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 September 30, 2003
 
 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 incorporation or organization)
(I.R.S. employer identification number)
 
 5520 Sespe Avenue, Suite D, Fillmore California
93015(Address of principal executive offices)
(Zip Code)
 
 Registrant's Telephone number, including area code: (805) 524-0024
 
 8135 Clybourn Avenue Sun Valley, California 91352Former 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 x    No o
 
 State the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date.
  
 Class of Common Stock
Outstanding at November 30, 2003$.20 par value
6,793,007 shares
 
 
 Transitional Small Business Disclosure Format  Yes o   No x
 
 
 
 
 
 
 
 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, 2002 and September 30, 2003 (unaudited)
 
 
 Condensed Consolidated Statements of Operations
 for the three and nine months ended September 30, 2002 (unaudited) and
 2003 (unaudited)
 
 Condensed Consolidated Statements of Cash Flows
 for the nine months ended September 30, 2002 (unaudited) and 2003 (unaudited)
 
 Notes to Condensed Consolidated Financial Statements
 
 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
 Item 3. CONTROLS AND PROCEEDURES
 
 
 PART II. - OTHER INFORMATION
 
 Item 1. Legal Proceedings
 
 Item 2 Changes in Securities and Use of Proceeds
 
 Item 3. Defaults Upon Senior Securities
 
 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
 
  
 
 
 
 
 
 
 
 Kaire Holdings Incorporated
 And Subsidiaries
 
 Consolidated Financial Statements
 For The Three and Nine Months Ended
 September 30, 2003
 
 
 
 
 
  
 C O N T E N T S
 
 
 
 
 Consolidated Balance Sheets
12Consolidated Statements of Operations
3Consolidated Statements of Cash Flows
45Notes to Consolidated Financial Statements
622 
 
   The accompanying notes are an integral part of these financial statements.Kaire Holdings Incorporated And Subsidiaries

Consolidated Balance Sheets
September 30, 2003 and December 31, 2002 
 ASSETSSeptember 30, 2003
December 31, 2002(unaudited)
(audited)Current AssetsCash and cash equivalents


$
60,274


$
20,356Accounts receivable (net of allowance for doubtful accountsof $0 and $0 in 2003 and 2002, respectively)



2,796



22,267Other receivables



131,857



156,782Advances to shareholders



2,750



-Inventory



74,142



-Deposits



60,162



53,919Prepaid expenses



1,547



-Current assets - discontinued operations, net



-



4,553Total Current Assets



333,528



257,877Other AssetsProperty and equipment, net of accumulated depreciation



138,352



27,305Goodwill



2,906,985



-Total Other Assets



3,045,337



27,305Total Assets


$
3,378,865


$
285,182 
 
 
 
 
 
 
 
 
 The accompanying notes are an integral part of these financial statements.

- 1 -   (continued)
 
 Kaire Holdings Incorporated And Subsidiaries

Consolidated Balance Sheets (continued)
September 30, 2003 and December 31, 2002 
 LIABILITIES AND STOCKHOLDERS' EQUITYSeptember 30, 2003
December 31, 2002(unaudited)
(audited)Current LiabilitiesAccounts payable and accrued expenses


1,442,030



754,875Income tax payable


7,000



4,800Loans payable


209,436



-Notes payable - related parties


5,746



200Note payable - acquisition


2,500,000



-Payable to shareholders


44,632



27,618Liabilities of discontinued operations


698,816



757,868Convertible notes - current portion


888,570



878,266Total Current liabilities


5,796,230



2,423,627Long term liabilitiesConvertible notes payable and debentures


-



-Capital leases-long term - discontinued


-



-Total long term liabilities


-



-Total Liabilities


5,796,230



2,423,627Stockholders' equityCommon stock, $0.20 par value900,000,000 shares authorized; 4,492,425and 2,163,691 shares issued and outstanding, respectively


898,485



432,739Common Stock Subscriptions Receivable


-



-Additional paid in capital


37,167,994



37,032,335Accumulated deficit


(40,483,844
)


(39,603,519
)Total Stockholders' Equity


(2,417,365
)


(2,138,445
)Total Liabilities and Stockholders' Equity

$
3,378,865


$
285,182 
 
 
 
 The accompanying notes are an integral part of these financial statements.

- 2 -   
 Kaire Holdings Incorporated And Subsidiaries

Consolidated Statements of Operations
For the Three and nine Months Ended June 30, 2003 and 2002 
 Three months ended September 30,
Nine months ended September 30,2003
2002
2003
2002(unaudited)
(unaudited)
(unaudited)
(unaudited)Net revenues


$2,038,359

$480,693

$4,299,001

$1,615,279Cost of goods sold


(1,844,951)

(372,687)

(3,899,612)

(1,544,564)Gross Profit


193,408

108,006

399,389

70,715Operating ExpensesSalaries


174,189

83,377

420,168

278,252Depreciation and amortization


21,886

22,056

47,457

60,160General and administrative


120,442

140,101

693,211

563,741Selling expense


1,268

1,281

4,273

7,284Rent


24,551

28,302

72,180

66,376Impairment of goodwill


-

-

-

-Total Operating Expenses


342,336

275,117

1,237,289

975,813Loss from operations


(148,928)

(167,111)

(837,900)

(905,098)Other Income (Expenses)Interest expense


(46,626)

(3,129)

(126,656)

(73,134)Miscellaneous income


-

18,258

27,705

25,599Settlement of notes payable


-



-

-Shareholder fees


-

(6,900)

(125)

(57,420)Gain (loss) on investment


-

-

-

-Total Other Income (Expenses)


(46,626)

8,229

(99,076)

(104,955)Loss from continuing operations before income taxes


(195,554)

(158,882)

(936,976)

(1,010,053)Provision for income taxes


(346)

-

(1,800)

(3,315)Loss from continuing operations


(195,900)

(158,882)

(938,776)

(1,013,368)Discontinued operations(Loss) Income from operations of discontinued segment(net of income tax expense of $200 in 2003 and 2002)


(1)

(25,391)

16,458

624,917Gain (loss) on disposal of assets of discontinuedsegment (net of income tax expense of $0in 2003 and 2002)


-

-

41,993

(400,000)Net Loss


$(195,901)

$(184,273)

$(880,325)

$(788,451)(Loss) earnings per weighted average share ofcommon stock outstandingFrom continuing operations


$(0.08)

$(0.09)

$(0.38)

$(0.56)From discontinued operations


(0.00)

(0.01)

0.02

0.12Total (loss) earnings per share


$(0.08)

$(0.11)

$(0.35)

$(0.44)Weighted-average shares outstanding -basic and diluted


2,492,425

1,711,742

2,492,425

1,809,139 The accompanying notes are an integral part of these financial statements.

- 3 -Kaire Holdings Incorporated And Subsidiaries

Consolidated Statements of Cash Flows
For the Three and nine Months Ended June 30, 2003 and 2002 
 2003
2002Increase (decrease) in cash and cash equivalentsNet loss

$
(880,325
)

$
(788,451
)Adjustments to reconcile net loss to net cash usedin operating activitiesDepreciation and amortization


47,457



60,160Debt issuance costs


-



68,811Reserve for other receivables


-



-Amortization of warrant and bond issuance discount


12,081



-Common stock issued for professional services


322,444



180,733Common stock issued for payment of interest


324



12,366Common stock issued for other compensation


-



-Loss on disposal of assets


-Loss on investment


-(Income) loss from operations of discontinued operations


(16,458
)


-(Gain) Loss on disposition of assets of discontinued operations


(41,993
)


-Loss provision - discontinued operations


-



400,000Change in net assets and liabilities of discontinued operations


(54,499
)


3,246Gain on settlement of note payable


-Impairment of goodwill


-Other


(38,085
)


5,708Non-cash other incomeTotal adjustments to net income

$
(649,054
)

$
(57,427
)Cash flow from operating activities:Changes in operating assets and liabilities net of effects from purchase ofEntreMetrix, Inc.:Trade accounts receivable

$
19,471


$
169,839Deposits


(6,243
)


(200
)Other receivables and assets


24,925



(414,667
)Amounts due from related parties


-



466,821Prepaids


(1,547
)


-Inventory


(74,142
)


556,510Income and sales tax payable


2,200



2,400Accrued interest on convertible notesAccrued interest on notes payable - related partiesAccounts payable and accrued expenses


687,155



(383,874
)Cash flow generated by (used in) operating activities

$
2,765


$
339,402Cash flow from investing activities:Purchase of property and equipment

$
(7,180
)

$
(48,815
)Cash acquired in acquisition of EntreMetrix, Inc.


27,576



-Net cash generated by (used in) investing activities

$
20,396


$
(48,815
)Cash flow from financing activities:Proceeds from notes payable - shareholders

$
17,014


$
-Payments on capital leases


-



(48,965
)Payments on loans


(23,542
)Proceeds from loans


7,435



-Proceeds from notes payable - related parties


5,546



-Payments on notes payable - Classic Care shareholders


-



(203,958
)Common stock issued for options exercised


-



-Subscriptions received


-



-Proceeds from convertible debenture


10,304



-Net cash generated by (used in) financing activities

$
16,757


$
(252,923
) 
 (continued)
 
 The accompanying notes are an integral part of these financial statements.

- 4 -   Kaire Holdings Incorporated And Subsidiaries

Consolidated Statements of Cash Flows (continued)
For the Nine Months Ended September 30, 2003 and 2002 
 2003
2002Net (decrease) increase in cashand cash equivalents

$
39,918


$
37,664Cash and cash equivalents at beginning of year


20,356



62,707Cash and cash equivalents at end of period

$
60,274


$
100,371Supplementary disclosures of cash flow informationCash paid during the year forInterest

$
-


$
5,398Income taxes

$
-


$
3,200 
 Supplemental schedule of non-cash investing and financing activities:During the nine months ended September 30, 2003, the Company entered into the followingnon-cash transactions:Issued 15,000,000 shares of common stock for consulting services valued at $22,500Issued 3,000,000 shares of common stock for conversion of $1,776 of notes payable, and $324 of accrued interest.Issued 182,738,202 shares of common stock for legal and consulting services valued at $299,944In January 2003, the Company acquired assets ofSespe PharmacyInventory

$
81,068Property and equipment


100,000Assets acquired


181,068Cash paid


(65,000
)Notes payable


(116,068
)Net

$
-In March 2003, the Company acquired EntreMetrix, Inc. for 250 million sharesof common stock and a note payable for $2.5 millionCash acquired in transaction

$
27,576Accounts receivable


958Prepaid expenses and other assets


135,253Goodwill


2,906,985Property and equipment


51,323Accounts payable and accrued expenses


(262,620
)Notes payable


(109,475
)Issuance of common stock - acquisition


(250,000
)Note payable - acquisition


(2,500,000
)$
-
 
 The accompanying notes are an integral part of these financial statements.

- 5 -   (continued)
 
 Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003** 
 In March 2003, the Company returned $26,625 of vehicles under capital leases to the lessors.
 
 During the nine months ended September 30, 2002, the Company entered into the following non-cash transactions:
 
 Issued 63,727,127 shares of common stock for conversion of $131,683 of notes payable and $12,366 of accrued interest.
 
 Issued 54,970,000 shares of common stock for conversion of stock options for consulting services valued at $120,733
 
 Issued 30,000,000 shares of common stock in lieu of cash for consulting services valued at $60,000
 
 
 
 
 
   1.  Summary of Significant Accounting Policies
 
 Organization and Line of Business
 
 Kaire Holdings Incorporated ("Kaire" or "the Company"), a Delaware corporation, was incorporated on June 2, 1986. Effective February 3, 1998, Kaire changed its name to Kaire Holdings Incorporated from Interactive Medical Technologies, Ltd., in connection with its investment in Kaire International, Inc. ("KII").
 
 In 1999, the Company formed YesRx.com, Inc., an Internet drugstore focused on pharmaceuticals, health and wellness and beauty products. YesRx.com focuses on selling drugs for chronic care as opposed to emergency needs, and works mainly with the patient who has regular medication needs and requires multiple refills.
 
 In May 2000, the Company acquired Classic Care, Inc. ("Classic Care"), which was organized as a corporation in April 1997, under the Laws of the State of California. Classic Care operated as an agency distributor of pharmaceutical products, via a unique prescription packaging system for consumers at senior assisted living and retirement centers in the Los Angeles area. Classic Care purchased prescription drugs in bulk and filled prescriptions for individuals living in the aforementioned facilities. Primary sales were to individuals and consisted of packaged prescription drugs in prescribed dosages. These packaged drug sales were primarily paid for by Medi-Cal, and the balances of the sales that were not covered by Medi-Cal were paid directly by individuals. Classic Care billed Medi-Cal and other third-party payors on behalf of the customer and received payment directly from Medi-Cal.
 
 On May 20, 2002, the Company and the original Classic Care Shareholders reached an agreement to settle all amounts due them. This agreement resulted in the Company selling the long-term services business clients to the original Classic Care shareholders and relinquishing all rights in the long-term services business in return for a release from repaying the promissory notes and contingent payments resulting from the original acquisition. In December 2002, the Company was informed by the Department of Health Services ("DHS") that the Medi-Cal Program was taking the following actions against Classic Care: 1) withholding 100 percent of payment to Classic Care; and 2) temporarily suspending and deactivating Classic Cares Medi-Cal provider number. In December 2002, the Company decided to voluntarily dissolve Classic Care, Inc. dba Classic Care Pharmacy, as a result of sanctions by the pharmacy management of the Department of Health Services and the subsequent suspension of the Medi-Cal license. In January 2003, the Companys management decided to start the process of a voluntary dissolution of Classic Care.
 
 In January 2003, the Company, through its subsidiary Effective Health, Inc., purchased all tangible and intangible assets of Sespe Pharmacy, a privately held company located in Fillmore, California. The total purchase price was $181,068.
 
 Effective September 20, 2003, shareholders of the Company and the Board of Directors approved a reverse stock split at a ratio of 1-for-200, which was determined by the Board of Directors of the Company to be in the best interests of the Company. Concurrent with this reverse split, the Companys symbol changed from "KAHI" to "KAIH".
 The accompanying notes are an integral part of these financial statements.

- 6 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 1.  Summary of Significant Accounting Policies (continued)
 
 Organization and Line of Business (continued)
 
 On March 18, 2003, the Company completed the purchase of EntreMetrix, Inc. ("EntreMetrix"), a privately held professional employment organization, by acquiring all of the outstanding capital stock of EntreMetrix, Inc. for a total purchase price of $2,750,000. The acquisition was accounted for using the purchase method of accounting and, accordingly, EntreMetrix, Inc.s, results of operations have been included in the consolidated financial statements since the date of acquisition. The source of funds for the acquisition was a combination of the Companys common stock and a note payable.
 
 
 Principles of Consolidation
 
 The unaudited consolidated financial statements include the accounts of Kaire and its wholly-owned subsidiaries (collectively the "Company"), a publicly-traded company listed and traded on the NASDAQ Over the Counter Bulletin Board ("OTCBB"). The Company's subsidiaries include Effective Health, Inc. (dba Sespe Pharmacy), Classic Care, Inc. (dba Classic Care Pharmacy) and EntreMetrix, Inc. Intercompany accounts and transactions have been eliminated upon consolidation.
 
 The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to consolidated financial statements and footnotes thereto for the fiscal quarter ended September 30, 2003, included herein. The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All inter-company transactions were eliminated. The Companys fiscal year ends on December 31 each year.
 
 The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Companys Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002.
 
 
 Estimates
 
 The preparation of financial statements in conformity with generally accepted accounting principles in the US requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include goodwill, allowance for doubtful accounts and contractual adjustments due to third-party contractual agreements.
 
 
 The accompanying notes are an integral part of these financial statements.

- 7 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 1.  Summary of Significant Accounting Policies (continued)
 
 Cash and Cash Equivalents
 
 For purposes of the statements of cash flows, cash equivalents include amounts invested in a money market account with a financial institution. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market.
 
 
 Concentration of Cash
 
 The Company at times during the year maintained cash balances in excess of the federally insured limit of $100,000 per institution. There were no uninsured balances as of September 30, 2003 and December 31, 2002.
 
 
 Revenue Recognition
 
 The Company recognizes revenue for pharmacy operations at the time the product is shipped to the customer or services are rendered. Outbound shipping and handling charges are included in net sales.
 
 Professional employment services revenue is recognized at the payroll date of the customer or as services are rendered. The payroll fee is due prior to the payroll date, but is not considered revenue until the date of the payroll. The company reports gross income as the total cost of the invoice for the staffing services rendered including gross payroll, payroll taxes, workers compensation, administrative fees and delivery fees. Amounts received prior to the payroll payment date are classified as deferred revenue.
 
 
 Net Client Revenue
 
 Net client revenue represents the estimated net realizable amounts from clients, third-party payors and others for sale of products or services rendered. For revenue recognition, revenue is recorded when the prescription is filled or when services are performed. A significant portion of Classic Cares revenue was from federal and state reimbursement programs.
 
 
 Third-Party Contractual Adjustments
 
 Contractual adjustments represent the difference between the pharmacys established billing rate for covered products and services and amounts reimbursed by third-party payors, pursuant to reimbursement agreements.
 
 The accompanying notes are an integral part of these financial statements.

- 8 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 1.  Summary of Significant Accounting Policies (continued)
 
 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.
 
 
 Goodwill
 
 The Company capitalized as goodwill the excess acquisition costs over the fair value of net assets acquired, in connection with business acquisitions in accordance with provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", and accordingly goodwill and intangible assets with indefinite lives are no longer amortized but instead tested for impairment at least annually. The carrying amount of goodwill will be reviewed periodically based on the undiscounted cash flows of the entities acquired over the remaining amortization period.
 
 
 Comprehensive Income (Loss)
 
 The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). 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 nine months ended September 30, 2003 and 2002, comprehensive loss is equivalent to the Companys net loss.
 
 
 Advertising Costs
 
 The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing costs for the nine months ended September 30, 2003 and 2002 were $1,973, and $28,048,respectively.
 
 
 Reclassifications
 
 Certain amounts in the 2002 financial statements have been reclassified to conform to the 2003 presentations. These reclassifications had no effect on previously reported results of operations or retained earnings.
 The accompanying notes are an integral part of these financial statements.

- 9 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 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," which 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 two segments.
 
 
 Stock-Based Compensation
 
 The Company measures compensation expense for its stock-based employee compensation plans using the intrinsic value method. The Company did not grant any options or warrants to employees during the nine months ended September 30, 2003. Accordingly, there is no stock compensation expense related to stock option or warrant grants during the period.
 
 
 Other Accounting Pronouncements
 
 In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based Compensation  Transition and Disclosure." This statement amends SFAS No.123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. Pursuant to SFAS No.123, the Company will continue to report pro forma expense amounts for the fair market value of stock options newly granted to employees.
 
 In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which amends SFAS 133 for certain decisions made by the FASB Derivatives Implementation Group.  In particular, SFAS 149: (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying instrument to conform it to language used in FASB Interpretation No. 45, "Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," and (4) amends certain other existing pronouncements.  This Statement is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. In addition, most provisions of SFAS 149 are to be applied prospectively.  Management does not expect the adoption of SFAS 149 to have a material impact on our financial position, cash flows or results of operations.
 
 The accompanying notes are an integral part of these financial statements.

- 10 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 1.  Summary of Significant Accounting Policies (continued)
 
 Other Accounting Pronouncements (continued)
 
 In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150").  SFAS 150 changes the accounting for certain financial instruments that under previous guidance issuers could account for as equity.  It requires that those instruments be classified as liabilities in balance sheets.  The guidance in SFAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective on July 1, 2003.  Management does not expect the adoption of SFAS 150 to have a material impact on our financial position, cash flows or results of operations.
 
 In November 2002, the FASB issued Interpretation No. 45 ("FIN 45") "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees. It also clarifies that at the time a company issues a guarantee the Company must recognize an initial liability for the fair value, or market value, of the obligations that it assumes under that guarantee. However, the provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor's obligations does not apply to product warranties or to guarantees accounted for as derivatives. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company does not expect any impact from adopting FIN 45 on its results of operations or financial position.
 
 In January 2003, the FASB issued Interpretation No. 46 ("FIN 46") "Consolidation of Variable Interest Entities." Until this interpretation, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 requires a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns. The Company does not believe the adoption of FIN 46 will have a material impact on its results of operations or financial position.
 
 
 
 The accompanying notes are an integral part of these financial statements.

- 11 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 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. The Company has a net working deficit of $5,196,384 for the nine months ended September 30, 2003. Additionally, the Company must raise additional capital to meet its working capital needs subsequent to the spin-off of Classic Care. If the Company is unable to raise sufficient capital to fund its operations for the Health Advocacy program, it might be required to discontinue operations. These factors raise substantial doubt about the Companys ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Companys ability to generate sufficient sales volume to cover its operating expenses and to raise sufficient capital to meet its payment obligations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
 Management has previously relied on equity financing sources and debt offerings to fund operations. The Company's reliance on equity and debt financing will continue, and the Company will continue to seek to enter into strategic acquisitions.
 
 
 
 3.  Accounts Receivable  Trade
 
 In 2003 and 2002, approximately 2% and 80% of net revenues were derived under federal and state third-party reimbursement programs. These revenues are based, in part, on cost reimbursement principles and are subject to audit and retroactive adjustment by the respective third-party fiscal intermediaries. In the opinion of management, retroactive adjustments, if any would not be material to the financial position, results of operations or cash flows of the Company.
 
 The Company provides an allowance for doubtful accounts based upon its estimation of uncollectible accounts. The Company bases this estimate on historical collection experience and a review of the current status of trade accounts receivable. The DHS informed the Company in December 2002 that Medi-CAL was withholding a 100% of its payments and Classic Cares Medi-CAL license was being suspended, and the operations of Classic Care ceased in January 2003.
 
 
 
 4.  Inventories
 
 Inventories consist of pharmaceuticals, medical supplies and equipment of $74,142 at September 30, 2003. The Company regularly checks its inventory for any expired or obsolete pharmaceuticals.
 The accompanying notes are an integral part of these financial statements.

- 12 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 5.  Common Stock Transactions
 
 The common stock transactions during the nine months ended September 30, 2003 were as follows:
 
 ·  On February 7, 2003, a holder of the Companys 8% convertible debentures elected to convert an aggregate of $1,776 principal amount of the debentures and $324 of related interest into 3,000,000 shares of the Companys common stock on March 21, 2003.
 
 ·  During the period ending June 30, 2003, the Company issued 57,746,665 shares of its common stock to various consultants in lieu of cash payments for services rendered. The aggregate value of services was $103,944.
 
 ·  The Company issued 140,000,000 shares of its common stock under the terms of the 2003 Legal and Consulting Services Plan. The common stock issued had an approximate market value of $196,000.
 
 ·  The Company issued 250,000,000 shares of its common stock, which had an approximate market value of $250,000, in connection with the acquisition of EntreMetrix, Inc.
 
 §  The Company issued 15,000,000 shares of its common stock to a consultant for providing management and financial consulting services. The market value of the services received were $22,500.
 
 The common stock transactions during the nine months ended September 30, 2002 were as follows:
 
 ·  The Company converted $127,240 in convertible notes payable and $11,946 of related interest into 59,862,127 shares of its common stock.
 
 ·  The Company issued 850,000 shares of common stock, with a market value of $24,625, for consulting services provided to the Company. Additionally, these three officers converted their stock options for 6,666,667 shares of common stock, and the Company recognized $389,216 in compensation expense.
 
 ·  The Company converted stock options into 54,970,000 shares of its common stock in a cash-less conversion. The Company recorded consulting expense of $120,733.
 
 
 Reverse Stock Split
 
 Effective September 20, 2003, the Board of Directors authorized a one-for-two-hundred reverse stock split to be effective in September 2003 to shareholders of record. The par value of the common stock was increased accordingly from $0.001 per share to $0.20 per share. In December 2003, the Board of Directors approved a change that reduced the par value from $0.20 per share to $0.001 per share.
 The accompanying notes are an integral part of these financial statements.

- 13 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 
 5.  Common Stock Transactions (continued)
 
 Reverse Stock Split (continued)
 
 Based on approximately 898,484,863 shares of Common Stock issued and outstanding as of September 20, 2003, the following table reflects a range of the approximate percentage reduction in the outstanding shares of Common Stock and the approximate number of shares of Common Stock that are outstanding as a result of the Reverse Stock Split.
 
 Reverse

Percentage

Shares To BeStock Split

Reduction

Outstanding1 for 200

99.5%

4,492,425 
 All outstanding options, warrants, rights and convertible securities were appropriately adjusted for the Reverse Stock Split automatically on the effective date of the Reverse Stock Split. The Reverse Stock Split affects all stockholders equally and does not affect any stockholders proportionate equity interest in the Company except for those stockholders whose fractional shares will be rounded up.
 
 None of the rights currently accruing to holders of the Common Stock, options or warrants to purchase Common Stock or securities convertible into Common Stock are affected by the Reverse Stock Split. Following the Reverse Stock Split, each share of New Common Stock entitles the holder thereof to one vote per share and will otherwise be identical to one share of the Old Common Stock.
 
 The percentage ownership of management, the number of stockholders or any aspect of the Companys business has not changed materially because of the Reverse Stock Split.
 
 
 
 6.  Related Party Transactions
 
 The following transactions occurred between the Company and certain related parties:
 
 Profit Ventures, Inc.
 
 Mr. Joel Rubenstein was the Managing Director of Classic Care, and his spouse is a shareholder in the Company. Mr. Rubenstein is also a trustee of the Shagrila Trust, which is the parent company of Profit Ventures, Inc. In 2000, Classic Care, entered into an agreement with Profit Ventures, Inc., to purchase products from Classic Care. Sales to Profit Ventures were $­­­­­­­­­­­­­­­­0 and $201,954 for the nine months ended September 30, 2003 and 2002, respectively. Sales to Profit represented 0% of the Companys total revenue from continuing operations for the nine months ended September 30, 2003 and 2002.
 The accompanying notes are an integral part of these financial statements.

- 14 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 7.  Accounts Payable and Accrued Expenses
 
 Accounts payable and accrued expenses at September 30, 2003, and December 31, 2002, consisted of the following:
 
 2003
2002Accounts payable


$
208,533


$
113,221Accrued professional and related fees



85,055



75,055Accrued compensation and related payroll taxes



233,587



233,587Accrued interest payable



431,130



394,599Other accrued expenses



447,877



400,540Total


$
1,406,182



1,217,002 
 
 
 8.  Convertible Notes Payable and Debentures
 
 Convertible debentures consists of the following at September 30, 2003, and December 31, 2002:
 
 2003
20028% convertible subordinated debentures, due in October 2002, convertible into shares of common stock at any time prior to maturity. Interest is payable quarterly, and principal is due at maturity.

$
390,000


$
390,0008% convertible subordinated debentures, due in January 2003, convertible into shares of common stock at any time prior to maturity. Interest is payable quarterly, and principal is due at maturity.


310,000



310,0008% convertible subordinated debentures, due in May 2002, convertible into shares of common stock at any time prior to maturity. Interest is payable quarterly, and principal is due at maturity.


117,570



119,34710% convertible subordinated debentures, due on demand, convertible into shares of common stock at any time prior to maturity. Interest is payable semi-annually, and principal is due at maturity.


71,000



71,000888,570



890,347Less: Unamortized Discount


-



(12,081
)Total debt


888,570



878,266Less: current portion


(888,570
)


(878,266
)Convertible debentures, less current portion

$
-


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

- 15 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 9.  Income Taxes
 
 The significant reason for the difference between the customary relationship between income tax expense and pre-tax accounting income for the nine months ended September 30, 2003, was due to net operating loss carryforwards available to offset federal and state income taxes. For the nine months ended September 30, 2003 and 2002, the Company had recorded a valuation allowance against its deferred tax assets, thus no deferred tax benefit was recorded.
 
 
 
 10.  Commitments and Contingencies
 
 Litigation
 
 Department of Health Services
 
 The Company is a provider of services under Californias Medicaid program ("Medi-Cal"), which is administered by the Department of Health Services ("DHS"). In a letter dated December 2002, DHS served notice to the Company of DHSs intent to withhold payment of claims submitted by the Company, and to deactivate the Companys Medi-Cal provider number, effective December 2002, based on alleged violations of the California Code of Regulations. The Company has provided documentary evidence to contest and rebut DHSs allegations.
 
 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 September 30, 2003. 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.
 
 
 Other Litigation
 
 The Company was involved in various legal actions arising in the normal course of business. Such matters did not have a material effect upon the financial position of the Company.
 
 
 Leases
 
 Operating leases
 
 The pharmacy was located at 1429 South Robertson Blvd, Los Angeles, CA and required a monthly rental payment of $4,500. The term of the lease was six (6) years and was scheduled to expire in March 2004. In December 2002, Classic Care Pharmacy vacated the facility. The Company obtained a lease severance effective December 4, 2002. All of the equipment, office equipment and furniture was placed into the warehouse/office leased by the Company.
 The accompanying notes are an integral part of these financial statements.

- 16 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 10.  Commitments and Contingencies (continued)
 
 Leases (continued)
 
 Operating leases (continued)
 
 In June of 2002, the Company leased a 7,334-square-foot building located at 8135 Clybourne Ave, Sun Valley, CA 91352, to serve as their corporate headquarters and storage facility. The lease is for a period of two years, ending June 2004, with monthly lease payments of $3,420. The Company subleases on a month-to-month basis approximately one half of the facility to Digital Media Group, Inc, a related company that is owned by the Companys CEO and Chairman, Steve Westlund.
 
 EntreMetrix leased offices located at 18662 MacArthur Boulevard, Floor 2, Irvine, CA under a non-cancelable operating lease agreement that required a monthly rental payment of $630. This lease expired in December 2002. The company continued to lease on a month-to-month basis through March 2003.
 
 EntreMetrix relocated its offices to 18101 Von Karman Avenue, Irvine, CA. The offices are leased under a non-cancelable operating lease agreement that requires a monthly rental payment of $3,600. This lease term runs from April 2003 through March 2004.
 
 In January 2003, the Company entered into an operating lease agreement for a pharmacy in Fillmore, California. The pharmacy facility is approximately 835 square feet. Payments under the lease will be $1,170 per month, and will commence on January 26, 2003, and will continue through the initial lease term of five years. The Company has options to renew the lease for two five-year periods and to purchase the facility at its estimated fair market value at any time during the lease term.
 
 Rent expense for the nine-month periods ended September 30, 2003 and 2002 was $72,180 and $66,376, respectively.
 
 
 Employment Agreements
 
 Chief Executive Officer Compensation
 
 On April 1, 2000, Mr. Steve Westlund signed a three-year employment agreement.
 
 Although Mr. Westlunds employment agreement states that his salary is to be $8,333 per month, his actual pay was deferred during the quarter. Mr. Westlund is entitled to be paid the balance of his monthly compensation in either cash or equity.
 
 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.
 
 The Company has accrued amounts due under the above compensation agreement of $222,540 as of September 30, 2003.
 The accompanying notes are an integral part of these financial statements.

- 17 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 10.  Commitments and Contingencies (continued)
 
 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 financial and management consulting services, and professional services rendered in connection with the Companys acquisition efforts. During the nine months ended September 30, 2002, the Company issued stock options convertible into 30,000,000 shares of common stock, and 15,000,000 these stock options were converted into common stock during the three-month period ended March 31, 2002.
 
 
 
 11.  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 potentially dilutive securities for the nine-month periods ended September 30, 2003 and 2002 respectively. The loss from operations for the three- and nine-month periods ended September 30, 2003 and 2002, make these securities anti-dilutive.
 
 Effective September 20, 2003, the Board of Directors authorized a one-for-two-hundred reverse stock split. The EPS calculations reflect the reverse stock split.
 
 
 
 12.  Discontinued Operations
 
 In December 2002, the Company decided to discontinue operations  at  its  Classic Care subsidiary,  a  pharmacy, and conduct a voluntary dissolution of Classic Care. In May 2002, the Company transferred its long-term care services business to the original shareholders of Classic Care. The expected disposal date of Classic Care is May 2003. Classic Cares sales for the nine months ended September 30, 2003 and 2002, were $8,266 and $7,725,532, respectively. The Company does not anticipate significant operating loss during the phase-out period. The results of Classic Cares operations have been reported separately as discontinued operations in the Statements of Operations. Prior period financial statements for 2002 have been restated to present the operations of the division as a discontinued operation.
 
 In the nine months ended September 30, 2003, the Company recognized a loss of $0 due to the disposal value of the inventory.
 
 The accompanying notes are an integral part of these financial statements.

- 18 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 12.   Discontinued Operations (continued)
 
 The  net  assets (liabilities)  of  the  discontinued  operations  have  been  recorded  at  their  estimated  net  realizable  value  under  the  caption  "Net  assets (liabilities)  of  discontinued  operations"  in  the  accompanying  Balance  Sheets  at  September 30, 2003,  and  December 31, 2002,  and  consist  of  the  following:
 
 2003
2002Inventories
$
-

$
3,000Property and equipment, net

-


1,553Total assets

-


4,553Accounts payable

(685,050
)

(674,240
)Accrued liabilities

(13,766
)

(13,766
)Capital leases

-


(69,862
)Total liabilities

(698,816
)

(757,868
)Net liabilities of discontinued operations
$
(698,816
)
$
(753,315
) 
 
 
 13.  Purchase of Assets of Sespe Pharmacy
 
 Effective January 26, 2003, the Company concluded its agreement to purchase all the tangible and intangible assets of Sespe Pharmacy, a privately held company, for a total cost of $181,068. The Company had opened escrow in 2002, and made a deposit of $40,000. The final purchase price consisted of (i)) a short-term promissory note in the amount of $116,068 due 120 days after, and (ii) a cash payment of $65,000. Under the terms of the agreement, the Company purchased the Sespe Pharmacy name, all inventory, office and pharmacy equipment, furniture and fixtures.
 
 The acquisition was recorded using the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired based on the estimated fair values  at  the  date  of  acquisition.  The operating results of this acquisition are included in the Companys Consolidated Results of Operations from the date of acquisition.
 
 The following table presents the allocation of the purchase price, including related acquisition costs, to the assets and liabilities acquired:
 
 
 Inventory
$
81,068Property and equipment

100,000Total purchase price
$
181,068 The accompanying notes are an integral part of these financial statements.

- 19 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 14.  Acquisition of EntreMetrix, Inc .
 
 In March 2003, the Company through its subsidiary completed the acquisition of all the outstanding common shares of EntreMetrix, Inc., a Nevada corporation, for $2,750,000. The agreed purchase price consists of (i) a 4% promissory note in the amount of $2.5 million due four years after closing, and (ii) the issuance of 250,000,000 shares of the Companys common stock having a market value of approximately $250,000.
 
 EntreMetrix is a Southern California-based company, and is a national provider of administrative employer and financial support services to small businesses primarily operating in the medical, life sciences and high-technology industries. Additionally, EntreMetrix provides outsourced human resources and financial support staff. The acquisition will be accounted for under the purchase method, whereby the purchase price will be allocated to the underlying assets and liabilities based on their estimated fair values. The resulting goodwill from this transaction is currently estimated at $2,906,985. The goodwill estimate is preliminary, pending the results of an audit, and further financial analysis. EntreMetrix commenced operations in July 2002.
 
 The following table presents the allocation of the acquisition cost, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed:
 
 Cash and cash equivalents

$
27,576Accounts receivable


958Other current assets


134,608Property and equipment


51,323Goodwill


2,906,985Other noncurrent assets


645Total assets

$
3,122,095Accounts payable and accrued expenses

$
262,620Notes payable


109,475Total liabilities

$
372,095Total acquisition costs

$
2,750,000 
 
 The allocation of the purchase price is based on preliminary data and could change when final valuation information is obtained.
 
 The accompanying notes are an integral part of these financial statements.

- 20-Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 14.  Acquisition of EntreMetrix, Inc . (continued)
 
 The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of EntreMetrix, Inc. had occurred at January 1, 2002:
 
 September 30, 2003
September 30, 2002Sales


$
5,608,274


$
1,919,437Net income (loss) from continuing operations


$
(1,091,619
)

$
(1,056,642
)Net income (loss)


$
(808,251
)

$
(831,725
)Net earnings (loss) per share from continuing operations


$
(0.44
)

$
(0.58
)Net total earnings (loss) per share


$
(0.32
)

$
(0.46
) 
 The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.
 
 
 
 15.  Companys Operations Are Classified Into Two Principal Reportable Segments: Professional Employment Organization and Pharmacy Operations
 
 The Company manages its operations through two business segments: professional employment organization and pharmacy operations.
 
 The  Company  evaluates  performance  based  on  net  operating  profit.  The  operating  segments  do  not  share  staff  or  facilities.  Additionally, no  materials  and/or  services  are  provided  to  one  operating  segment  by  the  other.  The  costs  of  operating  each segment  are  captured  discretely  within  each  segment.  The  Companys  property  and  equipment,  inventory,  and  accounts  receivable  are  captured  and  reported  discretely  within e ach operating segment.
 
 The accompanying notes are an integral part of these financial statements.

- 21 -Kaire Holdings Incorporated And Subsidiaries

Notes to Consolidated Financial Statements
**September 30, 2003 (Continued)** 15.  Companys Operations Are Classified Into Two Principal Reportable Segments: Professional Employment Organization and Pharmacy Operations (continued)
 
 Summary financial information for the two reportable segments is as follows:
 
 2003
2002Pharmacy Operations:Net sales

$
848,080


$
1,892,708Operating gain (loss)


(108,496
)


(199,608
)Property and equipment


81,460



-Accounts receivable


-



182,897Inventory


74,142



-Professional Employment Operations:Net sales

$
3,416,081


$
-Operating gain (loss)


(166,760
)


-Property and equipment


40,438



-Accounts receivable


2,796



-Inventory


-



- 
 
 
 16.  Amendment to Certificate of Incorporation to Decrease Number of Authorized Shares
 
 On March 28, 2003, the Company obtained a written consent of a majority of its shareholders to amend the Certificate of Incorporation to effect up to a one-for-200 reverse split of common stock. The exchange ratio is subject to the approval of the Board of Directors. The exchange ratio may range from one newly issued common share for each two outstanding shares of common stock to one newly issued share for each two hundred shares of common stock. The Amendment will have no effect on the par value of the common stock, which will remain at $0.001.
 
 
 17.  2003 Consulting and Legal Services Plan
 
 In March 2003, the Board of Directors approved the 2003 Consulting and Legal Services Plan. The purpose of the 2003 Consulting and Legal Services Plan ("Plan") is to provide the Company with a means of compensating selected key consultants and legal service providers to the Company and its subsidiaries for their services rendered with shares of Common Stock of the Company. The Plan will be administered by the Companys Board of Directors (the "Board"). The Companys Board shall (a) select those consultants legal service providers to whom shares of the Companys Common Stock shall be awarded or sold, and (b) determine the number of shares to be awarded or sold; the time or times at which shares shall be awarded or sold; whether the shares to be awarded or sold will be registered with the Securities and Exchange Commission; and such conditions, rights of repurchase, rights of first refusal or other transfer restrictions as the Board may determine. Each award or sale of shares under the Plan may or may not be evidenced by a written agreement between the Company and the persons to whom shares of the Companys Common Stock are awarded or sold. From time to time, the Board may make such changes in or additions to the Plan as it may deem proper and in the best interests of the Company and its Stockholders. The Board may also suspend or terminate the Plan at any time, without notice, and in its sole discretion.
  17.  2003 Consulting and Legal Services Plan
 
 For purposes of the Plan, the Board of Directors is authorized to sell or award up to 140,000,000 shares and/or options of the Companys Common Stock, $0.001 par value per share ("Common Stock").
 
 All key consultants and qualified legal service providers to the Company and any of its subsidiaries are eligible to participate in the Plan.
 
 The Board approved the issuance of 140,000,000 shares to various consultants under the terms of the Plan.
 
 
 
 18.  Subsequent Events
 
 On November 30, 2003, the Company entered into a Subscription Agreement for $320,000 whereby we issued the following 8% three year convertible debentures; $100,000 to Alpha Capital Aktiengesellschaft, $100,000 to Gamma Opportunity Capital Partners, LP and $120,000 to Longview Fund, LP. Additionally, in conjunction with these convertible debentures, the Company issued warrants to purchase the Company common stock to Alpha Capital Aktiengesellschaft (400,000 shares), Gamma Opportunity Capital Partners, LP, (400,000 shares), Longview Fund, LP (480,000 shares) and Bi-Coastal Consulting Corporation (720,000 shares).
 
 In addition, on December 1, 2003, the Company entered into a Subscription Agreement with Standard Resources Limited ("Standard") for $50,000 whereby a $50,000 8% three year convertible debenture was issued to Standard plus a warrant to purchase 200,000 shares of common stock.
 
 The conversion price per share of the above debentures shall be the lesser of (i) $.06 ("Maximum Base Price") or (ii) seventy percent (70%) of the average of the three lowest closing bid prices for the thirty (30) trading days prior to but not including the Conversion Date. The Conversion Price shall not be less than one-half of the Maximum Base Price unless the closing price of the Common Stock is less than one-half the Maximum Base Price for any ten (10) consecutive trading days.
 
 The above warrants have a per-share purchase price of $.06 and expire in three years.
 
 
 
 The accompanying notes are an integral part of these financial statements.

- 22 -**Kaire Holdings Incorporated And Subsidiaries**   
 Item 2.  Management's Discussion and Analysis or Plan of Operation
 
 
 Plan of Operation
 
 Our plan of operation is to: (1) expand the scope and range of existing programs, (2) expand the market share of our programs, and (3) open new channels of revenue and opportunity.
 
 Short Terms Goals
 
 ·  Achieve full integration of recent acquisitions
 ·  Continue marketing efforts to build revenue.
 ·  Enhance operational efficiencies during this expansion mode.
 
 Long Term Goals
 
 ·  Introduce next generation programs and services.
 ·  Establish internet based national program support and information networ
 
 Our work force is expected to stay flat or increase at a rate equal to actual increases of our business operations.
 
 In our opinion sufficient working capital will be available from internal operations and from outside sources during the next twelve months thereby enabling us to meet our obligations and commitments as they become payable. Historically, we have been successful in our efforts to secure working capital from private placements of common stock securities, bank debt, loans from private investors and the exercise of warrants for common stock.
 
 Results of Operations
 
 Three and Nine Months Ended September 30, 2003 Compared to September 30, 2002
 
 For the three and nine months ended September 30, 2003, revenues were approximately $2,038 359 and $4,299,001 respectively, for an increase of $1,557,666 and $2,683,722 respectively for the same period in 2002. The increase is primarily due to the acquisition of Entremetrix.
 
 Cost of goods sold for the three and nine month period ending September 30, 2003 was $1,884,951 and $3,899,612 respectively, for an increase of $1,472,264 and of $2,355,048 over the same periods in 2002. This increase is primarily due to the acquisition of Entremetrix.
 
 Gross profit for products and services was $193,408 and $399,389 for the three and nine months ended September 30, 2003, an increase of $85,402 and $328,674 over the same prior periods. The gross profit percentage rate for the three and nine month ended September 30, 2003 was 9.49% and 9.29% respectively compared to a gross profit percentage of 22.47% and 4.38% for the same period prior year. The lower gross margin percentages reflects the lower margins generated by Entrmetrix.
 
 Operating expenses for the three and nine month period ended September 30, 2003 was $342,336 and $1,237,289 respectively for an increase of $67,219 and $261,476 from the same period prior year. The increase for the three month period is mainly attributable to an increase in salaries of $91,000 offset by a decrease in general and administrative expenses of $20,000. The increase for the nine month period is also mainly attributable to an increase in salaries of $141,916, an increase in general and administrative expenses of $129,470 offset by an decrease in depreciation of $12,703.
 
 Interest expense the three and nine month period ended September 30, 2003 was $46,626 and $126,656 respectively for a increase of $43,497 and $53,522 for the comparable three and nine month period prior year. The increase is due to accrued interest on the Entremetrix promissory note.
 
 No provision was made for Federal income tax since the Company has incurred significant net operating losses from inception. Through September 30, 2003, the Company incurred a net operating loss for tax purposes of approximately $938,776. The net operating loss carry forward may be used to reduce taxable income through the year 2013. 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 September 30, 2003 the Company had assets of $3,378,865 compared to $285,182 on December 31, 2002, an increase of $3,093,683. The increase mainly consists of $2,906,985 of goodwill due to the Entremetrix acquisition, and increases in PP&E of $111,047 and an increase in inventory of $74,142. The Company had a total stockholders equity of $(2,417,365) on September 30, 2003 compared to equity of $(2,138,445) on December 31, 2002, a decrease of $278,920.
 
 As of September 30, 2003 the Companys working capital position decreased $3,296,952 from a negative $2,165,750 at December 31, 2002 to a negative $5,462,692 at September 30, 2003. The decrease is primarily a result of a $2,500,000 promissory note due to the acquisition of Entremetrix, an increase in accounts payable of $687,155, an increase in loans payable of $209,436 offset by an increase in inventory of $74,142 and an increase in cash of $39,918.
 
 Net cash generated by operating activities for the nine months ended September 30, 2003 amounted to $2,765 which mainly consists of the nine month net loss $(880,325), adjustments to net income for discontinued operations of $(112,950) offset by common stock issued for professional service of $322,444, accounts payables of $687,155 and miscellaneous other items of $(13,559).
 
 Net cash used by investing activities for the nine months ending September 30, 2003 amounted to $20,396 which was cash acquired in the acquisition of Entremetrix of $27,576 offset by purchases of property and equipment of 7,180.
 
 Financing activities for the nine months ending September 30, 2003 generated net cash of $16,757, consisting of proceeds from issuing notes and receiving loans of $40,299 offset by payment on loans.
 
 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. The Company has a net working deficit of $5,462,692 for the nine months ended September 30, 2003. Additionally, the Company must raise additional capital to meet its working capital needs subsequent to the spin-off of Classic Care. If the Company is unable to raise sufficient capital to fund its operations for the Health Advocacy program, it might be required to discontinue operations. These factors raise substantial doubt about the Companys ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Companys ability to generate sufficient sales volume to cover its operating expenses and to raise sufficient capital to meet its payment obligations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
 Management has previously relied on equity financing sources and debt offerings to fund operations. The Company's reliance on equity and debt financing will continue, and the Company will continue to seek to enter into strategic acquisitions.
 
 Subsequent Events
 
 On November 30, 2003, KAIH entered into a Subscription Agreement for $320,000 whereby we issued the following 8% three year convertible debentures; $100,000 to Alpha Capital Aktiengesellschaft, $100,000 to Gamma Opportunity Capital Partners, LP and $120,000 to Longview Fund, LP Additionally, in conjunction with these convertible debentures, KAIH issued warrants to purchase KAIH common stock to Alpha Capital Aktiengesellschaft (400,000 shares), Gamma Opportunity Capital Partners, LP, (400,000 shares), Longview Fund, LP (480,000 shares) and Bi-Coastal Consulting Corporation (720,000 shares).
 
 In addition, on December 1, 2003, KAIH entered into a Subscription Agreement with Standard Resources Limited ("Standard") for $50,000 whereby a $50,000 8% three year convertible debenture was issued to Standard plus a warrant to purchase 200,000 shares of common stock.
 
 The conversion price per share of the above debentures shall be the lesser of (i) $.06 ("Maximum Base Price") or (ii) seventy percent (70%) of the average of the three lowest closing bid prices for the thirty (30) trading days prior to but not including the Conversion Date. The Conversion Price shall not be less than one-half of the Maximum Base Price unless the closing price of the Common Stock is less than one-half the Maximum Base Price for any ten (10) consecutive trading days.
 
 The above warrants have a per share purchase price of $.06 and expire in three years.
 
 
 ITEM 3. CONTROLS AND PROCEEDURES
 
 (a)  Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.
 
 (b)  Changes in Internal Controls over Financial Reporting. During the most recent fiscal quarter, there have not been any significant changes in our internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
 
 
 Kaire Holdings Incorporated And Subsidiaries 
 PART II. OTHER INFORMATION
 
 Item 1.  Legal Proceedings
 
 Patent Claim
 
 An individual filed a complaint against us alleging breach of contract and fraud and related business torts related to certain patents that the plaintiff transferred to us. We believe that the plaintiffs claims are without merit. Although we reached a tentative settlement in this matter, the Plaintiff has failed to execute the settlement and the case was dismissed.
 
 Department of Health Services - Medi-Cal Action Against Classic Care Pharmacy
 
 On April 17, 2002 the Department of Health Services ("DHS") notified the management of Classic Care Pharmacy that the Medi-Cal Program intended to withhold 100% of payments and temporarily suspend and deactivate the Classic Care Pharmacy Medi-Cal provider number.
 
 The Department of Health Services ("DHS") took this action after having reviewed the prescriptions on record at Classic Care Pharmacy. The DHS stated that they had reviewed thirty-two prescriptions, and that two of the ten prescribing physicians had denied
 treating the patients and writing the prescriptions. The DHS cited Classic Care Pharmacy for violations of CCR, Title 22, Sec.51476.1, (a) and 51476.1(a)(2), which states that written prescriptions must contain the name of the prescribing physician and their provider number. Based on its findings the DHS and the Medical Program concluded that Classic Care Pharmacy might have intentionally committed fraud.
 
 Classic Care management retained outside counsel shortly after receiving the DHS notice to review the Department of Health Services findings. After reviewing the supporting DHS material, outside counsel informed Classic Care management that it believed the facts presented by the DHS were inaccurate and that its position was unfounded. Classic Care management and its principle shareholders obtained written affidavits from most of the physicians whose prescriptions had been reviewed by the DHS confirming that they had treated the patients and did prescribe the medications.
 
 On April 29, 2002, outside counsel contacted the DHS to discuss its findings and present the documentation supporting their position. DHS informed outside counsel that they would have to follow the standard appeal process, which normally requires two or more months to complete. Classic Care Pharmacy instructed outside counsel to seek an ex parte temporary restraining order against the DHS for their failure to show cause regarding their actions. On May 8, 2002, in the Superior Court for the state of California, the Court granted Classic Cares ex parte request issuing a preliminary injunction against the DHS and reinstated Classic Care Pharmacys medical provider number. The Court set May 24, 2002 as the date for the DHS to show cause. On May 24, 2002, the DHS was still not prepared to show cause. The court granted a 30-day extension.
 
 The Classic Care, Inc and Classic Care Pharmacy administrative appeal failed. Once the appeal took place the Superior court could no longer uphold our lack for due process claim and the DHS canceled Classic Care Pharmacys medical provider number. The justice department has not taken any further action against Classic Care Pharmacy.
 
 Except as otherwise specifically indicated above, we believe that we do not have any material liability for any lawsuits, settlements, judgments, or fees of defense counsel which have not been paid or accrued as of December 31, 2002.
 
 H.D. Smith Wholesale Drug Company  Action for breach of contact and other various causes of action
 
 On April 2, 2003, H.D. Smith filed a complaint against Classic Care, Inc., Kaire Holdings, Inc., Sarit Rubenstein, Steven Oscherwitz and Larisa Vernik for various causes of action relating amounts owed for certain drugs that were delivered to Classic Care. H.D. Barnes is seeking $430,205 plus interest. Kaire feels this is a Classic Care issue and very little if any of the amount owned relates to Kaire Holdings. This case is still in the discovery stage.
 
 
 Item 2.  Changes in Securities and Use of Proceeds
 
 During the Quarter ending September 30, 2003, 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
 
 On August 7, 2003, 15,000,000 shares were issued to Jay Isco for consulting services performed. The value of the common
 shares was $22,500.
 
 Issuances after September 30, 2003: Subsequent issuances :
 
 On October 17, 2003 the following restricted shares were issued:
 
 On October 17, 2003, was issued 375,000 restricted shares for consulting services. The value of the shares was $22,500. 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
 
 On October 17, 2003, Scott Absher was issued 375,000 restricted shares for consulting services. The value of the shares was $22,500. 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
 
 On October 17, 2003, Steven Westlund was issued 75,000 restricted shares for expenses owed. The value of the shares was $22,500. 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
 
 On October 17, 2003, Owen Naccarato was issued 375,000 restricted shares for legal services. The value of the shares was $22,500. 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
 
 On October 17, 2003, Joseph Maleki was issued 350,000 restricted shares for legal services. The value of the shares was $21,000. 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
 
 On October 17, 2003, Randy Jones was issued 250,000 restricted shares for consulting services. The value of the shares was $15,000. 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
 
 On October 17, 2003, Jay Isco was issued 200,000 restricted shares for consulting services. The value of the shares was $12,000. 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
 
 
 Item 3.   Defaults Upon Senior Securities
 
 None
 
 Item 4.   Submission of Matters of a Vote to Security Holders
 
 None
 
 Item 5.  Other Information
 
 None
 
 
 
 Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
 
 (a)  Exhibits
 
 31.1   Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
 ( Section 302 of the Sarbanes-Oxley Act of 2002)
 
 31.2   Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)
 ( Section 302 of the Sarbanes-Oxley Act of 2002)
 
 32.1   Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350
 (Section 906 of the Sarbanes-Oxley Act of 2002)
 
 32.2   Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350
 (Section 906 of the Sarbanes-Oxley Act of 2002)
 
 
 
 
 
 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: December 23, 2003  By: /s/ Steven R.Westlund
 Steven Westlund
 Chief Executive Officer, Chairman