<PAGE>
 
                                 FORM 10-QSB 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

               For the quarterly period ended  June 30, 1998
                                             ----------------

                                       OR

              [_] 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
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                           13-3367421
-------------------------------                        -----------------------
(State or other jurisdiction of                        (I.R.S. employer
incorporation or organization)                          identification number)

2139 Pontius Avenue, Los Angeles, California                   90025
--------------------------------------------------------------------------------
 (Address of principal executive offices)                   (Zip Code)

       Registrant's Telephone number, including area code: (310) 312-9652
                                                           --------------

                     INTERACTIVE MEDICAL TECHNOLOGIES LTD.
  ----------------------------------------------------------------------------
  (former, name, address and former fiscal year, if changed since last report)

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        No  X
                                              ---       ---

State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.

                                           Outstanding at
               Class of Common Stock       June 30, 1998
               ---------------------      ----------------
                 $.075 par value          8,152,815 shares

        Transitional Small Business Disclosure Format  Yes        No  X
                                                           ---       ---

                                      -1-
<PAGE>
 
                                  FORM 10-QSB
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                          KAIRE HOLDINGS INCORPORATED

                                     Index

PART I - FINANCIAL INFORMATION

     Item 1. Consolidated Financial Statements

             Condensed Consolidated Balance Sheets at
              December 31, 1997 and June 30, 1998 (unaudited)

             Condensed Consolidated Statements of Operations
              for the three and six months ended June 30, 1997 (unaudited)
              and 1998 (unaudited)

             Condensed Consolidated Statements of Cash Flows
              for the six months ended June 30, 1997 (unaudited)
              and 1998 (unaudited)

             Notes to Condensed Consolidated Financial Statements

     Item 2. Management's Discussion and Analysis of Financial Condition
              and Results of Operations.


PART II. - OTHER INFORMATION

     Item 1. Legal Proceedings

     Item 4. Submission of Matters of a Vote to Security Holders

     Item 5. Other Information

     Item 6. Exhibits and Reports on Form 8-K

SIGNATURES

                                      -2-
<PAGE>
 
                         PART I. FINANCIAL INFORMATION
                         -----------------------------

   ITEM I.   FINANCIAL STATEMENTS

                  KAIRE HOLDINGS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                      December 31, 1997 and June 30, 1998

<TABLE>
<CAPTION>
                           ASSETS
                           ------
 
                                     December 31,    June 30,
                                         1997          1998
                                     ------------   -----------
                                                    (unaudited)
<S>                                  <C>            <C>
   Current assets
      Cash and cash equivalents        $   35,928   $    8,667
      Accounts receivables, net            47,431       81,146
      Inventory                           115,042      115,965
      Prepaid expense                      70,947      134,300
                                       ----------   ----------
 
         Total current assets             269,348      340,078
 
   Furniture and equipment, net            58,196       24,894
   Other Assets                                         26,612
   Deposits                                 9,500        9,500
   Patents, net                            44,691       40,966
                                       ----------   ----------
       Total assets                    $  381,735   $  442,050
                                       ----------   ----------

                  LIABILITIES AND SHAREHOLDERS' DEFICIT
                  -------------------------------------
 
   Current liabilities
      Notes payable                        25,000       25,000
      Accounts payable and accrued 
       expenses                         2,271,946    2,201,421
                                       ----------   ----------
       Total current liabilities        2,296,946    2,226,421

   Convertible notes payable            2,000,100    1,612,600   
                                       ----------   ----------
       Total liabilities                4,297,046    3,839,021
                                       ----------   ----------
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      -3-
<PAGE>
 
                  KAIRE HOLDINGS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                      December 31, 1997 and June 30, 1998
<TABLE>
<S>                                                 <C>                      <C>
Shareholders' deficit
 Common stock, $0.075 par value
  authorized 400,000,000 shares,
  8,152,815 issued and outstanding                          212,430             215,924

 Additional paid-in-capital                              25,547,395          26,625,627
 Accumulated deficit                                    (29,675,136)        (30,238,522)
                                                       ------------        ------------
 
   Total Shareholders' Deficit                           (3,915,311)         (3,396,971)
 
Total liabilities and stockholders' deficit            $    381,735        $    442,050
                                                       ------------        ------------
</TABLE>



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

                                      -4-
<PAGE>
 
             INTERACTIVE MEDICAL TECHNOLOGIES LTD. AND SUBSIDARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 and 1998
<TABLE>
<CAPTION>

                                                        Three Months Ended            Six Months Ended
                                                              June 30,                    June 30,
                                                    ---------------------------    ------------------------
                                                         1997          1998           1997         1998
                                                    -----------     -----------    -----------    ---------
<S>                                                  <C>             <C>            <C>            <C>
REVENUES
     Products and Services                           $  73,801      $  125,793    $   143,480    $ 225,751
     Lease Rentals                                           -               -         90,590            -
                                                     ---------      ----------    -----------    ---------
       Total Revenue                                    73,801         125,793        233,976      225,751

Cost of Revenues                                        87,182          48,343        196,235      102,154

Gross Profit                                           (13,381)         77,450         37,741      123,597

Operating Expenses
    Research and development                            18,000           1,088         80,339        1,088
     Selling, general and administrative               286,220         257,388        570,151      623,240
                                                     ---------      ----------    -----------    ---------
      Total Operating Expenses                         304,220         258,476        650,490      624,328
                                                     ---------      ----------    -----------    ---------
Loss from Operations                                  (317,601)       (181,027)      (612,749)    (500,731)

Interest Expense and Other
Interest expense - other                                36,585          30,928         61,016       61,855
Interest expense - lease operations                          -               -         23,703            -
Interest Income                                            (94)              -           (331)           -
Net Losses on pending acquisition                      200,000               -        731,601            -
                                                     ---------      ----------    -----------    ---------
   Total interest expense and other                    236,491          30,928        818,989       61,855

                                                     ---------      ----------    -----------    ---------
 Loss before provision for state                      (554,092)       (211,954)    (1,431,738)    (562,586)

Provision for state income taxes                             -             400            800          800

Net Loss                                              (554,082)       (212,354)    (1,431,538)    (563,386)
                                                     ---------      ----------    -----------   ----------

Basic Loss per Share                                 $    0.88      $     0.08    $      2.25   $     0.25

Diluted Loss per Share                               $    0.88      $     0.08    $      2.25   $     0.25

Weighted average shares outstanding                    627,819       2,662,116        634,941    2,293,122
                                                     ---------      ----------    -----------   -----------

</TABLE>
          See the accompanying notes to these consolidated statements

                                      -5-
<PAGE>
 
                  KAIRE HOLDINGS INCORPORATED AND SUBSIDARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Six Months Ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
                                                      (Unaudited)     (Unaudited)
                                                         1997            1998
                                                     -------------   -------------   
<S>                                                  <C>             <C>
Cash flows from operating activities
Net Loss                                              $(1,432,538)   $(563,386)                                 
Adjustments to reconcile net loss to net cash
 used in operating activities:
    Amortization and Depreciation                         239,115       37,027
    Common stock issued for services                                   357,551
    Common stock issued for interest on notes                           53,987    
    Compensation expenses related to below-market 
     stock Options granted
(Increase) decrease in:
    Accounts receivable                                   (12,248)     (37,715)
    Lease receivable                                      (90,591)           -
    Prepaid expenses and other assets                       4,620      (89,965)
    Inventories                                                           (923)
Increase (decrease) in:
    Accounts payable and accrued expenses                 169,595      (70,525)
                                                      -----------    ---------
 
         Net cash used in operating activities         (1,122,047)    (309,949)
                                                      -----------    ---------
 
Cash flows from investing activities
    Purchase of furniture and equipment                    (2,773)           -
    Investment in affiliates                             (366,912)           -
                                                      -----------    ---------
         Net cash used in investing activities           (369,685)           -
 
Cash flows from financing activities
    Payments on notes payable                                   -      (10,000)
    Proceeds from issuance of common stock                450,000      132,688
    Proceeds from issuance of convertible notes           908,773      160,000
                                                      -----------    ---------
         Net cash provided by financing activities      1,358,773      282,688
                                                      -----------    ---------
 
</TABLE>

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

                                      -6-
<PAGE>
 
                  KAIRE HOLDINGS INCORPORATED AND SUBSIDARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Six Months Ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
 
                                                         (Unaudited)   (Unaudited)
                                                            1997          1998
                                                         -----------   -----------
<S>                                                      <C>           <C>
 
          Net decrease in cash and cash equivalents        (132,959)      (27,261)
                                                          ---------      --------
 
Cash and cash equivalents, beginning of period              192,421       35,9328
                                                          ---------      --------
 
Cash and cash equivalents, end of period                  $  59,463      $  8,667
                                                          ---------      --------
 
</TABLE>



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

                                      -7-
<PAGE>
 
                  KAIRE HOLDINGS INCORPORATED and SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)
                                 June 30, 1998

1.  Significant Risks
    -----------------

        The Company has incurred net losses of $2,066,727 and $12,210,263 for
the years ended December 31, 1996 and 1997, respectively and an additional loss
of $1,431,538 and $563,386 for the six months ended June 30, 1997 and June 30,
1998. The loss in 1997 resulted from a combination of failed acquisitions and
the related write down of investments. The continued loss in 1998 is a result of
remaining expenses related to the failed Kaire International acquisition attempt
coupled by continuing losses in operations. The accumulative effect of the
continuing losses have adversely affected the liquidity of the Company. Future
losses will likely negatively impact the Company's ability to raise future
working capital.

        As of June 30, 1998, the Company had an accumulated deficit of
$30,238,522 and negative working capital of $1,886,343. In addition, the Company
remains subject to various business risks including but not limited to its
ability to maintain vendor and supplier relationships by paying bills when due,
and overcoming future and ongoing product development, distribution and
marketing issues.

        The Company's condensed consolidated financial statements have been
prepared on the assumption the Company will continue as a going concern. The
Company has suffered recurring losses from operations, has an accumulated
deficit, has negative working capital and faces product development and
distribution issues that raise substantial doubt about its ability to continue
as a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount of liabilities that might result should the Company be unable to
continue as a going concern.

        The Company's condensed consolidated financial statements have been
prepared on the assumption the Company will continue as a going concern. The
Company has suffered recurring losses from operations, has an accumulated
deficit, has negative working capital and faces product development and
distribution issues that raise substantial doubt about its ability to continue
as a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount of liabilities that might result should the Company be unable to
continue as a going concern.

        The Company, which was formerly known as Interactive Medical
Technologies Ltd., was incorporated in Delaware in 1986. The Company provides
non-radioactive diagnostic products and laboratory analysis services to private
and government research facilities, academic centers, and hospitals engaged in
studying the effects of experimental drugs and/or surgical procedures have on
regional blood flow. The Company's products and services are sold through the
Company's E-Z Trac division.

                                      -8-
<PAGE>
 
        In 1993, the Company acquired Venus Management, Incorporated, ("VMI")
which was incorporated in New York on August 1, 1989. VMI's principle assets at
the time were two MRI systems, one which was leased to an MRI service provider
operating in New York and the second unit which was not operational. The non-
operational unit was returned to the finance company upon which VMI received a
release of claims agreement. Concerning the leased system, on or about March 1,
1995, VMI entered into a transfer of interest agreement with Siemens Credit
Corp., Medical Funding of America ("MFA") and Tri-county whereby Kaire gave its
corporate guaranty for all of Venus' obligations under this agreement. MFA
defaulted on the loan and on April 2, 1997 Siemens Credit Corporation filed a
civil action against Kaire for the accelerated amount due plus costs.
Subsequently, a Transfer of Interest Agreement was drawn up between Venus
Management, Siemens Credit Corporation and Medical Management, Inc. (NYSE symbol
CMI) whereby CMI would take over the lease and at the same time the legal action
was put on hold. (see legal Proceedings).

        In May 1996, the Company made a proposal to acquire Pastels
International, Inc. ("Pastels"), a private California personal care products
company that manufactured several beauty and skin care formulations. Prior to
June 1997, the Company decided not to proceed with the acquisition due to
Pastels not meeting certain key performance criteria. The company had advanced
$302,856 to Pastels, of which $272,437 was expensed in 1996 and the balance of
$30,419 was expensed in 1997.

        In September 1996, the Company attempted to enter into an agreement to
acquire Nutra Quest, Incorporated ("NQI"), a start-up network marketing company,
which distributed food supplement and nutrition consumer's products. Due to
difficulties with NQI's CEO and management, the anticipated business growth
expected by NQI never materialized which lead to the termination of NQI's CEO
during the fourth quarter of 1997. Subsequently, the NQI CEO seized the
Company's headquarters along with certain assets, thus permanently damaging
NQI's business. As a result of these of chain of events, NQI operations were
terminated during the fourth quarter of 1997. At this time any remaining
distributor downlines were transferred to Kaire International and the remaining
NONI inventory was also transferred to Kaire International, Inc. The Company
funded NQI $2,003,728 of which $502,728 and $1,501,000 was expensed in 1996 and
1997 respectively. (see Legal Proceedings).

        In December 1997 the Company entered into an agreement (the "Agreement")
to acquire 80% of Kaire International, Inc. ("KII"), a network marketing firm
based in Longmont, Colorado, with 1997 annual sales of approximately
$31,000,000. In exchange for KII's Common Stock, the Agreement called for the
Company to invest an initial $1,000,000 plus Company Common Stock, and to
subsequently provide additional capital totaling $2,000,000 by the latter of
February 15, 1998 or the completion of KII's year-end audit. Determining that
the Company was not going to raise the additional capital needed by such dates,
the Company and KII entered into an agreement whereby the Company assigned
approximately two thirds of its equity position in KII to a third party, and the
third party was to fund KII $2,000,000. For consideration, the Company received
an option from KII repurchase the same number of KII shares that it had assigned
to the third party $2,000,000. The Company was unable to raise the funds and the
option expired on August 5, 1998. After the occurrence of these events, the
Company owns 24% of KII. A write down of $2,632,003 in the KII investment was
reflected in the Company's 1997 financial statements. KII filed an S-1
Registration Statement on February 11, 1998 and an Amended S-1 Registration
Statements on July 10, 1998 and October 23, 1998. The Registration 

                                      -9-
<PAGE>
 
statement provides for the selling of 1,000,000 shares of KII at $6.00 a share.
The under writer is the May Davis Group Incorporated, located in Baltimore, MD,
and the attorney is Gusrae, Kaplan & Bruno located in New York, NY. Subsequent
to the filing of the amended Registration Statement, KII decided not to proceed
with the offering. On December 10, 1998, Natural Health Trends Corp., ("NHTC")
(NASDAQ: Symbol NHTCC), announced it had signed an agreement as of November 24,
1998 to purchase certain assets of KII for a combination of Series E and Series
F Preferred stock, Acquisition Warrants and a percentage of NHTC's net income
for a period of five years. On February 19, 1999, NHTC announced that the
acquisition was completed. It is not known what effect the NHTC agreement will
have on Kaire Holding's investment in KII, thus due to the uncertainty in Kaire
Holding's ability to recover its investment in KII, its investment in KII was
written off for the year ending December 1997.

        On February 19, 1998, Kaire Holdings, Incorporated changed its name from
Interactive Medical Technologies, Ltd., changed its NASDAQ OTC BBS symbol to
"KAHI" from "NONI" and reverse split its Common Stock at a ratio of seventy-five
(75) to one (1).

        Due to the above factors, losses are expected to continue at least for
the immediate future. In the event working capital is not available to the
Company, the Company would curtail all non commercial operations while
accelerating the distribution and sale of nutritional products and its efforts
to license its contrast microsphere technologies.

        The Company carries no direct product liability insurance, relying
instead on the coverage afforded by its distributors and the manufacturers from
whom it obtains products. These coverages directly protect the insured that pay
the premiums and only secondarily the Company. There is no assurance that such
coverages will adequately cover any claims that may be brought against the
Company. In addition, the Company does not have any general liability coverage.

2.  Summary of Significant Accounting Policies
    ------------------------------------------

             Basis of Presentation
             ---------------------

        The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. Certain
matters raise substantial doubt about the Company's ability to continue as a
going concern. As discussed in Note 1, the Company operates under extreme
liquidity constraints and, because of recurring losses, increasing difficulty in
raising necessary additional capital. Management's plan in regard to these
matters is described above. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.

        In the opinion of the management the accompanying consolidated financial
statements contain all adjustments necessary (consisting of only normal
recurring accruals) to present fairly the financial position at June 30, 1998,
the results of its operations for three and six months ended June 30, 1998 and
the cash flow for three and six months ended June 30, 1998. Certain information
and footnote disclosures
                                      -10-
<PAGE>
 
normally included in financial statements that would have been prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission, although management of the Company believes that the disclosures in
these financial statements are adequate to make the information presented
therein not misleading. It is suggested that these condensed financial
statements and notes thereto be read in conjunction with the financial
statements and the notes thereto included in the Company's December 31, 1997
Form 10-KSB.

        The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results of operations to be expected for the
full fiscal year ending December 31, 1998.

        Income Taxes
        ------------

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

        Fair Value of Financial Instruments
        -----------------------------------

        The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. 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 Split
        -----------

        On or about February 19, 1998, the Company effected a 1-for-75 reverse
stock split of its common stock. All share and per share data have been
retroactively restated to reflect this stock split.

        Stock Options
        -------------

        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 

                                      -11-
<PAGE>
 
Issued to Employees," to account for stock-based compensation. The Company has
elected 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.

        Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of state income taxes currently due. No
federal income taxes are due as a result of the Company's net operating loss
carryforwards.

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

        In 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS No. 128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings per share is
very similar to the previously reported fully diluted earnings per share. Basic
earnings per share is computed using the weighted-average number of common
shares outstanding during the period. Common equivalent shares are excluded from
the computation if their effect is anti-dilutive.


3.  Capital Transactions, Convertible Notes Payable and Debentures

       On December 9, 1997, the Company entered into an agreement with KII, a
multi-level marketing company, and certain KII stockholders ("KII Stockholders")
that collectively owned 3,573,351 shares, or approximately 80%, of KII's issued
and outstanding common stock. Based on the terms of the agreement, the Company
issued 1,576,122 shares of its common stock to the KII Stockholders in exchange
for 3,573,351 shares of KII's common stock. The 1,576,122 shares issued by the
Company were valued at approximately $3,694,000 which is equal to the number of
shares issued multiplied by the market price of the Company's common stock at
the date of the transaction. In addition to the exchange of shares, the Company
committed to provide $3,000,000 in additional capital to KII, or the Company
would forfeit a portion of its KII equity holdings based on certain provisions
of the agreement. The Company provided $1,000,000 in additional equity capital
and committed to provide an additional $500,000, $500,000, and $1,000,000 by
December 25, 1997, January 15, 1998, and February 15, 1998, respectively.

       The Company was unsuccessful in obtaining the additional $2,000,000 and
sold to an unrelated third party 2,500,155 shares of its KII common stock for
nominal consideration. The purchaser of these shares agreed to provide KII with
the additional $2,000,000 in capital, thereby relieving the Company of its
additional $2,000,000 capital commitment described above. Additionally, KII
granted the Company an option to purchase 2,500,155 shares of KII common stock
for $2,000,000, which expired on August 5, 1998. The Company was not able to
raise sufficient funds to exercise this option.

       As a result of the above transactions, the Company's ownership in KII has
been decreased from 80% to approximately 24% (1,073,196 shares), which occurred
subsequent to December 31, 1997. 

                                      -12-
<PAGE>
 
Based on the Company's temporary controlling interest in KII, the Company
accounted for its investment in KII using the equity method.

       A $2,632,000 impairment charge related to the Company's investment in KII
was recorded in the year ended December 31, 1997 due to the Company's subsequent
loss of ownership interest and the doubtfulness of recovering this investment.
Additionally, the Company provided a full valuation charge on the remaining
balance of the Company's investment in KII equal to $2,062,035.

       As of September 28, 1998, there were approximately 608 shareholders of
record of the company's Common Stock.

       During the fiscal year ended December 31, 1997, 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:

       For the period beginning on or about May 5, 1997 through December 31,
1997, there were 25,566,804 shares (340,891 shares on a post reverse split
basis) of common stock sold issued pursuant to Section 4(2) of the Securities
Act of 1933 and pursuant to Regulation S for approximately $1,222,639.

       For the period beginning May 23, 1997 through December 31, 1997, $441,500
of convertible promissory notes were converted into 7,354,321 shares (98,058
shares on a post reverse split basis) of common stock. The majority of these
shares were issued in reliance on Regulation S with the remainder made pursuant
to Section 4(2) of the Securities Act of 1933.

       1997 quarterly interest payments totaling $6,417.60 due on a convertible
promissory note held by the Wolas Family Trust were paid with 134,426 shares
(1,792 shares on a post reverse split basis) of the Company's common stock,
issued pursuant to Section 4(2) of the Securities Act of 1933.

       On December 18, 1997, 118,209,200 shares (1,576,123 shares on a post
reverse split basis) of the Company's common stock were issued to the
shareholders of Kaire International Inc., in exchange for at least 80% of Kaire
International's outstanding shares of common stock. The Company's common stock
were issued pursuant to Section 4(2) of the Securities Act of 1933.
 
       During October through December 1997, the Company issued 8% convertible
debentures due three years from the date of issuance. The debentures are
convertible beginning with the 41st day after issuance and at a conversion price
equal to 70% of the average closing bid price of the Company's common stock
during the last five days prior to the conversion date. In connection with the
issuance of these debentures, the Company recorded additional interest amounting
to $364,000 related to the beneficial conversion feature of the debentures. The
note holders have certain registration rights. At December 31, 1997, convertible
debentures outstanding aggregated to $850,000. These funds were issued to Kaire
International Inc. As of December 31, 1998, $225,000 remains to be converted.

        On or about January 1, 1998 through September 28, 1998, the Company
issued securities using 

                                      -13-
<PAGE>
 
exemptions available under the Securities Act of 1933 including sales made
pursuant to Section 4(2) of the Securities Act of 1933 and pursuant to
Regulation S, as follows (please note that the below 1998 shares issued reflect
the 75 to 1 reverse split that occurred on February 19, 1998).

       On or about January 1, 1998 through September 28, 1998 there were 37,153
shares of common stock sold issued pursuant to pursuant to Regulation S for
approximately $12,765.

       On or about January 1, 1998 through September 28, 1998, $1,035,654 of
convertible promissory notes were converted into 8,257,529 shares of common
stock. The majority of these shares were issued in reliance on Regulation S and
pursuant to Section 5 of the Securities Act of 1933.

       On or about January 1, 1998 through September 28, 1998, 1,394,138
registered shares of common stock were issued for consulting services rendered.

       Certain 1998 quarterly interest payments through August 30, 1998 totaling
$53,987 due on a convertible promissory note held by various note holders were
paid with 113,284 shares of the Company's common stock, issued pursuant to
Section 4(2) of the Securities Act of 1933.

        In February 1998, as a result of a Special Shareholder Meeting, the
Company effected a 1-for-75 reverse stock split of its common stock. All share
and per share data have been retroactively restated to reflect this stock split.

4.  Pending Acquisitions
    --------------------

        In 1996 and 1997, the Company attempted to enter into the Personal Care
Products area with Pastels International, Inc. ("Pastels"), and the Nutritional
Supplements area with Nutra Quest Incorporated ("NQI") through acquisitions.
Pastels manufactured several beauty and skin care formulations sold commercially
under the names AloeBare, a depilatory, and Skinnergy, an anti-aging skin
treatment. The Company ended its involvement with Pastels in early 1997 as a
result of Pastels not meeting certain key criteria necessary for the acquisition
to be successful. The company had advanced $302,856 to Pastels, all of which has
been expensed in full.

        NQI was a start up operation that the Company attempted to acquire in
1996 and 1997. NQI had a broad line of products with specific emphasis on
nutritional alternatives to coffee, tea and soda, herbal supplements to more
efficiently process calories, mineral and enzyme supplements for use as
digestive aids, athletic performance products containing a blend of amino acids
and rice protein as well as a personalized profile to evaluate the health and
nutritional needs of each individual. Due to difficulties with NQI's CEO and
management, the anticipated business growth expected by NQI never materialized
and by December 1997 NQI operations were terminated. The total amount advanced
Nutra Quest was $2,003,728 of which $502,728 was written off in 1996 with the
remainder of $1,501,000 being written off in 1997.

        In December 1997 the Company entered into an agreement (the "Agreement")
to acquire 80% of Kaire International, Inc. ("KII"), a network marketing firm
based in Longmont Colorado with 1997 

                                      -14-
<PAGE>
 
annual sales of approximately thirty one million dollars ($31,000,000). In
exchange for KII's Common Stock, the Agreement called for the Company to invest
an initial $1,000,000 plus Company Common Stock, and to subsequently provide
additional capital totaling two million dollars ($2,000,000) by the latter of
February 15, 1998 or when their independent accountants signed off on KII's 
year-end audit. Determining that the Company was not going to raise the
additional capital needed, the Company and KII entered into a third party
agreement whereby the Company assigned two thirds of its position in KII to a
third party and the third party was to fund KII two million dollars
($2,000,000). For consideration, the Company received an option from KII to
purchase back the same number of KII shares that it had assigned to the third
party, for two million dollars ($2,000,000). The Company was unable to raise the
funds and the option expired on August 5, 1998. The Company currently owns 24%
of KII and therefore is reported on the equity basis. A write down of $2,632.003
in the KII investment was reflected in the Company's financial statements based
on the Company's assignment of approximately two thirds of its equity position
to a third party for a release of $2,000,000 funding obligation. On December 10,
1998, Natural Health Trends Corp., ("NHTC") (NASDAQ: Symbol NHTCC), announced it
had signed an agreement as of November 24, 1998 to purchase certain assets of
KII for a combination of Series E and Series F Preferred stock, Acquisition
Warrants and a percentage of NHTC's net income for a period of five years. It is
not known what effect the NHTC agreement will have on Kaire Holding's investment
in KII, thus due to the uncertainty in Kaire Holding's ability to recover this
investment, the Company wrote off its investment in KII of $4,694,038 for the
year ending December 1997.

5.  Contingencies
    -------------

Rudolf Steiner Research Foundation - No Longer a Party to the Complaint

     In February 1996, the Rudolf Steiner Research Foundation filed a complaint
in the United States District Court for the Central District of California
against Clark M. Holcolm, Lawrence Gibson, Murray Bettingen, Bettingen, Inc.,
and the Company. This action alleges civil RICO, violation of the Securities Act
of 1933, violation of California Corporation Code, fraud, deceit and intentional
misrepresentation, negligent misrepresentation, conversion, constructive trust
and breach of contract. The Company has been removed as a party to this action.

SEC Proceeding - Settled

     Prior to June 1992, the Company, in executing a private placement, issued
approximately 2,506,982 shares of the Company's common stock to individuals.
This placement was structured in reliance upon the advice of the Company's then
securities counsel and was believed that the shares issued qualified for
exemption from registration under federal and state securities laws. However,
certain subsequent resale's of these shares, commencing in June 1992, by the
original purchasers or their transferees, raised an issue as to whether a
technical distribution occurred that might have required either the original
shares issued or the shares resold to have been registered. All of the foregoing
resales were either directly effected or arranged for by Clark M. Holcomb.

     In October 1993, the Company filed a registration statement with the SEC to
register all of the 

                                      -15-
<PAGE>
 
foregoing 2,506,982 shares with the SEC. Never the less, the SEC investigated
the above transactions and on October 1995, advised the Company that it was
filing a civil injunctive action against the Company, Dr. William Shell and
Clark M. Holcomb for alleged violations of the registration provisions of the
federal securities laws.

     The Company entered into a consent decree ("Decree") with the SEC in which
in the Company, without admitting or denying any wrongdoing, would be enjoined
from violating the registration provisions of the federal securities laws in the
future. The SEC accepted the Decree in June, 1997. No monetary penalties were
assessed against the Company.

Federal Trade Commission Proceeding - Settled

     The Seattle Regional Office of the Federal Trade Commission had advised the
Company that it believed the Company's fat sequesterant product, which was
marketed by KCD, a former licensee, under the name "SeQuester," had been
improperly represented in advertising claims, and that the sequesterant product,
when previously marketed by the Company under the name "Lipitrol", also was
improperly represented in advertising claims. (Note, this product is no longer
marketed by Kaire Holdings). On June 16, 1996 the FTC filed a complaint be filed
against the licensee, the Company and certain individuals in connection with the
foregoing. Subsequently the Company and the FTC agreed upon a proposed
settlement in which the Company would consent to a permanent injunction
prohibiting it from making misrepresentations relating to weight loss or weight
reduction products or services, or with respect to tests or studies relating to
such programs or services. In addition, the Company would pay consumer redress
to the FTC in an aggregate amount of $35,000 over a period of twelve months. The
Company's Board of Directors voted to accept the proposal in March 1996, which
was formally approved by the FTC in June 1997. Final payment was made to the FTC
on April 16, 1998.

Siemens Credit Corporation  - MRI Equipment Assigned to Third Party

     On or about February 19, 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.

                                      -16-
<PAGE>
 
Nutra Quest Inc. - Counter Claim Settled

     On or about October 17, 1997, the CEO of Nutra Quest, Inc. ("CEO"),
considered a wholly owned subsidiary of Kaire Holdings (formerly Interactive
Medical Technologies, Ltd. (the "Company")) was terminated. On or about that
time, the CEO took possession of and removed certain company financial and
administrative records of the Company and disputed the Company's ownership of
Nutra Quest, Inc. The Company obtained a permanent injunction preventing CEO
from representing himself as Nutra Quest Inc. and filed a complaint concerning
ownership of Nutra Quest Inc. The CEO appealed the injunction and served the
Company a cross complaint in July 1998. Concerning the Appeal, Nutra Quest's
opening appellate brief was due on September 11, 1998. Concerning the Cross-
Complaint, on August 21, 1998, the Company filed the following motions; 1)
Demurrer to Cross-Complaint, 2) Motion to Strike Cross-Complaint and 3) Motion
to Dismiss Cross-Complaint. On November 3, 1998 the respective parties engaged
mediation and successfully and completely resolved all claims. The settlement is
a "walk away" for all involved and does not require payment or receipt of any
funds or transfer of any assets or property.

     The effect of the CEO's actions against the Company in 1998 permanently
damaged Nutra Quest's business to the extent that the Company terminated its
operation in December 1997. The amount invested in Nutra Quest was written off
in 1997 (see financial statements for more detail).


M&A West, Inc. - Claim Against Company for Breach of Contract

     On or about July 2, 1998, M&A West, Inc. a Nevada corporation, filed a
Complaint against the Company claiming acts that constitute a breach of action.
M&A West, Inc. is a public relations firm that was contracted to help the
Company obtain additional funding through the creation of interest in our stock.
Kaire contends that M&A West did not perform as contracted and in turn filed an
answer and a counterclaim for return of compensation paid. The parties are
scheduled to attend Non-Binding Arbitration on March 29, 1999. The maximum award
is $40,000. Currently settlement offers have exchanged and are being reviewed by
both sides.

Ex-employee Files Various Claims against the Company

     On November 18, 1998, an ex-employee who was released from the Company on
or about January 1998 due to downsizing, filed suit against the Chief Executive
Officer and the Company for sexual harassment/discrimination, failure to
maintain a work environment free from harassment, wrongful
termination/constructive discharge in violation of public policy, breach of
implied-in fact contract, breach of covenant of good faith and fair dealing,
intentional infliction of emotional distress, negligence and retaliation. The
complaint was served the last week of December 1998. The damages prayed are as
follows: special damages - $250,000, general damages - $1,000,000 and punitive
damages - $3,000,000.

     The response to the complaint was filed January 29, 1999 with the discovery
process to begin shortly thereafter. The status conference is scheduled for June
18, 1999. It is the opinion of the Company that 

                                      -17-
<PAGE>
 
there is no basis for the above claims, however, there can be no assurance that
the Company will prevail.

     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, 1997. However, there can be no assurance that the Company will
prevail in any of the above proceedings. Also 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.

                                      -18-
<PAGE>
 
     Item 2.  Management's Discussion and Analysis or Plan of Operation

     The Company is engaged in the business of developing, manufacturing and
marketing diagnostic imaging products and services relating to blood flow
research in animals and the research and development of propriety diagnostic
imaging products and procedures for human applications that use existing imaging
equipment such as x-ray, CAT scan, MRI and ultra sound. The Company markets
three products, two of which are designed for animal blood flow studies, the E-Z
Trac Ultraspheres and the NuFlow fluorescent microspheres. The third product is
a service the Company provides for its clients which counts NuFlow fluorescent
microspheres used in the blood flow studies and measures regional blood flow
under laboratory conditions.
 
     The E-Z Trac Ultraspheres are microspheres designed for small research
studies measuring regional blood flow. The NuFlow fluorescent microspheres are
designed to measure regional blood flow for both small or large regional blood
flow research studies using E-Z Trac's Investigative Partner Service ("IPS") to
analyze the studies samples. The Company markets microsphere products to
pharmaceutical companies, universities, hospitals and other academic centers
engaged in regional blood flow studies o experimental drugs or surgical
procedures.

     In 1996 and 1997, the Company attempted to enter into the Personal Care
Products area with Pastels International, Inc. ("Pastels"), and the Nutritional
Supplements area with Nutra Quest Incorporated ("NQI") through acquisitions.
Pastels manufactured several beauty and skin care formulations sold commercially
under the names AloeBare, a depilatory, and Skinnergy, an anti-aging skin
treatment. The Company ended its involvement with Pastels in early 1997 as a
result of Pastels not meeting certain key criteria necessary for the acquisition
to be successful. The company had advanced $302,856 to Pastels, all of which has
been expensed in full.

     NQI was a start up operation that the Company attempted to acquire in 1996
and 1997. NQI had a broad line of products with specific emphasis on nutritional
alternatives to coffee, tea and soda, herbal supplements to more efficiently
process calories, mineral and enzyme supplements for use as digestive aids,
athletic performance products containing a blend of amino acids and rice protein
as well as a personalized profile to evaluate the health and nutritional needs
of each individual. Due to difficulties with NQI's CEO and management, the
anticipated business growth expected by NQI never materialized and by December
1997 NQI operations were terminated. The total amount advanced Nutra Quest was
$2,003,728 of which $502,728 was written off in 1996 with the remainder of
$1,501,000 being written off in 1997.

     In December 1997 the Company entered into an agreement (the "Agreement") to
acquire 80% of Kaire International, Inc. ("KII"), a network marketing firm based
in Longmont Colorado with 1997 annual sales of approximately thirty one million
dollars ($31,000,000). In exchange for KII's Common Stock, the Agreement called
for the Company to invest an initial $1,000,000 plus Company Common Stock, and
to subsequently provide additional capital totaling two million dollars
($2,000,000) by the latter of February 15, 1998 or when their independent
accountants signed off on KII's year-end audit. 

                                      -19-
<PAGE>
 
Determining that the Company was not going to raise the additional capital
needed, the Company and KII entered into a third party agreement whereby the
Company assigned two thirds of its position in KII to a third party and the
third party was to fund KII two million dollars ($2,000,000). For consideration,
the Company received an option from KII to purchase back the same number of KII
shares that it had assigned to the third party, for two million dollars
($2,000,000). The Company was unable to raise the funds and the option expired
on August 5, 1998. The Company currently owns 24% of KII and therefore is
reported on the equity basis. A write down of $2,632.003 in the KII investment
was reflected in the Company's financial statements based on the Company's
assignment of approximately two thirds of its equity position to a third party
for a release of $2,000,000 funding obligation. On December 10, 1998, Natural
Health Trends Corp., ("NHTC") (NASDAQ: Symbol NHTCC), announced it had signed an
agreement as of November 24, 1998 to purchase certain assets of KII for a
combination of Series E and Series F Preferred stock, Acquisition Warrants and a
percentage of NHTC's net income for a period of five years. It is not known what
effect the NHTC agreement will have on Kaire Holding's investment in KII, thus
due to the uncertainty in Kaire Holding's ability to recover this investment,
the Company wrote off its investment in KII of $4,694,038 for the year ending
December 1997.

     On February 19, 1998, Kaire Holdings, Incorporated changed its name from
Interactive Medical Technologies, Ltd., changed its NASDAQ OTC BBS symbol to
"KAHI" from "NONI" and reverse split its Common Stock at a ratio of one (1) to
seventy-five (75).

     In March 1998, the Company attempted to enter into an agreement to acquire
35% of Potomac Worldwide, Ltd. ("Potomac"), a BVI company, and its primary
subsidiary, Nanjing Potomak Beauty & Care Co. Ltd. ("Nanjing") located in
Mainland China. Nanjing retails and wholesales health foods, household
chemicals, cosmetics and shape forming underwear. The basis for this agreement
was to cross license products between Potomac and KII. Due to Kaire Holdings,
Inc.'s reduced equity position in Kaire International, Inc., the Potomac
agreement was not performed and is considered terminated.


Results of Operations

   Three and Six Months Ended June 30, 1997 Compared to June 30, 1998
<TABLE>
<CAPTION>
                                                          Three Months Ended            Six Months Ended
                                                                June 30,                    June 30,
                                                     ---------------------------    ------------------------
                                                         1997            1998            1997         1998
                                                     ----------      -----------    -----------    ---------
<S>                                                  <C>             <C>            <C>            <C>
   ($ Thousands)

   Revenues - Products and Services
        Microspheres & Lab Services                       $ 74          $ 126            $ 143         $ 226
        Fat Sequestration - License Fees
         and Royalties                                       -              -                              -
                                                          ----          -----            -----         -----
                                                            74            126               143          226

   Cost of Revenues
   Microspheres & Lab Services                              15             48               52           102

   Fat Sequestration - License Fees
    And Royalties                                            -              -                -             -
                                                          ----          -----            -----         -----
                                                            15             48               52           102
   Gross Margin Product & Services                          59             78               91           124
                                                          ----          -----            -----         -----


   Revenues - Lease Operations                               -              -               90             -
   Cost of Revenues - Lease operations                      72              -              144             -
                                                          ----          -----            -----         -----
     Gross margin - lease operations                       (72)                            (54)            -
                                                          ----          -----            -----         -----
</TABLE>

                                      -20-
<PAGE>
 
     The three and six months ended June 30, 1998, revenues from products and
services were approximately $125,793 and $225,751, an increase of 70% and 58%
from the same period in 1997. The increase was due to a combination of new
customers and increased activity by the current Company's clients.

     Gross profit for products and services was $77,450 and $123,597 for three
and six months ended June 30, 1998, an increase of $13,000 and 33,000 or 22% and
36% over the same periods prior year. The swing in gross margins are caused by
the timing of manufacturing supply purchases, which are expensed upon receipt.
Lease operations in 1997 experienced an additional decrease in gross margin due
to expenses relating to the MRI equipment which had not be assigned to a third
at that time.

     Research and development expense for the three and six month period ended
June 30, 1998 was $1,088 and $1088 respectively, a decrease of approximately
$17,000 and 79,000 from the comparable 1997 periods. The decrease was due to no
new R&D projects entered into in 1998.

     SG&A expense decreased to $257,388 from $286,220 for the three month period
ended June 30, 1998 and increased to $623,240 from $570,151 for the six month
period ended June 30, 1998. The three month decrease resulted from reduced
payroll expense and the phasing out of outside consultants. The increase in the
six month figure is due to the consulting expense that was incurred during the
first quarter of 1998.

     Interest expense for operations for the three and six month period ended
June 30, 1998 was $30,928 compared to $36,585 for the comparable three month
period prior year and $61,016 compared to $61,855 for the comparable six month
period prior year. The increase resulted from interest due on convertible notes
which were issued during first quarter of 1998. The decrease in interest expense
on lease operations is due to the assignment of the MRI lease to a third party
in 1997.

     No provision was made for Federal income tax since the Company has incurred
significant net 

                                      -21-
<PAGE>
 
operating losses from inception. Through June 30, 1998, the Company incurred net
operating losses for tax purposes of approximately $30,238,522. The net
operating loss carry forward may be used to reduce taxable income through the
year 2012. The Company's tax returns have not been audited by the Internal
Revenue Service. The carry forward amounts may therefore be subject to audit and
adjustment. As a result of the Tax Reform Act, the availability of net operating
loss carry forwards can be deferred, reduced or eliminated under certain
circumstances. Net operating losses in the State of California were not
available for use during 1992 and the carry forward period has generally been
reduced from fifteen years to five years beginning in 1993.



     Liquidity and Capital Resources
     -------------------------------

     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.

       On June 30, 1998 the Company had assets of $442,050 compared to $381,735
on December 31, 1997. The Company had a total stockholders' deficit of
$3,396,971 on June 30, 1998 compared to a deficit of $3,915,311 on December 31,
1997, an increase of $518,340. This increase for the six month period ended June
30, 1998 was the result of an increase of $1,081,726 in stockholders equity
consisting of the following; 1) issuance of stock for note conversions and sale
of stock totaling $640,433 and 2) stock and stock options issued for services
totaling $441,293 offset by the quarterly net operating loss of $563,386.

        As of June 30, 1998 the Company's working capital position decreased
$141,255 from a negative $2,027,598 at December 31, 1997 to a negative
$1,886,343, primarily as a result of the following: 1) increase in prepaid
assets of $63,353, 2) a decrease in accounts payable of $70,525, 3) an increase
in receivables of $33,715 offset by 4) a decrease in cash of $27,261.

        In order to meet its current operating needs, the Company has cut all
its operations except for the products and services sold through its E-Z
division, including consolidation of operations to West Los Angeles, headcount
reductions and elimination of all consultants and financial advisors. Going
forward, the company's plan of operation is to concentrate its efforts on the
sale of its colored microspheres and related laboratory and diagnostic services.

     Year 2000 Issue

        The Company has attempted to evaluate the impact of the year 2000 issue
on its business and does not expect the amounts, if any, to be expensed to be
material. No such costs have been expensed to 

                                      -22-
<PAGE>
 
date, since the Company uses off the shelf software.

        Currently the Company anticipates commencing communication with its
significant vendors and customers to determine the extent that year 2000
compliance issues of such parties may effect the Company. At this time, the
Company believes there will be no disruption in business due to its customers'
or vendors' year 2000 readiness. The Company has not established a contingency
plan. There can be no guarantee that the systems of such other companies will be
timely converted without a material adverse effect on the Company's business,
financial condition or results of operations.



                          PART II.  OTHER INFORMATION
                          ---------------------------
                                        


     Item 1.  Legal Proceedings

Rudolf Steiner Research Foundation - No Longer a Party to the Complaint

      In February 1996, the Rudolf Steiner Research Foundation filed a complaint
in the United States District Court for the Central District of California
against Clark M. Holcolm, Lawrence Gibson, Murray Bettingen, Bettingen, Inc.,
and the Company. This action alleges civil RICO, violation of the Securities Act
of 1933, violation of California Corporation Code, fraud, deceit and intentional
misrepresentation, negligent misrepresentation, conversion, constructive trust
and breach of contract. The Company has been removed as a party to this action.

SEC Proceeding - Settled

      Prior to June 1992, the Company, in executing a private placement, issued
approximately 2,506,982 shares of the Company's common stock to individuals.
This placement was structured in reliance upon the advice of the Company's then
securities counsel and was believed that the shares issued qualified for
exemption from registration under federal and state securities laws. However,
certain subsequent resale's of these shares, commencing in June 1992, by the
original purchasers or their transferees, raised an issue as to whether a
technical distribution occurred that might have required either the original
shares issued or the shares resold to have been registered. All of the foregoing
resales were either directly effected or arranged for by Clark M. Holcomb.

      In October 1993, the Company filed a registration statement with the SEC
to register all of the foregoing 2,506,982 shares with the SEC. Never the less,
the SEC investigated the above transactions and on October 1995, advised the
Company that it was filing a civil injunctive action against the Company, Dr.
William Shell and Clark M. Holcomb for alleged violations of the registration
provisions of the federal securities laws.

      The Company entered into a consent decree ("Decree") with the SEC in which
in the Company, 

                                      -23-
<PAGE>
 
without admitting or denying any wrongdoing, would be enjoined from violating
the registration provisions of the federal securities laws in the future. The
SEC accepted the Decree in June, 1997. No monetary penalties were assessed
against the Company.

Federal Trade Commission Proceeding - Settled

      The Seattle Regional Office of the Federal Trade Commission had advised
the Company that it believed the Company's fat sequesterant product, which was
marketed by KCD, a former licensee, under the name "SeQuester," had been
improperly represented in advertising claims, and that the sequesterant product,
when previously marketed by the Company under the name "Lipitrol", also was
improperly represented in advertising claims. (Note, this product is no longer
marketed by Kaire Holdings). On June 16, 1996 the FTC filed a complaint be filed
against the licensee, the Company and certain individuals in connection with the
foregoing. Subsequently the Company and the FTC agreed upon a proposed
settlement in which the Company would consent to a permanent injunction
prohibiting it from making misrepresentations relating to weight loss or weight
reduction products or services, or with respect to tests or studies relating to
such programs or services. In addition, the Company would pay consumer redress
to the FTC in an aggregate amount of $35,000 over a period of twelve months. The
Company's Board of Directors voted to accept the proposal in March 1996, which
was formally approved by the FTC in June 1997. Final payment was made to the FTC
on April 16, 1998.

Siemens Credit Corporation  - MRI Equipment Assigned to Third Party

      On or about February 19, 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.

Nutra Quest Inc. - Counter Claim Settled

      On or about October 17, 1997, the CEO of Nutra Quest, Inc. ("CEO"),
considered a wholly owned subsidiary of Kaire Holdings (formerly Interactive
Medical Technologies, Ltd. (the "Company")) was terminated. On or about that
time, the CEO took possession of and removed certain company financial and
administrative records of the Company and disputed the Company's ownership of
Nutra Quest, Inc. 

                                      -24-
<PAGE>
 
The Company obtained a permanent injunction preventing CEO from representing
himself as Nutra Quest Inc. and filed a complaint concerning ownership of Nutra
Quest Inc. The CEO appealed the injunction and served the Company a cross
complaint in July 1998. Concerning the Appeal, Nutra Quest's opening appellate
brief was due on September 11, 1998. Concerning the Cross-Complaint, on August
21, 1998, the Company filed the following motions; 1) Demurrer to Cross-
Complaint, 2) Motion to Strike Cross-Complaint and 3) Motion to Dismiss Cross-
Complaint. On November 3, 1998 the respective parties engaged mediation and
successfully and completely resolved all claims. The settlement is a "walk away"
for all involved and does not require payment or receipt of any funds or
transfer of any assets or property.

      The effect of the CEO's actions against the Company in 1998 permanently
damaged Nutra Quest's business to the extent that the Company terminated its
operation in December 1997. The amount invested in Nutra Quest was written off
in 1997 (see financial statements for more detail).


M&A West, Inc. - Claim Against Company for Breach of Contract

      On or about July 2, 1998, M&A West, Inc. a Nevada corporation, filed a
Complaint against the Company claiming acts that constitute a breach of action.
M&A West, Inc. is a public relations firm that was contracted to help the
Company obtain additional funding through the creation of interest in our stock.
Kaire contends that M&A West did not perform as contracted and in turn filed an
answer and a counterclaim for return of compensation paid. The parties are
scheduled to attend Non-Binding Arbitration on March 29, 1999. The maximum award
is $40,000. Currently settlement offers have exchanged and are being reviewed by
both sides.

      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, 1997. However, there can be no assurance that the Company will
prevail in any of the above proceedings. Also 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.

Ex-employee Files Various Claims against the Company

      On November 18, 1998, an ex-employee who was released from the Company on
or about January 1998 due to downsizing, filed suit against the Chief Executive
Officer and the Company for sexual harassment/discrimination, failure to
maintain a work environment free from harassment, wrongful
termination/constructive discharge in violation of public policy, breach of
implied-in fact contract, breach of covenant of good faith and fair dealing,
intentional infliction of emotional distress, negligence and retaliation.

      The complaint was served the last week of December 1998. The damages
prayed are as follows: special damages - $250,000, general damages -$1,000,000
and punitive damages - $3,000,000.

                                      -25-
<PAGE>
 
      The response to the complaint was filed January 29, 1999 with the
discovery process to begin shortly thereafter. The status conference is
scheduled for June 18, 1999. It is the opinion of the Company that there is no
basis for the above claims, however, there can be no assurance that the Company
will prevail.

      While the ultimate outcome of these issues, if claims were asserted and
litigated, is complicated and not free from doubt, management with the advice of
legal counsel believes, on the basis of the facts currently known, that it is
not probable that the Company would have any material liability. However, there
can be no assurance that the Company will prevail in any of the above
proceedings. Also 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

      The Company currently has no firm commitments for material capital
expenditures, with any such future commitments being dependent upon the
availability of funds. The Company does not anticipate that future compliance
with existing environmental and occupational safety regulations will have a
significant impact on its capital expenditures or on its financial condition or
future operating results.

      Item 4.   Submission of Matters of a Vote to Security 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 KHI was
voted and authorized by a majority of Kaire Holdings, Inc. shareholders. These
changes became effective on February 19, 1998.

      Item 6.   Exhibits and Reports on Form 8-K:

           (a)  Exhibits

                27  Financial Data Schedule

           (b)  The Company filed the following Reports on form 8-K:

                1.  Form 8-K dated  March 23, 1998: Items 4, 5 and 7.

                                      -26-
<PAGE>
 
                                   SIGNATURES
                                   ----------

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

                                      KAIRE HOLDINGS INCORPORATED.
                                      ----------------------------
                                      (Registrant)



   Date: March 5, 1999                By: /s/ Steven  R.Westlund
                                         ------------------------------
                                              Steven Westlund
                                              (Chief Executive Officer)


   Date: March 5, 1999                By: /s/ Peter T. Benz
                                         ------------------------------
                                              Peter T. Benz
                                              (President)


   Date: March 5, 1999                By: /s/ Owen M. Naccarato 
                                         ------------------------------
                                              Owen M. Naccarato
                                              (Chief Financial Officer)

                                      -27-