        (0.1)     (0.1)

                    Increase in the valuation allowance       (33.9)    (33.9)
                                                             -------- ---------
                                     Total                     (0.0)%    (0.0)%
                                                             ======== =========

                                     -F-18-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000

NOTE 9 - INCOME TAXES (continued)

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

                                                     2000           1999
                                                -------------- --------------
      Deferred tax asset
               Net operating loss carryforwards $   6,911,627  $   4,091,145
               Impairment of assets                 2,032,518      2,032,518
               Options/warrants                       675,700      2,101,337
               Other                                  223,641              -
                                                -------------- --------------
                                                    9,843,486      8,225,555
      Deferred tax liability
               State income taxes                    (548,008)             -
                                                -------------- --------------

               Net deferred tax asset               9,295,478      8,225,555
                                                -------------- --------------

               Valuation allowance                 (9,295,478)    (8,225,555)

                                                -------------- --------------
                                                $           -   $          -
                                                ============== ==============

      At December 31, 2000, the Company has available approximately $16,133,583
      in net operating loss carryforwards available to offset future federal and
      state income taxes, respectively, which begin to expire in 2020.

      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.

                                     -F-19-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000

NOTE 10 - COMMITMENTS AND CONTINGENCIES

         A. Litigation
         -------------

         Lease

         In February 1992, Medical Funding of America ("MFA") leased to
         Tri-County a Siemens Mobile Magneton Impact MRI System with a Van. On
         or about June 24, 1992, Siemens and MFA entered into a loan and
         security agreement in the amount of $2,019,496, which was paid directly
         to Siemens Medical Systems, Inc. On or about March 1, 1995, Siemens,
         MFA, Tri-County, and Venus Management (an Interactive Medical
         Technologies (Kaire Holdings) subsidiary ("Kaire") entered into a
         transfer of interest agreement whereby Kaire gave its corporate
         guaranty of all of Venus' obligations under this agreement. Venus and
         MFA defaulted on the loan, and on April 2, 1997, Siemens Credit
         Corporation filed a civil action for the accelerated amount due plus
         costs. This action is still pending. On or about October 9, 1997, a
         Transfer of Interest Agreement was drawn up between Venus Management,
         Siemens Credit Corporation, and Medical Management, Inc. ("CMI," NYSE
         symbol CMI) whereby CMI would take over the lease. CMI took possession
         of the MRI. All parties executed the agreement, except Siemens, who
         continued to negotiate with CMI in an attempt to get CMI to pay all of
         the arrearages owed Siemens. At present CMI and Siemens are still
         negotiating over the terms of the agreement. It is the opinion of the
         Company's management that its obligations under this agreement have
         been assigned and that Siemens will not pursue this matter any further.

         The Company's magnetic resonance imaging ("MRI") system (the "Unit")
         currently is installed in a mobile van at an operating site in
         Jefferson Valley, New York and has been in use since September 1992. It
         is leased to Tri-County Mobile MRI, L.P. ("Tri-County"), whose general
         partner is Diagnostics Resource Funding.

         This lease provides for monthly payments of $37,926 to Venus
         Management, Inc. ("VMI") through August 1999 and $68,589 in September
         1999 (with such payments being guaranteed by Medical Funding of
         America, Inc. ("MFA")), and VMI is required to make monthly installment
         payments (which include interest at 10.5% per annum on the unpaid
         principal balance) for the Unit to a third party finance company of
         $32,360 through August 1999 and $68,589 in September 1999. This lease
         provides for a purchase option at the expiration of the initial term of
         such lease equal to the then fair market value of the Unit.

         Tri-County was delinquent in making certain of its lease payments to
         VMI under the terms of the lease agreement concerning the Unit, and MFA
         failed to make these payments to VMI under its guarantee of
         Tri-County's payments to VMI. Accordingly, VMI had not made certain
         payments due to the third-party finance company for the Unit.

                                     -F-20-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

     A. Litigation (continued)
     -------------------------

     Lease (continued)

     As a result, the third-party finance company issued a notice of default to
     the Company. Tri-County is currently in discussions with the third-party
     finance company to restructure the obligation, to assume the debt, and to
     take title to the Unit. It is expected that the third-party finance company
     will accept the restructure, and the Company will release its title to the
     equipment in exchange for the third-party finance company releasing the
     Company from its debt obligation. However, if the parties are unable to
     resolve this matter, it is likely that the third-party finance company will
     institute an action against the Company, VMI, and Tri-County for the
     balance due, plus other costs and relief.


     Patent Claim

     An individual filed a complaint against the Company alleging breach of
     contract and fraud and related business torts related to certain patents
     that the plaintiff transferred to the Company. The Company believes that
     the plaintiff's claims are without merit and intends to vigorously defend
     itself. The amount of claimed damages is not yet determined.

     Except as otherwise specifically indicated above, management believes that
     the Company doesn't 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, 2000. However, there can be no assurance that
     the Company will prevail in any of the above proceedings. In addition, the
     Company may be required to continue to defend itself resulting in
     substantial additional expense. In the event the Company is unable to pay
     the defense costs associated with the foregoing, an unfavorable settlement
     or judgment could be awarded against the Company, which could have a
     material adverse effect upon the Company.

                                     -F-21-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

     B. Leases
     ---------

     Operating leases

     The Company leases two facilities under non-cancelable operating lease
     agreements. The first facility is located at 7348 Bellaire Avenue, North
     Hollywood, CA and requires a monthly rental payment of $2,300. This lease
     expires in May 2001 and the company has the right to renew the lease
     agreement for an additional 12-month from that date. The second facility is
     located at 1429 South Robertson Blvd, Los Angeles, CA and requires a
     monthly rental payment of $4,500. The term of the lease is six (6) years
     and expires in March 2005.

     Rent expense for the years ended December 31, 2000 and 1999 was $60,501
     and $57,611 respectively.

     Future minimum lease payments due under non-cancelable operating leases
     consist of the following as of December 31, 2000:


               2001                              $   81,600
               2002                                  65,500
               2003                                  54,000
               2004                                  54,000
               2005                                  13,500
                                                 ----------
               Future minimum lease payments     $  268,600
                                                 ==========

                                     -F-22-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

     Capital leases

     The Company maintains capital leases for some of its medical equipment and
     autos. The following is a schedule by year of the approximate future
     minimum lease payments required under these leases:


               2001                                      $  94,208
               2002                                         78,776
               2003                                         57,119
               2004                                          3,976
                                                         ---------
               Future Minimum lease payments             $ 234,079

               Less amount representing interest            36,970
                                                         ---------

               Present value of minimum lease payments     197,109

               Less current portion                         73,262
                                                         ---------

               Long-term capital lease obligation        $ 123,847
                                                         =========

     The leased property under capital leases as of December 31, 2000 has a cost
     of $304,899, accumulated amortization of $114,072 and a net book value of
     $190,827. Amortization of the leased property is included in depreciation
     expense and amounts to $35,572 for the year ended December 31, 2000.

     Employment Agreements
     ---------------------

     The Company has an employment agreement with its Chief Executive Officer
     that has a term of three years and one month, ending May 1, 2003. Under
     this agreement, the CEO receives an annual salary of $8,000.00 per month
     for the first year, 8,333.33 per month for the second year and $9,583.00
     for the third year. Additionally, the CEO received an option to purchase
     6,000,000 shares of the Company's stock at an option price of $.05 per
     share. The option is exercisable at any time and the payment of the option
     price may be deferred. The CEO 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.

                                     -F-23-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

     Employment Agreements (continued)
     ---------------------------------

     The Company has an employment agreement with its President that has a term
     of three years and one month ending May 1, 2003. Under this agreement, the
     CEO receives an annual salary of $6,250.00 per month for the first year,
     $8,000 per month for the second year and $9,200.00 for the third year.
     Additionally, the President received an option to purchase 4,500,000 shares
     of the Company's stock at an option price of $.05 per share. 2,250,000 of
     the shares are exercisable on April 1, 2000 and 2,250,000 shares are
     exercisable on April 1,2001. The payment of the option price may be
     deferred. The President also receives a commission of 1 1/2% of the merger
     price for any mergers or acquisitions completed by the Company during the
     term of the agreement

     The Company has an employment agreement with its Chief Financial Officer
     that has a term of three years and one month ending May 1, 2003. Under this
     agreement, the CFO receives an annual salary of $7,250.00 per month for the
     first year, $8,000 per month for the second year and $9,200.00 for the
     third year. Additionally, the CFO received an option to purchase 4,500,000
     shares of the Company's stock at an option price of $.05 per share.
     2,250,000 of the shares are exercisable on April 1, 2000 and 2,250,000
     shares are exercisable on April 1,2001. The payment of the option price may
     be deferred. The CFO also receives a commission of 1 1/2% of the merger
     price for any mergers or acquisitions completed by the Company during the
     term of the agreement

     In October 5, 2000 the Company entered into a one-year employment agreement
     with an automatic one-year extension with its Chief Technical Officer that
     provides for a base salary and an option to purchase 500,000 shares of the
     Company common stock. The Company will also grant the employee a 3-year
     option to purchase additional 300,000 shares of the Company common stock.

     An officer received 3,000,000 shares of the Company's stock during 1999
     with a market value of $60,000 as partial payment of employment
     liabilities. A former officer received 4,000,000 shares of the Company's
     stock during 1999 with a market value of $80,000 as payment of similar
     liabilities.

     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 and professional services rendered in
     connection with the Company's acquisition efforts.

                                     -F-24-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 11 - STOCKHOLDERS' EQUITY & STOCK OPTIONS

     Common Stock
     ------------

     The Company issued common stock to related parties, noted as follows:

     During the year ended December 31. 2000, three officers of the Company
     exercised options and acquired 4,500,000 shares of the Company's common
     stock at prices ranging from $.05-$.10 per share. Also, a director, before
     he was appointed, had received an option to purchase 2,000,000 shares of
     the Company's common stock at $0.05 in exchange for professional services.

     During 1999, the former President of the Company received 4,000,000 shares
     of common stock as repayment of prior amounts personally due him. In
     addition, this former officer of the Corporation received 13,443,750 shares
     in the form of converted market value options granted for consulting
     services at $.05 per share and shares issued for debt restructuring.

     During 1999, the Company's Chief Executive Officer received 3,000,000
     shares of common stock as repayment of prior amounts personally due him.

     During 1999, the new President of the Company exercised market value
     options and acquired 1,250,000 shares of the Company's common stock at $.04
     per share.

     During 1999, the Chief Financial Officer of the Company received 1,200,000
     shares of stock as compensation for services rendered during 1998 and 1999.

     Stock Options and Warrants
     --------------------------

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

                                                     1999         2000
                                                  ----------   -----------
     Net loss
             As reported                          $ (472,537)  $(2,413,175)
             Pro forma                            $ (488,522)  $(2,735,854)
     Basic and diluted loss per common share
             As reported                          $    (0.01)  $     (0.02)
             Pro forma                            $    (0.01)  $     (0.03)

                                     -F-25-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 11 - STOCKHOLDERS' EQUITY & STOCK OPTIONS (continued)

     Stock Options and Warrants (continued)
     --------------------------------------

     Options 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.

     The fair value of these options 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, 2000: dividend yield of 0%;
     expected volatility of 300%; risk-free interest rate of 5.3%; and expected
     life of 1 year; and 1999: dividend yield of 0%; expected volatility of
     100%; risk-free interest rate of 5.5%; and expected life of 1 to 1.5 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 options granted during the years ended
     December 31, 2000 and 1999 was $0.11 and $0.08, respectively.

     The following table summarizes information with respect to stock options
     outstanding and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                   Options Outstanding                           Options Exercisable
---------------------------------------------------------------------------------------------------------------
                                         Weighted                                                 Weighted
                                         Average         Weighted Average                         Average
     Exercise             Number         Exercise            Remaining            Number          Exercise
      Price             Of Shares         Price          Contractual Life        Of Shares         Price
---------------------------------------------------------------------------------------------------------------
<S>                     <C>              <C>             <C>                     <C>              <C>
      $ 0.05            11,700,000        $0.05               2.25               7,200,000         $0.05

      $ 0.15                 6,667        $0.15               1.50                   6,667         $0.15
                        ----------        -----               ----               ---------         -----

                        11,706,667        $0.05               2.25               7,206,667         $0.05
                        ==========        =====               ====               =========         =====
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                     -F-26-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 11 - STOCKHOLDERS' EQUITY & STOCK OPTIONS (continued)

         Stock Options and Warrants (continued)
         -------------------------------------

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

<TABLE>
<CAPTION>
                                                     Warrants         Weighted
                                                       And             Average
                                                  Stock Options       Exercise
                                                   Outstanding         Price
                                                 ---------------     -----------
          <S>                                    <C>                 <C>
          Outstanding, December 31, 1998             1,405,692       $      9.30
                   Granted                          18,720,000       $      0.05
                   Exercised                       (17,460,000)      $      0.05
                   Expired/Cancelled                  (687,692)      $      3.15
                                                 -------------       -----------

          Outstanding, December 31,1999              1,978,000       $      6.74
                  Granted                           29,850,000       $      0.05
                  Exercised                        (16,908,333)      $      0.10
                  Expired/Cancelled                 (1,463,000)      $      8.52
                                                 -------------       -----------

          Outstanding December 31, 2000             13,456,667       $      0.05
                                                 =============       ===========

          Exercisable, December 31, 2000             8,956,667       $      0.05
                                                 =============       ===========
</TABLE>

          The Company has 1,750,000 and 772,333 warrants outstanding as of
          December 31, 2000 and 1999, respectively. The exercise prices for the
          warrants range from $0.15 to $45. On October 29, 2000 the Company
          issued warrants to purchase 1,500,000 shares of its common stock at an
          exercise price of $0.15.


NOTE 12 - EARNINGS PER SHARE

          Earnings per share have been calculated using the weighted average
          number of shares outstanding during each period. Earnings per share-
          dilutive does not include the effect of 5,759,306 and 13,184,347 of
          dilutive shares for the years ended December 31, 2000 and 1999
          respectively. The net loss for the periods ended December 31, 2000 and
          1999 makes these shares anti-dilutive.

                                     -F-27-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 13 - MERGER AGREEMENTS

         Stason U.S. Pharmaceuticals, Inc.
         ---------------------------------

         The Company entered into a letter of intent with Stason U.S.
         Pharmaceuticals, Inc. (Stason). Under the agreement, Stason will
         receive a 17% interest in a wholly owned subsidiary, YesRx.com, Inc.,
         which was incorporated March 27, 2000. In exchange, Stason provided
         Kaire Holding's subsidiary, YesRx.com, Inc, with $175,000 in working
         capital. As of December 31, 2000, the parties were still undecided
         about the details of this investment. This amount is disclosed as a
         liability, an amount due Stason, in the financial statements.

         In addition, Stason and Kaire merged their laboratory operations into a
         new company called Stason Biotech, Inc. in which Stason and the Company
         own 60% and 40%, respectively, of the common stock of the newly formed
         Company. The Company accounts for this investment using the equity
         method.

         Classic Care Pharmacy, Inc.
         ---------------------------

         In May of 2000, the Company acquired Los Angeles-based Classic Care
         pharmacy. Classic Care Pharmacy provides specialized prescription
         medication services to seniors living in extended care facilities in
         Southern California. Under the merger agreement, the Company paid
         $1,000,000 in cash and issued 15,500,000 shares of common stock to
         acquire all the outstanding common stock (10,000 shares) of Classic
         Care Pharmacy. This agreement required that additional stock be issued
         if the price of the trading price of the stock on the OTCBB was less
         than $.50 per share on October 31, 2000.

         This agreement was amended on December 6, 2000 to include additional
         cash payments of $2,000,000, and to defer the determination date for
         any additional shares to be issued under the merger agreement to
         October 31, 2001. The target price of the acquisition was set at
         $9,500,000 and the value of public market valuation of the 15,500,000
         shares is required to be $6,500,000 or $.42 per share on or before that
         date to meet the target price of $9,500,000.

         If the price of the stock is not equal to or greater than $.42 per
         share during the period December 6, 2000 through October 31, 2001, the
         Company will be required to issue sufficient additional shares of
         Common Stock or pay additional cash to insure that the total
         consideration paid for the acquisition is $9,500,000. The additional
         stock must be issued or cash paid by November 30, 2001.

                                     -F-28-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000

NOTE 13 - MERGER AGREEMENTS (continued)

         Classic Care Pharmacy, Inc. (continued)
         ---------------------------------------

         The acquisition was accounted for as a purchase in accordance with
         provisions of APB 16. Under the purchase method of accounting, the
         purchase price is allocated to the assets acquired and liabilities
         assumed based on their estimated fair values at the date of the
         acquisition.

         The purchase price was allocated to the assets acquired and liabilities
         assumed based on their estimated fair values as determined by the
         Company:

<TABLE>
                      <S>                             <C>
                      Current assets                  $      471,960

                      Fixed assets                           282,485

                      Goodwill                             9,478,732
                                                      --------------

                      Total assets acquired               10,233,177

                      Less liabilities assumed               733,177
                                                      --------------

                      Cost of net assets acquired     $    9,500,000
                                                      ==============
</TABLE>

         Goodwill will be amortized on a straight-line basis over 20 years.
         Amortization expense as of December 31, 2000 amounted to $276,465.

                                     -F-29-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 13 - MERGER AGREEMENTS (continued)

         Classic Care Pharmacy, Inc. (continued)
         ---------------------------------------

         The following unaudited pro forma consolidated results of operations
         give effect to the acquisition of Classic Care Pharmacy as if it
         occurred as of the beginning of the periods presented below:

<TABLE>
<CAPTION>
                                                    Kaire Holdings Inc
                                          Consolidated Balance Sheet (Unaudited)
                                                      As of May 31, 2000

                                          5/31/00         5/31/00                                              5/31/00
                                           KAIRE       CLASSIC CARE     Adjust1    Adjust2        Adjust3     Pro forma
                                           -----       ------------     -------    -------        -------     ---------
<S>                                     <C>            <C>             <C>         <C>           <C>         <C>
Cash                                    $    565,158   $         -                                                565,158
Accounts Receivable                           19,690       197,376                                                217,066
Inventory                                          -       263,905                                                263,905
Other current assets                          55,186        10,679                                                 65,865
Property and Equip, net                       13,714       282,485                                                296,199
Other assets                                 505,000             -      9,000,000   (9,500,000)                     5,000
Goodwill                                           -             -                   9,478,732   (197,475)      9,281,257
                                        -----------------------------------------------------------------------------------

Total Assets                               1,158,748       754,445      9,000,000      (21,268)  (197,475)   $ 10,694,450
                                        ===================================================================================

Accounts payable                             114,338       452,792                                                567,131
Other liab & accrued exp                     195,576        33,635      2,500,000                               2,729,211
Other long-term liabilities                  200,000       246,750                                                446,750
Convertible notes and accrued interest       289,320             -                                                289,320
Common stock                                 589,193         1,000                      (1,000)                   589,193
Additional paid in capital                31,548,162       103,439      6,500,000     (103,439)                38,048,162
Retained earnings                        (31,777,841)      (83,171)                     83,871   (197,475)    (31,975,316)
                                        -----------------------------------------------------------------------------------

Total liabilities and Equity               1,158,748       754,445      9,000,000      (21,268)  (197,475)   $ 10,694,450
                                        ===================================================================================
</TABLE>

                                     -F-30-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 13 - MERGER AGREEMENTS (continued)

         Classic Care Pharmacy, Inc. (continued)
         ---------------------------------------

<TABLE>
<CAPTION>
                                                 Kaire Holdings Inc
                                  Consolidated Statement of Operations (pro forma):
                                          For the 12 months ended 12/31/99

                                           12/31/99            12/31/99                           12/31/99
                                             KAIRE           CLASSIC CARE       Adjust4           Pro forma
                                             -----           ------------       -------           ---------
        <S>                              <C>                 <C>                <C>               <C>
        Revenue                          $   259,545          $ 4,865,420                         $ 5,124,965
        Cost of goods                         89,245            3,301,805                           3,391,050
                                         -----------         ------------                         -----------
        Gross profit                         170,300            1,563,615                           1,733,915
        Operating expenses                 1,014,296            1,228,465        (473,940)          1,768,821
                                         -----------         ------------                         -----------
        Income from operations              (843,996)             335,150                            (508,846)
        Other expense (income)              (375,059)              33,042                            (342,017)
                                         -----------         ------------                         -----------
        Income before taxes                 (468,937)             302,108                            (166,829)
        Income taxes                           3,600                4,822                               8,422
                                         -----------         ------------      ----------         -----------
        Net income (Loss)                $  (472,537)         $   297,286       $(473,940)           (649,191)

        Weighted average shares           36,251,628               10,000
                                         ===========         ============      ==========         ===========

       Earnings (Loss) per share         $    (0.013)         $    29.729
                                         ===========         ============
</TABLE>


<TABLE>
<CAPTION>
                                                 Kaire Holdings Inc
                                  Consolidated Statement of Operations (pro forma):
                                           For the 5 months ended 05/31/00

                                         5/31/00              5/31/00
                                          KAIRE             CLASSIC CARE          Adjust5         Pro forma
                                          -----             ------------          -------         ---------
        <S>                           <C>                  <C>                   <C>              <C>
        Revenue                              77,626            2,199,547                            2,277,173
        Cost of goods                        81,594            1,626,319                            1,707,913
                                      -------------         ------------                          -----------
        Gross profit                         (3,967)             573,228                              569,261
        Operating expenses                  388,648              713,050         (197,475)            904,224
                                      -------------         ------------                          -----------
        Income from operations             (392,615)            (139,823)                            (532,438)
        Other expense (income)              199,544                    -                              199,544
                                      -------------         ------------                          -----------
        Income before taxes                (592,159)            (139,823)                            (731,982)
        Income taxes                            400                    -                                  400
                                      -------------         ------------      -----------         -----------
        Net income (Loss)              $   (592,559)          $ (139,823)        (197,475)           (929,857)

        Weighted average shares         109,193,033               10,000
                                      =============         ============

       Earnings (loss) per share       $     (0.005)          $  (13.982)
                                      =============         ============      ===========         ===========
</TABLE>

                                     -F-31-
<PAGE>

                          KAIRE HOLDINGS INCORPORATED
                               AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                               December 31, 2000


NOTE 13 - MERGER AGREEMENTS (continued)

         Classic Care Pharmacy, Inc. (continued)
         ---------------------------------------

         The pro forma adjustments to the consolidated balance sheets are as
         follows:

         Adjust1: To adjust the acquisition price to its actual value as if the
                  business combination occurred at the beginning of the period.

         Adjust2: To eliminate the investment account, the equity accounts of
                  the subsidiary (Classic Care pharmacy), and record the value
                  of goodwill.

         Adjust3: To record five (5) months amortization of goodwill.


         The pro forma adjustments to the consolidated income statements are as
         follows:

         Adjust4: To record twelve (12) months of amortization expense of
                  goodwill.

         Adjust5: To record five (5) months of amortization expense of goodwill.

                                     -F-32-