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 March
      31, 2005





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 May 31, 2005


$.001
      par
      value      33,877,252
      shares








Transitional
      Small Business Disclosure Format  Yes   No X











FORM
      10-QSB


Securities
      and Exchange Commission


Washington,
      D.C. 20549





KAIRE
      HOLDINGS INCORPORATED





Index








PART
      I -
      FINANCIAL INFORMATION


Item
      1.
      Consolidated Financial Statements





Condensed
      Consolidated Balance Sheets (unaudited) at


March
      31,
      2005 and December 31, 2004





Condensed
      Consolidated Statements of Operations (Unaudited)


for
      the
      three months ended March 31, 2005 and 2004





Condensed
      Consolidated Statements of Cash Flows (Unaudited)


for
      the
      three months ended March 31, 2005 and 2004





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  Unregistered
      Sales of Equity 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**


**March
      31, 2005**





**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**





**Consolidated
      Financial Statements**





**March
      31, 2005**














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














Consolidated
                Balance Sheets
            1
                -
                2Consolidated
                Statements of Operations
            3Consolidated
                Statements of Cash Flows
            4
                -
                5Notes
                to Consolidated Financial Statements
            6
                -
                22








**Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Consolidated
            Balance Sheets**
 **As
            of March 31, 2005 and December 31,
            2004**





ASSETSMarch
                31, 2005
            
            December
                31, 2004Current
                Assets
            (unaudited)
            
            (audited)Cash
                and cash equivalents
            $
            -
            
            $
            -Accounts
                receivable, trade
            
            156,081
            
            
            132,761Inventory
            
            117,545
            
            
            149,939Employee
                advances
            
            110
            
            
            -Total
                Current Assets
            
            273,736
            
            
            282,700Other
                AssetsProperty
                and equipment, net of accumulated depreciation
            
            63,497
            
            
            69,785Total
                Other Assets
            
            63,497
            
            
            69,785Total
                Assets
            $
            337,233
            
            $
            352,485





























(continued)








See
            accompanying notes.
 -
            1 -


**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**


**Consolidated
      Balance Sheets (continued)**


**As
      of March 31, 2005 and December 31, 2004**








LIABILITIES
                AND STOCKHOLDERS' EQUITYMarch
                31, 2005
            
            December
                31, 2004Current
                Liabilities
            (unaudited)
            
            (audited)Bank
                overdraft
            $
            43,476
            
            $
            19,931Accounts
                payable and accrued expenses
            
            354,917
            
            
            449,782Income
                tax payable
            
            647
            
            
            647Loans
                payable
            
            27,150
            
            
            49,000Notes
                payable - related parties
            
            13,181
            
            
            13,281Advances
                from shareholders
            
            73,607
            
            
            73,607Liabilities
                of discontinued operations - Classic Care
            
            145,611
            
            
            145,611Accrued
                interest - convertible debt
            
            233,918
            
            
            207,304Convertible
                notes - current portion
            
            718,762
            
            
            566,158Total
                Current Liabilities
            
            1,611,269
            
            
            1,525,321Long
                Term LiabilitiesConvertible
                notes payable and debentures
            
            313,267
            
            
            385,880Total
                Long Term Liabilities
            
            313,267
            
            
            385,880Total
                Liabilities
            
            1,924,536
            
            
            1,911,201Stockholders'
                EquityCommon
                stock, $0.001 par value900,000,000
                shares authorized; 33,877,252 and 30,877,252shares
                issued and outstanding in 2004 and 2003, respectively
            
            33,878
            
            
            30,878Additional
                paid in capital
            
            40,547,502
            
            
            40,275,501Accumulated
                deficit
            
            (42,168,683)
            
            
            (41,865,095)Total
                Stockholders' Equity
            
            (1,587,303)
            
            
            (1,558,716)Total
                Liabilities and Stockholders' Equity
            $
            337,233
            
            $
            352,485





See
            accompanying notes.
 -
            2 -


**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**


**Consolidated
      Statements of Operations**


**For
      The Three Months Ending March 31, 2005
      and 2004**





March
                31,
            
            March
                31,2005
            
            2004(unaudited)
            
            (unaudited)Net
                revenues
            $
            430,764
            
            $
            499,818Cost
                of goods sold
            
            (240,556)
            
            
            (403,524)Gross
                Profit
            
            190,208
            
            
            96,294Operating
                ExpensesSalaries
            
            119,697
            
            
            95,943Depreciation
                and amortization
            
            7,238
            
            
            6,624General
                and administrative
            
            251,814
            
            
            502,263Selling
                expense
            
            -
            
            
            18,942Rent
            
            
            7,291
            
            
            22,170Total
                Operating Expenses
            
            386,040
            
            
            645,942Loss
                from operations
            
            (195,832)
            
            
            (549,648)Other
                Income (Expenses)Interest
                expense
            
            (107,756)
            
            
            (91,170)Miscellaneous
                income
            
            -
            
            
            333Miscellaneous
                expense
            
            -
            
            
            (80)Total
                Other Income (Expenses)
            
            (107,756)
            
            
            (90,917)Loss
                from continuing operations before income taxes
            
            (303,588)
            
            
            (640,565)Provision
                for income taxes
            
            -
            
            
            (3,014)Loss
                from continuing operations
            
            (303,588)
            
            
            (643,579)Discontinued
                operationsLoss
                from operations of discontinued segment (Entremetrix), netof
                income tax expense of $800 for the year ended December 31,
                2003
            
            -
            
            
            (55,287)Gain
                on sale discontinued segment (Entremetrix)
            
            -
            
            
            276,848Gain/(Loss)
                from Discontinued Operations
            
            -
            
            
            221,561Net
                Loss
            
            $
            (303,588)
            
            $
            (422,018)(Loss)
                earnings per weighted average share ofcommon
                stock outstanding - basic and dilutedFrom
                continuing operations
            $
            (0.01)
            
            $
            (0.04)From
                discontinued operations
            
            0.00
            
            
            0.01Total
                (loss) earnings per share - basic and diluted
            $
            (0.01)
            
            $
            (0.03)Weighted-average
                shares outstanding - basic and diluted
            
            30,781,798
            
            
            15,466,443








See
            accompanying notes.
 -3 -


**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**For
      The Three Months Ending March 31, 2005
      and 2004**





March
                31,
            
            March
                31,2005
            
            2004(unaudited)
            
            (unaudited)Increase
                (decrease) in cash and cash equivalentsNet
                loss
            $
            (303,588)
            
            $
            (422,018)Adjustments
                to reconcile net loss to net cash usedin
                operating activitiesDepreciation
                and amortization
            
            7,238
            
            
            6,624Amortization
                of warrant and beneficial conversion feature
            
            71,867
            
            
            63,676Amortization
                of issuance costs
            
            8,125
            
            
            -Common
                stock issued for professional services and compensation
            
            150,000
            
            
            351,260Gain
                on sale of discontinued operations - EntreMetrix
            
            -
            
            
            (276,848)Gain
                on settlement
            
            -
            
            
            55,287Other
            
            -
            
            
            (9,126)Total
                adjustments to net income
            $
            (66,358)
            
            $
            (231,145)Cash
                flow from operating activities:Changes
                in operating assets and liabilities:(Increase)
                decrease in trade accounts receivable
            $
            (23,320)
            
            $
            (59,668)Other
                receivables
            
            (110)
            
            
            (3,450)Increase
                in bank overdraft
            
            23,545
            
            
            -Advances
                to shareholders
            
            -
            
            
            39,930Prepaid
                expenses
            
            -
            
            
            (279)Increase
                in inventory
            
            32,394
            
            
            6,503Increase
                (decrease) in income and sales tax payable
            
            33
            
            
            (8,000)Increase
                in accrued interest on convertible notes
            
            26,614
            
            
            23,962Increase
                in accounts payable and accrued expenses
            
            (94,898)
            
            
            70,117Cash
                flow generated by (used in) operating activities
            $
            (35,742)
            
            $
            69,115Cash
                flow from investing activities:Purchase
                of property and equipment
            $
            (950)
            
            $
            (14,712)Net
                cash generated by (used in) investing activities
            $
            (950)
            
            $
            (14,712)Cash
                flow from financing activities:Proceeds
                from notes payable - shareholders
            $
            -
            
            $
            16,258Proceeds
                from notes payable - related parties
            
            1,200
            
            
            450Payments
                on notes payable - related parties
            
            (1,300)
            
            
            -Payments
                on loans
            
            (21,850)
            
            
            (17,021)Proceeds
                from convertible notes payable
            
            125,000
            
            
            -Proceeds
                from conversion of warrants
            
            -
            
            
            132,000Net
                cash generated by (used in) financing activities
            $
            103,050
            
            $
            131,687Net
                (decrease) increase in cash and cash equivalents
            $
            -
            
            $
            (45,055)Cash
                and cash equivalents at beginning of year
            
            -
            
            
            45,055Cash
                and cash equivalents at end of period
            $
            -
            
            $
            -





(continued)











See
            accompanying notes.
 -4 -


**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**


**Consolidated
      Statements of Cash Flows (continued)**


**For
      The Three Months Ending March 31, 2005
      and 2004**





**Supplementary
                disclosures of cash flow information**Cash
                paid during the year forInterest
            $
            3,150
            
            $
            2,063Taxes
            $
            -
            
            $
            8,800**Supplemental
                schedule of non-cash investing and financing
                activities:****Non-cash
                investing and financing activities:**Common
                stock issued for services
            $
            150,000
            
            $
            351,260Common
                stock issued for conversion of notes payable
            $
            -
            
            $
            538,871Common
                stock issued for compensation
            $
            -
            
            $
            250,000Retired
                1,250,000 shares of common stock
            $
            -
            
            $
            250,000Sale
                of EntreMetrix- non-cash gain
            $
            -
            
            $
            276,848








During
      the three months ended March 31, 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








During
      the three months ended March 31, 2004, the Company entered into the following
      non-cash transactions:





Issued
      1,405,000 shares of common stock for consulting services and compensation valued
      at $351,260





Issued
      18,611,518 shares of common stock for conversion of $538,871ofnotes payable,





Issued
      1,000,000 shares of common stock to an employee for prior year compensation
      valued at $250,000





Retired
      1,250,000 shares of common stock valued at $250,000.





The
      sale
      of entreMetrix resulted in a non-cash gain of $276,848.











See
            accompanying notes.
 - 5-


**Kaire
        Holdings Incorporated**
 **and
        Subsidiaries**
 **Notes
        to Financial Statements**
 **March
        31, 2005**


**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.








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.





In
      May
      2000, the Company acquired Classic Care, Inc. ("Classic Care"), which was
      organized as a corporation in April 1997, under the Laws of the State of
      California. Classic Care operated as an agency distributor of pharmaceutical
      products, via a unique prescription packaging system for consumers at senior
      assisted living and retirement centers in the Los Angeles area. Classic Care
      purchased prescription drugs in bulk and filled prescriptions for individuals
      living in the aforementioned facilities. Primary sales were to individuals
      and
      consist of packaged prescription drugs in prescribed dosages. These packaged
      drug sales were primarily paid for by Medi-Cal, and the balances of the sales
      that are not covered by Medi-Cal were paid directly by individuals. Classic
      Care
      billed Medi-Cal and other third-party payors on behalf of the customer and
      receives payment directly from Medi-Cal.





On
      April
      17, 2002, Classic Care received notice from the State of California Department
      of Health Services ("DHS") that they were suspending Classic Care Pharmacy's
      Medi-cal provider number and withholding 100% of Classic Care Pharmacy's
      Medi-cal payments, alleging Classic Care Pharmacy had submitted numerous
      patients' claims without proper documentation.





As
      a
      result of the DHS claim, on May 20, 2002, the Company and the original Classic
      Care Shareholders reached an agreement to settle all amounts due them. This
      agreement resulted in the Company selling the long-term services business
      clients to the original Classic Care shareholders and relinquishing all rights
      in the long-term services business in return for a release from repaying the
      promissory notes and contingent payments resulting from the original
      acquisition. In December 2002, the Company was informed by the Department of
      Health Services ("DHS") that the Medi-Cal Program was taking the following
      actions against Classic Care: 1) withholding 100 percent of payment to Classic
      Care; and 2) temporarily suspending and deactivating Classic Care's Medi-Cal
      provider number. In January 2003, the Company's management decided to start
      the
      process of a voluntary dissolution of Classic Care.








See
            accompanying notes.
 - 6-
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Consolidated
            Statements of Cash Flows (continued)**
 **For
            the Three Months Ending March 31, 2005 and 2004**


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





Principles
      of Consolidation




The
      consolidated financial statements include the accounts of Kaire and its wholly
      owned subsidiaries (collectively the "Company"). The Company's subsidiaries
      include See/Shell Biotechnology, Inc.., EFFECTIVE Health, Inc. (dba Sespe
      Pharmacy), and YesRx.com. Intercompany accounts and transactions have been
      eliminated upon consolidation.








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 for the three months ended March 31, 2005,
      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 March 31, 2005, included
      herein. The consolidated financial statements include the accounts of the
      Company and its majority-owned subsidiaries. All inter-company transactions
      were
      eliminated. The Company's fiscal year ends on December 31 each year. The
      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, 2004.








Estimates




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and the disclosures of
      contingent assets and liabilities at the date of the financial statements,
      as
      well as the reported amounts of revenues and expenses during the reporting
      period. Actual results could differ from those estimates. Significant estimates
      include valuation of goodwill, 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.





See
            accompanying notes.
 - 7-
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


**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 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
      quarter ended March 31, 2005, gross revenues were approximately $540,205, less
      approximately $109,441 of contractual adjustments based on reimbursement
      contracts, resulting in net revenues of approximately $430,764.








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. The Company incurred a loss from operations. Thus, all common stock
      equivalents were deemed to be anti-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.


See
            accompanying notes.
 -8 -
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


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





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.








Stock-Based
      Compensation





The
      Company adopted the fair value based method of recording stock options
      consistent with Statement of Financial Accounting Standards (SFAS) No. 123,
      "Accounting for Stock-Based Compensation," for all employee stock options
      granted subsequent to fiscal year end 2004. Specifically, the Company adopted
      SFAS No. 123 using the "prospective method" with guidance provided from SFAS
      No.
      148, "Accounting for Stock-Based Compensation - Transition and Disclosure.” All
      employee stock option grants made since the beginning of fiscal 2005 have or
      will be 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.





SFAS
      No.
      123, "Accounting for Stock-Based Compensation," establishes and encourages
      the
      use of the fair value based method of accounting for stock-based compensation
      arrangements under which compensation cost is determined using the fair value
      of
      stock-based compensation determined as of the date of grant and is recognized
      over the periods in which the related services are rendered.





The
      Company did not issue any options or warrants to employees or consultants during
      the three months ended March 31, 2005 and 2004.


See
            accompanying notes.
 - 9-
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


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





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 three months ended March
      31, 2005 and 2004, comprehensive loss is equivalent to the Company's net
      loss.








Advertising
      Costs





The
      Company expenses advertising and marketing costs as they are incurred. There
      were no advertising and marketing costs for the three-month period ended March
      31, 2004. Advertising and marketing costs for the three-month period ended
      March
      31, 2004, were $4,884.








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.








Recent
      Accounting Pronouncements





In
      March
      2004, the FASB approved the consensus reached on the Emerging Issues Task Force
      (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and
      Its
      Application to Certain Investments." The objective of this Issue is to provide
      guidance for identifying impaired investments. EITF 03-1 also provides new
      disclosure requirements for investments that are deemed to be temporarily
      impaired. In September 2004, the FASB issued a FASB Staff Position (FSP) EITF
      03-1-1 that delays the effective date of the measurement and recognition
      guidance in EITF 03-1 until after further deliberations by the FASB. The
      disclosure requirements are effective only for annual periods ending after
      June
      15, 2004. The Company has evaluated the impact of the adoption of the disclosure
      requirements of EITF 03-1 and does not believe it will have an impact to the
      Company's overall consolidated results of operations or consolidated financial
      position. Once the FASB reaches a final decision on the measurement and
      recognition provisions, the Company will evaluate the impact of the adoption
      of
      EITF 03-1.


See
            accompanying notes.
 -10 -
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


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





Recent
      Accounting Pronouncements (continued)





In
      July
      2004, the EITF issued a draft abstract for EITF Issue No. 04-08, "The Effect
      of
      Contingently Convertible Debt on Diluted Earnings per Share" ("EITF 04-08").
      EITF 04-08 reflects the Task Force's tentative conclusion that contingently
      convertible debt should be included in diluted earnings per share computations
      regardless of whether the market price trigger has been met. If adopted, the
      consensus reached by the Task Force in this Issue will be effective for
      reporting periods ending after December 15, 2004. Prior period earnings per
      share amounts presented for comparative purposes would be required to be
      restated to conform to this consensus and the Company would be required to
      include the shares issuable upon the conversion of the Notes in the diluted
      earnings per share computation for all periods during which the Notes are
      outstanding Management does not expect the implementation of this new standard
      to have a material impact on its computation of diluted earnings per share.





In
      September 2004, the EITF delayed the effective date for the recognition and
      measurement guidance previously discussed under EITF Issue No. 03-01, "The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments" ("EITF 03-01") as included in paragraphs 10-20 of the proposed
      statement. The proposed statement will clarify the meaning of
      other-than-temporary impairment and its application to investments in debt
      and
      equity securities, in particular investments within the scope of FASB Statement
      No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
      and
      investments accounted for under the cost method. The Company is currently
      evaluating the effect of this proposed statement on its financial position
      and
      results of operations.





In
      November 2004, the Financial Accounting Standards Board Statement issued SFAS
      No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4", which
      clarifies the accounting for abnormal amounts of idle facility expense, freight,
      handling costs, and charges regardless of whether they meet the criterion of
      "so
      abnormal" that was originally stated in Accounting Research Bulletin No. 43,
      chapter 4. In addition, SFAS No. 151 requires that the allocation of fixed
      production overheads to conversion costs be based on the normal capacity of
      the
      production facilities. SFAS No. 151 is effective for inventory costs incurred
      during fiscal years beginning after June 15, 2005. Management does not expect
      the implementation of this new standard to have a material impact on its
      financial position, results of operations and cash flows.





In
      December 2004, the FASB issued a revision to SFAS 123, "Share-Based Payment,
      an
      amendment of FASB Statements Nos. 123 and 95," that addresses the accounting
      for
      share-based payment transactions in which a Company receives employee services
      in exchange for either equity instruments of the Company or liabilities that
      are
      based on the fair value of the Company's equity instruments or that may be
      settled by the issuance of such equity instruments. This statement would
      eliminate the ability to account for share-based compensation transactions
      using
      the intrinsic method that the Company currently uses and generally would require
      that such transactions be accounted for using a fair-value-based method and
      recognized as expense in the consolidated statement of operations. The effective
      date of this standard is for periods beginning after June 15, 2005. The Company
      has determined that the adoption of SFAS 123R will result in the Company having
      to recognize additional compensation expense related to the options or warrants
      granted to employees, and it will have an impact on the Company's net earnings
      in the future. This standard requires expensing the fair value of stock option
      grants and stock purchases under employee stock purchase plan. The Company
      is
      adopting this standard effective January 1, 2005.


See
            accompanying notes.
 - 11-
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


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





Recent
      Accounting Pronouncements (continued)





In
      December 2004, the Financial Accounting Standards Board Statement issued SFAS
      No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
      29",
      which amends Opinion 29 by eliminating the exception for nonmonetary exchanges
      of similar productive assets and replaces it with a general exception for
      exchanges of nonmonetary assets that do not have commercial substance. A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. SFAS
      No. 151 is effective for a fiscal year beginning after June 15, 2005, and
      implementation is done prospectively. Management does not expect the
      implementation of this new standard to have a material impact on its financial
      position, results of operations and cash flows.





In
      May
      2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
      154,
      "Accounting Changes and Error Corrections, a replacement of APB Opinion No.
      20
      and FASB Statement No. 3.” SFAS 154 requires retrospective application to prior
      periods' financial statements for changes in accounting principle, unless it
      is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. SFAS 154 also requires that retrospective application
      of a
      change in accounting principle be limited to the direct effects of the change.
      Indirect effects of a change in accounting principle, such as a change in
      non-discretionary profit-sharing payments resulting from an accounting change,
      should be recognized in the period of the accounting change. SFAS 154 also
      requires that a change in depreciation, amortization or depletion method for
      long-lived, non-financial assets be accounted for as a change in accounting
      estimate affected by a change in accounting principle. SFAS 154 is effective
      for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. Early adoption is permitted for accounting changes
      and
      corrections of errors made in fiscal years beginning after the date this
      Statement is issued. The Company is required to adopt the provisions of SFAS
      154, as applicable, beginning in fiscal 2007.











**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
      $303,588 and $422,018 for the three-month periods ended March 31, 2005 and
      2004,
      respectively. The Company also had a net working deficit of $1,337,533 for
      the
      three months ended March 31, 2005. 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, it might be required to
      curtail or 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.


See
            accompanying notes.
 -12 -
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


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





For
      the
      three-month periods ended March 31, 2005 and 2004, approximately 79% and 94%
      of
      net revenues of continuing operations were derived under federal, state and
      third-party insurance reimbursement programs. For the three-month period ending
      March 31, 2005 the breakout is as follows:





Medi-Cal
            66%Medi-Care
            5%Private
                Party
            21%Other
                third-parties
            8%





These
      revenues are based, in part, on cost reimbursement principles and are subject
      to
      audit and retroactive adjustment by the respective third-party fiscal
      intermediaries. In the opinion of management, retroactive adjustments, if any
      would not be material to the financial position, results of operations or cash
      flows of the Company.





The
      Company provides an allowance for doubtful accounts based upon its estimation
      of
      uncollectible accounts. The Company bases this estimate on historical collection
      experience and a review of the current status of trade accounts receivable.
      The
      Company determined that no allowance for doubtful accounts as of December 31,
      2004 and 2003 was necessary.











**4.**  **Common
      Stock Transactions**





The
      common stock transactions during the three months ended March 31, 2005, were
      as
      follows:





·
            The
                Company issued 3,000,000 shares of its common stock with a fair market
                value of $150,000 for consulting services provided to the Company.





The
      common stock transactions during the three months ended March 31, 2004, were
      as
      follows:





·
            The
                Company converted $538,871 in 8% convertible notes payable and related
                interest into 18,611,518 shares of its common
                stock.





·
            The
                Company issued 1,405,000 shares of its common stock, with a market
                value
                of $351,260, for consulting services provided to the
                Company.





·
            The
                Company converted warrants issued to note holders into 2,200,000
                shares of
                its common stock for $132,000.





·
            The
                Company retired 1,250,000 shares of common stock valued at
                $250,000.





·
            The
                Company issued 1,000,000 shares of its common stock to its CEO for
                past
                due compensation totaling $250,000.






13


**Kaire
        Holdings Incorporated**
 **and
        Subsidiaries**
 **Notes
        to Financial Statements**
 **March
        31, 2005**




**5.**  **Related
      Party Transactions**





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





Source
      One Group





The
      Company's chief financial officer also serves as the chief financial officer
      of
      Dalrada Financial Corporation (Dalrada). 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 has agreed to render professional employment and related services to the
      Company for a fee. The Company paid fees to SOG totaling $3,347 for the three
      months ended March 31, 2005. The fees charged by SOG to the Company are at
      the
      prevailing rate that SOG charges others.





**6.**  **Property
      and Equipment**





Property
      and equipment at March 31, 2005 and December 31, 2004 consisted of the
      following:





2005
            
            2004Furniture
                and fixtures
            $
            85,000
            
            $
            85,000Vehicles
            
            14,712
            
            
            14,712Computers
                and equipment
            
            22,094
            
            
            21,144121,806
            
            
            120,856Less
                accumulated depreciation and amortization
            
            (58,309)
            
            
            (51,071)Total
            $
            63,497
            
            $
            69,785





Depreciation
      and amortization expense was $7,238 and $6,624 for the three months ended March
      31, 2005 and 2004, respectively.





**7.**  **Accounts
      Payable and Accrued Expenses**





Accounts
      payable and accrued expenses at March 31, 2005 and December 31, 2004 of the
      following:





2005
            
            2004Accounts
                payable
            $
            267,580
            
            $
            356,969Accrued
                professional and related fees
            
            72,072
            
            
            90,000Accrued
                compensation and related payroll taxes
            
            13,721
            
            
            -Accrued
                interest payable
            
            -
            
            
            2,000Other
                accrued expenses
            
            1,544
            
            
            813Total
            $
            354,917
            
            
            449,782





See
            accompanying notes.
 - 14-
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


**8.**  **Convertible
      Notes Payable and Debentures**





Convertible
      debentures consist of the following at March 31, 2005 and December 31,
      2004:





March
                31, 2005
            
            December
                31, 20048%
                convertible subordinated debentures, originally due in October 2002
                and
                now on demand. Interest is payable quarterly, and principal is due
                at
                maturity.
            $
            38,547
            
            $
            38,5478%
                convertible subordinated debentures, originally due in January 2003
                and
                now on demand. Interest is payable quarterly, and principal is due
                at
                maturity.
            
            196,103
            
            
            196,1038%
                convertible subordinated debentures, originally due in August 2003
                and now
                on demand. Interest is payable quarterly, and principal is due at
                maturity.
            
            121,926
            
            
            121,9268%
                convertible subordinated debentures, due in December 2005. Interest
                is
                payable quarterly, and principal is due at maturity.
            
            320,000
            
            
            320,0008%
                convertible subordinated debentures, due in April 2006. Interest
                is
                payable quarterly, and principal is due at maturity.
            
            650,000
            
            
            650,0008%
                convertible subordinated debentures, due on March 29, 2006. Interest
                is
                payable quarterly, and principal is due at maturity.
            
            125,000
            
            
            -1,451,576
            
            
            1,326,576Less:
                Unamortized Bond Discount and Unamortized Debt Issuance
                Costs
            
            (419,547)
            
            
            (374,538)Total
                debt
            
            1,032,029
            
            
            952,038Less:
                current portion
            
            (718,762)
            
            
            (566,158)Convertible
                debentures, less current portion
            $
            313,267
            
            $
            385,880








10%
      Convertible Debentures





During
      January through May 1997, the Company issued convertible notes aggregating
      to
      $479,655, which were due in the same months in 2000. The notes have a stated
      interest rate of 10% per annum, and interest is payable semi-annually. The
      notes
      are convertible at $9.38 per share, which approximated the average trading
      price
      of the Company's common stock. $71,000 of these notes was still outstanding
      as
      of December 31, 2003. The Company has not been contacted nor been able to
      contact these notes holders for over four years. Accordingly, these notes were
      written off as of December 31, 2004, based on the advice of counsel.




15





**Kaire
        Holdings Incorporated**
 **and
        Subsidiaries**
 **Notes
        to Financial Statements**
 **March
        31, 2005**




**8.**  **Convertible
      Notes Payable and Debentures (continued)**





8%
      Convertible Debentures





During
      2000, the Company issued convertible notes that were due in October 2002. The
      notes have a stated interest rate of 8% per annum, and interest is payable
      quarterly and the principal balance is due at maturity. In 2004, the noteholders
      converted $327,094 of the outstanding principal into the Company's common stock.
      $38,547 and $365,641 of these notes was still outstanding as of December 31,
      2004 and 2003 respectively.





In
      2001,
      the Company obtained additional capital financing of $1,200,000 through the
      issuance of convertible notes payable. The Company also issued warrants to
      purchase 20,000 shares of the Company's common stock to various parties as
      part
      of these financing agreements.





Total
      funds received of $1,200,000 were allocated as follows: $760,000 to 8%
      convertible notes; $140,000 to the note warrants; and $300,000 to convertible
      benefit feature. The value allocated to the note warrants and the beneficial
      conversion feature was amortized to interest expense over the term of the
      notes.





The
      8%
      convertible debentures have a conversion price that is the lesser of (1) 80%
      of
      the average of the three lowest closing prices out of the thirty closing prices
      prior to the closing date and (2) 80% of the lowest three closing prices during
      the sixty trading days, as reported on the NASD OTC Bulletin Board, immediately
      preceding the purchase date. Thus, the debentures will be converted at prices
      below the current market price on the conversion date. If conversions of the
      debentures occur, shareholders may be subject to an immediate dilution in their
      per share net tangible book value. The current convertible debentures may be
      converted into common stock at any time.





During
      January 2001, the Company issued convertible notes aggregating to $500,000,
      which were due in January 2003. The notes have a stated interest rate of 8%
      per
      annum, and interest is payable quarterly and the principal balance is due at
      maturity. As of December 31, 2003, the Company had converted $196,650 into
      its
      common stock. In 2004, the Company converted an additional $87,247 into common
      stock. The Company has an outstanding principal balance of $196,103 and 283,350
      on these notes as of December 31, 2004 and December 31, 2003,
      respectively.





During
      August 2001, the Company issued a convertible note aggregating to $300,000,
      which is due in August 2002. The note has a stated interest rate of 8% per
      annum, and interest is payable quarterly and the principal balance is due at
      maturity. In 2003, 2002 and 2001, the noteholders converted $1,776, $31,651
      and
      $144,647, respectively, into the Company's common stock, and the principal
      balance of $121,926 on this note was still outstanding as of December 31, 2004
      and 2003.





In
      November 2003, the Company obtained debt financing of $370,000 through the
      issuance of convertible notes payable. The Company also issued warrants to
      purchase 2,200,000 shares of the Company's common stock to various parties
      as
      part of these financing agreements.





Total
      funds received of $370,000 were allocated $83,829 to the 8% convertible notes,
      $127,600 to the note warrants and $158,571 to the beneficial conversion feature.
      The value allocated to the note warrants and the beneficial conversion feature
      is being amortized to interest expense over the term of the
      notes.


See
            accompanying notes.
 - 16-
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


**8.**  **Convertible
      Notes Payable and Debentures (continued)**





8%
      Convertible Debentures (continued)





The
      8%
      convertible debentures issued in November 2003 have a conversion price that
      is
      the lesser of (1) 70% of the average of the three lowest closing prices out
      of
      the thirty closing prices prior to the closing date and (2) 80% of the lowest
      three closing prices during the sixty trading days, as reported on the NASD
      OTC
      Bulletin Board, immediately preceding the purchase date. Thus, the debentures
      will be converted at prices below the current market price on the conversion
      date. If conversions of the debentures occur, shareholders may be subject to
      an
      immediate dilution in their per share net tangible book value. The current
      convertible debentures may be converted into common stock at any time.





The
      warrants issued are convertible into 2,200,000 shares common stock at an
      exercise price of $0.06 per share, which is based upon the lowest closing price
      for the five days preceding the date of grant. The exercise price can be
      adjusted down by the Company, and the Company did not reprice any warrants
      in
      2004. In February and March 2004, the warrant holders exercised all the
      outstanding warrants.





In
      May
      2004, the Company concluded debt financing for $650,000, whereby the following
      8% convertible debentures were issued: $350,000 to Alpha Capital
      Aktiengesellschaft; $200,000 to Gamma Opportunity Capital Partners, LP; and
      $100,000 to Longview Fund, LP. Additionally, in conjunction with these
      convertible debentures, the Company issued detachable warrants to purchase
      4,444,444 shares of common stock in conjunction with the convertible notes.
      The
      exercise price of the warrants is $0.17 per share, and the warrants mature
      in
      five years.





The
      conversion price per share of the above debentures shall be equal to the lesser
      of (i) $.09 or (ii) eighty-five (85%) of the average of the closing bid prices
      for the fifteen (15) trading days prior to but not including the Conversion
      Date
      for the Common Stock. Closing bid price shall mean the last closing bid price
      as
      reported by Bloomberg LP. The Conversion Price shall be $.09 per share unless
      at
      any time after the closing price of the Common Stock as reported by Bloomberg
      LP
      for the Principal Market is less than $0.09 per share for fifteen (15)
      consecutive trading days.





Total
      funds received of $650,000 were allocated $312,108 to the 8% convertible notes,
      $240,834 to the note warrants and $97,059 to the beneficial conversion feature.
      The value allocated to the note warrants and the beneficial conversion feature
      is being amortized to interest expense over the term of the notes.





On
      March
      29, 2005, Kaire issued a $125,000, 8% interest per annum, two year convertible
      note to the Longview Fund LP. The Conversion Price per share shall be the lesser
      of (i) $.04 or (ii) eighty-five (85%) of the average of the closing bid prices
      for the fifteen (15) trading days prior to but not including the conversion
      date
      for the common stock. In addition Longview was issued a class A warrant for
      the
      purchase of 694,444 shares of the common stock at a per share purchase price
      of
      $0.042, and a class B warrant for the purchase of 3,000,000 shares of the common
      stock at a per share purchase price of $0.04. Total funds received of $125,000
      were allocated $105,750 to the note warrant and $19,250 to the beneficial
      conversion feature. The value allocated to the note warrants and the beneficial
      conversion feature is amortized to interest expense over the term of the
      note.


See
            accompanying notes.
 -17 -
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


**9.**  **Notes
      Payable**





The
      current note payable of $27,150 at March 31, 2005, is a note payable to a
      shareholder and bears a fixed interest rate of $6,000. The note is due on
      December 2, 2005 and bears an interest rate of 10% per annum.





**10.**  **Commitments
      and Contingencies**





Litigation





*Department
      of Health Services*





The
      Company is a provider of services under California's Medicaid program
      ("Medi-Cal"), which is administered by the Department of Health Services
      ("DHS"). DHS served notice to the Company that the Company received overpayment
      of claims submitted by the Company for certain drugs, based on alleged
      violations of the California Code of Regulations. The Company has provided
      documentary evidence to contest and rebut DHS's allegations and received an
      extension to provide evidence to the contrary. In December 2002, DHS informed
      the Company that it was suspending Classic Care's Medi-Cal license, and that
      it
      was withholding all further payments until its investigation is complete.
      Classic Care could not successfully operate without a Medi-Cal license. Thus,
      the Company has decided to cease operations of Classic Care. Management has
      fully reserved the accounts receivable balance regarding these
      allegations.





Additionally,
      DHS has alleged that Classic Care was overpaid in 1998, 1999 and 2000, and
      has
      requested a refund. The Company believes that all reimbursements received were
      appropriate, and management believes that it does not have a liability to the
      DHS.





Except
      as
      otherwise specifically indicated above, management believes that the Company
      does not have any material liability for any lawsuits, settlements, judgments,
      or fees of defense counsel which have not been paid or accrued as of December
      31, 2004. However, there can be no assurance that the Company will prevail
      in
      the above proceedings. In addition, the Company may be required to continue
      to
      defend it resulting in substantial additional expense. In the event the Company
      is unable to pay the defense costs associated with the foregoing, an unfavorable
      settlement or judgment could be awarded against the Company, which might have
      a
      material adverse effect upon the Company.





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 any claim in that time period and 5) Kaire
      did
      not benefit in any way from the alleged overpayment.





The
      DHS
      estimates the claim at around $1,566,396. An estimate of how much the claim
      would relate to Classic Care, Inc. cannot be made since the alleged claim
      includes a time period that begins over a year prior to Kaire's involvement
      with
      Classic Care, Inc. and that information is not available to Kaire.















**Kaire
      Holdings Incorporated**


**and
      Subsidiaries**


**Notes
      to Financial Statements**


**March
      31, 2005**






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





Litigation
      (continued)





*Company
      Is in Dispute with a Vendor*





The
      Company is in dispute over the amounts due this vendor for purchases of
      pharmaceuticals in 2001 and 2002 by its subsidiary, Classic Care, in the
      approximate amount of $550,000. The Vendor has filed a lawsuit naming the
      Company as a co-defendant. The Company with the advice of its counsel has
      evaluated these claims and vigorously defended itself in this
      litigation.





On
      December 30, 2004 a settlement was reached where Kaire is obligated to pay
      the
      vendor $50,000. Kaire's payment obligation will mature upon court approval
      of
      the settlement, with $10,000 due immediately at that time and the balance paid
      based on 12 monthly installments of $3,077.06 (which includes interest of
      7.50%). The settlement was executed by the parties at the end of April 2005.
      Kaire expects to obtain court approval within approximately sixty days of the
      time of this filing.








*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 $17,467 for goods and/or services. The Company has
      expressly denied any liability. The Company's attorney is completing a full
      analysis of the Plaintiff's claims, as this is in the early stage of the
      litigation.








Employment
      Agreements





*Chief
      Executive Officer Compensation*





On
      April
      5, 2005, the Company agreed to a new three year agreement with Mr. Westlund.
      The
      agreement calls for a monthly salary of $8,333 per month, with annual increases
      equaling 15% of the base salary. In addition, he will receive a 5 year option
      to
      purchase 12 million shares of the Company's common stock, at an option price
      of
      $0.05 per share.





During
      2004 Mr. Westlund received 2,000,000 shares of the Company's common stock in
      lieu of $370,000 of accrued and current compensation due him under the above
      compensation agreement. The Company had no accrued compensation due to Mr.
      Westlund as of December 31, 2004.





On
      October 17, 2003, Mr. Westlund was issued 375,000 shares of the Company's common
      stock in lieu of $22,500 of the total amount due to him under the above
      compensation agreement. The Company has accrued amounts due to Mr. Westlund
      of
      $317,980 as of December 31, 2003.





See
            accompanying notes.
 -19 -
 
 **Kaire
              Holdings Incorporated**
 **and
              Subsidiaries**
 **Notes
              to Financial Statements**
 **March
              31, 2005**


**11.**  **Stock
      Options and Warrants**





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
            3,694,444
            
            $
            0.04Exercised
            -
            
            $Expired/Cancelled
            -
            
            $Outstanding
                March 31, 2005
            8,138,888
            
            $
            0.11





The
      Company has and 8,138,888 warrants outstanding as of March 31, 2005 and
      4,444,444 as of December 31, 2004. The weighted average exercise price of the
      outstanding warrants as of March 31, 2004 is $0.11. The outstanding warrants
      have a clause that causes the exercise price to be adjusted down by the Company
      upon certain company actions by the warrant holders. The warrants expire 5
      years
      from the original date of grant. The Company has not repriced any warrants
      as of
      March 31, 2005.











**12.**  **Earnings
      per Share**





Earnings
      per share have been calculated using the weighted average number of shares
      outstanding during each period. As of March 31, 2005, potentially dilutive
      securities consist of convertible debentures convertible into 48,385,866 common
      shares and warrants convertible into 8,138,888 shares. Earnings per
      share-dilutive does not include the effect of potentially dilutive securities
      for the three months ended March 31, 2005 and 2004 respectively. The loss from
      operations and the net loss for the three months ended March 31, 2005 and 2004
      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.


See
            accompanying notes.
 -20 -
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Consolidated
            Statements of Cash Flows (continued)**
 **For
            the Three Months Ending March 31, 2005 and 2004**


**13.**  **Discontinued
      Operations - Classic Care, Inc. (continued)**





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





The
      net
      assets (liabilities) of the discontinued operations have been recorded at their
      estimated net realizable value under the caption "Net assets (liabilities)
      of
      discontinued operations - Classic Care" in the accompanying Balance Sheets
      at
      March 31, 2005 and December 31, 2004 consist of the following:





March
                31, 2005
            
            December
                31, 2004Non-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)





The
      following is a breakdown of the operations of Classic Care discontinued
      operations for the three month period ended March 31, 2005 and 2004 (there
      were
      no actual revenues and expenses for these periods):





2005
            
            2004Revenues
            $
            -
            
            $
            -Cost
                of sales
            
            -
            
            
            -Operating
                expenses
            
            -
            
            
            -Gain
                on settlement
            
            -
            
            
            -Other
                income
            
            -
            
            
            -Income
                tax
            
            -
            
            
            -Net
                income
            
            -
            
            
            -Disposal
            
            -
            
            
            -Net
            $
            -
            
            $
            -











See
            accompanying notes.
 - 21-
 
 **Kaire
            Holdings Incorporated**
 **and
            Subsidiaries**
 **Consolidated
            Statements of Cash Flows (continued)**
 **For
            the Three Months Ending March 31, 2005 and 2004**


**14.**  **Subsequent
      Events**





Employment
      Agreement





On
      April
      5, 2005, the Company agreed to a new three year agreement with Mr. Westlund.
      The
      agreement calls for a monthly salary of $8,333 per month, with annual increases
      equaling 15% of the base salary. In addition, he will receive a 5 year option
      to
      purchase 12 million shares of the Company's common stock, at an option price
      of
      $0.05 per share.





See
            accompanying notes.
 - 22-


**Item
      2. Management's Discussion and Analysis or Plan of Operation**








Plan
      of Operation





General





Our
      general operating plan focuses on delivering specialized programs and services
      targeted areas within the senior and chronic health care market. We believe
      this
      approach will help differentiate us from our competitors and establish us as
      a
      senior and chronic health care specialist. We also believe that the size of
      the
      aging baby boomer generation will create the need for numerous additional
      programs and services required to properly care for this group. Kaire will
      continue to position itself to take advantage of future market opportunities
      by
      continuing to develop and market products, programs and services that help
      patients comply with increasingly complex medication therapies including
      programs that help educate patients about their chronic conditions as well
      as
      programs that increase pharmacy operating efficiencies including the processing
      of state and private insurance claims.





Short
      Term Goals





Kaire’s
      main short term goal is to increase sales revenue and achieve profitability
      on
      an operational cash flow basis. We believe that goal will be achieved by second
      quarter 2005. Once achieved, the Company will be able to reduce or eliminate
      the
      need to raise additional working capital to sustain operations. Achieving this
      goal would include accomplishing the following:





·  Increase
      the number of retail and long term care patients served by focusing more of
      our
      resources on targeted sales and marketing programs.


·  Develop
      revenue channels with higher gross profit margins such as medical and
      incontinence supplies, durable medical equipment such as wheel chairs, beds
      and
      walkers, and equipment rentals.


·  Enhancing
      operational efficiencies during this expansion mode such as by installing
      procedures for routine functions and reassign employee functions that fit their
      individual strengths.





Long
      Term Goals





Our
      long
      term goals would be to expand on our short term goals, (i.e. expand our service
      coverage area) to increase sales and to introduce service programs that would
      be
      custom tailored to meet the needs of our clients as those needs arise.





Our
      work
      force is expected to stay flat or increase at a rate equal to actual increases
      of our business operations.





Concerning
      working capital, historically our revenues have been insufficient to cover
      operations. For the first four month period ending April 30, 2005, we have
      experienced approximately $89,000 a month in negative cash flow. Consequently,
      the Company has relied in part on private placements of common stock securities,
      bank debt, loans from private investors and the exercise of common stock
      warrants to meet operational needs. However, with revenue expected to grow
      steadily in the third and fourth quarter of 2005, we believe that over the
      next
      twelve months there will be sufficient working capital generated from sales
      to
      cover operational needs. This evaluation is based on results of an increased
      sales effort in our Effective Health subsidiary (dba Sespe Pharmacy) which
      is
      concentrating on facilities within a 50 miles radius of the pharmacy. However,
      some additional funding will be needed to cover operation expenses over the
      next
      several months. In the event that we are unable to obtain additional funding
      over the next several months, we will need to reduce operations to a point
      where
      cash outflow will not exceed cash inflow. Currently we do not have any excess
      cash.










In
      the
      event that revenue growth does not meet expectations, we may again need to
      seek
      working capital from its normal sources. Historically, we have been successful
      in our efforts to secure working capital from private placements of common
      stock
      securities, bank debt, loans from private investors and the exercise of warrants
      for common stock. 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
      operating needs of the Company. Management raised an additional $125,000 in
      March 2005 thought the issuance of convertible notes.





**Results
      of Operations**





Three
      Months Ended March 31, 2005 Compared to March 31, 2004


For
      the
      three months ended March 31, 2005 and 2004, revenues were approximately $430,764
      and $499,818 respectively, for a decrease of $69,054 or 13.8%. The revenue
      decrease is a result of a net decrease in the number of beds (i.e., patients)
      we
      are servicing. We discontinued servicing a 100 bed skilled nursing facility
      that
      was very costly to service due to its distant location and service requirements.
      However, we have offset most of the lost beds by picking up new residential
      board and care facilities located within a thirty mile radius of our pharmacy.





Cost
      of
      goods sold for the three month period ending March 31, 2005 was $240,556
      compared to $403,524 for the same prior year period for a decrease of $162,968
      or 40.4%. The decrease in cost of goods sold was due to a shift in the drugs
      required by patients from brand name drugs to generic drugs. During the quarter
      ended March 31, 2004, the drugs prescribed by the doctors included generics,
      which cost significantly less that brand name drugs. The prescribed drugs are
      chosen and ordered by the patient’s doctors. This shift in drug usage from brand
      name to generic drugs is not in our control and is not expected to be a
      recurring event.





Gross
      profit for the three months ended March 31, 2005 and 2004 were approximately
      $190,208 and $96,294 respectively, for an increase of $93,914 or 97.5%. The
      gross profit percentage rate for the three month period ended March 31, 2005
      was
      44.2% compared to 19.3% for the same in the same period in the prior year.
      The
      increase was attributable to a shift in drugs required by the patients from
      brand to generic name drugs. We generate margins on brand name drugs ranging
      from 8% to 25%, whereas on generics, our margins range from 35% to 70%. For
      the
      quarter ended March 31, 2005, approximately 75% of the drugs required by
      patients were filled with generic drugs.





SG&A
      expense for the three month period ended March 31, 2005 was $386,040 for a
      decrease of $259,902 (40.2%) from the same prior year period. The $259,902
      decrease consists primarily 1) a decrease in auto rentals of $8,000, 2) a
      decrease in marketing of $5,000, 3) a decrease in consulting fees of $396,000,
      4) a decrease in selling expenses of $18,942, 5) a decrease in rent of $14,879,
      and 6) a decrease in miscellaneous items of $3,335 offset by 7) an increase
      in
      legal fees of $103,000, 8) an increase in contract labor fees of $26,000, 9)
      an
      increase in salaries of $23,754, 10) an increase in accounting and professional
      fees of $33,500,





Interest
      expense the three month period ended March 31, 2005 was $107,756 compared to
      $91,170 for the comparable three month period prior year for an increase of
      $16,586 (18.2%). This increase is due to an increase in debt.










No
      provision was made for Federal income tax since the Company has incurred
      significant net operating losses from inception. Through March 31, 2005, the
      Company incurred a net operating loss for tax purposes of approximately
      $303,588. 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 beginning in 1993.





**Liquidity
      and Capital Resources**





Net
      non-cash items affecting operating activities for the three month period ending
      March 31, 2005 amounted to $66,358, which mainly consisted of the net loss
      for
      the three months ending March 31, 2005 of ($303,588) offset by the following:
      1)
      depreciation and amortization of $7,238, 2) amortization of warrant and
      beneficial conversion feature of $71,867, 3) common stock issued for
      professional services and compensation of $150,000, and 4) amortization of
      debt
      issuance costs of $8,125.





Net
      cash
      used by operating activities for the three month period ending March 31, 2005
      amounted to $35,742, consisting of an increase in accounts receivable and other
      receivables of $23,430 and an increase in accounts payable and accrued expenses
      of $94,898. These changes were offset by increases in 1) inventory of $32,394,
      3) sales tax payable of $33, 3) accrued interest on convertible notes of $26,614
      and a 4) bank overdraft of $23,545. We continue to rely on debt financing to
      meet our working capital needs.





Net
      cash
      used in investing activities for the three month period ending March 31, 2005
      was $950 which was attributable to the Company’s purchase of computer
      equipment.





Net
      cash
      generated from financing activities for the three month period ending March
      31,
      2005 was $103,050 which consisted of payment on notes to related parties of
      $1,300, payments on loans of $21,850, offset by proceeds from notes payable
      -shareholders of $1,200 and proceeds from the issuance of a convertible note
      of
      $125,000.





On
      March
      31, 2005 the Company had total assets of $337,233 compared to $352,485 on
      December 31, 2004, a decrease of $15,252 or 4.3%. The Company had a total
      stockholder's deficit of $1,587,303 on March 31, 2005, compared to a
      stockholders deficit of $1,558,716 on December 31, 2004, an increase of $28,587
      or 1.8%. As of March 31, 2005 the Company's working capital position decreased
      by $94,912 from a working capital deficit of $1,242,621 at December 31, 2004
      to
      a working capital deficit of $1,337,533 at March 31, 2005. This result was
      attributed primarily to increases in 1) convertible notes - current portion
      of
      $152,604, 2) accrued interest on the current portion of the accrued notes of
      $26,614, 3) bank overdraft of $23,545, plus decreases in 4) inventory of $32,394
      and 5) property, plant and equipment of $6,288 offset by decreases in 1)
      accounts payable and accrued expenses of $94,865, 2) loans payable of $21,850,
      3) notes payable of $100 plus increases in 3) accounts receivable of $23,320
      and
      other assets of $110.





Over
      the
      next twelve months, management is of the opinion that sufficient working capital
      will be obtained from operations and external financing to meet our operating
      needs. The following is a discussion of future cash requirements.











The
      fixed
      and ongoing expenses of Kaire are as follows:





Future
      maturities of convertible notes payable at March 31, 2005 were as
      follows:


Year
                EndedDecember
                31,
            
            Amount2005
            Convertible
                Notes due on demand or in 2005
            $
                676,5762006
            Convertible
                Notes Due March and May 2006
            775,000$
                1,451,576








Accounts Payable and Accrued Liabilities





Accounts
      payable and accrued liabilities at March 31, 2005 consisted of the
      following:


2005Accounts
                payable
            $
                354,917Advances
                from shareholders
            73,607Notes
                Payable - Short Term
            40,331$
                468,855


Future
      annual minimum lease payments under operating leases with remaining lease terms
      of greater than one year are summarized as follows:





Year
                Ended**December
                31,**2005
            
            $
                9,240$
                9,240























Fixed
      recurring Selling General and Administrative expenses would be as
      follows:





Estimated
      2005


Monthly Average


Salaries
      and benefits:    $40,000


Rent:             
      2,430 (increased space in 2005)


Contract
      Labor     
      15,289


Auto             
      1,250


Telephone
      and


Communications               
      2,250


Bank
      Charges            
      500


Total
      Monthly


Fixed
      SG&A costs        
      $61,719





Estimated
      future cash requirements





Our
      estimate of net cash requirements for overhead for the next twelve months
      subsequent to April 2005, is approximately $89,877 (includes the above fixed
      cost estimate of $61,719) a month for a twelve-month total of $1,078,524. The
      estimate of net cash inflow from operations for that time period is
      approximately $1,674,900.





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 $300,000 from outside
      sources. In March 2005, we received some of the needed funds of $125,000 in
      funds pursuant to a subscription agreement. If our projections over the next
      twelve months fall short of expectations, we will have to 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 $303,588
      and $422,018 for the three months ended March 31, 2005 and 2004, respectively.
      We also have a net working deficit of $1,337,533 for the three months ended
      March 31, 2005. Additionally, we must raise additional capital to meet our
      working capital needs. 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.





On
      March
      29, 2005, we issued a $125,000, 8% interest per annum, two year convertible
      note
      to the Longview Fund LP. The
      Conversion Price per share shall be the lesser of (i) $.04 or (ii) eighty-five
      (85%) of the average of the closing bid prices for the fifteen (15) trading
      days
      prior to but not including the conversion date for the common stock. In addition
      Longview was issued a class A warrant for the purchase of 694,444 shares of
      the
      common stock at a per share purchase price of $0.042, and a class B warrant
      for
      the purchase of 3,000,000 shares of the common stock at a per share purchase
      price of $0.04. The proceeds from this convertible note were used for working
      capital needs.










**Subsequent
      events**




Employment
      Agreement





On
      April
      5, 2005, the Company agreed to a new three year agreement with Mr. Westlund.
      The
      agreement calls for a monthly salary of $8,333.33 per month, with annual
      increases equaling 15% of the base salary. In addition, he will receive a 5
      year
      option to purchase 12 million shares of the Company’s common stock, at an option
      price of $0.05 per share.











**ITEM
      3. CONTROLS AND PROCEEDURES**





(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 in alerting them on a timely basis to material
      information relating to our Company (including our consolidated subsidiaries)
      required to be included in our reports filed or submitted under the Exchange
      Act. 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 significant changes in our internal controls over financial reporting or
      in
      other factors that have materially affected, or are reasonably likely to
      materially affect, our internal controls over financial reporting.





In
      June
      2005, the Company remediated the material weakness in internal control over
      financial reporting by having its CEO in addition to its CFO review in detail
      all adjustments affecting accounts receivable and revenue.





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.


See
            accompanying notes.
 -28 -


**P** **ART
      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
      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 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 at that time and the balance paid
      based on 12 monthly installments of $3,077.06 (which includes interest of
      7.50%). We expect to obtain the bankruptcy court approval.





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. We have expressly
      denied any liability. Our attorney is in process of further evaluating the
      Plaintiff’s claims, and the claim is at an early stage of the
      litigation.





Except
      as
      otherwise specifically indicated above, we believe that we do not have any
      material liability for any lawsuits, settlements, judgments, or fees of defense
      counsel which have not been paid or accrued as of December 31, 2004.





**Item
      2.**  **Unregistered Sales of Equity Securities and Use of Proceeds**





In
      March
      29, 2005, Kaire issued a $125,000, 8% interest per annum, two year convertible
      note to the Longview Fund LP. The
      Conversion Price per share shall be the lesser of (i) $.04 or (ii) eighty-five
      (85%) of the average of the closing bid prices for the fifteen (15) trading
      days
      prior to but not including the conversion date for the common stock. In addition
      Longview was issued a class A warrant for the purchase of 694,444 shares of
      the
      common stock at a per share purchase price of $0.042, and a class B warrant
      for
      the purchase of 3,000,000 shares of the common stock at a per share purchase
      price of $0.04




**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:
      June 21, 2005   By: /s/ Steven
      R.Westlund


Steven
      Westlund


Chief
      Executive Officer, Chairman






31