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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
AMENDMENT NO. 1
Registration Statement
Under
The Securities Act of 1933
Kaire Holdings Inc.
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(Exact name of registrant as specified in its charter)
Delaware 8980 13-3367421
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification Code Number identification
number)
7348 Bellaire Avenue, North Hollywood, CA 91605
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Address and Telephone number, including area code:
Steven Westlund
Chief Executive Officer
7348 Bellaire Avenue
North Hollywood, California 91605
(818) 255-4996
(Name, Address and Telephone Number of Agent for Service)
Copies of communications to:
Owen Naccarato, Esq.
Naccarato & Associates
19600 Fairchild, Suite 260
Irvine, California 92612
(949) 851-9261
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
List the Securities Act registration statement number of earlier effective
registration statement for the same offering. [X]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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Title of each Amount to be Proposed maximum Proposed maximum Exercise Proceeds to the Amount of
class of registered offering price aggregate price per Company registration fee
securities to per share offering price share
be registered
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<S> <C> <C> <C> <C> <C> <C>
Common (1) 13,335,704 (2) .11248 (4) 1,500,000 396.00
Shares, par
value $.001
underlying 118,852,460 (3) .122 (5) 14,500,000 3,828.00
secured
convertible
debenture
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Shares (1) 5,000,000 .12370 (6) 618,500.00 163.28
underlying 5,409,836 .13420 (7) 726,000.00 191.66
warrants
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Common shares 15,500,000 (8) .1016 (8) 415.75
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Total 158,098,000 4,994.70
registration fee
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</TABLE>
(1) Represents the shares of Common Stock being registered for offer by the
Company in connection with a financing (the "Subscription Agreement").
Currently, the shares of Common Stock offered also include an indeterminate
number of common shares in connection with the Subscription Agreement between
the Company and the Subscriber. With this in mind, the Company is required
pursuant to the Subscription Agreement (Section 7g) to register 200% of the
number of shares required to meet the Company's obligations to the Subscriber.
Consequently, such number of Common Shares is subject to adjustment and could be
materially less than such estimated amount depending upon factors that cannot be
predicted by the Company at this time, including, among others, the future
market price of the Common Stock. This presentation is not intended to
constitute a prediction as to the future market price of the Common Stock or
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as to the number of shares of Common Stock issuable upon exercise of the
convertible debenture. (See "Risk Factors -- Dilution").
(2) Includes: (a) 6,667,852 shares representing the conversion of the initial
8 % debentures, and (b) 6,667,852 shares representing reserve shares that may be
needed to account for market fluctuations in the price of the common stock prior
to the conversion of the debentures.
(3) Includes: (a) 59,426,230 shares representing the conversion of the 8 %
additional debentures, and (b) 59,426,230 shares representing reserve shares
that may be needed to account for market fluctuations in the price of the common
stock prior to the conversion of the debentures.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended (the
"Securities Act"); and is based on the of the price of $.11248 as per the terms
indicated in Section 4 (1)(b) of the Convertible Debenture and Section
11.1(c)(i) of the Subscription Agreement.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended (the
"Securities Act"); based on the of the price of $.122 as per the terms indicated
in Section 11.1(c)(ii) of the Subscription Agreement.
(6) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) of the Securities Act of 1933, as amended (the
"Securities Act"); based on the terms of the warrants, $0.12370 per share.
(7) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) of the Securities Act of 1933, as amended (the
"Securities Act"); based on the terms of the warrants, $0.13470 per share.
(8) Represents shares held by existing shareholders. Offering price is
estimated solely for the purpose of calculating the registration fee. Calculated
pursuant to Rule 457(g) and based on the average of the high and low bid on our
common stock on December 8, 2000.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effectiveness date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said section 8(a), may determine.
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PART I
INFORMATION REQUIRED IN PROSPECTUS
This document is being submitted to the Securities and Exchange Commission for
review and approval. After this document is reviewed and approved, it will
become effective.
The selling security holders (listed on page 27) may not sell their securities
until this registration statement becomes effective. These same selling security
holders may not accept offers to buy their securities until this registration
statement becomes effective.
This prospectus is not an offer to sell these securities and is not an offer to
buy these securities in any state where such an offer or sale is not permitted.
Subject to completion, dated January 16, 2001
Kaire Holdings, Inc.
158,098,000 SHARES OF COMMON STOCK
This prospectus relates to the future sale of our common stock to investors and
the resale of our common stock by the selling stockholders listed on page 27.
Our common stock trades on the Over-the-Counter Bulletin Board (also called the
"OTCBB"). Our trading symbol is: "KAHI." On December 1, 2000, the closing bid
for our common stock as reported on the OTCBB was $ .125 per share.
This Investment Involves a High Degree of Risk. You Should Purchase Shares Only
If You Can Afford a Complete Loss. Please See "Risk Factors" Beginning on Page
9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
As of the date of this prospectus, the shares of our common stock being offered
by the selling stockholders have not been registered for sale under the
securities laws of any state or jurisdiction.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with the
SEC. This means that we can disclose important information by referring you to
our previously filed SEC documents. Information incorporated by reference is
considered to be a part of this prospectus. Any information that we subsequently
file with the SEC will automatically update or supersede previously filed
information. We incorporate by reference the documents listed below, and any
future filing we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934:
1. Annual Report filed on Form 10-KSB for the period ending December 31,
1999 and December 31, 1998.
2. Quarterly Reports on Form 10-QSB for the periods ended September 30,
2000, June 30, 2000 and March 31, 2000.
3. Form 8-K filed 6/22/00 and Form 8-K/A filed 8/23/00.
You may request a copy of these filings, at no cost, by writing to us at:
Kaire Holdings, Inc.
Attention: Steven R. Westlund
7348 Bellaire Avenue
North Hollywood, California 91605
We have retained no underwriters in connection with this offering.
THE DATE OF THIS PROSPECTUS IS: Tuesday, January 16, 2001.
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with any information that is different.
The selling security holders are offering to sell, and seeking offers to buy,
shares of common stock only in jurisdictions where such offers and sales are
permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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Section Title Page No.
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<S> <C>
Summary of Information in the Prospectus 7
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Risk Factors 9
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Use of Proceeds 15
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Price Range of Common Stock 15
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Our Dividend Policy 16
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Management's Discussion and Analysis of Financial Condition and Results of Operations 16
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Our Business 21
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Management 23
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Executive Compensation 25
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Certain Relationships and Related Transactions 27
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Security Ownership of Certain Beneficial Owners and Management 27
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Description of Securities 28
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Selling Stockholders 29
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Plan of Distribution 31
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Legal Proceedings 32
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Experts 32
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Legal Matters 32
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Other Available Information 32
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Financial Statements F-1
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Indemnification
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</TABLE>
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SUMMARY OF INFORMATION IN THE PROSPECTUS
This prospectus summary highlights selected information contained in this
prospectus. To understand this offering fully, you should read the entire
carefully. Please pay particular attention to the section entitled "Risk
Factors" (which begins on page 9), and the section entitled "Financial
Statements" (which begins on page 31).
Unless otherwise indicated, this prospectus assumes that any of our outstanding
options or warrants have not been exercised into shares of our common stock.
KAIRE HOLDINGS, INC.
Kaire Holdings, Incorporated ("The Company"), formerly known as Interactive
Medical Technologies Ltd. ("IMT"), was incorporated in Delaware in 1986.
On February 19, 1998, we did the following three things:
1. We changed the name of the Company to Kaire Holdings, Inc. from
Interactive Medical Technologies, Ltd.;
2. We changed our NASDAQ OTCBB symbol to "KAHI" from "NONI"; and
3. We reverse split our common stock at a ratio of seventy-five (75) to
one (1).
Prior to November of 1999, the Company consisted of one functioning division
called EZ-TRAC. EZ-TRAC provides non-radioactive diagnostic products and
laboratory analysis and 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.
In November 1999, we refocused our business and marketing strategies. That same
month, we formed YesRx.com. YesRx.com is an online drugstore that markets and
distributes pharmaceuticals, health, wellness and beauty products to targeted
segments of the chronically ill population. Our goal for YesRx.com is to
increase medication compliance for patients undergoing complex medication
therapies. YesRx.com targets chronic care customers/patients, in particular:
1. HIV-AIDS Patients;
2. Senior Citizens;
3. Diabetics; and
4. Persons Who are Physically or Emotionally Disabled
In May of 2000, we signed a letter of intent with Stason USA, Inc. The letter of
intent provided that our EZ-TRAC lab would be moved from our North Hollywood
office to Stason's offices in Irvine, California. The letter of intent further
called for Stason to merge its laboratory business with the EZ-TRAC business.
The newly formed Stason/EZ-TRAC business is to be called "Stason Labs." It is
Stason's and our intent take the combined laboratory asset public during
calendar year 2001. Both Kaire and
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Stason are in the process of negotiating the final terms of the proposed Stason
Labs agreement.
In June of 2000, we acquired Los Angeles-based Classic Care pharmacy. Classic
Care Pharmacy provides specialized prescription medication services to seniors
living in extended care facilities throughout Los Angeles, California.
In July of 2000, we acquired the rights to the domain name "netFame.com." We
purchased the netfame.com domain address with the intention of developing an
interactive online exchange to facilitate communication between a planned
subscriber base consisting of emerging actors, models, and musicians, with
established entertainment industry agents. We plan on launching netFame in the
first half of 2001.
In November of 2000, we advanced our business strategy with the introduction of
the YesRx Health Advocate Program. The Health Advocate Program provides
medication compliance programs to HIV/AIDS, diabetic and senior health
communities.
The Offering
<TABLE>
<S> <C>
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Common Stock Outstanding 116,653,033 shares
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Common Stock to be offered by our Selling Shareholders 15,500,000 shares
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Common Stock to be offered by our Selling Investors 142,598,000 shares
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</TABLE>
Market for our Common Stock:
Our common stock trades on the Over-the Counter Bulletin Board, also called
OTCBB, under the trading symbol "KAHI". The market for our common stock is
highly volatile. We can provide no assurance that there will be a market in the
future for our common stock.
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RISK FACTORS
An Investment In Our Securities Involves A High Degree Of Risk. In Addition To
The Other Information In This Prospectus, You Should Carefully Consider The
Following Risk Factors Before Investing In Our Securities. If Any Of The
Following Risks Were To Actually Occur, The Company's Business Would Likely
Suffer. Consequently, The Price Of The Company's Common Stock Could Decline,
And Investors May Lose All Or Part Of Their Investment In The Company's Common
Stock.
We have a limited operating history in the retail (offline and online)
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prescription drug business. One should evaluate our business and prospects in
--------------------------
light of the fact that since 1986, we have changed our business focus on a
number of occasions. Our most recent change occurred in November of 1999 when
we started YesRx.com, an online prescription drug business.
We cannot guarantee the future profitability of our business. Although we
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recently reported our first quarterly profit in company history, in the past, we
have incurred net losses and cannot guarantee our business will generate profits
in the future. For example, due to the highly competitive nature of our
business, it is likely that we will have to allocate cash flow to marketing
efforts to acquire customers. These efforts may cause us to report losses in the
future.
Use of proceeds not specific. The proceeds of this offering have been allocated
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only generally. Proceeds have been generally allocated to finance possible
acquisitions, expand existing operations and as future working capital.
Accordingly, investors will entrust their funds with management. With only
limited information about management's specific intentions with respect to a
significant amount of the proceeds of this offering, investors will therefore
depend upon management's judgment in allocating these funds.
Dividends. In the past, our company has not paid dividends. We do not plan to
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pay dividends in the future.
"Penny Stock" Issues. The shares of common stock offered are for "penny stocks"
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as defined in the Exchange Act. These shares are traded in the over-the-counter
market on the OTC Bulletin Board. As a result, an investor may find it more
difficult to dispose of or obtain accurate quotations as to the price of the
shares of the common stock being registered. In addition, the "penny stock"
rules adopted by the SEC under the Exchange Act make the sale of the shares of
the common stock subject to certain regulations which impose sales practice
requirements on broker-dealers. For example, broker-dealers selling such
securities must, prior to effecting the transaction, provide their customers
with a document that discloses the risks of investing in such securities.
Furthermore, if the person purchasing the securities is someone other than an
accredited investor or an established customer of the broker-dealer, the broker-
dealer must also approve the potential customer's account by obtaining
information concerning the customer's financial situation, investment experience
and investment objectives. The broker-dealer
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must also make a determination whether the transaction is suitable for the
customer and whether the customer has sufficient knowledge and experience in
financial matters to be reasonably expected to be capable of evaluating the risk
of transactions in such securities. Accordingly, the SEC's rules may limit the
number of potential purchasers of the shares of the common stock.
If we can meet the listing requirements in the future, management intends to
apply to include the shares of the common stock being registered hereby for
quotation on The NASDAQ SmallCap Market operated by The NASDAQ Stock Market. Our
common stock has not yet been approved for quotation on The NASDAQ SmallCap
Market and there can be no assurance that an active trading market will develop
or if such market is developed that it will be sustained. The NASDAQ Stock
Market recently approved changes to the standards for companies to become listed
on The NASDAQ SmallCap Market, including, without limitation, new corporate
governance standards, a new requirement that companies seeking listing have net
tangible assets of $2,000,000, market capitalization of $35,000,000 or net
income of $500,000 and other qualitative requirements. If we are unable to
satisfy the requirements for quotation on the NASDAQ SmallCap Market, trading in
the common stock being registered hereby would continue to be conducted on the
OTC Bulletin Board. Even if the shares of the common stock are listed for
quotation on The NASDAQ SmallCap Market, the market price of the shares must
remain above $5.00 per share or else such shares will be subject to the "penny
stock" rules of the Commission discussed above. If the market price of such
shares falls below $1.00 per share, such shares will be delisted from The NASDAQ
SmallCap Market and will once again be quoted on the OTC Bulletin Board.
We may be unable to meet our future capital requirements. We have limited
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operating capital. We are dependent upon the receipt of cash from our operations
and elsewhere to develop our business. We believe that cash provided from our
operations, plus capital we received in our most recent registration will allow
us to meet our cash and capital requirements for the next 12 months. However, in
the future, we may require additional financing.
Financing is to be provided from:
1. Our operations;
2. The sale of equity securities;
3. Borrowing from other sources; or
4. Third party financing.
Any additional debt or equity financing may be dilutive to our shareholders.
Borrowing from third parties could result in our assets being pledged as
collateral. Loan terms from these borrowings would increase our debt service
requirements and could restrict our operations. There is no assurance that
capital will be available from any of these sources, or, if available, upon
terms and conditions acceptable to us.
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We depend heavily on our Classic Care executive team. Our executive team
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consists of the following persons: Steven R. Westlund, Mark L. Baum, John
Williams and Joel Rubenstein. Each one of these persons provides us with a
unique service. Each one of these persons has special knowledge and business
contacts which add value to the company. If one of more of these persons were to
leave the company, we may not be able to replace his services, and the business
would likely be materially and adversely affected. Therefore, we are highly
dependent upon the continued services of these individuals. To date, we have not
sought to obtain any key man life insurance coverage insuring the life of any of
these persons. We do not anticipate obtaining such coverage in the foreseeable
future.
Competition. We may not be able to effectively compete in our businesses due to
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the fact that many of our competitors are better financed companies with far
greater financial resources. Some of our competitors include larger, better
financed competitors in the retail prescription drug business (Rite-Aid,
Walgreens, Drug Emporium, PlanetRx.com, drugstore.com, Thrifty, Wal-Mart, Phar-
Mor, Eckerd, Kroger, Safeway, Albertson's to name just a few). There is also
competition for our customers from better financed wholesale drug distributors
(Bergen Brunswig and McKesson, among others), manufacturers (Merck, Johnson and
Johnson, American Home Products, Dupont, and others) and other parties who have
definite competitive and financial advantages against us.
Although we are attempting to establish ourselves as a niche player in the
prescription drug business, no assurance can be given that our competitors will
not use their advantages over us, and more directly pursue the customers we are
attempting to acquire and those who we have already acquired. As previously
discussed above, these competitors may have greater financial resources,
stronger management resources and a better ability to enhance their share of the
market. We cannot provide investors with any assurances that our competitors
will not gain greater market share at our expense, and if they do, that will
have an adverse effect on our business and the results of our operations.
Liquidity of Equity. There is no assurance of a liquid public market for our
-------------------
common stock. Although our common stock is now eligible for quotation on the
over-the-counter electronic bulletin board maintained by the NASD, there has
been no significant liquid public market for our common stock. There has been no
long term established public trading market for the common stock and there can
be no assurance given that a regular and established market will be developed
and maintained for the common stock. There can also be no assurance as to the
depth or liquidity of any market for our common stock or the market prices at
which our stockholders may be able to sell the common stock in the future.
Accordingly, investors may have difficulty in selling their common stock in the
future, and we can give no assurance that the common stock can ever be resold.
Technological Changes. We may be unable to respond to rapid technological
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changes in retail prescription drug business. This could materially harm our
ability to continue and expand our business. These technological changes include
the proliferation of the
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electronic prescription pad, and various other technologies which are gaining
marketshare.
Risk of Dilution. The issuance of these shares will have a dilutive effect on
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our common stock and may lower our stock price. We have reserved a significant
number of shares of our common stock for issuance upon the conversion of
convertible debentures, and the exercise of our warrants.
As of October 25, 2000, we had outstanding $750,000 of convertible debentures
that can be converted into shares of our common stock. Within ten days after the
filing date of this registration additional debentures amounting to $500,000
will be issued and within ten days after the effective date of this registration
additional debentures amounting to $1,250,000 will be issued The number of
shares we will issue upon the conversion of these debentures fluctuates with our
common stock market price, cannot be determined until the day of conversion and
is calculated by a formula set forth in the convertible debenture section 2.1
"Conversion into the Borrower's Common Stock". There is no limit on the number
of shares of our common stock that may be issued upon the conversion of these
convertible debentures. The convertible debentures amounting to $750,000 have a
conversion price that 87% of the average of the three lowest closing prices of
the ten trading days prior to the date of purchase, as reported on the NASD OTC
Bulletin Board and the convertible debentures amounting to $500,000 and
$1,250,000 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 prior to their maturity date of October 25, 2003.
As of October 25, 2000, we had outstanding a total of 5,000,000 warrants to
purchase our common stock at an exercise price of 110% of the lowest closing
price for the Company's common stock for the trading days preceding but not
including the Closing Date, as reported on the NASD OTC Bulletin Board, or other
such principal market or exchange where the Common Stock is listed or traded to
the date of funding. which is above the current market price. An additional
5,409,836 warrants to purchase our common stock, are issuable upon the
additional Convertible debenture funding, at an exercise price of 110% of the
lowest closing price for the Company's common stock for the trading days
preceding but not including the Closing Put Date, as reported on the NASD OTC
Bulletin Board, or other such principal market or exchange where the Common
Stock is listed or traded to the date of funding. These warrants may be
exercised any time from the date of issuance and from time to time up to and
including a period of three years. If the exercise of these warrants occur at
below market prices, shareholders will be subject to an immediate dilution in
their per share net tangible book value.
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As of October 25, 2000 we have reserved for 200% of the minimum number of shares
of common stock which would be issuable upon conversion in full of the
debentures, amounting to 132,188,163 shares of authorized and unissued common
stock. These reserve amounts are our good faith estimate of the number of shares
that we believe we need to reserve. We can provide no assurance as to how many
shares we will ultimately need to issue upon the conversion of the debentures.
If we are required to issue additional shares we will be required to file an
additional registration statement for those shares, a process which will be
costly and time consuming. The issuance of these shares will dilute our common
stock per share net tangible book value and may result in a decline in our stock
price.
Additional dilution may occur as a result of the Classic Care acquisition.
Pursuant to the terms of the Classic Care acquisition Agreement, the Company
agreed 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
(collectively the "Make Whole Shares" portion of the agreement). 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 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 Company is currently in the process of re-negotiating the terms of the Make
Whole provision of the Classic Care transaction documents.
Shares eligible for future sale could impair our stock price. The market price
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of our common stock as quoted on the over-the-counter electronic bulletin board
could drop due to sales of a large number of shares of our common stock or the
perception that these sales may occur. These factors could also make it more
difficult to raise funds through future offerings of common stock.
Fluctuations in our quarterly results may adversely affect our stock price. We
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expect to experience significant fluctuations in our future quarterly operating
and non-operating results due to a variety of factors, many of which are outside
our control. As a result, we believe that quarterly comparisons of our
operating and non-operating results are not necessarily meaningful. Investors
should not rely on the results of one quarter as an indication of our future
performance. Fluctuations in our quarterly operating and non-operating results
will cause our results to fall below comparable historical periods and the
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expectations of securities analysts and investors, which could cause the price
of our common stock to drop. Factors that may negatively affect our quarterly
operating results include:
- our ability to attract new customers;
- the announcement or introduction of new or enhanced products by our
competitors;
- changes in our pricing policies or the pricing policies of our competitors;
- the amount and timing of operating costs and capital expenditures relating to
expansion of our business, operations and infrastructure; and
- our ability to attract and retain new personnel in a timely and effective
manner.
Vulnerability of Computer Systems. Our computers and communications systems are
---------------------------------
vulnerable to damage or interruption which may hinder our ability to deliver
timely our products and services. Our ability to successfully provide our
products and services depends on the efficient and uninterrupted operation of
our computers and communications hardware systems. Substantially all of our
computer and communications systems are located in Southern California. Our
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, earthquakes, break-ins and other
events.
Risks Involved in Developing Technology. The development of electronic commerce
---------------------------------------
products and other proprietary technology entails significant technical and
business risks and requires substantial expenditures and lead time. We may be
unable to use new technologies effectively or adapt our products to customer
requirements or emerging industry standards.
Volatility of Equity. Our common stock price on the over-the-counter electronic
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bulletin board is likely to be highly volatile. The market price of our common
stock may be highly volatile, just as the stock market in general, and the
market for technology companies in particular, have been highly volatile.
Investors may not be able to resell their shares of common stock following
periods of volatility because of the market's adverse reaction to such
volatility. The trading prices of many technology stocks have reached
historical highs within the last year and have reflected relative valuations
substantially above historical levels. During the same period, such companies'
stocks have also been highly volatile and have recorded lows well below such
historical highs. We cannot assure you that our stock will trade at the same
levels as other technology stocks or that technology stocks in general will
sustain their current market prices.
Information About Forward-Looking Statements:
--------------------------------------------
This prospectus contains certain forward-looking statements, which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified because the context of the statement includes words such
as "may," "will," "except," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, this prospectus also contains
forward-looking statements about our future. Forward-looking statements include
statements about our Plans, Objectives, Goals, Strategies, Expectations for the
future, Future performance and events, Underlying
14
<PAGE>
assumptions for all of the above, and other statements which are not statements
of historical facts.
These forward-looking statements involve risks and uncertainties, which could
cause our actual results to materially differ from our forward-looking
statements. We make these forward-looking statements based on our analysis of
internal and external historical trends, but there can be no assurance that we
will achieve the results set forth in these forward-looking statements. Our
forward-looking statements are expressed in good faith and we believe that there
is a reasonable basis for us to make them.
In addition to other factors discussed in this prospectus, the following are
important factors that could cause our actual results to materially differ from
our forward-looking statements:
- our ability to respond to changes in the marketplace
- competitive factors
- the availability of financing on terms and conditions acceptable to us
- the availability of personnel with the appropriate technical skills
We have no obligation to update or revise these forward-looking statements to
reflect future events.
Use of Proceeds
The Company will not receive any proceeds upon the issuance of the common stock
That is the subject of this registration. However, within ten days after the
filing of this registration statement the Company is scheduled to receive net
funds of $455,000 and ten days after the effectiveness of this registration
statement the Company is scheduled to receive additional net funds of
$1,137,500, pursuant to the Subscription Agreement. If all the warrants in
this offering are exercised, the net proceeds to us from the exercise of
warrants, after the deduction of offering expenses, will be approximately
$1,223,495. The Company intends to use the net proceeds to finance possible
acquisitions, expand existing operations and working capital.
Price Range of Common Stock
Our common stock trades on the Over-the-Counter Bulletin Board, also called the
OTCBB, under the trading symbol "KAHI". The following table set forth the
quarterly high and low bid prices per share for our common stock. The bid prices
reflect inter-dealer prices, without retail markup, markdown, or commission and
may not represent actual transactions.
--------------------------------------------------------------------------------
Low Bid High Bid
--------------------------------------------------------------------------------
Fiscal 1998
--------------------------------------------------------------------------------
Third Quarter 1998 .02 .03
--------------------------------------------------------------------------------
Fourth Quarter 1998 .02 .02
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
15
<PAGE>
--------------------------------------------------------------------------------
Fiscal 1999
--------------------------------------------------------------------------------
First Quarter 1999 .016 .055
--------------------------------------------------------------------------------
Second Quarter 1999 .03 .16
--------------------------------------------------------------------------------
Third Quarter 1999 .081 .136
--------------------------------------------------------------------------------
Fourth Quarter 1999 .058 .14
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Fiscal 2000
--------------------------------------------------------------------------------
First Quarter 2000 .11 1.00
--------------------------------------------------------------------------------
Second Quarter 2000 .16 .60
--------------------------------------------------------------------------------
Third Quarter 2000 .13 .22
--------------------------------------------------------------------------------
Transfer Agent and Registrar
----------------------------
The Company's transfer agent is New Jersey Transfer located at: Jersey Transfer
and Trust, Attention: Howard Manger, 201 Bloomfield Avenue, Verona, New Jersey
07044, Fax: (973) 239-2361
Our Dividend Policy
The Company anticipates that for the foreseeable future, earnings will be
retained for the development of is business. Accordingly, the Company does not
anticipate paying dividends on the Common Stock in the foreseeable future. The
payment of future dividends will be at the sole discretion of the Company's
Board of Directors and will depend the Company's general business condition.
Management's Discussion and Analysis or Plan of Operation
Plan of Operation
The short-term objectives of the Company are the following:
1. Continue to develop and grow the Company's core Health Advocate
businesses in the specific areas of HIV/AIDS, Diabetic Care, Senior
Citizen Care and Disabled Care.
2. Continue to add new long term care facilities to the Classic Care
customer base.
3. Finalize the terms of the Stason Labs agreement for Kaire's EZ-TRAC
business and Stason USA lab business.
4. Seek out key alliances and potential acquisition candidates for the
Company's prescription drug distribution business.
5. Enter into a marketing agreement for the proposed Stason Labs
business.
6. Determine the feasibility of the YesRx spin-off.
The Company's long-term objectives are the following:
16
<PAGE>
1. Continue to streamline the Company's electronic order-taking and
distribution systems.
2. Expand the geographical reach of the Company's Health Advocate
Program.
3. Acquire development products and businesses for the proposed Stason
Labs.
There is no expected or planned sale of significant equipment by the Company.
But-for an acquisition, the Company's work force is expected to increase by
approximately 25% over the next twelve months.
Over the next twelve months, Management is of the opinion that sufficient
working capital will be obtained from operations and from external financing to
meet the Company's liabilities and commitments as they become payable. The
Company has in the past successfully relied 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.
17
<PAGE>
Results of Operations
Interim Financials Three and Nine Months Ended September 30, 2000 Compared to
-----------------------------------------------------------------------------
September 30, 1999
------------------
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
18
<PAGE>
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.
Comparison of years ended December 31, 1999 and 1998:
----------------------------------------------------
Net revenue for the year ended December 31, 1999 was $259,545, a decrease of
$110,793 or 30% from the year ended December 31, 1998. The decrease in net
revenues was due to a decrease in projects by our customers which required the
lab's products and services.
Gross profit for the year ended December 31, 1999 was $170,300, a decrease of
$43,963 or 20.5% compared to the same period in 1998. This decrease in gross
profit was attributable to the decrease in sales.
Selling, general and administrative expense ("SG&A") Increased to $1,014,143
from $981,605 for 1999 from 1998, amounting to a increase of $32,538 or 3.3%
from the same period last year.
Interest expense was $82,250 or the year ended December 31, 1999, which
represents a decrease of $144,735 or 63.7% from the same period last year. The
December 31, 1999 interest expense decrease is primarily a result of the
conversion the notes throughout 1999.
Other income of $354,479 resulted from writing off certain older liabilities for
which the company is no longer liable.
No provision was made for Federal income tax since the Company has incurred
significant net operating losses from inception.
Liquidity and Capital Resources
-------------------------------
The Company's revenues have been insufficient to cover acquisition costs, cost
of revenues and operating expenses. Therefore, the Company has been dependent
on private placements of common stock securities, bank debt, loans from private
investors and the exercise of common stock warrants in order to sustain
operations. In addition, there can be no assurances that private or other
capital will continue to be available, or that revenues will increase to meet
the Company's cash needs, or that a sufficient amount of the Company's common
stock or other securities can or will be sold or that any common stock purchase
options/warrants will be exercised to fund the operating needs of the Company.
19
<PAGE>
September 30, 2000 vs. Nine Months Ending September 30, 1999
------------------------------------------------------------
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.
December 31, 1999 vs. December 31, 1998
---------------------------------------
On December 31, 1999 the Company had assets of $160,00 compared to $185,572 on
December 31, 1998. The Company had a total stockholders' deficit of $586,426 on
December 31, 1999 compared to a deficit of $2,610,593 on December 31, 1998, a
decrease of $2,024,167. This decrease for the year ended December 31, 1999 was
the result 1) issuance of stock for note conversions and related interest
expense totaling $1,319,754, 2) stock and stock options issued for services
totaling $805,500 3) issuance of stock for the conversion of debt totaling
$170,448 and 4) stock issued for the sale of stock and a beneficial conversion
totaling $201,002 off set by the 1999 net loss of $472,537.
As of December 31, 1999 the Company's working capital position increased
$2,040,202 from a negative $2,626,628 at December 31, 1998 to a negative
$586,426 at December 31, 1999, primarily as a result a decrease in accounts
payable and accrued expenses of $890,639, an increase in cash of $124,337, and a
decrease in accounts receivable of $25,928.
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 5 million shares of Common
Stock of Kaire Holdings Incorporated.
It is anticipated that the $ 750,000 convertible debentures will be converted
into shares in accordance with the terms of these debentures.
20
<PAGE>
Our Business
Headquartered in North Hollywood, California, Kaire Holdings specializes in
creating unique consumer driven companies that specialize in defining markets
and providing products and services honed to meet the needs of users in a
particular consumer community. When Kaire markets products and services, Kaire
integrates marketing and distribution systems so that it can operate both online
and offline. This approach is designed to maximize penetration across multiple
consumer channels.
The Company principally has interests in three companies:
1. YesRx
2. Classic Care
3. Stason Labs
The Company also is in the developmental phase with a new entity called
"netFame."
YesRx:
-----
In 1999, the Company formed YesRx, an Internet-enabled drugstore that is focused
on marketing and distributing pharmaceuticals, health, wellness and beauty
products targeted chronic care health products consumers.
Given the high customer acquisition costs and related costs associated with
conducting business exclusively on the internet, YesRx management decided to
focus it's efforts on serving the needs of chronic care consumers as opposed to
acute care or emergency needs. The Company does not provide acute care
medications, but targets the patient who has regular medication needs and
multiple refills. This model provides operational feasibility with anticipated
recurring revenue streams.
In November of 2000, YesRx debuted it's Health Advocate Group Program. The
Health Advocate Group is a program focused on the needs of specific chronic care
communities. Some of these needs include providing these customers with
prescription and non-prescription products, durable and non-durable medical
equipment, access to targeted data regarding their respective illness, access to
communication with their physician, and various billing and insurance-related
services. Health Advocate Group products and services are delivered via per-to-
person delivery, mail and securely, through the world wide web. All Health
Advocate Group orders are filled through the Classic Case pharmacy in Los
Angeles, California.
To date, YesRx has designed Health Advocate programs for three groups: HIV/AIDS
patients, Diabetics and Geriatric and Senior Citizens. The Consumer Advocate
Group has been charged to develop specific programs to meets the needs of these
communities.
21
<PAGE>
Classic Care Pharmacy:
---------------------
On June 1, 2000, the Company completed the acquisition of Classic Care Pharmacy,
a Los Angeles-based business-to-business pharmacy. Classic Care's primary
business is selling prescription medications to assisted living facilities in
the greater Los Angeles area. Classic Care's current distribution capability
will allow it to fill up to 3,000 prescription orders per day.
Additionally, Classic Care serves as a distribution center for YesRx's Health
Advocate Group and for it's online retail prescription and non-prescription drug
business.
Stason Labs:
-----------
In May of 2000, Kaire signed a letter of intent with Stason USA, Inc. whereby
the Kaire EZ-TRAC lab would be moved from Kaire's North Hollywood office to
Stason's Irvine, California facility. The letter of intent further called for
Stason to merge it's laboratory business with Kaire's EZ-TRAC business into an
new company proposed to be called "Stason Labs." It is the intent of the
parties to the letter of intent is to take the combined laboratory asset
(collectively proposed as "Stason Labs") public during calendar year 2001. In
May of this year, the Kaire EZ-TRAC lab moved to the Stason facility in Irvine,
California.
Both Kaire and Stason are in the process of negotiating the final terms of the
proposed Stason Labs agreement.
Stason is a pharmaceutical company which specializes in product development,
pilot scale production, technology transfer and management of technical
information and resources for the development of prescription drugs in solid
form.
netFame:
--------
In July 2000, Kaire acquired the rights to the domain name "netFame.com." Kaire
purchased the netfame.com domain address with the intention of developing an
interactive online exchange to facilitate communication between the planned
subscriber base consisting of emerging actors, models, and musicians, with
established industry agents. The Company expects to launch netFame.com in the
first half of 2001.
22
<PAGE>
Important Events and Accomplishments
Some events have occurred over the past 6 months which the Company believes will
have a lasting positive effect on the Company's business. These favorable
events, starting from the most recent, are the following:
1. On November 13, 2000, Kaire Holdings, Inc. announces record third
quarter sales and posted it's first ever quarterly profit.
2. On November 11, 2000, YesRx launched the Health Advocate Program.
Along with the Health Advocate Program, YesRx debuted a new and
improved internet site which incorporates over 20,000 additional over
the counter products as well as new integrated health community
destinations for HIV, Senior, Diabetic and Disabled individuals.
3. On September 29, 2000, YesRx was chosen as a preferred pharmacy
provider by Open Solutions' Open Community Network of more than 250
financial institutions. Through this agreement, all Open Solutions
software users will have access to YesRx through their online bank
accounts.
4. On September 19, 2000, YesRx and QuickQuote Signed an Exclusive Online
Insurance Marketing Contract. This agreement provided that YesRx would
be paid a pre-determined amount for each and every insurance
application filled out through the YesRx website.
5. On June 26, 2000, Kaire announced that it had completed the first
stage of the strategic agreement with Stason USA. In doing so, Kaire
completed the training of Stason technicians and physically relocated
the EZ-Trac lab to Stason's Irvine, California facility.
6. On April 19, 2000, Kaire Holdings, Inc. executed the documents related
to the Classic Care Pharmacy acquisition. Classic Care will serve as a
distribution center for YesRx and will aid the Company in developing
the targeted Health Advocate program.
7. On April 18, 2000, YesRx became the first online pharmacy to debut a
Spanish language website. The site, FarmaciaYesRx.com, will supplement
the Company's efforts to reach Hispanic HIV/AIDS patients.
23
<PAGE>
Strategic Vision
The Company's strategy is to target what it believes is one of the more
profitable sectors of the prescription drug and general drugstore business:
medications and services for the chronic care patient. These consumers often
require multiple drugs on a monthly basis. Additionally, these consumers are
often in need of valuable information related to their particular medical
condition. The Company's approach is to integrate key value-added informational
services with excellent product distribution. The Company intends to expand the
scope of the Company's product and service offerings and the geography to which
these goods and services are delivered.
Employees
The Company currently has 33 full-time employees.
Management
Executive Officers and Directors
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Name Age Position
-------------------------------------------------------------------------------------------
<S> <C> <C>
Steven R. Westlund 54 Chairman of the Board and Chief Executive Officer
-------------------------------------------------------------------------------------------
Owen M. Naccarato 51 Chief Financial Officer, Secretary and Director
-------------------------------------------------------------------------------------------
Mark L. Baum 28 President
-------------------------------------------------------------------------------------------
Asher Gottesman 27 Director
-------------------------------------------------------------------------------------------
</TABLE>
The Officers and Directors of our Company will devote only such time as they
deem appropriate in the business affairs of our Company. It is, however,
expected that the officers will devote the time deemed necessary to perform
their duties for the business of our Company.
The directors of our company are elected to hold office until the next annual
meeting of shareholders and until their respective successors have been elected
and qualified.
Biographies Of Our Executive Officers And Directors
---------------------------------------------------
Steven Westlund has been the Chief Executive Officer and a director of the
Company since May 1995 and was elected Chairman of the Board in December 1995.
Mr. Westlund was Chairman of the Board and Chief Executive Officer of Vitafort
International Corporation from May 1993 through May 1995. Vitafort manufactured
and sold fat free foods. From January 1991 to May 1993, Mr. Westlund was Chief
Executive Officer of Lorenz/Germaine Incorporated and concurrently from January
1991 to June 1992 he acted as Chairman and Chief Executive Officer of Auto
Giant. Mr. Westlund specializes in corporate restructuring and market
development.
24
<PAGE>
Owen Naccarato Joined the Company in July 1997 as Chief Financial Officer
and Secretary on a one- year renewable contract and was elected to the
board of directors in January 1998. Mr. Naccarato has held various
operating positions, most recently as Chief Financial Officer for Bikers
Dream, Inc. a NASDAQ traded motorcycle assembler and parts distributor and
divisional vice president/controller for Baxter Healthcare, Inc., a NYSE
traded health care manufacturer and distributor. Mr. Naccarato is a
licensed attorney and is a member of the California State Bar Association.
He is also a Certified Public Accountant.
Mark Baum joined Kaire in July of 1999 as the President. Mr. Baum has more
than 10 years experience in creating and developing start-up enterprises -
from retail to manufacturing to internet-based businesses. Mr. Baum holds a
BA from the University of Texas at Arlington, and a Juris Doctorate from
California Western School of Law. Mr. Baum is a member of the America Bar
Association and is a licensed attorney in the State of California.
Asher Gottesman joined Kaire as a Director in August of 2000. Mr. Gottesman
served as a Partner of Amazing Savings Outlet Stores, a 40 unit retail
business with sales of more than 60 million dollars per year. Mr. Gottesman
is currently a partner in a real estate and investment trust which controls
more than 50 million dollars in assets. Mr. Gottesman joined the Kaire
Board of Directors through his association with Classic Care Pharmacy. In
1993, Mr. Gottesman earned a BA in Economics from Yeshiva University.
Information Concerning our Board of Directors and it's Committees
Directors receive no remuneration at this time. All Company Directors are
entitled to reimbursement of funds advanced to pay expenses in connection
with our Company's business. Our Company has not established committees of
the Board of Directors.
Executive Compensation:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Payouts Annual Compensation Long Term Compensation Awards
------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name Year Salary Bonus Other Annual Restricted Securities LTIP All Other
and Compensation Stock Underlying Payouts Compensation
Principal ($) Awards Options/SAR ($) ($)
Position ($) (#)
------------------------------------------------------------------------------------------------------------------------------------
CEO 2000 100K 4,833,333
------------------------------------------------------------------------------------------------------------------------------------
President 2000 75K 2,833,333
------------------------------------------------------------------------------------------------------------------------------------
CFO 2000 87K 2,833,333
------------------------------------------------------------------------------------------------------------------------------------
Total: 262K
------------------------------------------------------------------------------------------------------------------------------------
Directors 187K
as a
Group
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Chief Executive Officer Compensation:
------------------------------------
On April 1, 2000, Mr. Westlund signed a three year employment agreement
(attached hereto as Exhibit 10.36). The contract calls for Mr. Westlund to be
paid a base salary of $8,333.33 per month for the first year of the term. Mr.
Westlund's base salary shall increase 15% per year for the second year and
third years, respectively, per the agreement.
For the term of his employment agreement beginning on April 1, 2000, Mr.
Westlund has received a salary of $4,000.00 per month, and is entitled to be
paid the balance of his monthly compensation in either cash or equity.
Additionally, Mr. Westlund has been granted an option to purchase up to 6
million shares of Kaire Common Stock over the next 5 years at an option price of
5 cents ($0.05) per share. To date, Mr. Westlund has exercised 1,166,667
shares of the Company's Common Stock.
Chief Financial Officer Compensation:
------------------------------------
On April 1, 2000, Mr. Naccarato signed a three year employment agreement
(attached hereto as Exhibit 10.37). The agreement calls for Mr. Naccarato to be
paid a base salary of $7,250.00 per month for the first year of the term. Mr.
Naccarato's base salary shall increase 15% per year for the second year and
third years, respectively, per the agreement.
For the term of his employment agreement beginning on April 1, 2000, Mr.
Naccarato has received a salary of $4,000.00 per month, and is entitled to be
paid the balance of his monthly compensation in either cash or equity.
Additionally, Mr. Naccarato has been granted an option to purchase up to 4.5
million shares of Kaire Common Stock over the next 5 years at an option price of
5 cents ($0.05) per share. To date, Mr. Naccarato has exercised 1,166,667
shares of the Company's Common Stock.
President's Compensation:
------------------------
On April 1, 2000, Mr. Baum signed a three year employment agreement (attached
hereto as Exhibit 10.35). The agreement calls for Mr. Baum to be paid a base
salary of $6,250.00 per month for the first year of the term. Mr. Baum's base
salary shall increase 15% per year for the second year and third years,
respectively, per the agreement.
For the term of his employment agreement beginning on April 1, 2000, Mr. Baum
has received a salary of $4,000.00 per month, and is entitled to be paid the
balance of his monthly compensation in either cash or equity. Additionally, Mr.
Baum has been granted an option to purchase up to 4.5 million shares of Kaire
Common Stock over the next 5 years at an option price of 5 cents ($0.05) per
share. To date, Mr. Baum has exercised 1,166,667 shares of the Company's Common
Stock.
26
<PAGE>
Compensation of Directors:
Directors receive no remuneration for their services as directors at this time.
Certain Relationships and Related Transactions
On April 1, 2000, the Board of Directors entered into employment agreements (See
Exhibits 10.36,10.37 & 10.35, respectively) with Steven R. Westlund, Owen M.
Naccarato and Mark L. Baum. Said employment agreements provided for the
issuance of stock options to Mssrs. Westlund, Naccarato and Baum, respectively.
Mr. Westlund received options to purchase 6 million shares of the Company's
Common Stock at an option exercise price of five cents ($.05). Mr. Naccarato
received options to purchase 4 million shares of the Company's Common Stock at
an option exercise price of five cents ($.05). Mr. Baum received options to
purchase 4 million shares of the Company's Common Stock at an option exercise
price of five cents ($.05).
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the date of this Registration
Statement regarding certain Ownership of our Company's outstanding Common Stock
by all officers and directors individually, all officers and directors as a
group, and all beneficial owners of more than five percent of the common stock.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Name and Address Shares Beneficially Owned (1) Percent of Class
-----------------------------------------------------------------------------------
<S> <C> <C>
Steven R. Westlund 4,833,333 3.98 %
7348 Bellaire Avenue
North Hollywood, CA
91605
-----------------------------------------------------------------------------------
Owen M. Naccarato 2,833,333 2.37 %
7348 Bellaire Avenue
North Hollywood, CA
91605
-----------------------------------------------------------------------------------
Mark L. Baum 2,833,333 2.37 %
7348 Bellaire Avenue
North Hollywood, CA
91605
-----------------------------------------------------------------------------------
</TABLE>
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of the registration
statement upon the exercise of options or warrants. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants that are
held by such person and which are exercisable within 60 days of the date of this
registration statement have been exercised. Unless otherwise indicated, the
company believes that all persons named in the table have voting and investment
power with respect to all shares of common stock beneficially owned by them.
27
<PAGE>
Description of Securities
General
-------
As of the date of this Registration Statement, the authorized capital stock of
our Company consists of 400,000,000 shares of Common Stock, .001 par value, of
which 116,653,033 shares are issued and outstanding. There are approximately 664
shareholders that are not in street name. The following is a description of the
securities of our Company taken from provisions of our Company's Articles of
Incorporation and By-laws, each as amended. The following description is a
summary and is qualified in its entirety by the above referenced provisions of
the Articles of Incorporation and By-laws as currently in effect.
Common Stock
------------
Every holder of stock in the corporation shall be entitled to have a
certificate, signed by, or in the name of the corporation by, the chairman or
vice-chairman of the board of directors, or the president or a vice-president
and the treasurer or an assistant treasurer, or the secretary of the
corporation, certifying the number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations, or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or the back
of the certificate which the corporation shall issue to represent such class of
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or the back of the certificate which the
corporation shall issue to represent such class or series of stock, a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. When a certificate is countersigned (1) by a transfer agent other than
the corporation or its employee, (2) by a registrar other than the corporation
or its employee, the signatures of such officers may be facsimiles.
Warrant and Options:
-------------------
Pursuant to Section 6(b) and Section 11.4 of the Subscription Agreement, 500,000
Warrants at an exercise price of $.11248 have been issued to Libra Finance S.A.,
P.O. Box 4603, Zurich, Switzerland. Additionally, pursuant to the same
provisions, 1,000,000 Warrants at an exercise price of $.11248 have been issued
to Talbiya B. Investments Ltd., Ragnall House, 18 Peel Road, Douglas, Isle of
Man, 1M14L2, United Kingdom. An additional 8.5 million warrants have been
registered and not issued pursuant to the same provisions.
28
<PAGE>
The Company's CEO and Chairman, Mr. Westlund, currently has an option to
purchase 4,833,333 shares of the Company's Common Stock at an option price of
five cents per share ($ .05).
The Company's CFO and Secretary, Mr. Naccarato, currently has an option to
purchase 2,833,333 shares of the Company's Common Stock at an option price of
five cents per share ($ .05).
The Company's President, Mr. Baum, currently has an option to purchase 2,833,333
shares of the Company's Common Stock at an option price of five cents per share
($ .05).
Shares Eligible for Future Sale
On the date of this offering our Company has 116,653,033 shares of Common Stock
outstanding. Sales of a substantial number of shares of our Company's Common
Stock in the public market following this offering could adversely affect the
market price of the Common Stock. This offering is registering 158,097,999
shares of common stock all of which will be freely tradable without restriction
or further registration under the Securities Act. This includes: a) 66,094,082
shares representing the conversion of the 9% debentures and related interest
expense; b) 66,094,082 shares representing reserve shares that may be needed to
account for market fluctuations in the price of the common stock prior to the
conversion of the debentures, and c) 15,500,000 of other selling shareholders,
plus 10,409,836 warrants to be registered in connection with the secured
convertible debenture purchase agreement.
Selling Shareholders
The Shares being offered for resale by our Selling Stockholders are issuable to
our Selling Stockholder pursuant to the convertible debenture purchase agreement
(see Exhibit 10.33) and subscription agreement (see Exhibit 10.32).
Additionally, certain shares are being offered for sale by our Selling
Stockholders with piggyback registration rights.
Recent Financing
The table below sets forth information concerning the resale of shares of Common
Stock by the Selling Stockholders. The table reflects: (1) the number of shares
issuable upon conversion of debentures pursuant to the convertible debenture
purchase agreement, (2) shares issuable upon exercise of warrants pursuant to
the Common Stock Purchase Warrant Agreement and (3) shares issuable upon
conversion of certain convertible debentures with piggyback registration rights.
We will not receive any proceeds from the resale of the common stock by the
Selling Stockholders. We will receive proceeds from the exercise of the
warrants. Assuming all the shares registered below are sold by the Selling
Stockholders, none of the Selling Stockholders will continue to own any shares
of our Common Stock.
29
<PAGE>
The following table also sets forth the name of each person who is offering
shares of common stock by this prospectus, the number of shares of common stock
beneficially owned by each person, the number of shares of common stock that may
be sold in this offering and the number of shares of common stock each person
will own after the offering, assuming they sell all of the shares offered.
Beneficial ownership is determined in accordance with SEC rules and generally
includes voting or investment power with respect to securities. Common shares
that are issuable upon the exercise of outstanding options, warrants,
convertible Preferred Stock or other purchase rights, to the extent exercisable
within 60 days of the date of this Prospectus, are treated as outstanding for
purposes of computing each Selling Shareholder's percentage ownership of
outstanding common shares.
<TABLE>
<CAPTION>
Shares Beneficially Shares Shares Beneficially Owned
Owned Offered After Offering
Selling Prior to the For If All Offered
Stockholder (1) Offering (2) Sale (3) Shares Are Sold (3)
--------------- ------------------------ -------- ------------------------
Number of Shares (%) Number of Shares (%)
<S> <C> <C> <C> <C> <C>
The Keshet Fund 19,431,660 7.50% 19,431,660 0 0%
Keshet, L.P. 25,665,852 9.99% 68,737,845 0 0%
Balmore S.A. 25,665,852 9.99% 44,018,659 0 0%
Libra Finance S.A. 3,469,945 1.34% 3,469,945 0 0%
Talbiya B. Investments LTD. 6,939,891 2.68% 6,939,891 0 0%
Sarit Rubenstein Rubenstein 5,166,666 1.99% 5,166,666 0 0%
Stash Trust 10,333,333 3.40% 10,333,333 0 0%
</TABLE>
(1) No Selling Stockholder has held any position or office, or has had any
material relationship with us or any of our affiliates within the past
three years.
(2) Assumes that all convertible debentures have been converted and that all
warrants have been exercised into common stock.
(3) Assumes no sales are effected by the Selling Stockholder during the
offering period other than pursuant to this offering and that all shares
offered will be issued and sold.
(4) Includes the shares of our common stock issuable to The Kesnet Fund,
Keshet, Balmore, S.A., Libra Finance S.A. and Talbiya B. Investments LTD.,
subject to the 9.99% limitation, upon conversion of its debentures and
exercise of its warrants.
(5) Percentages are based on 259,251,033 shares of our common stock outstanding
on a fully diluted basis as of December 1, 2000.
(6) Pursuant to the Subscription Agreement between us and the debenture
holders, we are required to register such number of shares of common stock
equal to the sum
30
<PAGE>
of (i) 200% of the number of shares of common stock issuable upon
conversion in full of their debentures.
Plan of Distribution
The selling stockholders and any of their pledges, assignees, and successors-in-
interest may, from time to time, sell any or all of their shares of common stock
on any stock exchange, market, or trading facility on which the shares are
traded or in private transactions. These sales may be at fixed or negotiated
prices. There is no assurance that the selling stockholders will sell any or all
of the common stock in this offering. The selling stockholders may use any one
or more of the following methods when selling shares:
Ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers.
Block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction.
Purchases by a broker-dealer as principal and resale by the broker-dealer
for its own account.
An exchange distribution following the rules of the applicable exchange
Privately negotiated transactions
Short sales or sales of shares not previously owned by the seller
Broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share
A combination of any such methods of sale
Any other lawful method
The Selling stockholders may also engage in:
Short selling against the box, which is making a short sale when the seller
already owns the shares.
Buying puts, which is a contract whereby the person buying the contract may
sell shares at a specified price by a specified date.
Selling under Rule 144 under the Securities Act, if available, rather than
under this prospectus.
Other transactions in our securities or in derivatives of our securities
and the subsequent sale or delivery of shares by the stockholder.
Pledging shares to their brokers under the margin provisions of customer
agreements. If a selling stockholder defaults on a margin loan, the broker may,
from time to time, offer to sell the pledged shares.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from selling stockholders in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission from the purchaser in
31
<PAGE>
amounts to be negotiated. The selling stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be considered to be "underwriters" within the meaning of
the Securities Act for such sales. An underwriter is a person who has purchased
shares from an issuer with a view towards distributing the shares to the public.
In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be considered to be
underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the
shares in this offering. However, we will not pay any commissions or any other
fees in connection with the resale of the common stock in this offering. We
have agreed to indemnify the selling shareholders and their officers, directors,
employees and agents, and each person who controls any selling shareholder, in
certain circumstances against certain liabilities, including liabilities arising
under the Securities Act. Each selling shareholder has agreed to indemnify the
Company and its directors and officers in certain circumstances against certain
liabilities, including liabilities arising under the Securities Act.
If we are notified by the selling stockholder that they have a material
arrangement with a broker-dealer for the resale of the common stock, then we
would be required to amend the registration statement of which this prospectus
is a part, and file a prospectus supplement to describe the agreements between
the selling stockholder and the broker-dealer.
Legal Proceedings
Our Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
Experts
Our financial statements in the prospectus of this Form SB-2 registration
statement have been audited by Berg & Company, CPA, as disclosed in their report
appearing elsewhere in this registration statement.
Legal Matters
Legal matters concerning the issuance of shares of common stock offered in this
registration statement will be passed upon by Owen Naccarato, Attorney at Law.
Owen Naccarato does beneficially own shares of the company.
32
<PAGE>
Other Available Information
We are subject to the reporting requirements of the Securities and Exchange
Commission (the "commission"). We file periodic reports, proxy statements and
other information with the commission under the Securities Exchange Act of 1934.
We will provide without charge to each person who receives a copy of this
prospectus, upon written or oral request, a copy of any information that is
incorporated by reference in this prospectus (not including exhibits to the
information that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference). Requests should be directed to: Steven
R. Westlund
We have filed a registration statement on Form SB-2 under the Securities Act of
1933 Act with the Commission in connection with the securities offered by this
prospectus. This prospectus does not contain all of the information that is the
registration statement, you may inspect without charge, and copy our filings, at
the public reference room maintained by the Commission at 450 Fifth Street, N.W.
Washington, D.C. 20549. Copies of this material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W. Washington,
D.C. 20549, at prescribe rates. Information about the public reference room is
available from the commission by calling 1-800-SEC-0330.
The commission maintains a web site on the Internet that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the commission. The address of the site is www.sec.gov.
Visitors to the site may access such information by searching the EDGAR archives
on this web site.
33
<PAGE>
Financial Statements
KAIRE HOLDING INCORPORATED AND SUBSIDIARIES
Financial Statements
December 31, 1999 and 1998
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Deficit F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Kaire Holdings Incorporated
We have audited the accompanying consolidated balance sheet of Kaire Holdings
Incorporated and subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Kaire Holdings
Incorporated and subsidiaries as of December 31, 1999, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended in conformity with generally accepted accounting principles.
Berg & Company LLP
March 17, 2000
F-2
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
------------ ----------
Current assets
Cash and cash equivalents $ 130,668 $ 6,331
Accounts receivable, net of allowance
for doubtful accounts of $1,000 29,332 55,260
Inventory - 70,042
Deposits - 9,500
Other asset - 28,404
------------ ----------
Total current assets 160,000 169,537
------------ ----------
Noncurrent assets
Furniture and equipment 891,473 891,473
Less: Accumulated depreciation (891,473) (875,438)
------------ ----------
Total noncurrent assets - 16,035
------------ ----------
Total assets $ 160,000 $ 185,572
============ ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Notes payable $ 25,000 $ 25,000
Accounts payable and accrued expense 640,426 1,531,065
Convertible notes payable and debentures 81,000 1,240,100
---------- ----------
Total current liabilities 746,426 2,796,165
Total liabilities 746,426 2,796,165
---------- ----------
Stockholders' deficit
Common stock, $0.001 par value
400,000,000 shares authorized;
77,197,226 and
15,387,384 shares issued and
outstanding, respectively 77,197 15,387
Additional paid in capital 30,521,658 28,086,764
Accumulated deficit (31,185,281) (30,712,744)
------------ ------------
Total stockholders' deficit (586,426) (2,610,593)
------------ ------------
Total liabilities and stockholders'
deficit $ 160,000 $ 185,572
============ ============
See Accountants' Report and Notes to Financial Statements.
F-3
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, 1999 and 1998
1999 1998
----------- -------------
Revenues $ 259,545 $ 370,338
Cost of goods sold 89,245 156,075
----------- -----------
Gross Profit 170,300 214,263
----------- -----------
Operating expenses
Research and development 153 -
Selling, general, and administrative expenses 1,014,143 981,605
----------- -----------
Total operating expenses 1,014,296 981,605
----------- -----------
Loss from operations (843,996) (767,342)
----------- -----------
Other income (expense)
Interest expense (82,250) (226,985)
Other income (expense) 354,479 159
Loss provision on MRI equipment - 4,851
Non-cash miscellaneous income 27,326
Write-down of patents (44,691)
Write-down of accounts payable 75,504
----------- -----------
Total other (income) expenses 375,059 (266,666)
----------- -----------
Loss before provision for income taxes (468,937) (1,034,008)
Provision for income taxes 3,600 3,600
----------- -----------
Net loss $ (472,537) $(1,037,608)
=========== ===========
Basic loss per share $ (0.01) $ (0.13)
=========== ===========
Diluted loss per share $ (0.01) $ $(0.13)
=========== ===========
Weighted-average shares outstanding - basic 36,251,628 7,929,788
=========== ===========
Weighted-average shares outstanding - diluted 36,736,986 7,929,788
=========== ===========
See Accountants' Report and Notes to Financial Statements.
F-4
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED December 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated
-------------------------
Shares Amount Capital Deficit Total
----------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,832,401 $ 2,832 $ 25,756,993 $(29,675,136) $ (3,915,311)
Issued for conversion
of notes payable 10,773,292 10,773 936,061 946,834
Issued for convertible
note interest 333,310 333 48,647 48,980
Issued for professional
services 461,437 461 721,297 721,758
Issued for services 356,791 357 220,425 220,782
Issued for conversion
of debt 293,000 293 141,973 142,266
Sale of stocks 337,153 337 43,215 43,552
Beneficial Conversion 218,154
Net loss (1,037,608) (1,037,608)
---------- ----------- ------------ ------------- ------------
Balance, December 31, 1988 15,387,384 15,387 28,086,764 (30,712,744) (2,610,593)
---------- ----------- ------------ ------------- ------------
Issued for conversion
of notes payable 32,866,250 32,866 1,281,784 1,314,650
Issued for convertible
note interest 208,482 208 4,896 5,104
Issued for professional
services 335,000 335 19,165 19,500
Issued for services 817,610 818 64,182 65,000
Issued for conversion
of debt 7,678,708 7,679 162,769 170,448
Issued for options exercised 17,310,000 17,310 788,190 805,500
Issued for other compensation 1,275,000 1,275 62,475 63,750
Beneficial Conversion 1,318,792 1,319 51,433 52,752
Net loss (472,537) (472,537)
----------- ----------- ------------ ------------- ------------
Balance, December 31, 1999 77,197,226 $ 77,197 $ 30,521,658 $(31,185,281) $ (586,426)
=========== =========== ============ ============= ============
</TABLE>
See Accountants' Report and Notes to Financial Statements.
F-5
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (472,537) $(1,037,608)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation expense 16,035 42,160
Deposits 9,500 --
Common stock issued in services 65,000 220,782
Common stock issued for professional services 19,500 721,758
Common stock issued for interest on notes 5,104 48,980
Common stock issued for conversion of debt 170,448 142,266
Common stock for conversion of notes payable 1,314,650 946,834
Common stock issued for options exercised 805,500 --
Common stock issued for other compensation 63,750 --
Charge related to beneficial conversion feature of
convertible notes payable/debentures 52,752 218,154
Write-down and valuation provision related to investment
in Kaire International, Inc. 44,691
Non cash other expenses (income) (34,087) --
(Increase) decrease in
Accounts receivable 32,689 (7,828)
Prepaid expenses and other assets -- 44,334
Inventory 98,446 43,208
Increase (decrease) in
Accounts payable and accrued expenses (863,313) (740,880)
----------- -----------
Net cash provided by operating activities 1,283,437 686,851
----------- -----------
Cash flows from investing activities
Net cash used in investing activities -- --
----------- -----------
Cash flows from financing activities
Payments on notes payable (1,159,100) (760,000)
Proceeds from the issuance of common stock and from the
exercise of options/warrants 43,552
-----------
Net cash used in financing activities (1,159,100) (716,448)
----------- -----------
Net increase (decrease) in cash and cash equivalents 124,337 (29,597)
Cash and cash equivalents, beginning of year 6,331 35,928
----------- -----------
Cash and cash equivalents, end of year $ 130,668 $ 6,331
=========== ===========
</TABLE>
See Accountants' Report and Notes to Financial Statements
F-6
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
Supplemental disclosures of cash flow information
Interest paid $ 13,912 $ 2,751
------ -----
Income taxes $ 1,600 $ 1,200
----- -----
Supplemental schedule of non-cash investing and financing activities During the
year ended December 31, 1999, the Company entered into the following non-cash
transactions:
Issued 34,393,524 shares of common stock for conversion of $1,367,402 of notes
payable, and $5,104 of accrued interest.
Issued 817,610 shares of common stock for services valued at $65,000.
Issued 335,000 shares of common stock for professional fees valued at $19,500.
Issued 7,678,708 shares of common stock for conversion of debt valued at
$170,448.
Issued 17,310,000 shares of common stock for options exercised valued at
$805,500.
Issued 1,275,000 shares of common stock for other compensation valued at
$63,750.
See Accountants' Report and Notes to Financial Statements
F-7
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
---------------------------------
Kaire Holdings Incorporated ("Kaire"), a Delaware corporation, was incorporated
on June 2, 1986. Effective February 3, 1998, Kaire changed its name to Kaire
Holdings Incorporated from Interactive Medical Technologies, Ltd. in connection
with its investment in Kaire International, Inc. ("KII"). The principal activity
of Kaire is the sale of colored microspheres to pharmaceutical companies,
universities, hospitals, and other academic centers engaged in blood flow and
pharmaceutical research. In connection with these sales, Kaire also provides a
national reference and laboratory analysis service through its subsidiary, E-Z
TRAC, Inc.
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. YesRx focuses
on chronic care as opposed to emergency needs and works mainly with the patient
who has regular medication needs and multiple refills.
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., E-Z TRAC, Inc., Venus
Management, Inc., and EFFECTIVE Health, Inc. Except for E-Z TRAC, Inc., these
subsidiaries have no operations.
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.
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.
F-8
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 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. A significant portion of the Company's sales is within
the United States. International sales are minimal.
Net Loss Per Share
------------------
Income (loss) per common share is computed on the weighted average number of
common or common and common equivalent shares outstanding during each year.
Basic EPS is computed as net income (loss) applicable to common stockholders
divided by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock options, warrants and other convertible securities
when the effect would be dilutive. The Board of Directors approved a 1 for 75
revenue stock split of its common stock in 1998. The accompanying financial
statements have been restated to give effect of the split.
Inventory
---------
Inventory consists entirely of health care products and is stated at the lower
of cost or market.
Furniture and Equipment
-----------------------
Furniture and equipment are recorded at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided using the straight-line
method over estimated useful lives of three to five years.
Amortization of leasehold improvements is computed using the straight-line
method over the lesser of the asset life or the life of the respective lease.
Maintenance and minor replacements are charged to expense as incurred. Gains
and losses on disposals are included in the results of operations.
Research and Development
------------------------
Research and development expenses consist principally of payroll and related
expenses for development of the contrast microspheres. All research and
development costs are expensed as incurred.
F-9
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 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. 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
-----------
During 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.
F-10
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock Options (Continued)
-------------------------
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.
Comprehensive Income (Loss):
----------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130), which is effective for financial statements for periods beginning after
December 15, 1997. This pronouncement establishes standards for reporting and
display of comprehensive income (loss) and its components in a full set of
general-purpose financial statements. The Company, however, does not have any
components of comprehensive income (loss) as defined by SFAS 130 and therefore,
for the years ended December 31, 1999 and 1998, comprehensive loss is equivalent
to the Company's net loss.
Other Accounting Pronouncements
-------------------------------
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires that an enterprise
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company does
not believe that the adoption of the provisions of SFAS No. 133 will have a
material impact on its financial position or results of operations.
The FASB issued SFAS No. 131 on "Disclosures about Segments of an Enterprise and
Related Information" effective in 1998. The Company evaluated SFAS No. 131 and
determined that the Company operates in only one segment.
NOTE 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
$472,537 and $1,037,608 for the years ended December 31, 1999 and 1998,
respectively. This factor raises 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
F-11
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - GOING CONCERN (Continued)
shown in the accompanying balance sheet is dependent upon the Company's ability
to generate sufficient sales volume to cover its operating expenses. 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.
In 1999, the Company took significant steps toward reducing losses and improving
cash flow from operations, including assignment of its Santa Monica property
lease, significant reduction of its workforce, and consolidation of all
California operations to its North Hollywood facility.
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.
NOTE 3 - INVESTMENT IN KAIRE INTERNATIONAL, INC.
The Company's ownership in KII, Inc., a multi-level marketing company, has
been decreased from 80% to approximately 24% (1,073,196 shares), which occurred
in 1999. Based on the Company's temporary controlling interest in KII, the
Company accounted for its investment in KII using the equity method.
NOTE 4 - FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1999 and 1998 consisted of the
following:
1999 1998
------------- --------------
Furniture and equipment $ 460,076 $ 460,076
Leasehold improvements 431,397 431,397
------------- --------------
891,473 891,473
Less accumulated depreciation and amortization
891,473 875,438
------------- --------------
Total $ - $ 16,035
============= ==============
Depreciation and amortization expense for the years ended December 31,
1999 and 1998 was $16,035 and $42,159, respectively.
F-12
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 1999 and 1998
consisted of the following:
1999 1998
-------------- --------------
Accounts payable $ 126,200 $ 356,855
Accrued professional and related fees 108,091 237,339
Accrued compensation and related payroll taxes 2,928 225,703
Accrued interest payable 221,631 132,597
Other accrued expenses 181,576 578,571
-------------- --------------
Total $ 640,426 $ 1,531,065
============== ==============
NOTE 6 - CONVERTIBLE NOTES PAYABLE AND DEBENTURES
During October through December 1997, the Company issued 8% convertible
debentures due three years from the date of issuance. The debentures are
convertible beginning with the 41st day after issuance and at a conversion price
equal to 70% of the average closing bid price of the Company's common stock
during the last five days prior to the conversion date. In connection with the
issuance of these debentures, the Company recorded additional interest amounting
to $364,000 related to the beneficial conversion feature of the debentures. The
note holders have certain registration rights. At December 31, 1999,
convertible debentures outstanding aggregated to $0.
During January through May 1997, the Company issued convertible notes
aggregating to $479,655, which are due in, the same months in 2000. The notes
have a stated interest rate of 10% per annum, which 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. AtDecember 31, 1999,
$56,000 of these notes was outstanding.
The notes are callable by the Company after six months from the date of
issuance at a premium of 103% of face value on or before December 31, 1998, 102%
of face value on or before December 31, 1998, and 101% of face value if called
on or December 31, 1999. Upon closure of the offering, the Company is to
maintain a $100,000 sinking fund until such time as it realizes positive cash
flow from operations of $10,000 per month for three consecutive months. As of
December 31, 1999, no sinking fund had yet been established. As of December 31,
1999, notes aggregating to $25,000 were outstanding.
All convertible notes mature during the year ended December 31, 2000.
F-13
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 7 - INCOME TAXES
Significant components of the provision for taxes based on income for the years
ended December 31 are as follows:
1999 1998
----------- -------------
Current
Federal $ - $ -
State 3,600 3,600
------------ ------------
3,600 3,600
------------ ------------
Deferred
Federal - -
State - -
------------ ------------
Provision for income taxes $ 3,600 $ 3,600
============ ============
A reconciliation of the provision for income tax expense with the expected
income tax computed by applying the federal statutory income tax rate to income
before provision for (benefit from) income taxes for the years ended December 31
is as follows:
1999 1998
------------ ------------
Income tax provisions (benefit) computed
at federal statutory rate 34.0% (34.0%)
State taxes, net of federal benefit (0.1) (0.1)
Increase in the valuation allowance (34.0) 34.0
------------ ------------
Total (0.1)% (0.1)%
============ ============
F-14
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 7 - INCOME TAXES (continued)
Significant components of the Company's deferred tax assets and liabilities
for income taxes consist of the following:
1999 1998
------------ ------------
Deferred tax asset
Net operating loss carryforwards $ 4,091,145 $ 6,009,043
Impairment of assets 2,032,518 2,032,518
Options/warrants 2,101,337 1,103,734
Other - 102,729
----------- -----------
8,225,000 9,248,024
Valuation allowance (8,225,000) (9,248,024)
----------- -----------
Deferred tax liability - -
State income taxes - -
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
At December 31, 1999, the Company has available approximately $12,000,000 and
$5,00,000 in net operating loss carryforwards available to offset future federal
and state income taxes, respectively, which expire through 2014 and 2004,
respectively.
Tax rules impose limitations on the use of net operating losses following
certain changes in ownership. Such a change occurred in 1999, which will limit
the utilization of the net operating losses in subsequent years.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Litigation
In February 1992, Medical Funding of America ("MFA") leased to Tri-County a
Siemens Mobile Magneton Impact MRI System with a Van. On or about June 24, 1992,
Siemens and MFA entered into a loan and security agreement in the amount of
$2,019,496, which was paid directly to Siemens Medical Systems, Inc. On or about
March 1, 1995, Siemens, MFA, Tri-County, and Venus Management (an Interactive
Medical Technologies (Kaire Holdings) subsidiary ("Kaire") entered into a
transfer of interest agreement whereby Kaire gave its corporate guaranty of all
of Venus' obligations under this agreement.
Venus and MFA defaulted on the loan, and on April 2, 1997, Siemens Credit
Corporation filed a civil action for the accelerated amount due plus costs. This
action is still pending. On or about October 9, 1997, a Transfer of
F-15
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
Litigation (continued)
Interest Agreement was drawn up between Venus Management, Siemens Credit
Corporation, and Medical Management, Inc. ("CMI," NYSE symbol CMI) whereby CMI
would take over the lease. CMI took possession of the MRI. All parties executed
the agreement, except Siemens, who continued to negotiate with CMI in an attempt
to get CMI to pay all of the arrearages owed Siemens. At present CMI and Siemens
are still negotiating over the terms of the agreement. It is the opinion of the
Company's management that its obligations under this agreement have been
assigned and that Siemens will not pursue this matter any further.
Except as otherwise specifically indicated above, management believes that the
Company doesn't have any material liability for any lawsuits, settlements,
judgments, or fees of defense counsel which have not been paid or accrued as of
December 31, 1999. However, there can be no assurance that the Company will
prevail in any of the above proceedings. In addition, the Company may be
required to continue to defend itself resulting in substantial additional
expense. In the event the Company is unable to pay the defense costs associated
with the foregoing, an unfavorable settlement or judgment could be awarded
against the Company, which could have a material adverse effect upon the
Company.
Guarantee of Lease Payments
---------------------------
The Company's magnetic resonance imaging ("MRI") system (the "Unit") currently
is installed in a mobile van at an operating site in Jefferson Valley, New York
and has been in use since September 1992. It is leased to Tri-County Mobile MRI,
L.P. ("Tri-County"), whose general partner is Diagnostics Resource Funding.
This lease provides for monthly payments of $37,926 to Venus Management, Inc.
("VMI") through August 1999 and $68,589 in September 1999 (with such payments
being guaranteed by Medical Funding of America, Inc. ("MFA")), and VMI is
required to make monthly installment payments (which include interest at 10.5%
per annum on the unpaid principal balance) for the Unit to a third party finance
company of $32,360 through August 1999 and $68,589 in September 1999. This lease
provides for a purchase option at the expiration of the initial term of such
lease equal to the then fair market value of the Unit.
Tri-County was delinquent in making certain of its lease payments to VMI under
the terms of the lease agreement concerning the Unit, and MFA failed to make
these payments to VMI under its guarantee of Tri-County's payments to VMI.
Accordingly, VMI had not made certain payments due to the third- party finance
company for the Unit. As a result, the third-party finance company issued a
notice of default to the Company. Tri-County is currently in discussions with
the third-party finance company
F-16
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
Guarantee of Lease Payments (continued)
to restructure the obligation, to assume the debt, and to take title to the
Unit. It is expected that the third-party finance company will accept the
restructure, and the Company will release its title to the equipment in exchange
for the third-party finance company releasing the Company from its debt
obligation. Accordingly, the Company has provided $63,450 in 1998 to write off
the Company's net investment in this equipment, including the lease receivable
offset by the remaining debt and interest payable.
However, if the parties are unable to resolve this matter, it is likely that
the third-party finance company will institute an action against the Company,
VMI, and Tri-County for the balance due, plus other costs and relief.
On or about October 9, 1997, a Transfer of Interest Agreement was drawn up
between Venus Management, Siemens Credit Corporation, and Medical Management,
Inc. ("CMI," NYSE symbol CMI) whereby CMI would take over the lease. CMI took
possession of the MRI. All parties executed the agreement, except Siemens, who
continued to negotiate with CMI in an attempt to get CMI to pay all of the
arrearages owed Siemens. At present CMI and Siemens are still negotiating over
the terms of the agreement. It is the opinion of the Company's management that
its obligations under this agreement have been assigned and that Siemens will
not pursue this matter any further.
Accordingly, the equipment and related note payable have been removed from the
Company's balance sheet, which resulted in an immaterial change to operations.
At December 31, 1999, the Company's guarantee totaled approximately $1,200,000.
Office Lease
The Company leases a facility for its corporate office under non-cancelable
operating lease agreements that expire in May 2001. Future minimum lease
payments under these non- cancelable operating leases are as follows:
Year Ending
December 31,
------------
2000 $ 21,600
2001 9,000
---------
Total $ 30,600
=========
Rent expense for the years ended December 31, 1999 and 1998 was $57,611
and $90,144 respectively.
F-17
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
Employment and Consulting Agreements
------------------------------------
The Company has an employment agreement with it executive officer that expires
in June 2002. This is renewable thereafter for additional three- year terms. The
agreement may be terminated by either party with a written notice six months
prior to the expiration date of the initial term or any renewal term. The
agreement provides for a monthly base salary with specified increases during the
passage of time. A five-year option to purchase 200,000 shares of the Company's
common stock at the price of $3.75 per share has been granted to the executive
officer. Any compensation accrued but not paid, may be paid to the officer in
cash or in the form of common stock valued at $3.75 per share. In addition,
interest will be paid on accrued compensation at a rate of 8% per year. The
officer received 3,000,000 shares of the company's stock during 1999 with a
market value of $60,000 as partial payment of these liabilities. A former
officer received 4,000,000 shares of the company's stock during 1999 with a
market value of $80,000 as payment of similar liabilities.
The Company also has an employment agreement with its Chief Financial Officer,
which expired in June 1998. The agreement is renewable thereafter automatically
for twelve-month periods, unless written notice is received by the employee
ninety days prior to the expiration date. The agreement provides for a monthly
base salary along with 600,000 shares of the Company's common stock for each
twelve-month period.
The Company has an employment agreement with its President, expired on
February 15, 2000. The agreement provides for a monthly base salary along with
2,000,000 shares of the Company's common stock for each twelve-month period. The
Company shall give the President 45 days written notice prior to the effective
date of his termination after February 2000.
The Company has various consulting agreements that provide for issuance of
the Company's common stock and/or stock options/stock purchase warrants in
exchange for services rendered by the consultants. These agreements relate
primarily to raising of capital and professional services rendered in connection
with the Company's acquisition efforts.
F-18
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 9 - STOCKHOLDERS' DEFICIT
Common Stock
------------
Company issued common stock to related parties, noted as follows:
The former President of the Company received 4,000,000 shares of common stock
as repayment of prior amounts personally due him. In addition, this former
officer of the Corporation received 13,443,750 shares in the form of converted
market value options granted for consulting services at $.05 per share and
shares issued for debt restructuring.
The Company's Chief Executive Officer received 3,000,000 shares of common
stock as repayment of prior amounts personally due him.
The new President of the Company exercised market value options and acquired
1,250,000 shares of the Company's common stock at $.04 per share.
The Chief Financial Officer of the Company received 1,200,000 shares of stock
as compensation for services rendered during 1998 and 1999.
The Company has adopted only the disclosure provisions of SFAS No. 123. It
applies APB Opinion No. 25 and related interpretations in accounting for its
plans and does not recognize compensation expense for its stock-based
compensation plans other than for restricted stock and options issued to outside
third parties. If the Company had elected to recognize compensation expense
based upon the fair value at the grant date for awards under this plan
consistent with the methodology prescribed by SFAS No. 123, the Company's net
loss and loss per share would be reduced to the pro forma amounts indicated
below for the years ended December 31:
1999 1998
----------- -----------
Net loss
As reported $ (472,537) $ (905,608)
Pro forma $ (488,522) $ (905,608)
Basic and diluted loss per common share
As reported $ (0.01) $ (0.13)
Pro forma $ (0.01) $ (0.13)
Options are granted at prices are equal to the current fair value of the
Company's common stock at the date of grant. The vesting period is usually
related to the length of employment or consulting contract period.
F-19
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 9 - STOCKHOLDERS' DEFICIT (continued)
The fair value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for the year ended December 31, 1999: dividend yield of 0%; expected
volatility of 100%; risk-free interest rate of 5.5%; and expected life of 1 to
1.5 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because th e Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options. In 1998, the market share price
has decreased to levels significantly below the per share option/warrant
exercise price. Accordingly, the value of the options granted during 1998 is
deemed to be deminimus.
The weighted-average fair value of options granted during the years ended
December 31, 1999 was $0.08, and the weighted-average fair value of options
granted during the year ended December 31, 1998 was deminimus.
The following table summarizes information with respect to options
outstanding and exercisable at December 31, 1999:
Options Outstanding Options Exercisable
------------------------------------------ -------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Exercise Number Exercise Contractual Number Exercise
Prices Of Shares Price Life Of Shares Price
-------- --------- -------- ----------- --------- --------
$ 0.01 to $0.05 600,000 $0.05 1.00 600,000 $0.05
$ 0.06 to $0.10 155,000 $0.10 1.00 155,000 $0.10
$ 3.75 to $22.50 450,667 $4.73 3.10 450,667 $4.73
--------- -------- ----------- --------- --------
1,205,667 $1.80 1.75 1,205,667 $1.80
F-20
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 9 - STOCKHOLDERS' DEFICIT (Continued)
The following summarizes the Company's stock option and warrants
activity:
Warrants Weighted
And Average
Stock Options Exercise
Outstanding Price
------------- --------
Outstanding, December 31, 1997 (restated)
725,185 $ 26.25
Granted 695,000 $ 0.60
Expired/Cancelled (14,493) $ 62.25
------------ --------
Outstanding, December 31, 1998 1,405,692 $ 9.30
Granted 18,720,000 $ 0.05
Exercised (17,460,000) $ 0.05
Expired/Cancelled (687,692) $ 3.15
------------ --------
Outstanding December 31, 1999 1,978,000 $ 6.74
============ ========
Exercisable, December 31, 1999 1,978,000 $ 6.74
============ ========
During 1998, the trading price of the company's common stock fell below the
$.001 par value of stock. During this period, the conversion of convertible
notes payable to common stock resulted in common stock being issued at less than
par value. In 1998, $492,430 was charged to paid-in-capital for these
transactions.
The Company has 772,333 and 831,692 warrants outstanding as of December
31, 1999 and 1998, respectively. The exercise prices for the warrants range from
$0.60 to $45.
NOTE 10 - SUBSEQUENT EVENTS
The Company entered into a letter of intent with Stason U.S. Pharmaceuticals,
Inc. (Stason). Under the agreement, Stason will receive a 17% interest in a
wholly owned subsidiary, YesRx, Inc., which was incorporated March 27, 2000. In
exchange, Stason will provide YesRx, Inc., $175,000 in working capital and
provide a distribution facility for the Internet prescription and non-
prescription operations of the new company. In addition, Stason and Kaire will
merge their laboratory operations into a new company in which Stason will hold
75% of the common stock of the newly formed Company. The form of this merger has
not been determined. Kaire Holdings intends to pursue further Internet related
activities.
F-21
<PAGE>
KAIRE HOLDINGS INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 10 - SUBSEQUENT EVENTS (continued)
On February 1, 2000, the Company issued options to consultants for the
purchase of 4,950,000 shares of common stock at $0.15 per share. All these
shares were exercised by the option holders.
During March 2000, the Company signed a letter of intent to acquire Classic
Care Pharmacy, a Los Angeles based business-to-business pharmacy. The final
terms are still being negotiated.
The Company entered into a consulting agreement with an individual to
provide services related to the Kaire's drug fulfillment operations. The
consultant received an option to acquire 1,250,000 shares of Kaire's common
stock at $.05 per share and is to receive an option to acquire an additional
400,000 shares of common stock at $.05 per share if certain revenue goals are
reached.
F-22
<PAGE>
KAIRE HOLDINGS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999 and September 30, 2000
ASSETS
------
Dec 31, Sept 31,
1999 2000
-------- ----------
(unaudited)
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
------- ---------
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
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.
F-24
<PAGE>
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> <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) (64,939)
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 $ (0.02) $ (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 $ 0.003 $ (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.
F-25
<PAGE>
KAIRE HOLDINGS INCORPORATED AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 2000
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
1999 2000
-------- --------
<S> <C> <C>
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
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
KAIRE HOLDINGS INCORPORATED AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 1999 and 2000
<TABLE>
<CAPTION>
Unaudited) (Unaudited)
1999 2000
------- --------
<S> <C> <C>
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
------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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:
F-31
<PAGE>
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
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
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<PAGE>
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.
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<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
-------------------------------------------------
Indemnification of Directors and Officer
The corporation shall, to the fullest extent permitted by Section 145 of the
General Corporation Law of the state of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have the power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of the stockholders or disinterested Directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director, Officer, Employee or Agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
The Board of Directors of the Company may also authorize the Company to
indemnify employees or agents of the Company, and to advance the reasonable
expenses of such persons, to the same extent, following the same determinations
and upon the same conditions as are required for the indemnification of and
advancement of expenses to directors and officers of the Company. As of the
date of this Registration Statement, the Board of Directors has not extended
indemnification rights to persons other than directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act of 1933, as amended (the "Securities Act") and is therefore
unenforceable.
Other Expenses of Issuance and Distribution
Related to the securities being registered. The expenses shall be paid by the
Registrant.
SEC Registration Fee $ 5,058.53
Printing and Engraving Expenses $ 5,000.00
Legal Fees and Expenses $ 25,000.00
Accounting Fees and Expenses $ 10,000.00
Transfer Agent Fees $ 2,000.00
Blue Sky Fees $ 2,000.00
Miscellaneous $ 5,000.00
----------
Total 54,058.53
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<PAGE>
Recent Sales of Unregistered Securities
For the Month of December 1999.
-------------------------------
In December 1999, the Company issued 675,000 shares of common stock for
conversion of convertible debt valued at $33,740. The shares were issued
pursuant to the exemption provided for under Section 4(2) of the Securities Act
of 1933, as amended, as a "transaction not involving a public offering."
For the Quarter ending March 31, 2000.
--------------------------------------
In January 2000, the Company issued 3,010,808 shares of common stock for
conversion of convertible debt valued at $134,000. The shares were issued
pursuant to the exemption provided for under Section 4(2) of the Securities Act
of 1933, as amended, as a "transaction not involving a public offering."
For Second Quarter ending June 30, 2000
---------------------------------------
In April 2000, the Company issued 300,000 shares of common stock for exercise of
options valued at $9,000. The shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
In May 2000 the Company issued 15,500,000 shares of common stock as part of the
purchase price for the acquisition of Classic Care Pharmacy. The shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."
In May 2000, the Company issued 1,000,000 shares of common stock for exercise of
options valued at $50,000. The shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
For Third Quarter ending September 30, 2000
-------------------------------------------
In July and August 2000, the Company issued 724,000 shares of common stock for
exercise of options valued at $94,680. The shares were issued pursuant to the
exemption provided for under Section 4(2) of the Securities Act of 1933, as
amended, as a "transaction not involving a public offering."
II-2
<PAGE>
Item 27 Exhibits:
(a) Exhibits
<TABLE>
<S> <C>
3. Articles of Incorporation and bylaws of the Company, as amended. (1)
4.1 Form of Warrant Agreement between the Company and Jersey Stock Transfer and Trust Company, including the Form of Warrant
(as modified). (4)
4.2 Form of Stock Purchase Warrant (issued with promissory note). (2)
5.1 Opinion re: Legality (13)
10.1 License Agreement between F.A.T. Co. Research, Inc. and Dynamic Products, Inc. (1)
10.2 Agreements between F.A.T. Co. Research, Inc. and Dr. Shell and Jackie See for Development and Exploitation of Patented
Invention. (1)
10.3 Consulting Agreements between See/Shell and Drs. Dr. Shell And Jackie See. (1)
10.4 Original Equipment Manufacturing Agreement between Olympus Corporation and E-Z Trac, Inc. (3)
10.4 Distribution Agreement between E-Z Trac Inc., and Triton Technology, Inc. (3)
10.5 Employment Agreement between the Company and William Peizer, Jr. dated December 24, 1992. (4)
10.7 Agreement between William Peizer, Jr. and Clark M. Holcomb dated February 1, 1993. (4)
10.8 Exchange of Stock Agreement and Plan of Reorganization among The Company, Venus Management, Inc. and the stockholders of
Venus Management, Inc. (4)
10.9 Co-Management Agreements dated June 30, 1993 between Venus Management, Inc. and Medical Funding of America, Inc. (4)
10.10 Agreement dated June 30, 1993 between Venus Management, Inc. and Medical Funding of America, Inc. (4)
10.11 Letter dated August 20, 1993 between the Company and Lewis, D'Amato, Brisbois & Bisgaard re Debt Conversion Agreement.
(4)
10.12 Letter agreement dated March 13, 1993 between the Company and Clark M. Holcomb; Sale of Stock Agreement, dated November
1, 1992 by and between the Company and Clark M. Holcomb; and related Promissory Note rom Clark M. Holcomb to the
Company. (4)
10.13 Agreement concerning MRI System, dated as of February 10, 1994 by and between Siemens Credit Corporation, Venus
Management, Inc., the Company, Medical Funding of America, Inc. and Tri-County Mobile MRI, L.P. and related Transfer of
Interest Agreement, Corporate Guaranty by the Company, Amendment to Promissory Note of Medical Funding of America, Inc.
payable to Siemens Credit Corporation and Agreement concerning Lease Payment between Venus Management, Inc. and Tri-
County Mobile MRI, L.P. (4)
10.14 Agreement dated August 27, 1992 by and between Dr. William Shell and Clark M. Holcomb related to shares of the Company's
Common Stock owned by Dr. Shell. (4)
10.15 Agreement dated September 23, 1993 by and between Ladenburg,
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
Thalmann Co., Inc. and the Company. (4)
10.16 Consulting Agreement for Financial Public Relations dated as of February 25, 1994 by and between the Company and Robert
Bienstock and Richard Washor. (4)
10.17 License Agreement, dated March 23, 1994 by and between Effective Health, Inc. and KCD Incorporated. (4)
10.18 Professional Services Agreement, dated April 15, 1994 by and between RAI Finanz, and the Company. (4)
10.19 Consulting Agreement and Stock Plan dated as of August 25, 1994 by and between the Company and Hy Ochberg. (4)
10.20 Memorandum of Understanding dated as of August 16,1994 by and between the Company and Raifinanz (USA), Inc. (4)
10.21 Resonex Equipment Lease as of June 30, 1993 between Venus Management Company and Medical Funding of America. (4)
10.22 Becton Dickenson Supply Agreement dated November 2, 1994. (4)
10.23 Form 12b-25 dated March 30,1995. (5)
10.24 2/nd/ & Final Revised Proposal to Acquire Pastels International, Incorporated (6)
10.25 Revised Proposed Acquisition of Nutra Quest, Incorporated ( 6)
10.26 Number skipped
10.27 The 1998 Stock Compensation Plan (7)
10.28 The Amendment to the 1998 Stock Compensation Plan (8)
10.29 The 1999 Stock Compensation Plan (10)
10.30 The 2000 Stock Compensation Plan (11)
10.31 The Amendment to the 2000 Stock Compensation plan (12)
10.32 Form of Subscription Agreement (13)
10.33 Form of Convertible Debenture Agreement (13)
10.34 Form of Warrant Agreement (13)
10.35 Employment Agreement Mark Baum (13)
10.36 Employment Agreement Steven Westlund (13)
10.37 Employment Agreement Owen Naccarato (13)
22.1 Subsidiaries of the Company & See/Shell Biotechnology, Inc. (1)
22.2 Subsidiaries of the Company & E-Z Trac, Inc.-Articles of Incorporation, Amendments and By- Laws. (1)
22.3 Subsidiaries of the Company & Effective Health, Inc.-Articles of Incorporation, Amendments and By-Laws. (1)
22.4 Subsidiaries of the Company & Venus Management, Inc. Certificate of Incorporation, Amendments and By-Laws. (Included in
Exhibit 10.9.)
23.1 Consent of Counsel (included in Exhibit 5.1)
23.2 Consent of Berg & Co. (13)
25. Subsidiaries of the Company. (4)
</TABLE>
___________________________________________________________________________
(1) Previously filed as an exhibit to the Company's registration
statement on Form S-18, file number 33-17548-NY, as amended on
August 7, 1990, and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's registration
statement on Form S-18, file number 33-
II-4
<PAGE>
17548-NY, as amended on February 12, 1991, and incorporated
herein by reference.
(3) Previously filed as an exhibit to the Company's Registration
statement on Form S-1 8, file number 33-17548-NY, as amended on
June 24, 1991, and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Registration
Statement on Form SB-2, file number 33-51684-NY, as amended on
September 19, 1994, and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Form 10-QSB
filed for the quarterly period ended September 30, 1996.
(6) Previously filed as an exhibit to the Company's Form 10-KSB
filed for the period ended December 31, 1996.
(7) Incorporated by reference to the Company's Form S-8 dated
January 9, 1998 and filed with the Commission on January 9,
1998.
(8) Incorporated by reference to the Company's Form S-8 dated March
25, 1998 and filed with the Commission on March 25, 1998.
(9) Incorporated by reference to the Company's Form S-8 dated April
4, 1999 and filed with the Commission on March 19, 1999.
(10) Incorporated by reference to the Company's Form S-8 dated
October 15, 1999 and filed with the Commission on October 15,
1999.
(11) Incorporated by reference to the Company's Form S-8 dated
February 11, 2000 and filed with the Commission on February 11,
2000.
(12) Incorporated by reference to the Company's Form S-8 dated May
26, 2000 and filed with the Commission on May 26, 2000.
(13) Previously filed as an exhibit to the Company's Registration
Statement on Form SB-2, file number 333-51758, on December 13,
2000 and incorporated herein by reference.
II-5
<PAGE>
UNDERTAKINGS
The undersigned registrant hereby undertakes that it will:
Undertaking (a)
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement; and arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) ('230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of the
Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Undertaking (e)
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
II-6
<PAGE>
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the
/s/ Steven R. Westlund
--------------------------------------------------------
Steven R. Westlund Chief Executive Officer and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated:
/s/ Steven R. Westlund January 16, 2001
--------------------------------------------------------
Steven R. Westlund Chief Executive Officer and Director
/s/ Owen M. Naccarato January 16, 2001
--------------------------------------------------------
Owen M. Naccarato Chief Financial Officer and
Director
/s/ Asher Gottesman January 16, 2001
--------------------------------------------------------
Asher Gottesman, Director
II-7
