SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





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


For
      the
      quarterly period ended June
      30, 2006





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.
                Employerincorporation
                or organization)
            
            Identification
                No.)








552
                Sespe Avenue, Suite D, Fillmore , CA
            93015(Address
                of principal executive offices)
            (Zip
                code)




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





__________________________________________________________________


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





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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 _





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 July 31, 2006


$.001
      par
      value     42,616,806 shares





Indicate
      by check mark whether the registrant is a shell company (as defined
      in


Rule
      12b-2 of the Exchange Act). (Check one): Yes [ ] No [X]











Transitional
      Small Business Disclosure Format  Yes   No X





FORM
      10-QSB


Securities
      and Exchange Commission


Washington,
      D.C. 20549





KAIRE
      HOLDINGS INCORPORATED








PART
      I -
      FINANCIAL INFORMATION





Item
      1.
      Consolidated Financial Statements





Condensed
      Consolidated Balance Sheets at


December
      31, 2005 and June 30, 2006 (unaudited)





Condensed
      Consolidated Statements of Operations (Unaudited)


for
      the
      three months ended June 30, 2005 and 2006





Condensed
      Consolidated Statements of Operations (Unaudited)


for
      the
      six months ended June 30, 2005 and 2006





Condensed
      Consolidated Statements of Cash Flows (Unaudited)


for the
      three months ended June 30, 2004 and 2005





Notes
      to
      Condensed Consolidated Financial Statements





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


Results
      of Operations.





Item
      3.
      Controls and Procedures








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**


**June
      30, 2006**












**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**





**Consolidated
      Financial Statements**


**June
      30, 2006**








**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
                -
                30























ASSETSJune
                30, 2006
            
            December
                31, 2005Current
                Assets
            (unaudited)
            
            (audited)Cash
                and cash equivalents
            $
            1,892
            
            $
            -Accounts
                receivable, trade (net of allowance for doubtfulaccounts
                of $55,000 and $55,000, respectively
            
            112,935
            
            
            95,854Inventory
            
            
            74,336
            
            
            67,705Deferred
                financing costs, net of amortization
            
            17,824
            
            
            41,317Total
                Current Assets
            
            206,987
            
            
            204,876Other
                AssetsProperty
                and equipment, net of accumulated depreciation
            
            29,482
            
            
            41,546Total
                Other Assets
            
            29,482
            
            
            41,546Total
                Assets
            $
            236,469
            
            $
            246,422









































(continued)























LIABILITIES
                AND STOCKHOLDERS' DEFICITJune
                30, 2006
            
            December
                31, 2005Current
                Liabilities
            (unaudited)
            
            (audited)Bank
                overdraft
            $
            505
            
            $
            4,634Accounts
                payable and accrued expenses
            
            497,706
            
            
            526,626Income
                tax payable
            
            800
            
            
            647Notes
                payable - related parties
            
            10,381
            
            
            10,381Advances
                from shareholders
            
            99,766
            
            
            97,937Liabilities
                of discontinued operations - Classic Care
            
            145,611
            
            
            145,611Accrued
                interest - convertible debt
            
            386,530
            
            
            319,138Convertible
                notes
            
            1,724,157
            
            
            1,373,570Derivative
                liability
            
            1,644,606
            
            
            1,497,659Warrant
                liability
            
            192,408
            
            
            126,095Total
                Current Liabilities
            
            4,702,470
            
            
            4,102,298Total
                Liabilities
            
            4,702,470
            
            
            4,102,298Stockholders'
                DeficitCommon
                stock, $0.001 par value, 900,000,000 shares authorized;42,616,806
                and 35,453,897 shares issued and outstanding atJune
                30, 2006, and December 31, 2005, respectively
            
            42,617
            
            
            35,454Additional
                paid in capital
            
            40,139,231
            
            
            39,991,758Accumulated
                deficit
            
            (44,647,849)
            
            
            (43,883,088)Total
                Stockholders' Deficit
            
            (4,466,001)
            
            
            (3,855,876)Total
                Liabilities and Stockholders' Deficit
            $
            236,469
            
            $
            246,422

























Three
                months ended
            
            Six
                months endedJune
                30, 2006
            
            June
                30, 2005
            
            June
                30, 2006
            
            June
                30, 2005(unaudited)
            
            (restated,
                unaudited)
            
            (unaudited)
            
            (restated,
                unaudited)Net
                revenues
            $
            87,593
            
            $
            273,987
            
            $
            373,679
            
            $
            704,751Cost
                of goods sold
            
            64,008
            
            
            251,991
            
            
            277,372
            
            
            492,547Gross
                Profit
            
            23,585
            
            
            21,996
            
            
            96,307
            
            
            212,204Operating
                ExpensesSalaries
                and related expenses
            
            61,380
            
            
            120,249
            
            
            116,445
            
            
            239,996Depreciation
                and amortization
            
            6,111
            
            
            7,397
            
            
            12,064
            
            
            14,635General
                and administrative
            
            130,028
            
            
            154,846
            
            
            482,112
            
            
            406,610Selling
                expense
            
            162
            
            
            960
            
            
            2,943
            
            
            960Rent
            
            
            7,415
            
            
            10,346
            
            
            16,285
            
            
            17,637Total
                Operating Expenses
            
            205,096
            
            
            293,798
            
            
            629,849
            
            
            679,838Loss
                from operations
            
            (181,511)
            
            
            (271,802)
            
            
            (533,542)
            
            
            (467,634)Other
                Income (Expense)Interest
                expense
            
            (43,031)
            
            
            (30,422)
            
            
            (82,370)
            
            
            (81,503)Gain
                from change in warrant liability
            
            61,292
            
            
            57,704
            
            
            156,293
            
            
            98,733Gain/(loss)
                from change in derivative liability
            
            86,283
            
            
            (90,208)
            
            
            (45,991)
            
            
            (190,832)Other
                income
            
            21,298
            
            
            -
            
            
            21,298
            
            
            -Accretion
                of convertible debt discount
            
            (120,295)
            
            
            (114,785)
            
            
            (251,543)
            
            
            (207,506)Debt
                issuance costs
            
            (13,252)
            
            
            (8,125)
            
            
            (26,505)
            
            
            (16,250)Total
                Other Income (Expense)
            
            (7,705)
            
            
            (185,836)
            
            
            (228,818)
            
            
            (397,358)Loss
                from continuing operations before income taxes
            
            (189,216)
            
            
            (457,638)
            
            
            (762,360)
            
            
            (864,992)Provision
                for income taxes
            
            (2,400)
            
            
            -
            
            
            (2,400)
            
            
            -Net
                Loss
            
            $
            (191,616)
            
            $
            (457,638)
            
            $
            (764,760)
            
            $
            (864,992)Loss
                per weighted average share of commonstock
                outstanding - basic and diluted
            $
            (0.00)
            
            $
            (0.01)
            
            $
            (0.02)
            
            $
            (0.03)Weighted-average
                shares outstanding - basic and diluted
            
            41,143,479
            
            
            33,877,252
            
            
            38,941,539
            
            
            33,327,252























2006
            
            2005Increase
                (decrease) in cash and cash equivalents:
            (unaudited)
            
            (restated,
                unaudited)Net
                loss
            $
            (764,760)
            
            $
            (864,992)Adjustments
                to reconcile net loss to net cash usedin
                operating activities:Depreciation
                and amortization
            
            12,064
            
            
            14,635Accretion
                of convertible debt discount
            
            251,543
            
            
            207,506Loss
                from change in derivative liability
            
            45,991
            
            
            190,832Gain
                from change in warrant liability
            
            (156,293)
            
            
            (98,733)Non-cash
                interest associated with derivative liabilities
            
            -
            
            
            23,317Common
                stock issued for payment of interest
            
            14,977
            
            
            -Warrants
                issued for consulting expense
            
            222,606
            
            
            -Common
                stock issued for professional services and compensation
            
            139,659
            
            
            150,000Amortization
                of deferred financing costs
            
            26,505
            
            
            16,250Changes
                in operating assets and liabilities:Increase
                in trade accounts receivable
            
            (17,081)
            
            
            (20,552)Increase
                in other receivables
            
            -
            
            
            (110)(Increase)
                decrease in inventory
            
            (6,631)
            
            
            67,529Increase
                in income tax payable
            
            153
            
            
            -Decrease
                in sales tax payable
            
            (65)
            
            
            (337)Increase
                in accrued interest on convertible notes
            
            67,392
            
            
            47,602Decrease
                in accounts payable and accrued expenses
            
            (28,855)
            
            
            (31,035)Net
                cash used in operating activities
            
            (192,795)
            
            
            (298,088)Cash
                flow from investing activities:Purchase
                of property and equipment
            
            -
            
            
            (950)Net
                cash used in investing activities
            
            -
            
            
            (950)Cash
                flow from financing activities:Proceeds
                from notes payable - related parties
            
            -
            
            
            1,200Payments
                on notes payable - related parties
            
            -
            
            
            (3,800)Proceeds
                from notes payable - shareholders
            
            1,829
            
            
            -Payments
                on loans
            
            -
            
            
            (49,000)Proceeds
                from convertible notes payable
            
            200,000
            
            
            475,000Increase
                in deferred financing costs
            
            (3,013)
            
            
            (40,550)Decrease
                in bank overdraft
            
            (4,129)
            
            
            (19,931)Net
                cash generated by financing activities
            
            194,687
            
            
            362,919Net
                increase in cash and cash equivalents
            
            1,892
            
            
            63,881Cash
                and cash equivalents at beginning of year
            
            -
            
            
            -Cash
                and cash equivalents at end of period
            $
            1,892
            
            $
            63,881








(continued)

























2006
            
            2005(unaudited)
            
            (unaudited,
                restated)**Supplementary
                disclosures of cash flow information**Cash
                paid during the year forInterest
            $
            -
            
            $
            17,575Taxes
            $
            2,400
            
            $
            -








**Supplementary
      disclosures of non-cash transactions:**





During
      the six months ended June 30, 2006, the Company entered into the following
      non-cash transactions:





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

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

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







During
      the six months ended June 30, 2005, the Company entered into the following
      non-cash transactions:





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


























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





Organization
      and Line of Business





Kaire
      Holdings Incorporated (“Kaire” or “the Company”), a Delaware corporation, was
      incorporated on June 2, 1986. Effective February 3, 1998, Kaire changed its
      name
      to Kaire Holdings Incorporated from Interactive Medical Technologies, Ltd.





In
      November 2002, the Company, through its subsidiary Effective Health, Inc.,
      purchased certain assets of Sespe Pharmacy, a privately held company located
      in
      Fillmore, California. The asset acquisition was concluded on January 26, 2003.
      Sespe Pharmacy provides both retail and long-term care pharmacy services.
      Long-term pharmacy care services focus on the following: 1) helping chronically
      ill patients residing in assisted-living facilities maintain compliance with
      their medication therapies; 2) monitoring any adverse drug reactions; and 3)
      assisting the long-term care providers in monitoring patient progress.
      Specialized long-term care services include: providing the patients their
      monthly cycle medications; providing the long-term care providers with
      in-service training and drug education, including providing detailed policies
      and procedures manuals; providing monthly reviews of patient drug regimes;
      and
      processing all patient insurance claims. Specialized products include unit
      dose
      bubble pack of individual patient’s medication; secure mobile medication carts
      and emergency medication kits for night or weekend patient
      emergencies.








History





In
      1999,
      the Company formed YesRx.Com, Inc., an Internet drugstore focused on
      pharmaceuticals, health, wellness and beauty products. The Company focuses
      on
      selling drugs for chronic care as opposed to emergency needs and works mainly
      with the patient who has regular medication needs and requires multiple refills.
      This business was phased out during the year ended December 31, 2001.





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








Principles
      of Consolidation





The
      accompanying unaudited interim consolidated financial statements include the
      accounts of Kaire and its wholly owned subsidiaries (collectively the
“Company”). The Company’s subsidiaries include Effective Health, Inc. (dba Sespe
      Pharmacy), and YesRx.com. Intercompany accounts and transactions have been
      eliminated upon consolidation.















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





Basis
      of Presentation





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





The
      accompanying unaudited interim consolidated financial statements represent
      the
      financial activity of Kaire Holdings Incorporated and its subsidiaries. The
      consolidated financial statements for the six months ended June 30, 2006, have
      been prepared in accordance with generally accepted accounting principles for
      interim financial information in the US 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 June 30, 2006, included herein. The
      consolidated financial statements include the accounts of the Company and its
      majority-owned subsidiaries. All inter-company transactions were eliminated.
      The
      financial statements and notes are representations of the management and the
      Board of Directors who are responsible for their integrity and
      objectivity.





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, 2005.








Estimates





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







Cash
      and Cash Equivalents





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























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





Revenue
      Recognition





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








Net
      Client Revenue





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








Third-Party
      Contractual Adjustments





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





For
      the
      three and six months ended June 30, 2006, gross revenues were $135,743 and
      $440,311 less approximately $76,592 and $96,610, respectively of contractual
      adjustments based on reimbursement contracts, resulting in net third-party
      contract revenues of approximately $59,151 and $343,701
      respectively.








Net
      Loss per Share





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








Inventory





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




















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





Stock
      Warrants Issued to Third Parties





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








Income
      Taxes





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








Fair
      Value of Financial Instruments





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








Convertible
      Debt Financing and Derivative Liabilities





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




















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





Convertible
      Debt Financing and Derivative Liabilities (continued)





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





At
      each
      balance sheet date, the Company adjusts the derivative financial instruments
      to
      their estimated fair value and analyzes the instruments to determine their
      classification as a liability or equity. As of June 30, 2006, the estimated
      fair
      value of the Company’s derivative liability was $1,644,606, as well as a warrant
      liability of $192,408. As of December 31, 2005, the estimated fair value of
      the
      Company’s derivative liability was $1,497,659, as well as a warrant liability of
      $126,095. The estimated fair value of the debt features was determined using
      the
      probability weighted averaged expected cash flows/Lattice Model. The model
      uses
      several assumptions including: historical stock price volatility (utilizing
      a
      rolling 120 day period), risk-free interest rate (3.50%), remaining maturity,
      and the closing price of the Company’s common stock to determine estimated fair
      value of the derivative asset. In valuing the debt features at June 30, 2006,
      the Company used the closing price of $0.012 and the respective conversion
      and
      exercise prices for the warrants. For the year ended December 31, 2005, there
      was a decrease in the market value of the Company’s common stock to $0.025 from
      $0.055 at December 31, 2004.










Reclassifications





Certain
      amounts in the 2005 financial statements have been reclassified to conform
      to
      the 2006 presentations. These reclassifications had no effect on previously
      reported results of operations or retained earnings.








Stock-Based
      Compensation





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





Specifically,
      the Company adopted SFAS No. 123R using the “prospective method” This statement
      replaced FAS-123, *Accounting
      for Stock-Based Compensation,* supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      amends FAS-95, *Statement
      of Cash Flows.* FAS-123R
      requires companies to apply a fair-value-based measurement method in accounting
      for shared-based payment transactions with employees and to record compensation
      cost for all stock awards granted after the required effective date and for
      awards modified, repurchased or cancelled after that date. The scope of FAS-123R
      encompasses a wide range of share-based compensation arrangements, including
      share options, restricted share plans, performance-based awards, share
      appreciation rights, and employee share purchase plans. All employee stock
      option grants made since the beginning of fiscal 2005 have been expensed over
      the related stock option vesting period based on the fair value at the date
      the
      options are granted. Prior to fiscal 2005, the Company applied Accounting
      Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to
      Employees,” and related interpretations in accounting for stock
      options.


















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





Stock-Based
      Compensation (continued)





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








Comprehensive
      Income (Loss)





Statement
      of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”
(SFAS 130) established standards for reporting and display of comprehensive
      income (loss) and its components in a full set of general-purpose financial
      statements. Comprehensive income consists of net income and unrealized gains
      (losses) on available-for-sale securities; foreign currency translation
      adjustments; changes in market values of future contracts that qualify as a
      hedge; and negative equity adjustments recognized in accordance with SFAS No.
      87. The Company, however, does not have any components of comprehensive income
      (loss) as defined by SFAS 130 and therefore, for the periods ended June 30,
      2006
      and 2005, comprehensive loss is equivalent to the Company’s net loss.








Advertising
      Costs





The
      Company expenses advertising and marketing costs as they are incurred. The
      Company incurred no advertising and marketing costs for the periods ended June
      30, 2006 and 2005.








Segment
      and Geographic Information





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





The
      Company operated in only one segment during the periods ended June 30, 2006
      and
      2005.




















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





Recent
      Accounting Pronouncements





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





In
      March
      2006 FASB issued SFAS 156 “Accounting for Servicing of Financial Assets” this
      Statement amends FASB Statement No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,* with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. This Statement is effective as of the beginning of the
      Company’s first fiscal year that begins after September 15, 2006. Management
      believes that this statement will not have a significant impact on the
      consolidated financial statements.





The
      Company believes that the adoption of these standards will have no material
      impact on its financial statements.





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



















**2.**  **Going
      Concern**





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, the Company has experienced net losses
      of
      $764,760 and $864,992 for the six-month periods ended June 30, 2006 and 2005,
      respectively. The Company also had a net working deficit of $4,495,483 as of
      June 30, 2006. Additionally, the Company must raise additional capital to meet
      its working capital needs. If the Company is unable to raise sufficient capital
      to fund its operations for the Health Advocacy program, it might be required
      to
      discontinue its pharmacy operations. These factors raise substantial doubt
      about
      the Company’s ability to continue as a going concern. In view of the matters
      described above, recoverability of a major portion of the recorded asset amounts
      shown in the accompanying balance sheet is dependent upon the Company’s ability
      to generate sufficient sales volume to cover its operating expenses and to
      raise
      sufficient capital to meet its payment obligations. The financial statements
      do
      not include any adjustments relating to the recoverability and classification
      of
      recorded asset amounts, or amounts and classification of liabilities that might
      be necessary should the Company be unable to continue in existence.





Management
      has previously relied on equity financing sources and debt offerings to fund
      operations. The Company’s reliance on equity and debt financing will continue,
      and the Company will continue to seek to enter into strategic acquisitions.
      On
      March 29, 2005, Kaire issued a $125,000, 8% interest per annum, two- year
      convertible note to the Longview Fund LP. On June 22, 2005, Kaire issued three
      two year convertible notes for an aggregate of a $350,000, 8% interest per
      annum, to the following: 1) $100,000 to the Longview Fund LP., $175,000 to
      the
      Longview Equity Fund LP, and 3) $75,000 to the Longview International Equity
      Fund, LP. On December 9, 2005 Kaire issued a $150,000, 12% interest per annum,
      two-year convertible note to the Longview Fund LP.





On
      March
      13, 2006 Kaire issued a $100,000, 12% interest per annum, two-year convertible
      note to the Longview Fund LP. On April 11, 2006 Kaire issued a $100,000, 12%
      interest per annum, two-year convertible note to the Longview Fund LP.
      Additionally, management is increasing its efforts to generate revenue from
      third-party payers other than Medicare and Medi-Cal.











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





In
      the
      six months ended June 30, 2006 and 2005, approximately 33.4% and 71.0% of net
      revenues of continuing operations were derived under federal and state insurance
      reimbursement programs with 56.4% and 29% respectively coming from private
      party
      reimbursements and other third parties. For the three-month period ending June
      30, 2006, the breakout is as follows:





Medi-Cal
            17.32%Medi-Care
            0.00%Private
                Party
            36.08%Other
                third-parties
            46.60%








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.


















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





The
      Company provides an allowance for doubtful accounts based upon its estimation
      of
      uncollectible accounts. The Company bases this estimate on historical collection
      experience and a review of the current status of trade accounts receivable.
      The
      Company determined that an allowance for doubtful accounts provision of $55,000
      was needed as of December 31, 2005 and no additional allowance for doubtful
      accounts for June 30, 2006, was necessary.











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





During
      the six months ended June 30, 2006, and during the years ended December 31,
      2005, 2004 and 2003, the Company issued notes to third parties. As part of
      the
      several of the financing transactions, the Company also issued warrants to
      purchase shares of stock at various exercise prices.





Date
                of Note
            
            Amount
                of Notes
            
            Conversion
                Price(1)
            
            Term
                of NoteDecember
                12, 2003 (2)
            
            $
            676,576
            
            $
                0.04 or 70%
            
            3
                yearsMay
                3, 2004
            
            $
            650,000
            
            $
                0.09 or 85%
            
            3
                yearsMarch
                29, 2005
            
            $
            125,000
            
            $
                0.04 or 85%
            
            1
                yearJune
                23, 2005
            
            $
            350,000
            
            $
                0.03 or 80%
            
            2
                yearsDecember
                13, 2005 (2)
            
            $
            150,000
            
            70%
            
            2
                yearsMarch
                13, 2006 (2)
            
            $
            100,000
            
            70%
            
            2
                yearsApril
                11, 2006 (2)
            
            $
            100,000
            
            70%
            
            2
                years







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





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

|(2) | no
              warrants issued with this financing
              transaction.
|--- | -------------------------------------------------------------------------------




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





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















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




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



















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





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





The
      Notes
      also provide for liquidated damages on the occurrence of several events. As
      of
      December 31, 2005, no liquidating damages have been incurred by the Company.





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





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





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





The
      debt
      discount is being accreted using the effective interest method over the term
      of
      the note. The value of the discount on the converted notes on the books is
      being
      accreted over the term of the note (three years). For the six months ended
      June
      30, 2006 and 2005, the Company accreted $251,543 and $207,506, respectively,
      of
      debt discount related to the Notes.








Warrants
      Issued





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





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



















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





Warrants
      Issued (continued)





These
      amounts have been classified as a derivative instrument and recorded as a
      liability on the Company’s balance sheet in accordance with current
      authoritative guidance. The estimated fair value of the warrants was determined
      using the Black-Scholes option-pricing model with a closing price of on the
      date
      of issuance and the respective exercise price, a 5 year term, and the volatility
      factor relative to the date of issuance. The model uses several assumptions
      including: historical stock price volatility (utilizing a rolling 120 day
      period), risk-free interest rate (3.50%), remaining time till maturity, and
      the
      closing price of the Company’s common stock to determine estimated fair value of
      the derivative liability. In valuing the warrants at December 31, 2004, the
      Company used the closing price of $0.055, the respective exercise price, the
      remaining term on each warrant, and a volatility of 129%. In accordance with
      the
      provisions of SFAS No. 133, Accounting for Derivative Instruments, the Company
      is required to adjust the carrying value of the instrument to its fair value
      at
      each balance sheet date and recognize any change since the prior balance sheet
      date as a component of Other Income (Expense). The warrant derivative liability
      at December 31, 2004, had increased to a fair value of $68,059, due in part
      to a
      decrease in the market value of the Company’s common stock to $0.055 from $0.12
      at issuance of the May 3, 2004 amount, which resulted in Other Income of
      $124,652 on the Company’s books. For the year ended December 31, 2005, the
      warrant derivative liability had increased to a value of $126,095, due in part
      to a decrease in the market value of the Company’s common stock to $0.025 from
      $0.055 at December 31, 2004, which resulted in an “Other Income” item of
      $105,771 for the year ended December 31, 2005. The Company used a closing price
      of $0.025, the respective exercise prices, remaining time till maturity and
      a
      113% volatility factor.





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








Debt
      Features





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





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



















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





Debt
      Features (continued)





Date
                of Note
            
            Amount
                of Notes
            
            Debt
                Features Value at Issuance
            
            Initial
                Carrying ValueDecember
                12, 2003
            
            $
            676,576
            
            $
            338,642
            
            $
            337,934May
                3, 2004
            
            $
            650,000
            
            $
            516,920
            
            $
            133,080March
                29, 2005
            
            $
            125,000
            
            $
            33,850
            
            $
            91,150June
                23, 2005
            
            $
            350,000
            
            $
            73,964
            
            $
            276,036December
                13, 2005
            
            $
            150,000
            
            $
            76,150
            
            $
            73,850March
                13, 2006
            
            $
            100,000
            
            $
            50,767
            
            $
            49,233April
                11, 2006
            
            $
            100,000
            
            $
            50,189
            
            $
            49,811








In
      subsequent periods, if the price of the security changes, the embedded
      derivative financial instrument related to the debt features will be adjusted
      to
      the fair value with the corresponding charge or credit to Other Expense or
      Income. The estimated fair value of the debt features was determined using
      the
      probability weighted averaged expected cash flows / Lattice Model with the
      closing price on original date of issuance, a conversion price based on the
      terms of the respective contract, a period based on the terms of the notes,
      and
      a volatility factor on the date of issuance. The model uses several assumptions
      including: historical stock price volatility (utilizing a rolling 120 day
      period), risk-free interest rate (3.50%), remaining maturity, and the closing
      price of the Company’s common stock to determine estimated fair value of the
      derivative liability. In valuing the debt features at June 30, 2006 the Company
      used the closing price of $0.012 and the respective conversion price, a
      remaining term coinciding with each contract, and a volatility of 122%. For
      the
      six months ended June 30, 2006, the estimated value of the debt features
      increased to $1,644,606, thus during the six months ended June 30, 2006, the
      Company recorded additional Derivative Liability of $100,956 associated with
      funding received during the period, plus Other Expense on the consolidated
      statement of operations for the change in fair value of the debt features
      related to these notes of $45,991.





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





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





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
















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





Debt
      Features (continued)





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





For
      the
      six months ended June 30, 2005, the Company recorded Other Expense of $190,832
      and Other Income of $98,733, related to the increase in value of the debt
      features and decrease in value of the warrants, respectively. A tabular
      reconciliation of this adjustment follows:





For
      the
      six months ended June 30, 2005:









$
            98,733
            income,
                decrease in value of 2003, 2004 and 2005 warrant liability(190,832)
            expense,
                increase in value of 2003, 2004, and 2005 derivative
                liability$
            (92,099)
            other
                expense related to convertible debt












For
      the
      six months ended June 30, 2006, the Company recorded Other Expense of $45,991
      and Other Income of $156,293, related to the increase in value of the debt
      features and decrease in value of the warrants, respectively. A tabular
      reconciliation of this adjustment follows:







For
      the
      six months ended June 30, 2006:









$
            (5,768)
            income,
                decrease in value of 2003 and 2004 warrant liability(3,256)
            income,
                decrease in value of 2003 and 2004 derivative liability(54,103)
            income,
                decrease in value of 2005 warrant liability47,382
            expense,
                increase in value of 2005 derivative liability(96,422)
            income,
                decrease in value of 2006 warrant liability1,865
            expense,
                increase in value of 2006 derivative liability$
            (110,302)
            other
                income related to convertible debt





















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





Debt
      Features (continued)







For
      the
      six months ended June 30, 2005, the Company recorded $207,506 of interest
      expense related to the accretion of debt related to the convertible
      financing.







For
      the
      six months ended June 30, 2005:









$
            55,610
            of
                interest expense related to accretion of 2003 convertible
                debt109,865
            of
                interest expense related to accretion of 2004 convertible
                debt42,031
            of
                interest expense related to accretion of 2005 convertible
                debt$
            207,506
            of
                interest expense related to convertible debt







For
      the
      six months ended June 30, 2006, the Company recorded $251,543 of interest
      expense related to the accretion of debt related to the convertible
      financing.




For
      the
      six months ended June 30, 2006:









$
            51,888
            of
                interest expense related to accretion of 2003 convertible
                debt102,514
            of
                interest expense related to accretion of 2004 convertible
                debt83,873
            of
                interest expense related to accretion of 2005 convertible
                debt13,268
            of
                interest expense related to accretion of 2006 convertible
                debt$
            251,543
            of
                interest expense related to convertible debt







The
      balance of the carrying value of the convertible debt as of December 31, 2005,
      and June 30, 2006, is:









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







$
            1,373,570
            December
                31, 2005 value99,044
            original
                carrying value on 2006 convertible debt251,543
            accretion
                of convertible debt - 2006$
            1,724,157
            June
                30, 2006 carrying value of debt




















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





Debt
      Features (continued)




The
      balance of the carrying value of the derivative liability as of December 31,
      2005, and June 30, 2006, is:









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





$
            1,497,659
            December
                31, 2005 value of derivative liability100,956
            original
                value of 2006 derivative liability22,128
            change
                in value of 2003 derivative liability(25,384)
            change
                in value of 2004 derivative liability47,382
            change
                in value of 2005 derivative liability1,865
            change
                in value of 2006 derivative liability$
            1,644,606
            June
                30, 2006 value of derivative liability





The
      balance of the carrying value of the warrant liability as of December 31, 2005,
      and June 30, 2006, is:









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







$
            126,095
            December
                31, 2005 value of warrant liability222,606
            original
                carrying values of 2006 warrant liability(5,768)
            income,
                decrease in value of 2004 warrant liability(54,103)
            income,
                decrease in value of 2005 warrant liability(96,422)
            income,
                decrease in value of 2006 warrant liability$
            192,408
            June
                30, 2006 value of warrant liability


















**5.**  **Common
      Stock Transactions**





Common
      stock transactions during the six months ending June 30, 2006





The
      Company issued 1,576,545 shares of common stock for conversion of $14,977 of
      note interest.





The
      Company issued 5,586,364 shares of common stock for professional services valued
      at $139,659.





Common
      stock transactions during three months ending June 30, 2005





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






















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





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





Source
      One Group





The
      Company’s chief financial officer served as the chief financial officer of
      Dalrada Financial Corporation (Dalrada) until May 5, 2006, when he resigned
      from
      that position. Dalrada, through its subsidiary Source One Group (“SOG”),
      operates a professional employment organization. SOG provides services for
      the
      Company as its professional employment organization. The Company entered into
      an
      Employment Services Agreement with SOG pursuant to which SOG agreed to render
      professional employment and related services to the Company for a fee. The
      Company paid fees to SOG totaling $0 and $3,347 for the six months ended June
      30, 2006 and 2005, respectively. The fees charged by SOG to the Company are
      at
      the prevailing rate that SOG charges others.











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





Property
      and equipment at June 30, 2006, and December 31, 2005, consisted of the
      following:





June
                30, 2006
            
            December
                31, 2005Furniture
                and fixtures
            $
            85,000
            
            $
            85,000Vehicles
            
            14,712
            
            
            14,712Computers
                and equipment
            
            22,094
            
            
            22,094121,806
            
            
            121,806Less
                accumulated depreciation and amortization
            
            (92,324)
            
            
            (80,260)Total
            $
            29,482
            
            $
            41,546





Depreciation
      and amortization expense for the quarters ended June 30, 2006 and 2005 was
      $12,064 and $14,635, respectively.













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








Accounts
      payable and accrued expenses at June 30, 2006 and December 31, 2005 consisted
      of
      the following:





June
                30,
              2006
            
            December
                31, 2005Accounts
                payable
            $
            293,186
            
            $
            279,791Accrued
                professional and related fees
            
            71,000
            
            
            150,072Accrued
                compensation and related liabilities
            
            93,410
            
            
            41,138Accrued
                settlements
            
            33,417
            
            
            45,092Sales
                tax payable
            
            42
            
            
            107Other
                accrued expenses
            
            6,651
            
            
            10,426Total
            $
            497,706
            
            
            526,626








**9.**  **Commitments
      and Contingencies**





Litigation





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





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





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





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





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



















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





Litigation
      (continued)





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





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





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








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





On
      April
      2, 2003, H.D. Smith filed a complaint against Classic Care, Inc., Kaire
      Holdings, Inc., Sarit Rubenstein, Steven Oscherowitz and Larisa Vernik for
      various causes of action relating amounts owed for certain drugs that were
      delivered to Classic Care. H.D. Barnes was seeking $430,205 plus interest.
      On
      December 30, 2004 a settlement was reached where Kaire is obligated to pay
      the
      plaintiff $50,000. Kaire’s payment obligation will mature upon court approval of
      the settlement, with $10,000 due immediately (paid July 8, 2005) and the balance
      paid based on 12 monthly installments of $3,077 (which includes interest of
      7.50%) to commence shortly thereafter. The balance owed as of both December
      31,
      2005, and June 30, 2006, was $27,692. Kaire is currently in breach under this
      settlement agreement.










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





On
      January 20, 2005, McKesson Medical-Surgical, Inc. (“Plaintiff”) filed a
      complaint against Effective Health, Inc., a subsidiary of Kaire, for failure
      to
      pay the principal sum of $17,466 for goods and/or services. A settlement was
      reached in October 2005 calling for Effective Health to pay $2,000 upon
      execution and $1,300 a month until the balance is paid off. The balance owed
      as
      of December 31, 2005 was $10,401. The balance owed as of June 30, 2006 was
      $1,365.





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 June 30, 2006.















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





Litigation
      (continued)





*Medical
      License*





The
      Department of Health Services (“DHS”) denied Sespe’s application (including a
      subsequent appeal) for a MediCal provider number and on February 22, 2006.
      Sespe
      is currently billing MediCal using the prior owner’s provider number pursuant
      through a power of attorney.  Sespe expects this provider number may be
      cancelled at any time by DHS.  The Company is in consulting with its legal
      counsel regarding its options, but it is not clear under the statutes whether
      Sespe can continue the practice of using the old provider number after being
      rejected for a new number, or if Sespe can use such number until the DHS
      rejects  filings using the old provider number. The financial condition and
      operations of the Company in future periods could be adversely affected if
      Sespe
      is not able to continue to process Medical patients.








Employment
      Agreements





*Chief
      Executive Officer Compensation*





Effective
      April 1, 2005, Kaire agreed to a new three year agreement with its Chief
      Executive Officer, Mr. Steven Westlund. The agreement calls for a monthly salary
      of $8,333 per month, with annual increases equaling 15% of the base salary.
      In
      addition, on November 1, 2005 he received a 5 year option to purchase 12 million
      shares of the Company’s common stock, at an option price of $0.05 per
      share.





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








Consulting
      Agreements





The
      Company has various consulting agreements that provide for issuance of the
      Company’s common stock and/or stock options/stock purchase warrants in exchange
      for services rendered by the consultants. These agreements relate primarily
      to
      raising of capital, accounting services, legal services, and professional
      services rendered in connection with the Company’s acquisition efforts. The
      Company has no amounts due under these agreements as of June 30, 2006 and 2005.











**10.**  **Stock
      Options and Warrants**





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





Options
      and warrants are granted at prices that are equal to the current fair value
      of
      the Company’s common stock at the date of grant. The Company records
      compensation expense on options granted the current fair market value. The
      vesting period is usually related to the length of employment or consulting
      contract period. In the six months ending June 30, 2006 and 2005, the Company
      granted warrants convertible into the Company’s common stock pursuant to the
      issuance of convertible debentures (see Note 4).


















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





The
      fair
      value of employee warrants was estimated at the date of grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions for the quarters ended June 30, 2006 and 2005; dividend yield of
      0%;
      expected volatility of 150%; risk-free interest rate of 4.0%; and expected
      life
      of 5 years.





The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options, which have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions including the expected stock price volatility. Because
      the Company’s employee stock options have characteristics significantly
      different from those of traded options, and because changes in the subjective
      input assumptions can materially affect the fair value estimate the existing
      models, in management’s opinion, do not necessarily provide a reliable single
      measure of the fair value of its stock options. The weighted-average fair value
      of warrants granted to employees during the year ended December 31, 2005 was
      $0.16.





The
      following table summarizes information with respect to stock warrants
      outstanding and exercisable at June 30, 2006:





Warrants
                Outstanding
            
            Warrants
                ExercisableRange
                of Exercise
              Prices
            
            Number
              Outstanding
                as of June 30, 2006
            
            Weighted
              Average
              Remaining
                Contractual Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
                Exercisable as of June 30, 2006
            
            Weighted
              Average
              Exercise
              Price$0.03
                - $0.17
            
            37,972,221
            
            4.22
            
            
            $
                0.06
            
            37,972,221
            
            
            $0.0637,972,221
            
            4.22
            
            
            $
                0.06
            
            37,972,221
            
            
            $0.06








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





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


















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





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





Warrants
              And
              Stock
                Options
              Outstanding
            
            Weighted
              Average
              Exercise
              PriceOutstanding
                December 31, 2004
            4,444,444
            
            $
            0.17Granted
                March 29, 2005
            3,694,444
            
            $
            0.04Granted
                June 22, 2005
            5,833,333
            
            $
            0.03Granted
                November 1, 2005
            12,000,000
            
            $
            0.05Exercised
            -
            
            $
            -Expired/Cancelled
            -
            
            $
            -Outstanding
                December 31, 2005
            25,972,221
            
            $
            0.06Granted
                February 28, 2006
            12,000,000
            
            $
            0.05Exercised
            -
            
            
            -Expired
            -
            
            
            -Outstanding
                June 30, 2006
            37,972,221
            
            $
            0.06








The
      Company has 37,972,221 warrants outstanding as of June 30, 2006, and 25,972,221
      warrants outstanding as of December 31, 2005. The weighted exercise price of
      the
      outstanding warrants as of June 30, 2006, and December 31, 2005, is $0.06.
      The
      outstanding warrants have a clause that causes the exercise price can be
      adjusted down by the Company upon certain Company actions. The warrants expire
      5
      years from the original date of grant. The Company has not repriced any warrants
      as of June 30, 2006.











**11.**  **Restatement
      of Financial Statements**





The
      Company has restated its previously issued 2004 consolidated financial
      statements for matters related to the following previously reported items:
      properly reflect the accounting for convertible notes, the related debt
      derivative and warrants pursuant to EITF Nos. 00-19, 05-02, 05-04 and SFAS
      No.
      133; and the related income tax effects. The accompanying financial statements
      for 2004 have been restated to reflect the corrections. Also, retained earnings
      at January 1, 2004 was reduced by $23,826 as a result of adjustments to the
      carrying value of convertible debentures, warrant liability and other derivative
      liabilities, which previously were unrecorded liabilities in 2003.















**11.**  **Restatement
      of Financial Statements (continued)**





Six
      months ended June 30, 2005





The
      following is a summary of the restatements for the six months ended June 30,
      2005 (unaudited):





Increase
                in interest expense
            $
            94,343Amortization
                of debt discount
            
            (207,506)Net
                changes in fair value of warrant liability
            
            98,733Net
                change in fair value of debt derivative liability
            
            (190,832)Debt
                issuance costs
            
            (16,250)$
            (221,512)





The
      following is a summary of the restatements for the six months ended June 30,
      2005:





Income
                tax effect of restatement
            $
            -Total
                increase in net loss
            $
            221,512





The
      effect on the Company’s previously issued June 30, 2005, financial statements
      are summarized as follows:


Three
                and six months ended June 31, 2005Balance
                Sheet
            Previously
                reported
            
            Change
            
            RestatedConvertible
                notes - current portion
            $
            814,603
            
            $
            237,374
            
            $
            1,051,977Derivative
                liability
            $
            -
            
            $
            1,102,198
            
            $
            1,102,198Warrant
                liability
            $
            -
            
            $
            133,133
            
            $
            133,133Total
                Current liabilities
            $
            1,718,465
            
            $
            1,472,705
            
            $
            3,191,170Convertible
                notes payable and debentures - non-current
            $
            495,799
            
            $
            (495,799)
            
            $
            -Total
                long term liabilities
            $
            495,799
            
            $
            (495,799)
            
            $
            -Total
                Liabilities
            $
            2,214,264
            
            $
            976,906
            
            $
            3,191,170Additional
                paid in capital
            $
            40,683,881
            
            $
            (897,524)
            
            $
            39,786,357Accumulated
                deficit
            $
            (42,508,575)
            
            $
            (79,382)
            
            $
            (42,587,957)Total
                Stockholders' Equity
            $
            (1,790,816)
            
            $
            (976,906)
            
            $
            (2,767,722)Statement
                of Operations - three monthsInterest
                expense
            $
            (68,090)
            
            $
            37,668
            
            $
            (30,422)Gain/(loss)
                from change in warrant liability
            $
            -
            
            $
            57,704
            
            $
            57,704Gain/(loss)
                from change in derivative liability
            $
            -
            
            $
            (90,208)
            
            $
            (90,208)Accretion
                of convertible debt
            $
            -
            
            $
            (114,785)
            
            $
            (114,785)Debt
                issuance costs
            $
            -
            
            $
            (8,125)
            
            $
            (8,125)Total
                Other Income (Expenses)
            $
            (68,090)
            
            $
            (117,746)
            
            $
            (185,836)Loss
                from continuing operations before income taxes
            $
            (339,892)
            
            $
            (117,746)
            
            $
            (457,638)Loss
                from continuing operations
            $
            (339,892)
            
            $
            (117,746)
            
            $
            (457,638)Net
                Loss
            $
            (339,892)
            
            $
            (117,746)
            
            $
            (457,638)Statement
                of Operations - Six monthsInterest
                expense
            $
            (175,846)
            
            $
            94,343
            
            $
            (81,503)Gain/(loss)
                from change in warrant liability
            $
            -
            
            $
            98,733
            
            $
            98,733Gain/(loss)
                from change in derivative liability
            $
            -
            
            $
            (190,832)
            
            $
            (190,832)Accretion
                of convertible debt
            $
            -
            
            $
            (207,506)
            
            $
            (207,506)Debt
                issuance costs
            $
            -
            
            $
            (16,250)
            
            $
            (16,250)Total
                Other Income (Expenses)
            $
            (175,846)
            
            $
            (221,512)
            
            $
            (397,358)Loss
                from continuing operations before income taxes
            $
            (643,480)
            
            $
            (221,512)
            
            $
            (864,992)Loss
                from continuing operations
            $
            (643,480)
            
            $
            (221,512)
            
            $
            (864,992)Net
                Loss
            $
            (643,480)
            
            $
            (221,512)
            
            $
            (864,992)Loss
                per weighted average share of common stockoutstanding
                - basic and diluted
            $
            (0.02)
            
            $
            (0.01)
            
            $
            (0.03)

















**11.**  **Restatement
      of Financial Statements (continued)**





Six
      months ended June 30, 2005 (continued)





The
      loss
      after discontinued operations for the six months ending June 30, 2005 was
      originally $643,480, while the six months ending June 30, 2005 restated loss
      after discontinued operations is reported as $864,992, an increase in loss
      of
      $221,512. This increase in loss, related to the convertible debt and warrants
      issued through June 30, 2005 consists of the following: 1) the accretion of
      debt
      amounting to $207,506; 2) interest expense relating to the debt derivatives
      of
      $190,832; 3) debt issuance costs of $16,250; offset by 4) warrant interest
      income of $98,733; and 5) decrease in interest expense of $94,343.





On
      the
      June 30, 2005 balance sheet, the restatement resulted in an increase in
      liabilities of $976,906 consisting of the following; 1) an increase to the
      derivative liability of $1,102,198; 2) an increase to the warrant liability
      of
      $133,133; 3) an increase in debt discount of $237,374; and 4) a decrease in
      long-term convertible debt of $495,799. There was also a decrease in additional
      paid in capital of $897,524.











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





Earnings
      per share have been calculated using the weighted average number of shares
      outstanding during each period. As of June 30, 2006 and 2005, potentially
      dilutive securities consist of convertible debentures convertible into
      154,253,835 and 48,385,866 common shares and warrants convertible into
      37,972,221 and 8,138,888 shares respectively. Earnings per share-dilutive does
      not include the effect of potentially dilutive securities for the periods ended
      June 30, 2006 and 2005. The loss from operations and the net loss for the
      six-month periods ended June 30, 2006 and 2005, make these securities
      anti-dilutive.







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





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





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

















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





The
      net
      assets (liabilities) of the discontinued operations have been recorded at their
      estimated net realizable value under the caption “Net assets (liabilities) of
      discontinued operations - Classic Care” in the accompanying Balance Sheets at
      June 30, 2006, and December 31, 2005, and consist of the following:





June
                30,
              2006
            
            December
                31, 2005Non-trade
                receivable
            
            -
            
            
            -Total
                Assets
            $
            -
            
            $
            -Accounts
                payable
            
            (131,845)
            
            
            (131,845)Accrued
                liabilities
            
            (13,766)
            
            
            (13,766)Reserve
                for litigation
            
            -
            
            
            -Total
                liabilities
            
            (145,611)
            
            
            (145,611)Net
                assets (liabilities) of discontinued operations
            $
            (145,611)
            
            $
            (145,611)








There
      was
      no income or loss related to the operations of Classic Care during the six
      months ended June 30, 2006 and 2005.












































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





Plan
      of Operation





Our
      general operating plan up until June 30, 2006 was focused on delivering
      specialized programs and services targeted areas within the senior and chronic
      health care market. We will continue with this strategy but intend to increase
      the direction and scope of our activities. This renewed emphasis is due to
      the
      following reasons:




|· | On
              October 17, 2005, due to an issue related to our dissolved Classic
              Care
              pharmacy, Medi-Cal denied Sespe Pharmacy’s application for a new Medi-Cal
              provider number. Sespe’s old provider number was cancelled on May 1, 2006
              which meant we were no longer able to service our Medi-Cal clients.
              We had
              been focusing on signing up non Medi-Cal clients and as a result we
              have
              reduced the Medi-Cal portion of sales to 33.4% of total sales through
              June
              30, 2006. However ramping up non-Medi-Cal sales has been slow and
              anticipated IPA contractual arrangements have not produced the influx
              of
              revenue expected, and
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|· | Additionally
              towards the end of May, 2006 our largest client started ramping down
              the
              number of orders being send to us. The ramping down was a client based
              decision and not related to our performance. We are in discussions
              with
              the client to try to change that decision.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Based
      on
      these two factors, management has decided to proceed with the following plan:





|· | Increase
              our marketing effort with the hope of replacing our major client,
|- | ----------------------------------------------------------------------------------------




|· | Seek
              a strategic alliance that can increase revenue,
              or
|- | -----------------------------------------------------------------------------------




|· | seek
              a company in the industry to acquire or to be acquired by to improve
              revenues and offset the cost of being
              public.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------




Short
      and Long Term Goals





Our
      short
      term goal, as noted above, is to replace the loss of our major client and seek
      other alternatives to grow the pharmacy business. Over the longer term, we
      hope
      to find a company to acquire that is in the same line of business.





Concerning
      working capital, historically our revenues have been insufficient to cover
      the
      cost of running Kaire Holdings operations and pay its non-operational costs.
      For
      the six month period ending June 30, 2006 our operations have not been
      generating a positive cash flow. Additional funds are required to cover
      non-operational costs which include the costs to maintain a public entity.
      In
      order to cover such costs, Kaire Holdings has relied in part on private
      placements of common stock securities, loans from private investors and in
      some
      instances the exercise of common stock warrants to meet the non-operational
      needs. With reduced revenues,, we believe that over the next twelve months
      there
      will be a need for more additional working capital to meet our non-operational
      needs. Currently Kaire has no excess cash, i.e. it is used as soon as it is
      received. We estimate that an additional $100,000 in funds will need to be
      raised in order to carry us through the next twelve months. To offset the cash
      requirements, Kaire has reduced its staff and its non operational expenses.





Historically,
      we have been successful in our efforts to secure working capital mainly from
      private placements of common stock securities and loans from private investors.
      However, there can be no assurances that private or other capital will continue
      to be available to meet our cash needs, or that a sufficient amount of our
      common stock or other securities can or will be sold or that any common stock
      purchase options/warrants will be exercised to fund the non operational needs
      of
      the Company.





On
      December 13, 2005, Kaire entered into a subscription agreement to issue $350,000
      in convertible debentures, 12% annual interest rate in three traunches. A
      convertible debenture for $150,000 was issued on December 13, 2005 and its
      underlying shares are being registered through this document. A second
      convertible debenture of $100,000 was issued on March 13, 2006 and the third
      traunch of $100,000 was funded on April 11, 2006. As mentioned above, Kaire
      will
      most likely need another $200,000 to carry us through the next twelve months.








Results
      of Operations





Three
      and Six Months Ended June 30, 2006 Compared to June 30, 2005





Revenues




For
      the
      three and six months ended June 30, 2006, revenues were approximately $87,593
      and $373,679 respectively, for a decrease of $186,394 and $331,072 (68.0% and
      47.0%) respectively for the same periods in 2005. The decrease in sales is
      a
      result of the pharmacy’s Medi-Cal provider number being turned off around May 1,
      2006 and the reduction of business from a major client.





Cost
      of
      Goods Sold





Cost
      of
      goods sold for the three and six-month period ending June 30, 2006 was $64,008
      and $277,372 respectively, for a decrease of $187,983 and $215,175 (74.6% and
      43.7%), respectively, over the same periods in 2005. This decrease is a direct
      result of the fall in sales.





Gross
      Profit





Gross
      Profit the three and six-month period ending June 30, 2006 was 23,585 and
      $96,307 respectively, for an increase of $1,589 (7.2%) for the three months
      over
      the same period in 2005, and a decrease of $115,897 (54.6%) for the six months
      over the same period in 2005. The increase in gross profit for the three month
      period is due to our patients in the prior year period requiring mostly brand
      name drugs which provide us a low gross margin. The decrease in gross profit
      for
      the six month period is a direct result of the fall in sales. .





Operating
      Expenses





Operating
      expenses for the three and six month period ended June 30, 2006 were $205,096
      and $629,849 respectively for a decrease of $88,702 (30.2%) and $49,989 (7.4%)
      respectively from the same period prior year. The $49,989 decrease in expenses
      is mainly attributable to decreases of 1) $123,551 (51.5%) in salaries and
      related expenses as a result of head count reduction, 2) $2,571 (17.6%) in
      depreciation expense, 3) $1,352 (7.7%) in rent, offset by increases in 4)
      general and admin of $75,502 (18.6%) and 5) $1,983 (206.6%) in selling expense.
      The increase in general and admin of $75,502 is primarily the result of
      increases in 1) consulting expense of $263,871 (3,958.6%) and 2) office expenses
      of $12,267 (492.7%), offset by decreases in 1) employee benefit expense of
      $14,508 (87.7%), 2) contract labor and outsides services of $15,768 (18.7%),
      3)
      accounting expenses of $95,242 (57.7%), and 4) legal expenses of $72,676
      (69.4%)





Interest
      expenses for the three and six month period ended June 30, 2006 was $43,031
      and
      $82,370 respectively for an increase of $12,609 (41.4%) and $867 (1.1%)
      respectively from the same period prior year. In the six months ended June
      30,
      2006, the increase in interest was due to an increase in short term debt from
      the same period prior year. Gain from the change in warrant liability for the
      three and six month period ended June 30, 2006 was $61,292 and $156,293
      respectively for a gain of $3,588 (6.2%) and $57,560 (58.3%) respectively over
      the same period prior year. This gain was a result of a decrease in the
      valuation of the warrant liability. Derivative liability income/(expense) for
      the three and six month period ended June 30, 2006 was $86,283 and $(45,991)
      for
      a decreased expense of $176,491 (195.6%) and $144,841 (75.9%) respectively
      from
      the same period prior year. This decrease in expense was a result of an increase
      in the valuation of the derivative liability. Accretion of convertible debt
      discount expense for the three and six month period ended June 30, 2006 was
      $120,295 and $251,543 respectively for an increase of $5,510 (4.8%) and $44,037
      (21.2%) respectively from the same period prior year. The increase is a result
      of the issuance of additional debt during the three month period ending June
      30,
      2006. Debt issuance costs for the three and six month period ended June 30,
      2006
      was $13,252 and $26,505 respectively for an increase of $5,127 (63.1%) and
      $10,255 (63.1%) respectively for the same period prior year, which is a result
      of the costs associated with the issuance of additional debt subsequent to
      June
      30, 2005.


.





Federal
      Income Tax





No
      provision was made for Federal income tax since the Company has incurred
      significant net operating losses from inception. Through June 30, 2005, the
      Company incurred a net operating loss for tax purposes of approximately
      $643,480. The net operating loss carry forward may be used to reduce taxable
      income through the year 2014. The Company's tax returns have not been audited
      by
      the Internal Revenue Service. The carry forward amounts may therefore be subject
      to audit and adjustment. As a result of the Tax Reform Act, the availability
      of
      net operating loss carry forwards can be deferred, reduced or eliminated under
      certain circumstances. Net operating losses in the State of California were
      not
      available for use during 1992 and the carry forward period has generally been
      reduced from fifteen years to five years




Liquidity
      and Capital Resources





Cash
      flow
      used in operations for the six month period ending June 30, 2006 amounted to
      $192,795, which mainly consisted of the net loss for the six months ending
      June
      30, 2006 of $764,760 plus 1) the gain from change in warrant liability of
      $156,293, 2) the decrease in accounts payable and accrued expenses of $28,855,
      3) the increase in inventory of $6,631, 4) a decrease in sales tax payable
      of
      $65 and 5) an increase in accounts receivable of $17,081, offset by the
      following: 1) depreciation and amortization of $12,064, 2) accretion of
      convertible debt discount of $251,543, 3) loss from change in derivative
      liability of $45,991, 4) common stock issue for payment of interest of $14,977,
      5) warrants issued for consulting expense of $222,606, 6) common stock issued
      for professional services of $139,659, 7) amortization of deferred financing
      costs of $26,505, 8) a decrease in income tax payable of $153 and 9) an increase
      in accrued interest in convertible notes of $67,392.




No
      cash
      was used in investing activities for the six month period ending June 30, 2006.









Net
      cash
      generated from financing activities for the six month period ending June 30,
      2006 was $194,687 which consisted primarily of proceeds from notes payable
      -
      shareholder of $1,829 and proceeds from convertible notes payable of $200,000,
      offset by the decrease in bank overdraft of $4,129 and an increase in deferred
      financing costs of $3,013 associated with the funding received during the six
      months ended June 30, 2006.




On
      June
      30, 2006 the Company had total assets of $236,469 compared to $246,422 on
      December 31, 2005, an decrease of $9,953 or 4.0%. The Company had a total
      stockholder's deficit of $4,466,001 on June 30, 2006, compared to a stockholders
      deficit of $3,855,876 on December 31, 2005, an increase of $610,125 or 15.8%.
      As
      of June 30, 2006 the Company's working capital position decreased by $598,061
      (15.3%) from a working capital deficit of $3,897,422 at December 31, 2005 to
      a
      working capital deficit of $4,495,483 at June 30, 2006. This result was
      attributed primarily to increases in 1) convertible notes - current portion
      of
      $350,587 (25.5%), 2) increase in warrant liability of $66,313 (52.6%), 3)
      increase in derivative liability of $146,947 (9.8%), 4) increase in accrued
      interest on the current portion of the accrued notes of $67,392 (21.1%), 5)
      increase in advances from shareholder of $1,829 (1.9%), 6) increase in income
      taxes payable of $153 (23.6%), and 7) a decrease in deferred financing costs
      of
      $23,493 (56.9%), offset by an 1)increase in cash of $1,892 (100.0%), 2) an
      increase in inventory of $6,631 (9.8%), 3) a decrease in bank overdraft of
      $4,129 (89.1%) 4) a decrease in accounts payable and accrued expenses of $28,920
      (5.5%) and 5) an increase in accounts receivable of $17,081 (17.8%).





Over
      the
      next twelve months, management is of the opinion that sufficient working capital
      will be obtained from operations and external financing to meet our operating
      needs through the reduction of non essential programs, however it is unlikely
      that there will be sufficient capital to meet our non operational needs. The
      following is a discussion of future cash requirements.








Estimated
      future cash requirements





Our
      estimate of net cash requirements for overhead for the next twelve months
      subsequent to June 2006 is approximately $10,000 to $20,000 a month for a
      twelve-month estimated total of $120,000 to $240,000. The estimate of net cash
      inflow from operations for the same period is approximately $140,000.





We
      have
      generally financed our operations through the sale of its common stock. In
      order
      to sustain operations in the near term, it is anticipated that we will need
      an
      additional small infusion of funds of approximately $100,000 from outside
      sources. If we are unable to access the needed funds through increased revenues
      or seek additional equity funding. If we are unable to gain access to such
      funding, we will be forced to curtail operations until such funding is
      obtained.





Going
      Concern





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, we have experienced net losses of $764,760
      and $864,992 for the six months ended June 30, 2006 and 2005, respectively.
      We
      also have a net working deficit of $4,495,483 for the six months ended June
      30,
      2006. Additionally, we must raise additional capital to meet our working capital
      needs as a result of our continuing losses and the curtailment of orders from
      a
      major client. If we are unable to raise sufficient capital to fund our
      operations, we might be required to curtail or discontinue our pharmacy
      operations. These factors raise substantial doubt about our 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 our ability to generate sufficient sales volume
      to
      cover our 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 we be unable to
      continue in existence.




Management
      has previously relied on equity financing sources and debt offerings to fund
      operations. The Company’s reliance on equity and debt financing will continue,
      and the Company will continue to seek to enter into strategic acquisitions.
      On
      March 29, 2005, Kaire issued a $125,000, 8% interest per annum, two year
      convertible note to the Longview Fund LP. On June 22, 2005, Kaire issued three
      two year convertible notes for an aggregate of a $350,000, 8% interest per
      annum, to the following: 1) $100,000 to the Longview Fund LP., $175,000 to
      the
      Longview Equity Fund LP, and 3) $75,000 to the Longview International Equity
      Fund, LP. On December 9, 2005 Kaire issued a $150,000, 12% interest per annum,
      two year convertible note to the Longview Fund LP.





On
      March
      13, 2006 Kaire issued a $100,000, 12% interest per annum, two year convertible
      note to the Longview Fund LP. On April 11, 2006 Kaire issued a $100,000, 12%
      interest per annum, two year convertible note to the Longview Fund LP.
      Management will continue in its efforts to generate revenue from third-party
      payers other than Medicare and Medi-Cal and to replace the loss of its main
      client.




ITEM 3.
      CONTROLS AND PROCEDURES




(a)       
      Our Chief Executive Officer and Chief Financial Officer have evaluated the
      effectiveness of our disclosure controls and procedures (as such term is defined
      in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”)) as of the end of the period 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 effective in ensuring that all information required
      to
      be disclosed in reports that we file or submit to under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the Securities and Exchange Commission rules and forms. In June 2005, we
      announced that our year end financial statements were to be restated, relating
      to accounts receivable and revenue. Our conclusion to restate resulted in
      affecting our assessment regarding our controls, and that they were not
      effective as of the period ended in this report.





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





Limitations
      on the Effectiveness of Internal Controls





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







PART
      II.
      OTHER INFORMATION







**Item
      1.**  **Legal
      Proceedings**





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





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





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





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





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





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





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







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





On
      April
      2, 2003, H.D. Smith filed a complaint against Classic Care, Inc., Kaire
      Holdings, Inc., Sarit Rubenstein, Steven Oscherowitz and Larisa Vernik for
      various causes of action relating amounts owed for certain drugs that were
      delivered to Classic Care. H.D. Barnes is seeking $430,205 plus interest. On
      December 30, 2004 a settlement was reached where Kaire is obligated to pay
      the
      plaintiff $50,000. Kaire’s payment obligation will mature upon court approval of
      the settlement, with $10,000 due immediately (paid July 8, 2005) and the balance
      paid based on 12 monthly installments of $3,077.06 (which includes interest
      of
      7.50%) to commence shortly thereafter. The balance owed as of June 30, 2006
      was
      $27,692. Kaire is currently in breach of this court due to lack of funds to
      make
      payments.




McKesson
      Medical - Surgical Inc. v. Effective Health





On
      January 20, 2005, McKesson Medical-Surgical, Inc. (“Plaintiff”) filed a
      complaint against Effective Health, Inc., a subsidiary of Kaire, for failure
      to
      pay the principal sum of $17,466 for goods and/or services. A settlement was
      reached in October 2005 calling for Effective Health to pay $2,000 upon
      execution and $1,300 a month until the balance is paid off.





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 March 31, 2006.







ITEM
      2.  Changes
      in Securities and Use of Proceeds






On
      June
      23, 2005, we issued three convertible notes for and aggregate of $350,000,
      8%
      interest per annum. These notes mature in two years. T he
      Conversion Price per share shall be the lesser of (i) $.03 or (ii) eighty (80%)
      of the average of the closing bid prices for the five (5) trading days prior
      to
      but not including the conversion date for the common stock. In addition we
      to
      the investors warrants to purchase 5,833,332 shares of the common stock at
      a per
      share purchase price of $0.04. The proceeds from this convertible note were
      used
      for working capital needs




On
      April
      25, 2006, we issued 550,000 shares to Roe Serrano pursuant to a labor
      settlement. The stock was valued at $.032 per share or $17,600.





On
      April
      25, 2006, we issued an aggregate of 4,986,364 shares to consultants for services
      rendered, valued at $.028 per share or $139,618.




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)





(b)  Reports
      on Form 8-K:





None

















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:
      August 22, 2006   By: /s/ Steven
      R.Westlund


Steven
      Westlund


Chief
      Executive Officer, Chairman