<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000
--------------------
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
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(Exact name of registrant as specified in its charter)
Delaware 13-3367421
----------------------------- ----------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
7348 Bellaire, North Hollywood, California 91605
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (818) 255-4996
--------------
(former, name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
-
State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock September 30, 2000
--------------------- -------------------
$.001 par value 116,653,033 shares
Transitional Small Business Disclosure Format Yes ____ No X
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FORM 10-QSB
Securities and Exchange Commission
Washington, D.C. 20549
KAIRE HOLDINGS INCORPORATED
Index
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1999 and September 30, 2000 (unaudited)
Condensed Consolidated Statements of Operations
for the three and nine months ended September 30, 1999 (unaudited)
and 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1999 (unaudited) and 2000
(unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters of a Vote to Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
-----------------------------
ITEM I. FINANCIAL STATEMENTS
KAIRE HOLDINGS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999 and September 30, 2000
ASSETS
------
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------- --------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 130,668 $ 107,638
Accounts receivables, net 29,332 1,072,873
Inventory 290,080
Prepaid expense 65,337
---------- ----------
Total current assets 160,000 1,535,928
Furniture and equipment, net 252,581
Other Assets 52,387
Deposits 5,000
Investments 30,000
Goodwill, net 3,727,614
---------- ----------
Total assets $ 160,000 $5,603,510
---------- ----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Notes payable 25,000 25,000
Accounts payable and accrued expenses 640,426 1,283,989
Convertible notes payable 81,000 467,892
---------- ----------
Total current liabilities 746,426 1,776,881
---------- ----------
Total liabilities 746,426 1,776,881
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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KAIRE HOLDINGS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999 and September 30, 2000
December 31, September 30,
1999 2000
---- ----
(unaudited)
Shareholders' deficit
Common stock, $0.001 par value
authorized 400,000,000 shares,
115,929,033 issued and outstanding 77,197 116,653
and 116,653,033 issued and outstanding
Additional paid-in-capital 30,521,658 35,695,702
Accumulated deficit (31,185,281) (31,985,726)
------------ ------------
Total Shareholders' Deficit (586,426) 3,826,629
Total liabilities and stockholders' deficit $ 160,000 $ 5,603,510
------------ ------------
The accompanying notes are an integral part of these financial statements.
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KAIRE HOLDINGS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 and 2000
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C>
REVENUES
Products and Services $ 61,928 $2,017,966 $ 198,374 $2,806,810
Lease Rentals -- -- -- --
----------- ---------- ----------- ----------
Total Revenue 61,928 2,017,966 198,374 2,806,810
Cost of Revenues 33,798 1,341,252 54,504 1,837,236
Gross Profit 28,130 676,714 143,870 969,574
Operating Expenses
Research and development 153 153
Selling, general and administrative 158,080 646,570 479,074 1,234,513
----------- ---------- ----------- ----------
Total Operating Expenses 158,233 646,570 479,227 1,234,513
----------- ---------- ----------- ----------
Profit from Operations (Loss) (130,102) 30,144 (335,357) (264,939)
Other Income and (Expense)
Interest expense (16,183) (1,551) (68,257) (16,095)
Other Expenses (10,005) (75,000) (25,804) (310,000)
Below Market Note Conversion (427,100) (662,593)
Other Income 683 75,000 399,800 86,828
----------- ---------- ----------- ----------
Total interest expense and other (452,605) (1,551) (356,854) (239,267)
Profit before provision for state (Loss) (582,708) 28,593 (692,210) (504,206)
Provision for state income taxes 400 400 1,200 1,200
Net Income (Loss) (583,108) 28,193 (693,410) (505,406)
----------- ---------- ----------- ----------
Basic (Loss) per Share $ (0.02) $ 0.0003 $ (0.03) $ (0.0055)
Basic Shares Weighted Average 27,929,434 91,363,388 22,033,808 91,958,815
Diluted (Loss) per Share $ ( 0.02) $ 0.0003 $ (0.03) $ (0.0054)
Diluted Shares Weighted Average 27,929,434 95,868,588 23,033,808 93,691,584
</TABLE>
See the accompanying notes to these consolidated statements
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KAIRE HOLDINGS INCORPORATED AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 2000
(Unaudited) (Unaudited)
1999 2000
---- ----
Cash flows from operating activities
Net Loss $ (693,410) $ (505,406)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization and Depreciation 15,190 66,089
Deposits (5,000)
Common stock issued for services 151,500 94,500
Common stock issued for interest on notes 4,529 14,543
Common stock issued for Convertible notes 26,546
Expenses related to below-market stock 662,593
Common Stock Issued for Other Compensation 315,000
Convertible notes payable/debentures 10,000
Non cash other expenses (income) (82,025)
(Increase) decrease in:
Accounts receivable 7,405 (1,043,541)
Prepaid expenses and other assets (4,610) (65,337)
Inventories (290,080)
Increase (decrease) in:
Accounts payable and accrued expenses (589,345) 1,020,456
----------- -----------
Net cash used in operating activities (391,044) (444,254)
----------- -----------
Cash flows from investing activities
Purchase of furniture and equipment -- (252,581)
Purchase of Goodwill (690,794)
Investment in affiliates -- (30,000)
----------- -----------
Net cash used in investing activities -- (973,375)
Cash flows from financing activities
Payments on notes payable
Payments to classic care shareholders (255,000)
Proceeds from issuance of common stock 240,000 1,649,599
Proceeds from issuance of convertible notes 150,000
----------- -----------
Net cash provided by financing activities 390,000 1,394,599
----------- -----------
The accompanying notes are an integral part of these financial statements.
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KAIRE HOLDINGS INCORPORATED AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 1999 and 2000
(Unaudited) (Unaudited)
1999 2000
---- ----
Net decrease in cash and cash equivalents (1,044) (23,030)
--------- ---------
Cash and cash equivalents, beginning of period 6,331 130,668
--------- ---------
Cash and cash equivalents, end of period $ 5,287 $ 107,638
--------- ---------
The accompanying notes are an integral part of these financial statements.
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KAIRE HOLDINGS INCORPORATED and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 2000
1. Significant Risks
-----------------
The Company has incurred net losses of $1,037,608 and $472,537 for the
years ended December 31, 1998 and 1999, respectively and an additional loss of
$109,935 for the nine months ended September 30, 1999 and profit of $20,612 for
the nine months ended September 30, 2000.
The Company's condensed consolidated financial statements have been
prepared on the assumption the Company will continue as a going concern. The
Company however has suffered recurring losses from operations that raise doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount of liabilities that might result should the
Company be unable to continue as a going concern. The Company's condensed
consolidated financial statements have been prepared on the assumption the
Company will continue as a going concern.
The Company, formerly known as Interactive Medical Technologies Ltd., was
incorporated in Delaware in 1986. The Company's former main business was
providing non-radioactive diagnostic products and laboratory analysis services
to private and government research facilities, academic centers, and hospitals
engaged in studying the effects of experimental drugs and/or surgical procedures
have on regional blood flow. These products and services are sold through the
Company's E-Z Trac division. As previously disclosed, effective May 1, 2000, the
Company had entered into an agreement with Stason Labs of Irvine, whereby the
laboratory was transferred to Stason's Irvine facility for the purpose of
providing better service to existing customers plus to explore the possibilities
of expanding the laboratory services into new areas.
Kaire Holdings, Inc.'s current focus is in developing and marketing
products and services to businesses and consumers of specific market segments by
joining traditional business concepts with internet technologies.
In 1999 the Company formed YesRx.com., which is an Internet drugstore that
is focused on pharmaceuticals, health, wellness and beauty products. The site
targets Internet shoppers and in particular, the senior citizen. In addition to
the Business to Consumer strategy, the company is in the process of implementing
a tightly focused Business to Business/Agency plan to fulfill orders to various
targeted groups through an advocate or enterprise that acts as a central
distributor. YesRx focuses on chronic care as opposed to emergency needs. The
company does not provide urgent care medications but works with the patient who
has regular medication needs and multiple refills. This provides operational
feasibility and recurring revenue streams. It is management's intent to spin off
YesRx.com into a separate company, contingent on funding.
In furtherance of its internet initiatives, on June 1, 2000, the Company
acquired Classic Care Pharmacy, a Los Angeles-based business to business
pharmacy. Through this acquisition, Kaire will be able to expand its business to
business and consumer customer base. The purchase called for Kaire to
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pay Classic Care ownership $1 million in cash in installments and up to 15.5
million shares of restricted Kaire common stock.
On February 19, 1998, Kaire Holdings, Incorporated changed its name from
Interactive Medical Technologies, Ltd., changed its NASDAQ OTC BBS symbol to
"KAHI" and reverse split its Common Stock at a ratio of seventy-five (75) to one
(1).
The Company carries no direct product liability insurance, relying instead
on the coverage afforded by its distributors and the manufacturers from whom it
obtains products. These coverages directly protect the insured that pay the
premiums and only secondarily the Company. There is no assurance that such
coverages will adequately cover any claims that may be brought against the
Company. In addition, the Company does not have any general liability coverage.
2. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. Certain
matters raise substantial doubt about the Company's ability to continue as a
going concern. As discussed in Note 1, the Company operates under extreme
liquidity constraints and, because of recurring losses, increasing difficulty in
raising necessary additional capital. Management's plan in regard to these
matters is described above. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
In the opinion of the management the accompanying consolidated financial
statements contain all adjustments necessary (consisting of only normal
recurring accruals) to present fairly the financial position at September 30,
2000, the results of its operations for the three and nine months ended
September 30, 2000 and the cash flow for nine months ended September 30, 2000.
Certain information and footnote disclosures normally included in financial
statements that would have been prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, although management of
the Company believes that the disclosures in these financial statements are
adequate to make the information presented therein not misleading. It is
suggested that these condensed financial statements and notes thereto be read in
conjunction with the financial statements and the notes thereto included in the
Company's December 31, 1999 Form 10-KSB.
The results of operations for the nine months ended September 30, 2000 are
not necessarily indicative of the results of operations to be expected for the
full fiscal year ending December 31, 2000.
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
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have been included in the financial statements or tax returns. Under this
method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
The provision for income taxes represents the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
Fair Value of Financial Instruments
-----------------------------------
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents and accounts payable
and accrued liabilities, the carrying amounts approximate fair value due to
their short maturities. The amounts shown for notes payable also approximate
fair value because current interest rates offered to the Company for debt of
similar maturities are substantially the same.
Stock Split
-----------
On or about February 19, 1998, the Company effected a 1-for-75 reverse
stock split of its common stock. All share and per share data have been
retroactively restated to reflect this stock split.
Stock Options
-------------
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current implicit
value accounting method specified in Accounting Principles Bulletin ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," to account for
stock-based compensation. The Company has elected to use the implicit value
based method and has disclosed the pro forma effect of using the fair value
based method to account for its stock-based compensation.
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of state income taxes currently due. No
federal income taxes are due as a result of the Company's net operating loss
carryforwards.
Net Loss Per Share
------------------
In 1997, the Financial Accounting Standard Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
No. 128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. Basic earnings per
share is computed using the weighted-average number of common shares outstanding
during the period. Common equivalent shares are excluded from the
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computation if their effect is anti-dilutive.
3. Capital Transaction, Convertible Notes Payable and Debentures
During the first two Quarter of fiscal 2000 ending March 31, 2000 and June
30, 2000, the Company issued securities using the exceptions available under the
Securities Act of 1933 including unregistered sales made pursuant to Section
4(2) of the Securities Act of 1933, as follows:
Quarter one ending March 31, 2000:
The Company issued 3,010,808 shares of common stock for conversion of debt
valued at $134,000.
The Company issued 4,565,000 shares of common stock for options exercised
valued at $656,500
The Company issued 3,130,000 shares of common stock for other compensation
valued at $190,000.
Quarter two ending June 30, 2000:
The Company issued 500,000 shares of common stock for other compensation
valued at $50,000.
Quarter Three ending September 30, 2000
The Company issued 560,000 shares of common stock for other compensation
valued at $75,000.
4. Acquisitions
------------
On June 1, 2000, the Company completed the acquisitions to acquire Classic
Care Pharmacy, a Los Angeles-based business to business pharmacy. Through this
acquisition, Kaire will be able to expand its business to business and consumer
customer base. The transaction resulted in the Company Paying $4,100,000
consisting of $1,000,000 in cash and 15,500,000 shares of the Company's common
stock with a value of $3,100,000 for all the outstanding shares of Classic Care
Pharmacy.
Additionally, the Company agrees to guarantee the shareholders of Classic
Care a $0.50 per share stock value of the Closing Shares, the Escrow Shares and
the Additional Shares. The stock price will be determined based on the average
of the low and high bid prices for Acquirer's common stock quoted for the last
ten trading days prior to three business days prior to the effectiveness of a
registration statement covering the subject shares. Here, the Company agrees to
subtract the stock price, based on a certain calculation from $0.50 and, on the
Effective Date of the Registration Statement, issue to Classic Care's
shareholders shares of the Company's common stock with a fair market value equal
to the aggregate amount of such shortfall (the "Make Whole Shares"). By way of
illustration, if the Closing Shares, the Escrow Shares and the Additional Shares
total 20 million shares, but the fair market value as determined on effective
date is only $0.30 per share, then Acquirer would have to issue to the Company
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Shareholders an amount of Make Whole Shares with a fair market value equal to
$4,000,000 (20 million X $0.20), or 13,333,333 shares ($4 million/$0.30). For
the purposes of this report, diluted shares outstanding include an additional
23,250,000 common shares to reflect potential dilution.
The assets and liabilities acquired from Classic Care were as follows:
Accounts receivable $ 320,803
Inventory 315,973
Other current assets 80,337
Fixed assets 238,485
Intangibles 52,386
Goodwill 3,790,794
Account payable (390,886)
Long term liabilities (287.892)
----------
Cost of net assets acquired 4,100,000
In February 2000, the Company formed a strategic business relationship with
Stason Pharmaceuticals Inc., ("Stason"), the U.S. affiliate of Taiwan-based
Standard Chemical and Pharmaceutical Co. Limited. Stason is an FDA-approved
manufacturer of pharmaceutical drugs as well as various over-the-counter,
health-oriented consumer products.
Under the agreement, Stason and the Company formed a joint venture to
pursue opportunities in the bio-medical field. As of May 1, 2000, the Company
transferred its laboratory operation to the new entity. The final terms of the
joint venture is still being determined.
Item 2. Management's Discussion and Analysis or Plan of Operation
The Company's former main business, E-Z Trac Division, was providing non-
radioactive diagnostic products and laboratory analysis services to private and
government research facilities, academic centers, and hospitals engaged in
studying the effects of experimental drugs and/or surgical procedures have on
regional blood flow. As previously disclosed, effective May 1, 2000, the Company
had entered into an agreement with Stason Labs of Irvine, whereby the laboratory
was transferred to Stason's Irvine facility for the purpose of providing better
service to existing customers plus to explore the possibilities of expanding the
laboratory services into new areas.
E-Z Trac markets three products, two of which are designed for animal blood
flow studies, the E-Z Trac Ultraspheres and the NuFlow fluorescent microspheres.
The third product is a service the Company provides for its clients which counts
NuFlow fluorescent microspheres used in the blood flow studies and measures
regional blood flow under laboratory conditions.
The E-Z Trac Ultraspheres are microspheres designed for small research
studies measuring regional blood flow. The NuFlow fluorescent microspheres are
designed to measure regional blood flow for both small or large regional blood
flow research studies using E-Z Trac's Investigative Partner
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Service ("IPS") to analyze the studies samples. The Company markets microsphere
products to pharmaceutical companies, universities, hospitals and other academic
centers engaged in regional blood flow studies of experimental drugs or surgical
procedures.
YesRx.com
YesRx is an internet-enabled drugstore that is focused on the distribution
of pharmaceuticals, health, wellness and beauty products, as well as tens of
thousands of pages of health-related information to targeted niche chronic care
communities. The Company consists of 4 core business segments:
YesRx.com: Internet-Enabled Pharmacy
---------
YesRx.com is the internet segment of the Company. YesRx is a key component
of the Company's overall pharmacy strategy as the Company intends to transition
acquired customers from fax-based, walk-in and traditional mail-order ordering
to internet-based ordering and account maintenance. YesRx is a fully integrated
internet commerce catalogue of thousands of prescription and non-prescription
products, durable medical equipment, tens of thousands of pages of health-
related information, and comprehensive listing for related service providers.
The Consumer Advocates Group: Understanding the Needs of Chronic Care Patients
----------------------------
The Consumer Advocate Group is a program focused on the needs of specific
chronic care communities. Some of these communities are: HIV/AIDS patients,
Diabetics, Geriatric and Senior Citizens, and the Disabled. The Consumer
Advocate Group has been charged to develop specific programs to meets the needs
of these communities. Thus far, The Consumer Advocate Group has successfully
implemented programs in the HIV/AIDS and Diabetic communities.
YesRx International Licensing: Brand Awareness and Deployment Internationally
-----------------------------
This division focuses on building the YesRx brand outside of the United
States and in non-English speaking countries. Thus far, the YesRx.com website
has been translated and is being used in various Spanish speaking communities.
This business segment is currently developing a Chinese character version of
YesRx for possible deployment in markets in Taiwan and China.
Classic Care Pharmacy: Assisted Living and Business to Business Solutions
---------------------
On June 1, 2000, the Company completed the acquisition of Classic Care
Pharmacy, a Los Angeles-based business to business pharmacy. Classic Care is a
"high tech" assisted living facility pharmacy located in Los Angeles. Classic
Care's houses some of the latest prescription fulfillment technologies from
companies like Baxter HealthCare Systems and RNA Pharmacy Systems. These
technologies allow this facility to fill up to 3,000 prescriptions per day for
Classic Care's customer base which exceeds 3,000 beds.
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Results of Operations
Three and nine Months Ended September 30, 1999 Compared to September 30, 2000
For the three and nine months ended September 30, 2000, revenues were
approximately $2,017,966 and $2,806,810, an increase of $1,956,038 and
$2,608,436 respectively from the same periods in 1999. The increase was due to
the acquisition of Classic Care Pharmacy. Revenue from laboratory operations For
the three and nine months ended September 30, 2000 were $0 and $0, a decrease of
$61,928 and $198,374 respectively from the three and nine months ended September
30, 1999. This decrease in lab revenue is a result of the laboratory operations
being transferred to Stason Labs as of May 1, 2000.
Gross profit for products and services was $676,713 and $969,574 for three and
nine months ended September 30, 2000, an increase of $648,583 and 825,704 over
the same periods prior year. The increase was due to the acquisition of Classic
Care Pharmacy.
SG&A expense increased to $646,570 from $158,080 for the three months period
ended September 30, 2000 and increased to $1,234,513 from $479,074 for the nine
months period ended September 30, 2000. The increase in SG&A was due to the
following: 1) the acquisition of Classic Care accounted for the majority of the
increase in both the three months and nine months ended September 30, 2000 and
2) increases in the three and nine month periods ended September 30, 2000
expenditures for Kaire Holdings's base businesses is related to the company's
internet operations, i.e., consultants and internet access and hosting expenses.
Interest expense for operations for the three and nine month period ended
September 30, 2000 was $1,551 compared to $16,183 for the comparable three month
period prior year and $16,095 compared to $68,257 for the comparable nine month
period prior year. The decrease resulted from Conversion of significant amount
of convertible notes into common stock during first and second quarters of 1999.
Interim Period Cost of Goods Sold
Interim period cost of goods sold is calculated using the perpetual inventory
record. The Company reports any significant adjustments that result from
reconciliations of the perpetual inventory record to periodic and annual
physical inventory observations.
No provision was made for Federal income tax since the Company has incurred
significant net operating losses from inception. Through September 30, 2000, the
Company incurred net operating losses for tax purposes of approximately
$505,406. The net operating loss carry forward may be used to reduce taxable
income through the year 2012. The Company's tax returns have not been audited by
the Internal Revenue Service. The carry forward amounts may therefore be subject
to audit and adjustment. As a result of the Tax Reform Act, the availability of
net operating loss carry forwards can be deferred, reduced or eliminated under
certain circumstances. Net operating losses in the State of California were not
available for use during 1992 and the carry forward period has generally been
reduced from fifteen years to five years beginning in 1993.
Liquidity and Capital Resources
-------------------------------
The Company's revenues have been insufficient to cover acquisition costs, cost
of revenues and
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operating expenses. Therefore, the Company has been dependent on private
placements of common stock securities, bank debt, loans from private investors
and the exercise of common stock warrants in order to sustain operations. In
addition, there can be no assurances that private or other capital will continue
to be available, or that revenues will increase to meet the Company's cash
needs, or that a sufficient amount of the Company's common stock or other
securities can or will be sold or that any common stock purchase
options/warrants will be exercised to fund the operating needs of the Company.
On September 30, 2000 the Company had assets of $5,603,509 compared to
$160,000 on December 31, 1999, or an increase of $5,443,509 which is a result of
the acquisition of Classic Care Pharmacy. The Company had a total stockholders'
equity of $3,826,629 on September 30, 2000 compared to a deficit of $586,426 on
December 31, 1999, an increase in the equity of $4,413,055 which is also a
result of the acquisition of Classic Care Pharmacy.
As of September 30, 2000 the Company's working capital position increased
$339,472 from a negative $586,426 at December 31, 1999 to a negative $246,954.
The $339,472 increase was attributable to the following: 1) the Classic Care
acquisition accounted for $756,358 of this increase and 2) a decrease in Kaire
Holdings cash of $195,264 and accounts receivable of $100,645 accounts for the
remaining increase in working capital.
In order to meet its current operating needs, the Company has reduced its cash
requirements by transferring its E-Z division to Stason Labs. The Company feels
that further expense reductions plus the added cash generated by the Classic
Care division should provide enough cash to sustain the operations of the
business in short run.
Year 2000 Issue
The Company experienced no disruption in business to customers or vendors
or had a material adverse effect on the company's business, financial condition
or results of operations related to the year 2000.
Subsequent Events
-----------------
The company issued three convertible notes for $750,000, with simple interest
accruing at the annual rate of 8%, in October 2000. Interest payable on the
Notes shall accrue at the annual rate of 8% and be payable quarterly commencing
January 1, 2001. The Holder shall have the right to convert the principal amount
and interest due under the notes into Shares of the Kaire's Common Stock. The
note and the common shares issuable upon conversion of the notes have not been
registered under the Securities Act of 1933. The Company also issued common
stock purchase warrant the right to purchase 2.5 million shares of Common Stock
of Kaire Holdings Incorporated. This warrant and the common shares issuable upon
exercise of this warrant have not been registered under the Securities Act of
1933.
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PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
No new matters to report.
Item 4. Submission of Matters of a Vote to Security Holders
On or about October 1, 1997, a proposal to increase the number of
authorized shares to 400,000,000 for the purpose to provide for the merger with
Kaire International, Inc. was voted upon and authorized by a majority of Kaire
Holdings, Inc. shareholders.
On or about January 30, 1998, a proposal to 1) reverse split the Company's
common stock up to and not to exceed a reverse ratio of seventy-five to one, 2)
amend the Company's Articles of Incorporation changing the Company name to Kaire
Holdings Incorporated and 3) changing the Company's NASDAQ symbol to KHI was
voted and authorized by a majority of Kaire Holdings, Inc. shareholders. These
changes became effective on February 19, 1998.
Item 5. Other Information
Subsequent Events
-----------------
The company issued three convertible notes for $750,000, with simple
interest accruing at the annual rate of 8%, in October 2000. Interest payable on
the Notes shall accrue at the annual rate of 8% and be payable quarterly
commencing January 1, 2001. The Holder shall have the right to convert the
principal amount and interest due under the notes into Shares of the Kaire's
Common Stock. The note and the common shares issuable upon conversion of the
notes have not been registered under the Securities Act of 1933. The Company
also issued common stock purchase warrant the right to purchase 2.5 million
shares of Common Stock of Kaire Holdings Incorporated. This warrant and the
common shares issuable upon exercise of this warrant have not been registered
under the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
27 Financial Data Schedule
(b) The Company filed the following Reports on form 8-K:
1. Form 8-K dated February 19, 1998 reporting a change in the
Company's independent account, a name change, a seventy - five to one
reverse common stock split, and the signing of an agreement to purchase
thirty - five percent in a Singapore company and its Mainland China multi
level marketing subsidiary.
2. Form 8-K dated April 8, 1999 reporting a change in the Company's
independent account and the resignation of Peter Benz as the Company's
President and Board member.
3. Form 8-K June 22, 2000 reporting the acquisition of Classic Care
Pharmacy.
4. Form 8-K/A August 23, 2000 reporting proforma financials of the
Classic Care Pharmacy acquisition.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
KAIRE HOLDINGS INCORPORATED.
----------------------------
(Registrant)
Date: November 13, 2000 By: /s/ Steven R.Westlund
-------------------------
Steven Westlund
(Chief Executive Officer)
Date: November 13, 2000 By: /s/ OWEN M. NACCARATO
_________________________
Owen M. Naccarato
(Chief Financial Officer)
Date: November 13, 2000 By: /s/ Asher Gottesman
-------------------------
Asher Gottesman
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