NUTRITION FOR LIFE INTERNATIONAL INC, POS AM, 1996-11-12

NUTRITION FOR LIFE INTERNATIONAL INC
POS AM, 1996-11-12
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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As filed with the Securities and Exchange Commission on November 12, 1996
Registration No. 33-92274
================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

----------

POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM SB-2

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

NUTRITION FOR LIFE INTERNATIONAL, INC.
--------------------------------------
(Name of Small Business Issuer)

Texas 5122 76-0416176
(State or jurisdiction of (Primary Standard (IRS Employer
incorporation or Industrial Classification Identification No.)
organization) Code Number)

9101 Jameel
Houston, Texas 77040
(713) 460-1976
(Address of principal executive offices)

David P. Bertrand
9101 Jameel
Houston, Texas 77040
(713) 460-1976

(Name, address, and telephone number of agent for service)

Copies of communications to:

Robert M. Bearman, Esq.
Bearman Talesnick & Clowdus
Professional Corporation
1200 17th Street, Suite 2600
Denver, Colorado 80202
Telephone: (303) 572-6500
Facsimile: (303) 572-6511

Approximate date of commencement of proposed sale to the public:

As soon as practicable after effective date of Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
please check the following box. (X)

----------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective 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, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>

Item in Form SB-2 Caption in Prospectus
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<S> <C>

1. Front of Registration Statement Facing Page; Outside Front Cover Page
and Outside Front Cover of
Prospectus

2. Inside Front and Outside Back Inside Front Cover Page
Cover pages of Prospectus

3. Summary Information and Risk Prospectus Summary; Risk Factors
Factors

4. Use of Proceeds Prospectus Summary; Use of Proceeds

5. Determination of Offering Price Risk Factors

6. Dilution Risk Factors; Dilution

7. Selling Security Holders Not Applicable

8. Plan of Distribution Cover Page

9. Legal Proceedings Business

10. Directors, Executive Officers, Management
Promoters and Control Persons

11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management

12. Description of Securities Description of Securities

13. Interest of Named Experts and Legal Matters; Experts
Counsel

14. Disclosure of Commission Management
Position on Indemnification for
Securities Act Liabilities

15. Organization Within Last 5 Years The Company

16. Description of Business Business

17. Management's Discussion and Management's Discussion and Analysis of
Analysis or Plan of Operation Financial Condition and Results of
Operations

18. Description of Property Business

19. Certain Relationships and Certain Transactions
Related Transactions

20. Market for Common Equity and Risk Factors; Price Range of Securities
Related Stockholder Matters

21. Executive Compensation Management

22. Financial Statements Financial Statements

23. Changes in and Disagreements Not Applicable
with Accountants on Accounting and
Financial Disclosure
</TABLE>
<PAGE>

AMENDED PROSPECTUS

NUTRITION FOR LIFE INTERNATIONAL, INC.

434,416 Shares of Common Stock

Nutrition for Life International, Inc. (the "Company") offered 920,000
common stock purchase warrants (the "Warrants"), in a securities offering
pursuant to a Prospectus dated July 10, 1995. As adjusted for a two-for-one
stock split effective December 8, 1995, the holder of one Warrant is entitled to
purchase one share of Common Stock at an exercise price of $3.75 per share.
Prior to the date of this Amended Prospectus, 485,584 Warrants to purchase
485,584 shares of Common Stock have been exercised. Accordingly, this Amended
Prospectus relates to the offering by the Company of 434,416 shares of Common
Stock which may be acquired by exercise of 434,416 Warrants.

The exercise period of the Warrants commenced on July 10, 1995 and extends
for three years unless the Warrants are earlier called for redemption by the
Company. The Company may call the Warrants for redemption on 30 days prior
written notice at a price of $.05 per Warrant within the term of the Warrants if
the closing bid price of the Company's Common Stock exceeds the exercise price
of the Warrants by at least 50% ($5.63) during a period of at least 20 of the 30
trading days immediately preceding the notice of redemption and the Company has
in effect a current registration statement. This Amended Prospectus is part of
a current registration statement. The Company has not elected to call the
Warrants for redemption, but may choose to do so in the future.

In addition, in connection with the Company's public offering of securities
pursuant to a Prospectus dated July 10, 1995, the Company sold to Cohig &
Associates, Inc. and Neidiger/Tucker/Bruner, Inc. and their designees, the
Representatives of the Underwriters, for $100 warrants to purchase an aggregate
of 160,000 shares of Common Stock and 80,000 Warrants to purchase 80,000 shares
of Common Stock (the "Representatives' Securities"). The Representatives'
Securities are exercisable for a four-year period which commenced July 10, 1996
at $3.225 per share of Common Stock and at $.15 per Warrant. The Warrants have
the same exercise price ($3.75) as the Warrants issued to the public. This
Prospectus also relates to the Representatives' Securities.

The Company's Common Stock and Warrants are traded on the Nasdaq National
Market under the symbols NFLI and NFLIW, respectively. On November 11, 1996, the
closing prices of the Common Stock and Warrants were $12.75 per share and $9.00
per Warrant, respectively. See "Price Range of Securities."

--------------------------------

For information concerning certain risks, see "Risk Factors".

--------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>

======================================================================
PRICE TO PUBLIC UNDERWRITING PROCEEDS TO
DISCOUNTS(1) COMPANY(1)(2)(3)
----------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.... $ 3.75 $ 0.00 $ 3.75
----------------------------------------------------------------------
Total........ $1,629,060 $ 0.00 $1,629,060
======================================================================
</TABLE>

(1) This Offering is being conducted by the Company. No commissions will be
paid in connection with the exercise of any of the Warrants.
(2) Before deducting offering expenses payable by the Company of approximately
$45,000.
(3) Assumes exercise of all Warrants, of which there is no assurance.

The date of this Amended Prospectus is November __, 1996
<PAGE>

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET FORTH HEREIN OR
TO THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON MAKING SUCH OFFER OR SOLICITATION.

AVAILABLE INFORMATION

The Company is subject to the information requirements of the Securities
Exchange Act of 1934 and in accordance therewith files periodic reports, proxy
statements and other information with the Securities and Exchange Commission
("the Commission"). Reports, proxy statements and other information concerning
the Company may be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 as well as at its offices at
Northwestern Atrium Center, 500 W. Madison St., Ste. 1400, Chicago, Illinois
60661 and Seven World Trade Center, Ste. 1300,New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth St., N.W., Room 1024, Washington, D.C.
20549 at prescribed rates.

The Company intends to furnish its shareholders with annual reports, which
will include audited financial statements.

The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and exhibits thereto. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as a part thereof.
Statements herein concerning the provisions of any contract or other document
are not necessarily complete and, in each instance, reference is made to the
contract or other document filed as an exhibit to the Registration Statement.
Any interested party may obtain copies of all or any portion of the Registration
Statement and its exhibits at prescribed rates from the Public Reference Section
of the Commission at its principal office at Judiciary Plaza, 450 Fifth St.,
N.W., Room 1024, Washington, D.C. 20549.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All statements other than statements of historical fact included in this
Prospectus, including without limitation, the statements under "Prospectus
Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
located elsewhere herein regarding the Company's financial position and
liquidity, the Company's operations and proposed operations, and other matters,
are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in this Prospectus, including without limitation in
conjunction with the forward-looking statements included in this Prospectus.

2
<PAGE>

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PROSPECTUS SUMMARY

This summary is qualified in its entirety by the more detailed information
and financial statements and related notes appearing elsewhere in this
Prospectus or incorporated by reference herein. Throughout this Prospectus,
Nutrition For Life International, Inc. and its predecessors are referred to
collectively as the "Company". All information with respect to the Common Stock
and per share amounts herein have been adjusted, unless otherwise indicated, to
give effect to a three-for-five split of the Company's Common Stock effected in
July 1995 and a two-for-one split of the Company's Common Stock effected in
December 1995.

The Company

The Company develops products that are designed for health-conscious
consumers, and sells those products to consumers through its network of
independent distributors. The Company has developed a network of approximately
86,000 distributors. The Company offers a product line of approximately 320
products in eight categories, including nutritional supplements, health foods,
weight management items, skin care products, and other consumer products.

The Company develops products that it believes will have market appeal to
its distributors and their customers, and assists its distributors in building
their own businesses. The advantages the Company offer to distributors is that
they can start a business without normal start-up costs and other difficulties
usually associated with new ventures. The Company provides product development,
marketing aids, customer service, and essential record-keeping functions for its
distributors. The Company also provides other support programs to the
distributors including satellite broadcasts, international teleconferencing
calls, international and regional seminars, a proprietary "monthly" magazine,
and business training systems.

The Company's marketing program is designed to provide incentive for
distributors to build an organization of recruited distributors in their
downline to maximize their earning potential. The Company has experienced a
substantial increase in the number of distributors. The number of distributors
increased from approximately 37,800 on September 30, 1994 to 57,300 on September
30, 1995. At present, the Company has approximately 86,000 distributors. The
Company's continued growth depends to a significant degree on its ability to
retain and motivate its existing distributors and to attract new distributors.
In addition, in 1996 the Company's marketing program became the subject of
regulatory scrutiny and the Company was named as a defendant in class action law
suits. The disposition of these matters could have a material effect on the
Company's operations and financial condition. See "Risk Factors", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Legal Proceedings".

The Company purchases most of its products directly from manufacturers and
sells them to its independent distributors located in all 50 states, the
District of Columbia, Puerto Rico, Guam, Canada, the United Kingdom, Korea and
the Philippines. The Company expanded the number of its distributors located in
Canada, Guam, and Puerto Rico during the past two years and recently initiated
business operations in the United Kingdom. The Company expects to expand its
efforts in these countries and in other parts of the world.

The Company intends to pursue its business strategy of increasing sales and
profitability by (1) attracting and retaining distributors to its network
marketing system; (2) increasing product sales; and (3) expanding its marketing
activities into new international markets. The Company also intends to pursue
potential opportunities for growth through mergers and acquisition of
complimentary businesses.

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3
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- --------------------------------------------------------------------------------
The Offering

Securities offered ........................ Common Stock, $.01 par value

Exercise Price Per Warrant................. $3.75

Common Stock outstanding prior to the
Offering .................................. 5,568,562 shares

Common Stock outstanding after the
Offering (1) ........................... 6,002,978 shares

Use of proceeds ........................... For general corporate purposes
and working capital

NASDAQ Symbols:

Common Stock ........................ NFLI

Warrants ............................ NFLIW

- -------

(1) Assuming the exercise of all outstanding Warrants. Does not include
shares of Common Stock issuable upon exercise of the
Representatives'Securities and options issued or reserved for issuance by
the Company. See "Management"; and "Financial Statements".

- --------------------------------------------------------------------------------

4
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Summary Financial Data
(in thousands, except per share amounts and Operating Data)

<TABLE>
<CAPTION>
Years Ended Nine Months Ended
September 30, June 30,
------------- -------------
1994 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statements of Operations Data:
Net sales........................... $17,583 $32,290 $77,859 $ 19,190
Gross profit........................ 4,801 8,774 24,687 4,157
Operating income.................... 442 2,921 12,714 1,151
Net income.......................... 250(2) 2,244 8,072 1,070

Earnings per share:
Primary............................ .09 .65 1.25 .37
Fully diluted...................... .08 .51 1.25 .29

Weighted average number of shares
outstanding (1):
Primary............................ 2,825 3,437 6,451 2,912
Fully diluted...................... 3,792 4,444 6,451 3,910

Operating Data:
Number of distributors(3)........... 37,800 57,300 86,000 48,700
Sales per distributor(4)............ $44 $58 $121 $49
Total products offered.............. 260 270 320 270
<CAPTION>
June 30,
1996
----
<S> <C>
Balance Sheet Data:
Working capital..................... $13,683
Total assets........................ 26,435
Total liabilities................... 9,494
Stockholders' equity................ 16,941
</TABLE>
________________

(1) The weighted average number of shares of Common Stock outstanding for each
period presented has been calculated giving effect to a three-for-five
stock split on July 10, 1995 and a two-for-one stock split on December 8,
1995, and after giving effect to dilutive stock options and warrants.

(2) Net income for the fiscal year ended September 30, 1994 is net of a
$181,243 preferred stock conversion expense. See "Financial Statements".

(3) Includes "active" distributors only at the end of the period indicated. The
Company regards distributors as "active" if they have purchased product
from the Company during the preceding twelve months.

(4) Computed using a simple average for the periods indicated.

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5
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating the Company, its
business and this Offering before purchasing any of the Common Stock offered
hereby.

Risks Related to the Company

Distributor Network. The Company's products are distributed through an
extensive network marketing system of distributors. Distributors are independent
contractors who purchase products directly from the Company for their own use,
or for resale. Distributors typically work on a part-time basis for the Company,
and may engage in other business activities, including the sale of products
offered by competitors of the Company. The Company has a large number of
distributors, and a relatively small corporate staff to implement its marketing
programs and provide motivational support. The Company's continued growth
depends to a significant degree on its ability to retain and motivate its
existing distributors and to attract new distributors by continuing to offer new
products and new marketing programs.

Regulatory Scrutiny. The Company's network marketing system is subject to
governmental laws and regulations generally directed at ensuring that product
sales are made to consumers of the products and that compensation and
advancement within the marketing organization is based on sales of products
rather than investment in the organization. These laws and regulations include
the federal securities laws, matters administered by the Federal Trade
Commission and various state anti-pyramid and business opportunity laws.
Although the Company believes that it is in compliance with all such laws and
regulations, the Company remains subject to the risk that, in one or more of its
present or future markets, its marketing system could be found not to be in
compliance with applicable laws or regulations. Failure by the Company to comply
with these laws and regulations could have an adverse material effect on the
Company in a particular market or in general.

To become a distributor of the Company, a person must be sponsored by an
existing distributor, sign the official Distributor Agreement, and purchase a
"distributor success kit" from the Company, which is currently priced at $35.
The Company's distributors earn the right to receive commissions upon obtaining
the level of "executive." Executive level distributors may earn commissions on
sales generated by other distributors in their downline organization. There are
three ways for a distributor to meet the requirement to become an executive,
which can be met the same day he or she enrolls as a distributor or over an
extended period of time at the election of the distributor. The Company
previously used the designation of "Instant Executive Program" to reference the
qualifications for becoming an executive distributor on an accelerated basis.
The Instant Executive Program, particularly as marketed by Kevin Trudeau, a key
independent distributor, and his marketing organization, has been the subject of
legal and regulatory scrutiny.

In April 1996 the Attorney General of the State of Illinois (the
"Attorney General") filed suit against the Trudeau Marketing Group, Inc., Kevin
Trudeau and Jules Leib, People v. Trudeau (the "Illinois Suit") alleging
-----------------
violations of the Illinois Consumer Fraud and Deceptive Practices Act and the
Illinois Business Opportunities Sales Law of 1995 by, among other things,
operating a "pyramid sales scheme." Mr. Leib works with Mr. Trudeau. In
addition, the Secretary of State of the State of Illinois issued to Mr. Trudeau
and the Trudeau Marketing Group a Summary Order to Cease and Desist prohibiting
them from offering or selling "business opportunities" in the State of Illinois.
Generally, a "business opportunity" is an agreement involving sales of products
or services enabling the purchaser to start a business when the purchaser is
required to pay more than $500. Many other states have "business opportunity"
statutes.

The Company was not named as a defendant in the Illinois Suit, but the
Company's management viewed the Illinois Suit as an opportunity to discuss the
Company's marketing program and to resolve confusion surrounding the program. On
July 16, 1996, the Company entered into an "Assurance of Voluntary Compliance"
(the "AVC") with the Illinois Attorney General. The AVC preserves the ability of
a new distributor to become an executive distributor the day that he or she
enrolls by purchasing at least $1,000 in qualifying product volume and by
joining

6
<PAGE>

the Order Assurance Program and Master Developer Series. Under the AVC, the
Company will maintain its same executive level qualifications, but to aid
clarification, it will no longer use the "Instant Executive" designation. The
Company entered into substantially similar agreements with the States of Hawaii,
Idaho, Kansas, Kentucky, Michigan, Missouri, New Jersey and Pennsylvania. The
Company is presently negotiating agreements with two other states. If the
Company does not enter into an AVC-type agreement with these states, the states
may file suit against the Company alleging violation of business
opportunity and anti-pyramid laws. The effect of the implementation of the
measures in the AVC, including the requirement that executive distributors must
make at least 5 retail sales in a month, and of any agreements the Company may
make with other states, is uncertain.

The Company has been informed that in July 1996, Mr. Trudeau signed a
consent decree resolving the lawsuit with the Illinois Attorney General and
entered into a settlement agreement with the Illinois Secretary of State
resolving the Cease and Desist Order. Among other things, Mr. Trudeau has agreed
to abide by all applicable provisions of the AVC entered into between the
Company and the Illinois Attorney General. The Company has also been informed
that Mr. Leib entered an Assurance of Voluntary Compliance with the Illinois
Attorney General.

In April 1996, the Company received notice from the Securities and
Exchange Commission (the "Commission") of a formal order of private
investigation into possible violations by the Company of the federal securities
laws. Although the Commission may explore various acts of, and filings by, the
Company, the inquiry appears to be concentrated on the Company's executive level
distributor program. With the assistance of special counsel, the Company is
cooperating in providing information requested by the Commission. The Company
cannot predict the ultimate outcome of the investigation.

The Company does not believe that the manner in which it markets its
products constitutes a "pyramid scheme" or a "security." The only financial
requirement to become a distributor is to purchase a "distributor success kit"
which is currently priced at a nominal charge of $35. In addition, the Company
does not pay a fee or other compensation to distributors as direct remuneration
for enrolling distributors in their "downline" and the Company encourages all
distributors to retail their products to consumers who are not Company
executives. In addition, the Company believes that the efforts it has undertaken
with the Illinois Attorney General and regulatory authorities in other states,
which culminated in the AVC in Illinois and elsewhere, will assist the Company
in complying with government laws and regulations in the future. Nonetheless,
there can be no assurance that the appropriate authorities in any states will
not initiate court proceedings against the Company for violation of applicable
laws.

Class Action Litigation. In August 1996, a suit was filed against the
Company in the United States District Court for the Southern District of Texas,
Houston Division (the "Federal Action"). Also named as defendants were Kevin
Trudeau, a key distributor of the Company, the Trudeau Marketing Group, Inc.,
Bernard Sherman, the largest beneficial owner of the Company's Common Stock,
certain officers of the Company, and Cohig & Associates, Inc. and
Neidiger/Tucker/Bruner, Inc., the investment banking firms which previously
served as underwriters of the July 1995 public offering of the Company's
securities. The Federal Action was brought as a class action on behalf of
persons who became "instant" executive distributors of the Company and persons
who purchased the Company's Common Stock and Warrants between July 11, 1995 and
July 16, 1996.

The principal allegations of the complaint in the Federal Action are that
certain aspects of the executive distributor compensation program constituted an
illegal pyramid scheme and the sale of an unregistered security and that the
Company failed to disclose the existence of these aspects and Mr. Trudeau's
past. The plaintiffs seek unspecified damages, costs and fees of litigation and
punitive damages.

In August 1996, a suit was also filed against the Company and the
same defendants named in the Federal Action in the District Court of Harris
County, Texas (the "State Action"). The State Action was brought as a class
action on behalf of persons who purchased Common Stock and Warrants of the
Company during the period from July 11, 1995 through July 16, 1996.

7
<PAGE>

its outstanding financial results were directly attributable to the
questioned aspects of its marketing practices and failed to adequately
disclose Mr. Trudeau's past. The plaintiffs seek unspecified damages, costs
and fees of litigation and punitive damages.

The Company strongly denies the allegations in both suits and intends to
vigorously defend against the charges made against it. The pendency of
these suits, as well as a potentially unfavorable decision to the
defendants, could have a material adverse effect on the Company's financial
condition and its operations.

Negative Media and Other Reports. The Company's ability to continue its
growth is dependent upon the Company's success in retaining and motivating
its existing distributors and in attracting new distributors. A significant
part of the Company's recent growth is attributable to the efforts of Kevin
Trudeau and his marketing organization (collectively referred to as
"Trudeau"). Mr. Trudeau has twice been convicted of criminal charges during
the past 10 years. See "Business - Distribution and Marketing" for
biographical information concerning Mr. Trudeau. Trudeau has been
particularly successful in recruiting new distributors who quickly attain
executive level status with the Company.

Mr. Trudeau's criminal past was highlighted in an article which appeared
in The Wall Street Journal on January 19, 1996. The author of the article
also questioned the legality of Trudeau's marketing practices and, in
particular, the offering of products requiring a $1,000 purchase. Similar
negative reports were published on the same day by Bloomberg, a news wire
service, and by cable television station CNBC. Other negative media reports
occurred subsequently.

The Company is uncertain of the impact of the negative reports in the
financial media on its retention and recruitment of distributors. If the
negative reports in the financial media or any legal developments cause
distributor recruitment and/or retention to suffer, there could be an
adverse effect on the Company's future sales. Moreover, even if the
Company's operating results were unaffected, the negative media coverage
could adversely impact the price of the Common Stock.

In addition, an individual who several years ago was employed by, and a
major shareholder of, a predecessor of the Company, has embarked on a
campaign to discredit and harm the Company and Trudeau. He has published
negative statements on the Internet and elsewhere regarding the Company and
Trudeau and has contacted various regulatory agencies to complain about the
Company and Trudeau. In separate actions, the Company and Trudeau brought
defamation lawsuits against this individual. The Company was awarded a
default judgment and Trudeau was awarded damages of $10 million. The court
also ordered that the defendant be enjoined from publishing the statements
alleged to be defamatory in Trudeau's complaint against him. Nontheless,
there is a risk that this individual and/or others may engage in actions
which would damage the reputation of the Company and adversely affect the
Company's operations.

Statements and Other Actions by Distributors. The Company's distributors
are required to sign the Company's official Distributor Agreement which
requires them to abide by the Company's policies. Nonetheless, in certain
instances distributors have created promotional material which does not
accurately describe the Company's marketing program or may have made
statements regarding potential earnings or other matters not in accordance
with the Company's policies. Although the Company was not sued by
regulatory authorities, such actions lead to increased regulatory scrutiny
as described above. In order to assure itself that its policies and
practices and those of its independent distributors conform to law and
fairly protect the interests of consumers, the Company entered into an AVC
with the State of Illinois and similar agreements with several other states.
Among other things, the Company agreed in the AVC to more carefully monitor
against misdescriptions by distributors of the Company's executive
compensation plan. The Company has approximately 86,000 distributors.
Although the Company intends to increase its efforts to monitor its
distributors' statements and activities, there can be no assurance that the
Company will be able to accomplish this objective and the Company could be
subject to additional regulatory scrutiny and potential claims. In
addition, distributors could make predictive statements about the Company's
operations or other unauthorized remarks regarding the Company which the
Company may be unable to control. Such actions could also adversely affect
the Company.

Competition. The business of distributing and marketing vitamins and
minerals, personal care items, weight management items, and other products
offered by the Company is highly competitive. Numerous manufacturers,
distributors and retailers compete actively for consumers. Many of the
Company's competitors are substantially larger than the Company and have
greater financial resources. The market is highly sensitive to the
introduction of new products or weight management plans that may rapidly
capture a significant share of the market. As a result, the Company's
ability to remain competitive depends in part upon the successful
introduction of new products.

8
<PAGE>

The Company is subject to significant competition from other marketing
organizations for the recruitment of distributors. The Company's ability to
remain competitive depends, in significant part, on the Company's success in
recruiting and retaining distributors. In the last quarter of the fiscal
year ended September 30, 1995 and during the nine months ended June 30,
1996, one executive level distributor, Kevin Trudeau and his marketing
organization, made a significant contribution to the growth of the Company.
See "Business - Distribution and Marketing". Mr. Trudeau and the other
distributors of the Company are not obligated to continue acting as
distributors of the Company. There can be no assurance that the Company's
programs for recruitment and retention of distributors will be successful.
See "Business - Competition".

Dependence on Key Personnel. The Company's future success depends on the
continued availability of certain key management personnel, including David
P. Bertrand and Jana Mitcham, founders, officers and directors of the
Company. The Company has obtained "key man" insurance on the lives of Mr.
Bertrand and Ms. Mitcham with benefit amounts to the Company of $1,060,000
and $660,000, respectively. The Company's continued growth and
profitability also depends on its ability to attract and retain other
management personnel.

Family Relationships. At September 30, 1996, the Company employed
approximately 200 persons. Of these 200 persons, 15 persons have a family
relationship, through birth or marriage, with either David P. Bertrand or
Jana Mitcham, executive officers of the Company. The Company's management
believes that all of the Company's employees have been employed by the
Company on the basis of their qualifications, and that their retention by,
and advancement within, the Company has been, and will continue to be,
determined by their individual performances as an employee of the Company,
and not due to any family relationship. Nonetheless, due to the large
number of family relationships, the potential for conflicts of interest
could be significant.

Government Regulations. Although the Company confines its activities to
marketing and distribution, the manufacturing, processing, formulation,
packaging, labeling and advertising of the Company's products are subject to
regulation by federal agencies, including the Food and Drug Administration
(the "FDA"), the Federal Trade Commission, the Consumer Product Safety
Commission, the United States Department of Agriculture, the United States
Postal Service and the United States Environmental Protection Agency. These
activities are also subject to regulation by various agencies of the states
and localities in which the Company's products are sold. In October 1994
the "Dietary Supplement Health and Education Act of 1994" was enacted. The
FDA has not yet reconciled its existing regulations with this new
legislation. Therefore, the Company cannot determine to what extent any
changed or amended regulations will affect its business. The Company cannot
determine what effect currently proposed FDA regulations, when and if
promulgated, will have on its business in the future. Such regulations
could, among other things, require expanded or different labeling, the
recall or discontinuance of certain products, additional record keeping and
expanded documentation of the properties of certain products and scientific
substantiation. In addition, the Company cannot predict whether new
legislation regulating its activities will be enacted, which new legislation
could have a material adverse effect on the Company. See "Business-
Government Regulation".

Expansion Into Foreign Markets. Although the Company intends to
continue to expand into foreign markets, there can be no assurance that the
Company can open markets on a timely basis or that such new markets will
prove to be profitable. Significant regulation and legal barriers must be
overcome before marketing can begin in any foreign market. Also, before
marketing has commenced, it is difficult to assess the extent to which the
Company's products and sales techniques will be successful in any given
country. In addition to significant regulatory barriers, the Company may
also expect problems related to entering new markets with different cultural
bases and legal systems from those encountered in the past. See "Business -
Markets". Moreover, expansion of the Company's operations into new markets
entails substantial working capital and capital requirements associated with
regulatory compliance.

Effect of Exchange Rate Fluctuations. The Company has commenced efforts
to expand its marketing organization in foreign countries. As a result,
exchange rate fluctuations may have a significant effect on its sales

<PAGE>

and the Company's gross margins. Further, if exchange rates fluctuate
dramatically, it may become uneconomical for the Company to establish or
continue activities in certain countries.

No Firm Contracts with Suppliers or Manufacturers. The Company does not
have any written contracts with any of its suppliers or manufacturers or
commitments from any of its suppliers or manufacturers to continue to sell
products to the Company. A substantial portion of the products purchased by
the Company have been supplied by NION Laboratories ("NION"). Richard S.
Kashenberg, a director of the Company, is the chief executive officer of
NION. Until June 1995 NION was owned by Shermfin Corp., the Company's
largest shareholder, and Mr. Kashenberg. Since June 1995, NION has been
owned by a privately held corporation with no affiliation with the Company
other than Mr. Kashenberg's continuation as the chief executive officer of
NION. Since June 1995 NION has continued to be a principal supplier of
product to the Company and the Company believes that its relationship with
NION is satisfactory. However, there can be no assurance that NION will
continue to be a significant and reliable supplier to the Company. The
Company does not have long term supply agreements with NION or any other
vendor. Accordingly, there is a risk that any of the Company's suppliers or
manufacturers could discontinue selling their products to the Company for
any reason. Although the Company believes that it could establish alternate
sources for most of its products, any delay in locating and establishing
relationships with other sources could result in product shortages and back
orders for the products, with a resulting loss of revenues to the Company.

Product Liabilities. Although the Company does not engage in the
manufacture of any of the products it markets and distributes, the Company
could be exposed to product liability claims. The Company has not had any
such claims to date. Although the Company maintains product liability
insurance which it believes to be adequate for its needs, there can be no
assurance that the Company will not be subject to claims in the future or
that its insurance coverage will be adequate.

Risks of the Offering

Control by Principal Shareholders. Following completion of this
offering, the Company's officers and directors and their affiliates will
beneficially own approximately 35% of the then issued and outstanding shares
of Common Stock. There are no cumulative voting rights under the Company's
Articles of Incorporation and, therefore, these shareholders could possess
the ability to elect all of the directors of the Company, to increase its
authorized capital, to dissolve or merge the Company or to sell its assets
and generally to exert substantial control over the business and operations
of the Company. See "Principal Shareholders" and "Description of
Securities".

Shares Eligible for Future Sale. Upon completion of this offering, the
Company will have 6,002,978 shares of Common Stock outstanding. The shares
issued in this offering and the shares previously outstanding will be freely
tradeable without restriction under the Securities Act of 1933, as amended
(the "Securities Act"), except for any shares held by an "affiliate" of the
Company, as that term is defined in Rule 144 under the Securities Act.

The Company's officers and directors and their affiliates own
beneficially 2,405,690 shares of Common Stock, of which 1,834,250 shares are
currently eligible for sale in the public market pursuant to Rule 144. In
addition, the Company has agreed to register the 360,000 shares issued to
Shermfin Corp. in July 1995 at the request of Shermfin Corp. during the
period commencing July 10, 1996 and ending July 10, 1999. The Company has
also agreed to register 120,000 shares of Common Stock for resale by KT
Corp., an affiliate of Kevin Trudeau, and Nightingale-Conant Corporation, a
supplier to the Company. See "Shares Eligible for Future Sale".

Inability to Exercise Warrants. It is possible that the Warrants could
be acquired by persons residing in jurisdictions where the Company is unable
to qualify the shares underlying the Warrants for issuance upon exercise.
Warrant holders residing in such jurisdictions would have to sell their
Warrants or they would be called for redemption. Also, it is possible the
Company may be unable, for unforeseen reasons, to cause the registration
statement of which this Amended Prospectus is a part, to remain current. If
a current registration statement is not in effect, the Warrants cannot be
exercised. If that occurred, the Company would extend the period for
redemption so that holders of the Warrants would be permitted a minimum
period of 30 days to exercise the Warrants.

<PAGE>

Potential Redemption of the Warrants. The Company may call all of the
Warrants for redemption at a redemption price of $.05 per Warrant on 30
days' prior written notice within the term of the Warrants if the closing
bid price of the Common Stock exceeds the exercise price by at least 50%
($5.63) during a period of at least 20 of the 30 trading days immediately
preceding the notice of redemption and the Company has in effect a current
registration statement. If the Company determines to redeem the Warrants,
holders of Warrants could either exercise their warrants, sell such Warrants
in the market or tender their Warrants to the Company for redemption. See
"Description of Securities - Warrants".

Shares Available for Issuance; Possible Adverse Impact of Issuance of
Preferred Stock. The Company is authorized to issue 20,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. A total of 6,002,978
shares of Common Stock will be issued and outstanding immediately after the
offering. Therefore, a substantial number of authorized shares of Common
Stock will be available for issuance. These shares may be issued at the
discretion of the Board of Directors of the Company in accordance with the
Texas Business Corporation Act (the "TBCA"). Unless otherwise required by
the TBCA, as in the case of certain extraordinary actions, shareholder
approval will not be required for the issuance of additional shares of
Common Stock.

The Company has available for issuance 1,000,000 shares of Preferred
Stock. There are currently no shares of Preferred Stock outstanding.
Shares of Preferred Stock may be issued by the Company in the future without
shareholder approval and upon such terms as the Company's Board of Directors
may determine. The rights of the holders of Common Stock will be subject to
and may be affected adversely by the rights of holders of any Preferred
Stock that may be issued in the future. The availability of Preferred
Stock, while providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of
discouraging a third party from acquiring control of the Common Stock. The
Company has no plans to issue any shares of Preferred Stock. See
"Description of Securities - Preferred Stock".

Dilution. Purchasers of Common Stock in the offering will suffer
immediate dilution of $.67 per share or 17.9% in the net tangible book value
of their investment. See "Dilution".

Dividends. The Company declared an initial cash dividend of $.02 per
share of Common Stock in September 1996. Although it is the Company's
present intent to declare dividends of this amount on a quarterly basis, the
determination of whether to pay dividends will be made by the Board of
Directors and will depend on many factors. See "Dividend Policy".

<PAGE>

THE COMPANY

The Company is a Texas corporation organized in September 1993 to be the
surviving corporation of the merger (the "Merger") of the Company and its
predecessors, Nutrition Express Corporation of Colorado, Inc. ("NEC-
Colorado") and Nutrition Express Corporation of Utah, Inc. ("NEC-Utah").
The Merger was effected in June 1994.

Prior to the Merger each of NEC-Colorado and NEC-Utah owned a 50%
interest in Nutrition for Life International, a Texas partnership formed in
1989 (the "Partnership"). As a result of the Merger, the assets and
liabilities of the Partnership, as well as those of NEC-Colorado and NEC-
Utah, have become the assets and liabilities of the Company. The Company
has continued the business operations of the Partnership as they were
previously conducted. The Merger was effected primarily to eliminate the
cumbersome structure of the Partnership and its two public corporate
partners, which was costly to maintain and difficult for distributors and
others to understand.

The Merger was accounted for as a reorganization of entities under common
control in a manner similar to a pooling of interests. Accordingly, the
Company's financial statements have been restated for all periods prior to
the Merger to reflect the results of operations, financial positions and
cash flows of the companies in the Merger on a historical cost basis. See
"Financial Statements".

The Company's offices are located at 9101 Jameel Street, Houston, Texas
77040. Its telephone number is (713) 460-1976.

12
<PAGE>

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
434,416 shares of Common Stock being offered by the Company are estimated to
be $1,584,060. Net proceeds of the offering will be used for general
corporate purposes and working capital. Pending these uses, the net
proceeds of this offering will be invested in short-term, interest bearing,
investment grade securities, including government obligations or other money
market instruments.

DILUTION

The net tangible book value of the Company at June 30,1996, after taking
into effect the exercise of 38,110 Warrants (at the exercise price of $3.75
per share) which occurred prior to the date of this Amended Prospectus, was
$16,924,646 or $3.04 per share. Net tangible book value per share
represents the total net tangible assets of the Company less total
liabilities, divided by the number of shares of Common Stock outstanding.
Without taking into effect any other changes in the net tangible book value
after June 30, 1996, other than to give effect to the sale by the Company of
an additional 434,416 shares of Common Stock pursuant to exercise of
Warrants (at the exercise price of $3.75 per share) and the receipt of net
proceeds therefrom of $1,584,060, the net tangible book value of the Company
at June 30, 1996 would have been $18,508,706 or $3.08 per share. This
represents an immediate increase in the net tangible book value of $.04 per
share to existing stockholders and an immediate dilution of $.67 per share
to new investors. The following table illustrates this per share dilution:
<TABLE>
<CAPTION>

<S> <C>
Public offering price per share of Common Stock.................. $3.75

Net tangible book value per share of Common Stock at June 30,
1996(1).......................................................$3.04
Increase per share of Common Stock attributable to
purchase of Common Stock by Warrant holders in this offering. .04
----
Net tangible book value per share of Common Stock at June 30,
1996, as adjusted to reflect this offering...................... $3.08
-----

Dilution per share of Common Stock to new investors in this
offering........................................................ $ .67
=====

Dilution as a percentage of offering price....................... 17.9%
=====
</TABLE>
------------------

(1) Includes the exercise of 38,110 Warrants which occurred after June 30,
1996, but before the date of this Amended Prospectus.

DIVIDEND POLICY

The Company declared its first cash dividend on its Common Stock in
September 1996. The dividend of $.02 per share was paid in October 1996.
The Company currently intends to declare dividends in this amount on a
quarterly basis. However, the determination of the payment of dividends in
the future will be within the discretion of the Company's Board of Directors
and will depend on the earnings, capital requirements and operating and
financial condition of the Company, among other factors.

13
<PAGE>

PRICE RANGE OF SECURITIES

Since July 1995, the Common Stock has traded on the National Market
System of The Nasdaq Stock Market under the symbol "NFLI". From June 1994
to July 1995, the Common Stock was traded on the Electronic Bulletin Board
system operated by the National Association of Securities Dealers, Inc.
Quotations in the table below for the periods prior to the quarters ended
September 30, 1995 reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not necessarily reflect actual
transactions. The quotations for the quarters ended September 30, 1995 and
thereafter represent the range of high and low trade quotations. For the
earlier periods, the quotations reflect the high bid and low bid prices.
The quotations have been adjusted to give effect to a three-for-five split
of the Common Stock effected on July 10, 1995 and a two-for-one split of the
Common Stock effected on December 8, 1995.

The Warrants commenced trading in July 1995 on the National Market System
of The Nasdaq Stock Market under the symbol "NFLIW".

Common Stock Warrants
-------------- --------------
Quarter Ended High Low High Low
- ------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Fiscal 1994
- -----------
June 30, 1994 (Commencing June 27, 1994).. $ 1.25 $ 1.25
September 30, 1994........................ 1.25 1.25
Fiscal 1995
- -----------
December 31, 1994......................... 1.67 1.25
March 31, 1995............................ 3.54 1.67
June 30, 1995............................. 3.65 1.67
September 30, 1995........................ 9.50 2.50 $ 5.63 $ 0.25
Fiscal 1996
- -----------
December 31, 1995......................... 24.00 8.63 20.13 5.00
March 31, 1996............................ 35.00 16.75 31.50 13.00
June 30, 1996............................. 23.00 8.50 19.25 5.00
September 30, 1996........................ 17.75 9.50 14.25 6.50
</TABLE>
On November 11, 1996, the closing prices of the Common Stock and Warrants
were $12.75 per share and $9.00 per Warrant, respectively. As of September
30, 1996, there were 1,433 record holders of Common Stock.

14
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview

The Company develops products that are designed for health conscious
consumers, and sells those products through its network of approximately
86,000 independent distributors. The Company offers a line of approximately
320 products in eight categories, including nutritional supplements, health
foods, weight management items, skin care products and other consumer
products.

The Company has experienced rapid growth in both net sales and income
during the past two fiscal years and the nine months ended June 30, 1996.
Management believes that the Company's success is attributable primarily to
the Company's emphasis on continually improving both its marketing programs
and product offerings and the efforts of its independent distributors in
attracting new distributors to the Company's network. The Company's sales
expansion has been the result of growth in both domestic and foreign
markets. The Company intends to expand its efforts in these areas and also
expects to enter into markets in other countries outside the United States.
The rate and extent of this expansion will depend upon many factors,
including sales momentum, the effect of government regulations, and general
economic conditions.

Results of Operations

The following table sets forth for the periods indicated the percentages
which selected items in the consolidated Statement of Operations bear to net
sales:
<TABLE>
<CAPTION>

Year Ended
September 30, Nine Months Ended June 30,
-------------------- ----------------------------
1994 1995 1996 1995
---------- -------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0 100.0 100.0
Cost of sales 72.7 72.8 68.3 74.2
----- ----- ----- -----
Gross profit 27.3 27.2 31.7 25.8
Marketing, distribution
and administrative 24.8 18.1 15.4 19.8
expense ----- ----- ----- -----

Operating income 2.5 9.1 16.3 6.0
Interest and other income (0.1) 0.3 0.6 (0.4)
(expense), net ----- ----- ----- -----
Income before tax expense 2.4 9.4 16.9 5.6
Income tax expense 0.0 2.4 6.6 0.0
----- ----- ----- -----
Net income 2.4 7.0 10.3 5.6
Preferred stock conversion 1.0 0.0 0.0 0.0
expense ----- ----- ----- -----
Net income applicable to 1.4% 7.0 10.3 5.6
common shares ===== ===== ===== =====
</TABLE>

15
<PAGE>

Nine Months Ended June 30, 1996 Compared to Nine Months Ended June 30, 1995

Net sales for the nine months ended June 30, 1996 increased by $58,669,000
or 305.7% to $77,859,000 from $19,190,000 for the nine months ended June 30,
1995. The increase in net sales is a result of the Company increasing its number
of distributors and its sales per average number of distributors. At June 30,
1996 the Company had approximately 86,000 distributors compared to approximately
48,700 at June 30, 1995. However, the rate of growth in the number of
distributors slowed during the three months ended June 30, 1996, to a net
increase of 3,502 distributors. Increases in the number of distributors were
11,489 and 13,651, respectively, during the three months ended December 31, 1995
and March 31, 1996. The increase in net sales is recapped below:
<TABLE>
<CAPTION>

<S> <C>
Instant Executive purchases $34,493,000
Growth in sales due to increased
number of distributors 12,572,000
Increase in distributor average sales 11,604,000
----------
$58,669,000
==========
</TABLE>

The Company's net sales per average number of distributors per month
increased from $49 during the nine month period ended June 30, 1995 to $121 for
the nine months ended June 30, 1996. Approximately 59% of the increase in net
sales was due to new distributors electing to purchase product to qualify as an
executive under the program formerly known as the Instant Executive Program.

The Instant Executive Program has been the fastest method in which a
distributor could attain the level of "executive". Executive level distributors
may earn commissions on sales generated by other distributors in their downline
organization. The Instant Executive Program, particularly as marketed by Kevin
Trudeau, a key distributor of the Company, has been the subject of legal and
regulatory scrutiny.

In April 1996 the Attorney General of the State of Illinois (the "Attorney
General") filed suit against the Trudeau Marketing Group, Inc., Kevin Trudeau,
and Jules Leib, People v. Trudeau (the "Illinois Suit"). The Company was not
named as a defendant in the Illinois Suit, but the Company's management viewed
the Illinois Suit as an opportunity to discuss the Company's marketing program
and to resolve confusion surrounding the program. On July 16, 1996, the Company
entered into an "Assurance of Voluntary Compliance" (the "AVC") with the
Attorney General. The AVC preserves the ability of a new distributor to become
an executive distributor the day that he or she enrolls by generating at least
$1,000 in qualifying product volume and by joining the Order Assurance Program
("OAP") and Master Developer Series. Under the AVC, the Company will maintain
its same executive level qualifications, but to aid clarification, it will no
longer use the "instant executive" designation.

Other key features of the AVC focus on the Company's commitment to: (a)
create an official explanation of its marketing and compensation plan and to
prohibit distributors from creating their own explanations of how the marketing
and compensation plan works; (b) make clear that there are no mandatory
purchases of product to become a distributor; (c) take further steps to stress
distributor compliance with the Company's policies and procedures; and (d)
create a World Wide Web site on the Internet to provide more information about
the Company's products and programs. The Company also agreed to provide
distributor earnings disclosures, to make clear that executive distributors
cannot earn commissions unless they are engaged in the sale of the Company's
products to 5 consumers per month at retail, including procedures to verify
retail sales, and to take additional steps to encourage distributors to redeem
OAP certificates for product. The Company also agreed to make a contribution to
the Illinois Consumer Education Fund.

The Company entered into substantially similar agreements with the states
of Hawaii, Idaho, Kansas, Kentucky, Michigan, Missouri, New Jersey and
Pennsylvania. The Company expects to enter into agreements with other states in
the future.

16
<PAGE>

The Company expended significant time and resources engaging in the
discussions with the Attorney General and other state attorneys general.
Included in the results of operations for the nine months ended June 30, 1996
were expenses of approximately $782,000 related to the Company's resolution of
these states' legal issues. These expenses included contributions to state
funds, legal fees, costs associated with revised marketing literature and other
distributor communications, and the establishment of a World Wide Web site on
the Internet. In addition, uncertainty about the possible outcome of these
discussions may have affected the efforts of some of the Company's distributors
during the quarter ended June 30, 1996. The future effect of the resolution of
these issues in Illinois and the other eight states, and the implementation of
the measures noted in the AVC, is uncertain.

The AVC preserves the OAP, a popular option for distributors. Under the
OAP, a distributor may elect to enroll in a minimum ordering program to maintain
eligibility for bonuses. Minimum orders ranging from $41 to $300 per month are
automatically placed by credit card or check. So long as distributors continue
to enroll in the OAP the Company is assured of sales and the distributor is
assured participation in bonus programs. As noted above, the Company has agreed
in the AVC to take additional steps to encourage distributors to redeem OAP
certificates for product and to limit the number of OAP certificates which may
be issued. The OAP is voluntary and no restrictions are placed upon any
participant's ability to exit the Program. As of June 30, 1996 and 1995,
respectively, there were approximately 43,800 and 10,000 participants in this
Program. On the average during the nine months ended June 30, 1996, the Company
issued OAP certificates for approximately 39% of the participants. The
percentage for the comparable period in 1995 is not available.

Cost of sales increased by $38,938,000 or 273.6% to $53,171,000 for the
nine months ended June 30, 1996 from $14,233,000 for the nine months ended
June 30, 1995. Also included in the cost of sales for the nine months ended
June 30, 1996, is approximately $58,000 of the $782,000 incurred in resolving
the state legal issues discussed above. Cost of sales as a percentage of net
sales decreased from 74.2% to 68.3% in the nine months ended June 30, 1996
compared to the nine months ended June 30, 1995. Cost of sales, which includes
product costs, commissions and bonuses paid to distributors, and shipping costs,
is recapped below:
<TABLE>
<CAPTION>

Nine months ended
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Product costs 23.3% 24.3%
Commissions and bonuses paid
to distributors 38.5 41.0
Shipping costs 6.5 8.9
---- ----
68.3% 74.2%
==== ====
</TABLE>

The percentage of product costs decreased 1.0% primarily as a result of
improved pricing with higher volume. The decrease in the percentage of
commissions and bonuses paid of 2.5% was the result of the significant growth in
Instant Executive Program purchases and the lower level of the associated
commissions and bonuses in relation to a slower growing, maturing organization.
The decrease of 2.4% in the percentage of shipping costs resulted from economies
of scale in shipping costs associated with the volume of sales from the Instant
Executive Program.

Gross profit increased 398.0% or $19,730,000 from $4,957,000 for the nine
months ended June 30, 1995 to $24,687,000 for the nine months ended June 30,
1996. Gross profit as a percentage of sales increased from 25.8% for the nine
months ended June 30, 1995 to 31.7% for the nine months ended June 30, 1996.

Marketing, distribution and administrative expenses increased $8,168,000 or
214.6% from $3,806,000 for the nine months ended June 30, 1995 to $11,974,000
for the nine months ended June 30, 1996. As a percentage of net sales, marketing
distribution and administrative expenses decreased to 15.4% for the nine months
ended June 30, 1996 from 19.8% for the nine months ended June 30, 1995. The
dollar increase resulted primarily from increased personnel costs, credit card
fees, postage and professional fees to support the Company's growth. Also

17
<PAGE>

included in the increase in marketing, distribution and administrative expenses
is approximately $724,000 of the $782,000 incurred in resolving the state legal
issues discussed above.

Operating income for the nine months ended June 30, 1996 increased
$11,563,000 or 1004.6% to $12,714,000 from $1,151,000 for the nine months ended
June 30, 1995, principally as a result of the higher level of sales and the
increase in the gross profit as a percentage of sales. Operating income as a
percentage of sales increased from 6.0% for the nine months ended June 30, 1995
to 16.3% for the nine months ended June 30, 1996.

Other income increased $478,000 for the nine months ended June 30, 1996
from a deficit of $81,000 for the nine months ended June 30, 1995. The increase
was primarily a result of interest income earned.

There was no estimated income tax expense for the nine months ended
June 30, 1995 under the provisions of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109 (Accounting For Income
Taxes), as the Company was able to utilize its loss carryforward to offset
income. As of September 30, 1995, the Company had approximately $553,000 of net
operating loss available to carry forward and offset against future earnings.
The Company anticipates it will use a significant portion of the available net
operating loss carryforwards in fiscal 1996.

Net income was $8,072,000 for the nine months ended June 30, 1996, an
increase of 654.4% compared to $1,070,000 for the nine months ended June 30,
1995, principally as a result of higher level of sales and the increase in gross
profit as a percentage of sales.

Year Ended September 30, 1995 Compared to Year Ended September 30, 1994

Net sales for the year ended September 30, 1995 increased by $14,707,000 or
84% to $32,290,000 from $17,583,000 for the year ended September 30, 1994. The
increase in net sales is primarily the result of a 51.6% growth in the number of
distributors. As of September 30, 1995, the Company had approximately 57,300
distributors compared to approximately 37,800 at September 30, 1994. Of the
19,500 increase in distributors, 7,700 were new distributors utilizing the
Instant Executive option. In addition, a price increase was enacted on June 1,
1995 on certain products to offset related increases in product costs. The
increase in net sales is recapped below :

<S> <C>
Instant Executive purchases $ 7,700,000
Growth in sales due to increased
number of distributors 6,067,000
Sales price increase 940,000
----------
$14,707,000
==========
</TABLE>

Also included in the increase in net sales was an increase in sales outside
the United States. Net sales in Canada increased from $2,435,000 for the year
ended September 30, 1994 to $4,157,000 for the year ended September 30, 1995.
Net sales in Puerto Rico for the year ended September 30, 1995 were $2,214,000,
up from $264,000 for the year ended September 30, 1994.

Cost of sales increased by $10,732,000 or 84% to $23,515,000 for the year
ended September 30, 1995 from $12,783,000 for the year ended September 30, 1994.
Cost of sales as a percentage of net sales increased only slightly in the year
ended September 30, 1995 compared to the year ended September 30, 1994. Cost of
sales, which includes product costs, commissions and bonuses paid to
distributors, and shipping costs, is recapped as a percentage of net sales in
the following table:

18
<PAGE>

Year Ended
September 30,
-------------
1994 1995
---- ----
<S> <C> <C>
Product Costs 24.1% 24.3
Commissions and bonuses paid to 39.7 40.5
distributors
Shipping costs 8.9 8.0
73.7% 72.8
==== ====
</TABLE>

The percentage of product costs increased slightly as the Company balanced
increases in product costs with increases in sales prices as noted above. The
increase in the percentage of commissions and bonuses paid to distributors of
0.8% was the result of maturing distributor incentives and the balancing of
selected product incentive levels. The decrease of 0.9% in the percentage of
shipping costs resulted from economies of scale in shipping costs and a
reduction in shipping costs associated with the volume of sales of product in
the Instant Executive Program.

Gross profit increased by 83% or $3,973,000 from $4,801,000 for the year
ended September 30, 1994 to $8,774,000 for the year ended September 30, 1995.
Gross profit as a percentage of sales decreased from 27.3% for the year ended
September 30, 1994 to 27.2% for the year ended September 30, 1995.

Marketing, distribution and administrative expense increased $1,494,000 or
34.3% to $5,853,000 for the year ended September 30, 1995 from $4,359,000 for
the year ended September 30, 1994. As a percentage of sales, marketing,
distribution and administrative expenses decreased from 24.8% for the year ended
September 30, 1994 to 18.1% for the year ended September 30, 1995. The dollar
increase resulted primarily from increased salaries, credit card discount rate
charges, postage, travel and marketing expense to provide for the growth in
sales.

Operating income increased $2,479,000 or 561% to $2,921,000 for the year
ended September 30, 1995 compared to $442,000 for the year ended September 30,
1994, principally as a result of the higher level of sales. Operating income as
a percentage of sales increased from 2.5% for the year ended September 30, 1994
to 9.0% for the year ended September 30, 1995.

Other income increased to $88,000 for the year ended September 30, 1995
from a deficit of $11,000 for the year ended September 30, 1994. The increase
was primarily a result of a partial collection of a legal judgment in favor of
the Company and interest income earned.

The Company incurred income tax expense of $765,000 for the year ended
September 30, 1995. There was no income tax expense for the year ended
September 30, 1994 as the Company was able to utilize its loss carryforwards to
offset income. As of September 30, 1995, the Company had approximately $553,000
of net operating loss available to carryforward subject to limitations imposed
by the Tax Reform Act of 1986.

Net income was $2,244,000 for the year ended September 30, 1995, an
increase of 420% compared to net income of $431,000 for the year ended
September 30, 1994.

Liquidity and Capital Resources

The Company has financed its recent growth primarily from funds obtained
from operations. The Company had cash and cash equivalents of $12,844,000 at
June 30, 1996 compared to $8,960,000 at September 30, 1995. For the nine months
ended June 30, 1996, the net cash provided by operations was $5,842,000 and
approximately $1,632,000 was used for the acquisition of property and equipment
and $1,997,000 for purchases of securities of U.S. Government Agencies. The
Company also received $1,711,000 from the exercise of Warrants issued in the
public offering completed in July, 1995 and the exercise of stock options. The
Company received net cash from operations for the nine months ended June 30,
1995 of $1,568,000 and used $236,000 for the acquisition of property

19
<PAGE>

and equipment and other assets. The increase in net cash provided by operations
and cash and cash equivalents was a result of a record sales and more efficient
operations.

The Company had working capital of $13,683,000 at June 30, 1996 compared to
$6,082,000 at September 30, 1995. Approximately 95% of all sales are paid in
advance before shipment; therefore, accounts receivable as a percentage of sales
averages a relatively low 5% of monthly sales and bad debts have been
insignificant.

Approximately 65% of the Company's net sales are processed through credit
card transactions. The Bank which services these transactions has requested that
the Company grant the Bank a security interest in the funds deposited from
credit card transactions to protect the Bank against customer returns and
"charge backs". To accomplish this the Company pledged in May, 1996, $3,000,000
in repurchase agreements purchased by the Company from the Bank to collateralize
the Bank. In July, 1996, the Bank reduced the pledged collateral to $500,000 in
repurchase agreements and a $500,000 letter of credit. The Company's returns and
credit card "charge backs" did not exceed 5% of net sales for the nine month
period ended June 30, 1996.

In August, 1996, the Board of Directors declared a quarterly cash dividend
of $.02 per common share payable October 15, 1996 to shareholders of record as
of September 30, 1996. Dividends of $111,650 were accordingly paid on
October 15, 1996.

In September, 1996, the Board of Directors authorized a repurchase program
of the Company's common stock. Under the program the Company may purchase up to
200,000 shares in the open market or through privately negotiated transactions.
The program terminates June 30, 1997, unless extended by the Board of Directors.

The Company believes its existing cash resources and revenues to be derived
from operations should be sufficient to meet the Company's capital needs and
planned expansion requirements for the next twelve months. The Company currently
anticipates expanding its operations in established markets and into foreign
markets.

The Company has not been subjected to any material price increases by its
suppliers and inflation is not expected to have a material impact on the
Company's business during the next twelve months.

Other Information

A significant part of the Company's recent growth is attributable to the
efforts of Kevin Trudeau, a key independent distributor, and his marketing
organization (collectively referred to as "Trudeau"). As noted in the "Business"
section, Mr. Trudeau has been convicted twice of criminal charges during the
past ten years. Mr. Trudeau's criminal past has been highlighted, and his
marketing practices questioned in various media reports, commencing with an
article which appeared in The Wall Street Journal on January 19, 1996. Similar
--- ---- ------ -------
negative reports were published on the same day by Bloomberg, a news wire
service, and by cable television station CNBC. Mr. Trudeau was also the subject
of legal actions in the State of Illinois.

In addition, in August 1996 the Company and Trudeau were named as
defendants in class action lawsuits filed in state court and federal court in
Texas. See "Legal Proceedings." The Company strongly denies the allegations in
both suits and intends to vigorously defend against the charges made against it.
The pendency of these suits, as well as a potentially unfavorable decision to
the defendants, could have a material adverse effect on the Company's financial
condition and its operations.

The Company's continued growth depends to a significant degree on its
ability to retain and motivate its existing distributors and to attract new
distributors. The Company experiences significant competition in the marketing
of its products. The Company has been successful in competing by offering
products which are attractive to health-conscious consumers. However, if the
negative reports in the financial media or any legal developments caused
distributor recruitment and/or retention to suffer, there could be a material
adverse effect on the Company's future results of operations and its financial
condition.

20
<PAGE>

BUSINESS

Business Development

The Company is a Texas corporation organized in September 1993 to be the
surviving corporation of the merger (the "Merger") of the Company and its
predecessors, Nutrition Express Corporation of Colorado, Inc. and Nutrition
Express Corporation of Utah, Inc. The Merger was effected in June 1994.

The Company's marketing program is designed to provide incentive for
distributors to build an organization of recruited distributors in their
downline to maximize their earning potential. The Company has experienced an
increase in the number of distributors from approximately 37,800 on September
30, 1994 to 57,300 on September 30, 1995. The Company has approximately 86,000
distributors. The Company's sales per average number of distributors increased
from $44 per month during the year ended September 30, 1994 to $58 per month for
the year ended September 30, 1995 and from $49 per month for the nine months
ended June 30, 1995 to $121 per month for the nine months June 30, 1996. The
Company believes that the increases in the number of distributors and the
monthly sales per average number of distributors were the result of the
Company's ability to increase sales of its health-related products by timely
introduction of new products, increased public awareness of nutrition and its
benefits, an innovative marketing program, including the opportunity to become
an executive distributor and earn commissions and bonuses, and increased public
confidence that network marketing is a viable method to distribute product and
earn supplemental income. However, there can be no assurance that either the
number of distributors or the monthly sales per average number of distributors
will be sustained or grow. See "Risk Factors".

The Company intends to pursue its business strategy of increasing sales and
profitability by (1) attracting and retaining distributors to its network
marketing system; (2) increasing product sales to existing distributors; and (3)
expanding its marketing activities into new international markets. The Company
also intends to pursue potential opportunities for growth through mergers and
acquisitions of complimentary businesses.

21
<PAGE>

In February 1996, the Company's executive offices were moved to
9101 Jameel, Suite 180, Houston, TX 77040.

Distribution and Marketing

The Company's products are distributed through a network marketing system
consisting of a network of approximately 86,000 distributors. Distributors are
independent contractors who purchase products directly from the Company for
their own use and for resale to retail consumers. Distributors may elect to work
on a full-time or part-time basis. Management believes that its network
marketing system is well suited to marketing its nutritional supplements and
other products because sales of such products are strengthened by ongoing
personal contact between retail consumers and distributors, many of whom use the
Company's products themselves. No one distributor accounted for more than 5% of
the Company's annual sales in either of the past two fiscal years.

The Company's ability to increase sales is significantly dependent on its
ability to attract, motivate and retain distributors. The Company utilizes an
innovative marketing program which it believes is superior to programs offered
by other network marketing companies. The program provides financial incentives,
distributor training and support, low priced starter kit, no inventory
requirements, and low monthly purchase requirements. Management intends to reach
potential new distributors through advertising, satellite broadcasts, tele-
conferencing and regional sales meetings. The Company experienced a net increase
in the number of distributors during the fiscal year ended September 30, 1994 of
8,377 and during the fiscal year ended September 30, 1995, 19,468 distributors
were added. During the nine months ended June 30, 1996, 28,642 distributors were
added.

Distributors' revenues are derived from several sources. First,
distributors may receive revenues by purchasing the Company's products at
wholesale prices and selling the Company's products to customers at retail
prices. Second, distributors earn the right to receive commissions upon
attaining the level of "executive." Executive level distributors may earn
commissions on product purchases by other distributors in their downline
organization. The first level of each executive may have no more than four
executives, and commissions may be earned on the sale of product to executives
in up to the first seven levels of their downline. The qualification for a
distributor to earn commissions is a one time requirement and there are three
ways of meeting this requirement which are as follows:

. Generate cumulative qualifying product volume of $1,500

. or generate cumulative qualifying product volume of $1,200 and enroll in
the optional Order Assurance Program

. or generate cumulative qualifying product volume of $1,000, enroll in the
optional Order Assurance Program at the monthly level of $100 and
subscribe to the $35 monthly optional Master Developer Series

"Qualifying product volume" is product the distributor and his other
downline distributors purchase at wholesale directly from the Company either for
personal use or for sale to other customers at retail. There is no time limit to
meet these qualifications, and distributors may choose to become executives the
same day that they enroll as a distributor or over any period of time. An
executive level distributor may attain higher levels of commission based on
sales generated by distributors within his or her organization. The only
qualification to remain an executive is to purchase $40 in product every month.
Management believes that the right of executive level distributors to earn
commissions contributes significantly to the Company's ability to retain its
productive distributors. Management also believes that the timely introduction
of new and topical programs and products has assisted the Company to increase
its network of distributors.

The Company previously marketed an Instant Executive Program. The Instant
Executive Program merely referred to the option by which distributors could
choose to qualify immediately rather than through incremental product purchases
over time. The Instant Executive Program, particularly as marketed by Kevin
Trudeau, a key distributor of the Company,

22
<PAGE>

has been the subject of legal and regulatory scrutiny. The Company has
determined to discontinue the use of the Instant Executive Program
designation. However, the qualification requirements for distributors to
attain the level of "executive distributor" and the commissions and bonuses
which may be earned as an executive distributor have not changed. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

In April 1996 the Attorney General of the State of Illinois (the
"Attorney General") filed suit against the Trudeau Marketing Group, Inc.,
Kevin Trudeau, and Jules Leib, People v. Trudeau (the "Illinois Suit"). The
-----------------
Company was not named as a defendant in the Illinois Suit, but the Company's
management viewed the Illinois Suit as an opportunity to discuss the
Company's marketing program and to resolve confusion surrounding the
program. On July 16, 1996, the Company entered into an "Assurance of
Voluntary Compliance" (the "AVC") with the Attorney General. The AVC
preserves the ability of a new distributor to become an executive
distributor the day that he or she enrolls by generating at least $1,000 in
qualifying product volume and by joining the Order Assurance Program ("OAP")
and Master Developer Series. Under the AVC, the Company will maintain its
same executive level qualifications, but to aid clarification, it will no
longer use the "instant executive" designation.

Other key features of the AVC focus on the Company's commitment to: (a)
create an official explanation of its marketing and compensation plan and to
prohibit distributors from creating their own explanations of how the
marketing and compensation plan works; (b) make clear that there are no
mandatory purchases of product to become a distributor; (c) take further
steps to stress distributor compliance with the Company's policies and
procedures; and (d) create a World Wide Web site on the Internet to provide
more information about the Company's products and programs. The Company also
agreed to provide distributor earnings disclosures and to make clear that
executive distributors cannot earn commissions unless they are engaged in
the sale of the Company's products to consumers at retail, including
procedures to verify retail sales. Specifically, an executive distributor
will not be entitled to receive bonuses or commissions on downline sales
unless within the preceding one month period the executive distributor has
made at least 5 retail sales, or within the preceding two month period has
made 10 retail sales. The Company also agreed to take additional steps to
encourage distributors to redeem OAP certificates for product and to make a
contribution to the Illinois Consumer Education Fund.

To become a distributor, a person must be sponsored by an existing
distributor, sign the official Distributor Agreement and purchase a
"distributor success kit" from the Company. A distributor success kit
currently costs approximately $35 and provides sales aids, brochures, order
forms, audio and video cassette recordings and a subscription to the
Company's monthly publication, Lifestyles.

The following table sets forth the number of the Company's distributors
on the dates indicated:
<TABLE>
<CAPTION>

At September 30, At June 30,
---------------

1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Approximate number of distributors(1) 29,500 37,800 57,300 86,000
</TABLE>
-------------------------
(1) Includes "active" distributors only. A distributor remains active by
generating a minimum of $40 in sales volume at least once every 12 months.
In order to maintain executive status and to be eligible for commissions and
bonuses, an executive distributor must generate a minimum of $40 in sales
volume every other month.

The Company seeks to expand its distributor base in each market by
offering distributors attractive compensation opportunities. Management
believes the Company's executive level distributor compensation plan is
superior to that of other network marketing organizations because the
program offers an opportunity for the distributor to become successful
without having to finance a large inventory of products and requires only a
modest amount of sales to meet the commission requirements.

23
<PAGE>

The Company participates in rallies in various key cities in North
America, Puerto Rico, the United Kingdom and Pacific Rim countries and
participates in motivational and training events in key countries, all of
which are designed to inform large numbers of prospective and existing
distributors about the Company's product line and selling techniques.
Distributors give presentations relating to their experiences with the
Company's products and the methods by which they develop their distributor
organizations. Specific selling techniques are explained, and emphasis is
placed on the need for consistency in using such techniques. Participants
are encouraged to ask questions regarding selling techniques and product
developments and to share information with other distributors attending the
rallies. Distributors are also given opportunities to interact with other
distributors and to develop confidence in selling and goal-setting
techniques. Motivation is offered to participants in the form of
recognition, gifts, excursions and tours, which are intended to foster an
atmosphere of excitement throughout the distributor organization.
Prospective distributors are educated about the structure, dynamics and
benefits of the Company's network marketing system. During the years ended
September 30, 1994 and 1995, the Company expended approximately $136,000 and
$138,000, respectively, on promotional activities related to distributors'
rallies and the annual convention.

In July 1996 the Company entered into an Administrative and Consulting
Services Agreement (the "Agreement") with Distributor Services, L.L.C.
("DS"). DS is an affiliate of Nightingale-Conant, a major supplier of self
improvement programs to the Company. It is provided in the Agreement that,
except to the extent the Company produces its own material in-house, DS will
have the exclusive right to produce and sell all of the Company's recruiting
and training material. Such materials will be produced and marketed at the
expense of DS and DS will be entitled to all revenues received from the
sales of such materials. DS has also been granted the exclusive right to
produce, organize and sell, at its own expense, admission to all Company
sponsored recruiting or promotional events and to receive all revenues
received therefrom. The Company will have the exclusive right of approval
over the content of all materials and meetings produced by DS. Without
additional compensation, DS will provide consulting services to the Company
with respect to the Company's marketing strategy and program, including the
Company's weekly teleconference, magazine and other communications with
distributors. For a fee, DS will also produce and provide to the Company
each month at least four master cassettes for sale by the Company in the
Company's Master Developer Series. The term of the Agreement is fifteen
years and the parties have agreed to negotiate in good faith successive
fifteen year terms. The Agreement may be earlier terminated for breaches of
any material obligation. It is expected that Kevin Trudeau, a key
distributor of the Company, will be principally responsible for DS's
performance in connection with this Agreement. Mr. Trudeau produces self
improvement tapes which are sold by Nightingale-Conant to the Company and
others.

The Company continues to develop marketing strategies and programs to
motivate distributors. These programs are designed to increase
distributors' monthly product sales and the recruiting of new distributors.
Some of the programs that the Company has implemented are as follows:

Car Bonus Program. The Company offers a car bonus program, whereby it makes
car payments up to $3,500 per month for qualifying distributors. The Company
has no liability relating to the financing or purchasing of the automobile.
The car bonus program was initiated in fiscal 1990. As of June 30, 1996, the
Company had 316 distributors in the program. The requirements for a
distributor to qualify for the car bonus program are as follows:

. Generate $100 sales volume for nine consecutive months (or six months
if the distributor attends one of the Company's training programs or
subscribes to the optional Master Developer Series).

. The distributors' third level executives must generate at least $4,000
in sales volume for two consecutive months (that would be in either the
fifth and sixth month, or eighth and ninth month, depending on
qualifications).

. As the distributors' third level generates higher sales volume, the
Company will make larger monthly payments up to a maximum of $750 per
month.

24
<PAGE>

Order Assurance Program. The Company provides a program whereby the
distributor may enroll in a minimum ordering program in order to maintain
eligibility for bonuses. Minimum orders ranging from $41 to $300 per month
are automatically placed by credit card or check. Differing amounts for the
optional Order Assurance Program exist to allow generation of sales volume
at levels that correspond to commission and bonus qualification levels,
i.e., $40 is the minimum sales volume to remain an active executive; $80 is
the minimum sales volume to qualify as a bronze or silver executive; $100 is
the minimum sales volume qualification level for the car bonus program; $160
is the minimum sales volume to be eligible for gold executive; and $300 is
the minimum sales volume requirement to be a platinum executive. Therefore,
this Program ensures sales for the Company and the distributors
participation in bonus programs. The Order Assurance Program was initiated
in fiscal 1993. The Order Assurance Program is voluntary and no restrictions
are placed upon any participant's ability to exit the Order Assurance
Program. The Company has agreed in the AVC that, effective in January 1997,
a distributor will not receive additional product certificates under the
Program and will be given 30 days notice that their Program status will be
suspended if: (i) 4 monthly unredeemed certificates are issued consecutively
to the distributor for a maximum credit of 4 times the distributor's
enrollment level; or (ii) the distributor has accumulated unredeemed
certificates with a total face value of 6 times the distributor's then
designated Program amount. However, these requirements would not be
applicable if the distributor redeems 1 or more of the issued certificates,
or notifies the Company that he is accumulating toward a "big ticket" item.
As of September 30, 1994, September 30, 1995 and June 30, 1996,
respectively, there were approximately 5,700, 22,800 and 43,800 participants
in the Order Assurance Program.

Personal Recruiting and Sales Campaign. These programs were developed to
assist distributors in developing their downlines and increasing product
sales. These programs provide special incentives for quicker qualification
into the executive level distributor compensation program.

As a part of the Company's commitment to maintain constant communication
with its distributor network, the Company offers the following support
programs:

Satellite Network. The Company broadcasts a one hour program twice a week
that includes product information and marketing training as well as
motivational presentations and "lifestyle" stories of many of its successful
distributors. The satellite broadcasts were initiated in fiscal 1994.

24 hour Teleconference. The Company provides 24 hour access to a weekly
recorded teleconference call to its distributors that includes interviews
with successful distributors, current product information, announcements and
product specials offered by the Company. The teleconference calls were
initialed in fiscal 1994.

Freedom Magazine. The Company publishes Freedom Magazine, a publication
that provides information on the network marketing industry and the Company.
The magazine was developed in fiscal 1994 to recruit new distributors by
answering the most commonly asked questions by potential new distributors.
Management believes it is one of the more effective marketing tools in the
industry.

Master Developer Series. The Company provides a monthly subscriber service
of leading self development books and audio programs that serve as a link
between the philosophy and ideals of the Company and its distributors.

Product Literature. The Company produces for its distributors comprehensive
and attractive four color catalogues and brochures that display and describe
the Company's products.

Toll Free Access. The Company furnishes toll free numbers for: (1)
placement of orders, (2) customer service assistance, and (3) faxing of
orders and applications.

The Company experienced significant growth in sales in the fiscal year
ended September 30, 1995 and in the nine months ended June 30, 1996.
Management of the Company believes this is directly related to the increases
in both the number of distributors and the monthly sales per average number
of distributors. Management also believes the significant part of the
Company's growth is attributable to the enthusiasm and momentum generated by
executive level distributors who are able to motivate their downline
organizations through various marketing methods, including the use of
newsletters, brochures and other sales aids and the holding of meetings and
rallies at the expense of the sponsoring distributor.

In the last quarter of the fiscal year ended September 30, 1995 and in
the nine months ended June 30, 1996, one executive level distributor, Kevin
Trudeau, was particularly noteworthy in this regard, and he has made a

25
<PAGE>

significant contribution to the growth of the Company during this period.
In addition to the marketing methods described above, Mr. Trudeau has
sponsored radio and newspaper advertisements and radio and television
infomercials to attract new distributors. Mr. Trudeau has substantial prior
experience in product sales through the use of infomercials. In addition,
he has served as a host of a series of infomercials entitled "A Closer Look"
and "Vantage Point". During the last several months, he has also frequently
served as a guest on the Home Shopping Network.

Mr. Trudeau is the producer of the "Mega Memory" home study course and is
the author of Kevin Trudeau's Mega Memory book which was published in 1995
----- --------- ---- ------
by William Morrow. He founded the American Memory Institute, a memory
training school, in 1983. Mr. Trudeau is also frequently featured as a
prominent speaker at motivational seminars and other programs.

During the past five years, Mr. Trudeau has also been engaged in other
entrepreneurial activities, including KT Corp., which is a distributor of
the Company, the Trudeau Marketing Group, which markets sales aids, memory
tapes and other products to distributors of the Company, and Mega Systems,
Inc., which markets memory and other home study courses. Mr. Trudeau is no
longer employed by Mega Systems, Inc.

In 1990 Mr. Trudeau plead guilty in a Massachusetts state court to
larceny involving a bank overdraft. He was incarcerated for 21 days and
received a suspended sentence of three years. In 1991, Mr. Trudeau plead
guilty in federal court in Massachusetts to a charge of providing false
information on a credit card application and was sentenced to 24 months
incarceration and 24 months supervised release. Mr. Trudeau has informed
the Company that he is no longer under any parole or other type of
supervised provisions. In addition, in 1990, Mr. Trudeau filed a Petition
under Chapter 13 of the Bankruptcy Code in the United States Bankruptcy
Court in Dallas, Texas. Shortly after the filing, Mr. Trudeau withdrew the
Petition and no further action was taken.

Markets

The following chart sets forth the countries in which the Company
currently operates, the year operations were commenced in each country, and
product and historical sales information by country during the periods
indicated.
<TABLE>
<CAPTION>

Year Ended September 30, Nine Months Ended June 30,
-------------------------- --------------------------
(in Thousands) (in Thousands)

Country(1) Year 1994 1995 1996
------- Entered ---- ---- ----
--------
<S> <C> <C> <C> <C>
United States 1984 $14,700 $25,800 $71,800
Canada 1993 2,400 4,200 4,900
Puerto Rico 1994 300 2,200 1,100
Korea(2) 1991 100 100 30
Philippines(2) 1993 100 100 --
</TABLE>
- ------------------
(1) The Company commenced operations in the United Kingdom in
September 1996.

(2) The Company sells its products to distributors in Korea and the
Philippines which do not use the Company's network marketing system.

26
<PAGE>

The Company currently plans to enter additional markets outside the
continental United States. Upon deciding to enter a new market, the Company
expects to hire local legal counsel to help ensure that the Company's network
marketing system and products comply with all applicable regulations and that
the Company's profits may be expatriated. In addition, local counsel will
typically be asked to assist in helping to establish favorable public
relations in the new market by acting as an intermediary between the Company
and local regulatory authorities, public officials and business people. Local
counsel is also expected to be responsible for explaining the Company's
products and product ingredients to appropriate regulators.

If regulatory approval is required in a foreign market, the Company's local
counsel will work with regulatory agencies to confirm that all of the
ingredients of the Company's products are permissible within the new market.
During the regulatory compliance process, the Company may alter the
formulation, packaging or labeling of its products to conform to applicable
regulations as well as local variations in customs and consumer habits, and
the Company may modify certain aspects of its network marketing system as
necessary to comply with applicable regulations.

Following completion of the regulatory compliance phase, the Company will
undertake the steps necessary to meet the operational requirements of the new
market. The Company will initiate plans to satisfy the inventory,
distribution, personnel and transportation requirements of the new market, and
the Company will modify its distributor manuals, cassette recordings,
videocassette and other training materials as necessary to be suitable for the
new market. The Company has prepared manuals in French and Spanish.
Currently, the Company's products are distributed to all markets from the
Company's Houston, Texas distribution center.

In August 1994, to assist the Company in its entry into new markets, the
Company retained the services of Dr. David Santiago. In December 1995, Dr.
Santiago and the Company agreed to a termination of their relationship.

Products

The Company markets and distributes an extensive product line of
approximately 320 items in eight different categories: (1) vitamins and
minerals and antioxidants; (2) Nutique personal care items; (3) food and
weight management items; (4) herbal formulas, (5) homeopathic and special
formulas; (6) cleaning concentrates; (7) filtration systems; and (8) self-
improvement programs. The line consists of primarily consumable products that
are designed to target the growing consumer interest in natural health
alternatives for nutrition and personal care. In developing its product line,
the Company has emphasized quality, purity, potency, and safety.

Vitamins and minerals and antioxidants. The Company markets approximately 44
vitamin and mineral products that are offered in a variety of combinations
including the Company's proprietary Grand Master(R), Master-Key-Plus(R), and
OraFlow Plus(R) formulations.

Nutique personal care items. The Company markets 25 Nutique hair and skin
care products including skin care formulas for men and women, shampoo and
conditioner, hand and body lotions, sunscreen, an alphahydroxy acid skin
rejuvenating complex, and a thigh creme. Each of these products contains
ingredients that are formulated to promote healthier looking skin and hair.

Food and weight management items. The Company markets over 51 food and weight
management products. These include a whey beverage in four flavors, the
Nutri-Mac line of pastas, the Nutri-Blend flour and baking mixes, instant food
shakes, fiber products, the Nutri-Cookie(R), and Lean Life(R), a herbal weight
management formulation.

Herbal formulas. The Company's 31 herb and herbal formulation products are
produced using only natural ingredients and are precisely measured and
carefully processed into a convenient tablet or capsule form. The line
consists of many traditionally popular herbs such as alfalfa, ginkgo biloba,
and garlic, as well as special blends developed by the Company.

27
<PAGE>

Homeopathic and special formulas. Homeopathic remedies, when prepared in
minute amounts, mimic disease symptoms and stimulate the body's defense
systems. The Company offers 65 homeopathic remedies that have been formulated
in accordance with the Homeopathic Pharmacopoeia of the United States. In
addition, the Company markets a variety of other special formula products
including shark cartilage liquid and capsules, pain relief formulations, cough
syrup, digestive aids, sports massaging gel, a special formula dentifrice and
special phytochemical products.

Cleaning concentrates. The Company markets household cleaning products that
are non-volatile and biodegradable. There are 18 products, including a liquid
hand and body soap, dishwasher concentrate, laundry concentrates, laundry
softener, a heavy duty cleaner-degreaser, and a pine disinfectant.

Filtration systems. The Company markets 31 products designed to test or
improve the quality of air and water, including electrostatic air filters,
radon testing kits and water filtration systems.

Self improvement programs. The Company markets approximately 55 motivational
and self improvement tapes and other products, purchased primarily through
arrangements with Nightingale-Conant Corporation.

The Company continually seeks to identify, develop and introduce
innovative, effective and safe products. During the fiscal year ended
September 30, 1995 the Company introduced approximately 25 new products or
services. From September 30, 1995 to June 30, 1996 the Company introduced
approximately 50 new products or services. Management believes that its
ability to introduce new products increases its distributors' visibility and
competitiveness in the marketplace.

New Product Development

The Company expands its product line through the development of new
products. New product ideas are derived from a number of sources, including
trade publications, scientific and health journals, the Company's management
and consultants, and outside parties. Prior to introducing products into the
Company's markets, local counsel and other representatives retained by the
Company investigate product formulation matters as they relate to regulatory
compliance and other issues. To the extent possible, the Company's products
are formulated to suit both the regulatory and marketing requirements of the
particular market.

The Company does not maintain its own product research, development and
formulation staff but relies upon independent research, vendor research
departments, research consultants and others for such services. When the
Company, one of its consultants or another party identifies a new product
concept or when an existing product must be reformulated for introduction into
a new or existing market, the new product concept or reformulation is
generally submitted to the Company's suppliers for technological development
and implementation. The Company owns the proprietary rights to a majority of
its product formulations.

Product Warranties and Returns

The Company's product warranties and policy regarding returns of products
are similar to those of other companies in the industry. If a retail
purchaser of any of the Company's products is not satisfied with the product,
he may return it to the distributor from whom he purchased it at any time
within 30 days of his purchase. The distributor is required to refund the
purchase price to the retail purchaser. The distributor may then return the
unused portion of the product to the Company for an exchange of equal value.
Most products are warranted against defect by the manufacturers of those
products. Most products returned to the Company, however, are not found to be
defective in manufacture. As a result, most products returned to the Company
are replaced by the Company at its cost.

28
<PAGE>

For the fiscal year ended September 30, 1995 and the nine months ended June
30, 1996, the cost of products returned to the Company was insignificant.

Management Information System

The Company maintains a proprietary computerized system for processing
distributor orders and calculating distributor commission and bonus payments
which enables it to remit such payments promptly to distributors. The Company
believes that prompt remittance of commissions and bonuses is vital to
maintaining a motivated network of distributors and that this has enhanced the
loyalty of the distributors to the Company.

The Company's computer system provides each distributor a detailed monthly
accounting of all sales and recruiting activity in his or her downline. These
convenient statements eliminate the need for substantial record keeping on
behalf of the distributor. The computer system also is fully integrated with
the Company's financial reporting system that generates monthly reports,
invoices and payroll. As a precaution, duplicate copies of the Company's
computer records are transferred daily to an off-site location for
safekeeping.

Manufacturing and Supplies

The Company currently purchases all of its vitamins, nutritional
supplements and all other products from third parties that manufacture such
products to the Company's specifications and standards. The Company purchased
products from NION Laboratories ("NION") in the approximate amounts of
$1,706,000 and $2,258,000 for the twelve months ended September 30, 1994 and
1995, respectively, and $4,179,000 for the nine months ended June 30, 1996.
Richard S. Kashenberg, a director of the Company, is the chief executive
officer of NION. Until June, 1995 NION was owned by Shermfin Corp., the
Company's largest shareholder, and Mr. Kashenberg. Since June 1995 NION has
continued to be a principal supplier of product to the Company and the Company
believes that its relationship with NION is satisfactory. However, there can
be no assurance that NION will continue to be a significant and reliable
supplier to the Company.

The Company does not have long term supply agreements with NION or any
other vendor. Although the Company believes that it could establish alternate
sources for most of its products, any delay in locating and establishing
relationships with other sources could result in product shortages and back
orders for the products, with a resulting loss of revenues to the Company.

The Company places significant emphasis on quality control. All
nutritional supplements, raw materials and finished products are subject to
sample testing, weight testing and purity testing by independent laboratories.

Trademarks and Service Marks

Most products are packaged under the Company's "private label". The
Company has registered trademarks with the United States Patent and Trademark
Office for its Master Key Plus/(R)/, Oraflow Plus/(R)/, LeanLife/(R)/, Nutri-
Cookie/(R)/, Requin 3/(R)/, Grand Master/(R)/, Phytonol/(R)/, BioWater/(R)/,
and Phytogreen/(R)/. It has applied for trademark registration for its
BioGlow/(TM)/, BioRub/(TM)/, MasterPiece/(TM)/ and PowerPlay/(TM)/.

Competition

The Company competes with many companies marketing products similar to
those sold and marketed by the Company. It also competes intensely with
other network marketing companies in the recruitment of distributors.

There are many network marketing companies with which the Company competes
for distributors. Some of the largest of these are Nature's Sunshine, Inc.,
Herbalife International, Inc., and Rexall Sundown, Inc. Each of these
companies is substantially larger than the Company and has significantly
greater resources. The Company competes

29
<PAGE>

for distributors by means of its marketing program that includes its
commission structure, training and support services, and other benefits.

Not all competitors market all types of products marketed by the Company,
and some competitors market products and services in addition to those
marketed by the Company. For example, some competitors are known for and are
identified with sales of herbal formulations, some are known for and are
identified with sales of household cleaning and personal care products, and
others are known for and are identified with sales of nutritional and dietary
supplements. The Company's principal methods of competition for the sale of
products are its responsiveness to changes in consumer preferences and its
commitment to quality, purity, and safety.

Government Regulation

Although the Company confines its activities to marketing and distribution,
the manufacturing, processing, formulation, packaging, labeling and
advertising of the Company's products are subject to regulation by federal
agencies, including the Food and Drug Administration (the "FDA"), the Federal
Trade Commission, the Consumer Product Safety Commission, the United States
Department of Agriculture, the United States Postal Service and the United
States Environmental Protection Agency. These activities are also subject to
regulation by various agencies of the states and localities in which the
Company's products are sold.

In November 1991, the FDA issued proposed regulations designed to, among
other things, amend its food labeling regulations. The proposed regulations
met with substantial opposition. In October 1994, the "Dietary Supplement
Health and Education Act of 1994" (the "Dietary Supplement Law") was enacted.
Section 11 of the Dietary Supplement Law provided that the advance notice of
proposed rule making by the FDA concerning dietary supplements was null and
void. FDA regulations that became effective on June 1, 1994 would require
standard format nutrition labeling on dietary supplements. However, because
the new Dietary Supplement Law also addresses labeling of dietary supplements,
the FDA has indicated that it will not enforce its labeling regulations until
January 1, 1997. In the interim, new regulations are expected to be proposed
by the FDA. Because the FDA has not yet reconciled its existing regulations
with the new Dietary Supplement Law, the Company cannot determine to what
extent any changed or amended regulations will affect its business.

The Dietary Supplement Law did not affect the July 1, 1994 effectiveness of
the FDA's health claims regulations. Those regulations prohibit any express
or implied health claims for dietary supplements unless such claims are
approved in advance by the FDA through the promulgation of specific
authorizing regulations. Such approvals are rarely provided by the FDA.
Therefore, no claim may be made on a dietary supplement label or in printed
sales literature, "that expressly or by implication characterizes the
relationship of any substance to a disease or health-related condition". The
Company cannot determine what effect currently proposed FDA regulations, when
and if promulgated, will have on its business in the future. Such regulations
could, among other things, require expanded or different labeling, the recall
or discontinuance of certain products, additional record keeping and expanded
documentation of the properties and certain products and scientific
substantiation. In addition, the Company cannot predict whether new
legislation regulating its activities will be enacted, which new legislation
could have a material adverse effect on the Company.

The Company has an ongoing compliance program with assistance from
experienced FDA counsel regarding the nature and scope of food and drug legal
matters affecting the Company's business and products. The Company is unaware
of any legal actions pending or threatened by the FDA against the Company.

Employees

At September 30, 1996, the Company employed approximately 200 persons. The
majority of the Company's employees are office, clerical and warehouse
employees. The Company believes that its relationship with its employees is
good.

30
<PAGE>

LEGAL PROCEEDINGS

As noted in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," the Company entered into an
"Assurance of Voluntary Compliance" with the Illinois Attorney General and
similar agreements with other states. The Company may enter into other
agreements with two other states as a result of pending negotiations. However,
if such negotiations are unsuccessful, litigation could result. See "Risk
Factors". In the future, inquiries may continue from various state agencies
concerning the marketing of the Company's programs. In addition, a formal
investigation has been commenced by the Securities and Exchange Commission
regarding possible violations by the Company of the federal securities laws.
The Company cannot predict the ultimate outcome of the investigation.

In August 1996, a suit was filed against the Company in the United
States District Court for the Southern District of Texas, Houston Division
(the "Federal Action"). Also named as defendants were Kevin Trudeau, a key
distributor of the Company, the Trudeau Marketing Group, Inc., Bernard
Sherman, the largest beneficial owner of the Company's common stock, certain
officers of the Company, and Cohig & Associates, Inc. and Neidiger/Tucker/
Bruner, Inc., the investment banking firms which previously served as
underwriters of the July 1995 public offering of the Company's securities. The
Federal Action was brought as a class action on behalf of persons who became
"instant" executive distributors of the Company and persons who purchased the
Company's Common Stock and Warrants between July 11, 1995 and July 16, 1996.

The principal allegations of the complaint in the Federal Action are that
certain aspects of the executive distributor compensation program constituted
an illegal pyramid scheme and the sale of an unregistered security and that
the Company failed to disclose the existence of these aspects and Mr.
Trudeau's past. The plaintiffs seek unspecified damages, costs and fees of
litigation and punitive damages.

In August 1996, a suit was also filed against the Company and the same
defendants in the Federal Action in the District Court of Harris County, Texas
(the "State Action"). The State Action was brought as a class action on behalf
of persons who purchased Common Stock and Warrants of the Company during the
period from July 11, 1995 through July 16, 1996.

The principal allegations of the complaint in the State Action are that
certain aspects of the executive distributor compensation program constituted
an illegal pyramid scheme and that the Company failed to disclose that its
outstanding financial results were directly attributable to the questioned
aspects of its marketing practices and failed to adequately disclose Mr.
Trudeau's past. The plaintiffs seek unspecified damages, costs and fees of
litigation and punitive damages.

The Company strongly denies the allegations in both suits and intends to
vigorously defend against the charges made against it. The pendency of these
suits, as well as a potentially unfavorable decision to the defendants, could
have a material adverse effect on the Company's financial condition and its
operations.

31
<PAGE>

MANAGEMENT

Officers and Directors

The officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------

<S> <C> <C>
David P. Bertrand 53 President, Director and Chairman of the Board of Directors

Jana Mitcham 48 Executive Vice President, Secretary and Director

Barry C. Loder 38 Vice-President and Chief Financial Officer

John R. Brown, Jr. 58 Vice-President-Finance

Ronnie D. Meaux 42 Vice President, Treasurer, and Assistant Secretary

F. Wayne Ballenger 48 Director

M. F. Florence 59 Director

Richard S. Kashenberg 40 Director

Gregory Pusey 44 Director
</TABLE>

David P. Bertrand has served as President and Chairman of the Board of
Directors of the Company and its predecessors since 1984. Mr. Bertrand
received a B.S. degree in education in 1966 and a Master of Education degree
in administration and supervision in 1969, both from McNeese State University
in Lake Charles, Louisiana. Mr. Bertrand is the brother-in-law of Jana
Mitcham.

Jana Mitcham has served as Executive Vice President, Secretary and
Director of the Company and its predecessors since 1984. Ms. Mitcham received
a B.A. degree in 1974 in special education from McNeese State University and
undertook graduate work in special education at the Korean Extension of the
University of Maryland. Ms. Mitcham is the sister-in-law of David P. Bertrand.

Barry C. Loder became Vice President and Chief Financial Officer of the
Company in March 1995. From October 1993 until he joined the Company, Mr.
Loder was a financial consultant, performing corporate finance, merger and
acquisition and other financing activities. From January 1992 to October
1993, he was in Corporate Development with Allwaste, Inc., a publicly held
environmental services company. From December 1989 to December 1991, he was
the Senior Vice President-Finance of Republic Waste Industries, Inc., a
publicly held integrated solid waste management company. Mr. Loder received a
B.B.A. degree in Accounting and Finance from Walsh College and an M.B.A.
degree from Houston Baptist University. He is a Certified Public Accountant
and is currently working towards a Chartered Financial Analyst designation.

John R. Brown, Jr. became Vice President-Finance of the Company in
September, 1996. From April, 1989 until he joined the Company, Mr. Brown was
a management consultant performing merger and acquisition services, systems
analyses, financial reporting assistance, and other services for both publicly
and privately held companies. From June, 1987 to March, 1989 he was Vice
President-Finance & Administration for Environmental Protective Industries,
Inc., an environmental services organization. Mr. Brown is a Certified Public
Accountant and has over

32
<PAGE>

20 years experience in public accounting with both national and local firms.
Mr. Brown received a B.S. in Mechanical Engineering from Stanford University
and an M.B.A. from the University of Texas at Austin.

Ronnie D. Meaux has served in various accounting and finance capacities
for the Company and its predecessors since 1985. He is currently Vice
President and Treasurer of the Company. Mr. Meaux received a B.S. degree in
accounting in 1977 from McNeese State University.

F. Wayne Ballenger has served as President of First Commercial Capital
since 1995. He has also served as President of Puncture Guard L.L.C. since
December 1994. From March 1992 to December 1994, he served as director of
sales and marketing for Petrolon, Inc., a multi-level marketing organization.
Immediately prior thereto, he served as a vice president of Southwest Bank of
Texas with commercial lending responsibilities. Mr. Ballenger received at
B.B.A. degree from the University of the South in 1968.

M. F. Florence has served as President of Sherfam Inc. since 1989.
Sherfam Inc. is a holding company, principally of pharmaceutical companies and
is the parent of Shermfin Corp., which is a principal shareholder of the
Company. From 1958 to 1989, Mr. Florence was associated with the firm of Wm.
Eisenberg & Co., a firm of chartered accountants in Canada. He served as a
partner of the firm from 1964 to 1989. Mr. Florence received a Bachelor's
degree from the University of Toronto. He is the recipient of a Chartered
Accountant degree from the Institute of Chartered Accountants of Ontario. Mr.
Florence is also a Director of Barr Laboratories, Inc., a publicly held
corporation whose common shares are listed on the American Stock Exchange. Mr.
Florence has served as a director of the Company since 1994.

Richard S. Kashenberg has served as President of NION Laboratories since
1982. NION Laboratories is a principal supplier of products sold by the
Company. Mr. Kashenberg served as President and Director of NEC-Utah from
1991 until its merger with the Company in 1994. Mr. Kashenberg has served as
a director of the Company since 1994. Mr. Kashenberg received a Bachelor's
degree from Vanier College.

Gregory Pusey is primarily engaged in private investment activities. He
has served both as President of Livingston Capital, Ltd. and President of the
General Partner of Graystone Capital, Ltd., venture capital firms, since 1987.
He is also President and a director of Cambridge Holdings, Ltd., a publicly
held real estate firm, and a co-founder and director of USMX, Inc., a publicly
held mining company. From May 1989 until January 1990, Mr. Pusey also served
as Chief Financial Officer of USMX, Inc. Mr. Pusey received a B.S. degree in
Finance from Boston College in 1974. Mr. Pusey became a director of the
Company in 1994.

The Company has entered into an agreement with Shermfin Corp. wherein it
has agreed that, for so long as Shermfin Corp. owns 10% or more of the
outstanding Common Stock of the Company, Shermfin Corp. will be entitled to
designate one person to serve as a member of the Company's Board of Directors.
The current designee is M. F. Florence who shall continue to serve in such
capacity until written notice otherwise is provided by Shermfin Corp. to the
Company. See "Certain Transactions".

The Company's Board of Directors has two standing committees, the Audit
Committee and the Option Committee. M.F. Florence and Gregory Pusey serve as
the two members of the Audit Committee. The primary functions of the Audit
Committee are to review the scope and results of audits by the Company's
independent auditors, internal accounting controls, non-audit services
performed by the independent accountants and the cost of accounting services.
F. Wayne Ballenger, M.F. Florence and Richard S. Kashenberg serve as the three
members of the Option Committee. The Option Committee administers the
Company's stock option plans for employees and consultants.

Executive Compensation

The following table sets forth certain information regarding
compensation paid by the Company (and its predecessors) to the officers whose
total annual compensation exceeded $100,000 during the fiscal years ended
September 30, 1994 and 1995.

33
<PAGE>

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------

Annual Compensation Awards Payouts
----------------------------------- -------------------- ---------

Other
Annual Restricted All Other
Name and Principal Salary compensa- Stock Options/ LTIP Compensa-
Position Year ($) Bonus tion Awards SARs Payouts tion(1)
================== ==== ======= ======= ========== ========== ======== ======= =======

<S> <C> <C> <C> <C> <C> <C> <C> <C>
David P. Bertrand 1994 143,256 24,000 -0- -0- -0- -0- 12,885
Chief Executive 1995 162,006 143,829 5,250 -0- 80,400 -0- 12,885
Officer of the Company

Jana Mitcham 1994 144,826 24,000 -0- -0- -0- -0- 9,013
Executive Vice President 1995 157,316 143,829 5,250 -0- 75,600 -0- 9,013
of the Company
</TABLE>
------------

(1) The Company has obtained insurance policies on the lives of Mr. Bertrand
and Ms. Mitcham, of which benefit amounts of $1,060,000 and $660,000 on
the lives of Mr. Bertrand and Ms. Mitcham, respectively, constitute
"keyman" insurance and are payable to the Company. Approximately 51% of
the aggregate insurance benefits on the lives of Mr. Bertrand and Ms.
Mitcham are payable to beneficiaries designated by Mr. Bertrand and Ms.
Mitcham.. In addition, part of the cash value may be used as retirement
benefits for the executive officers. The premiums paid by the Company
allocable to these items are included in the table.

In 1995 the Company entered into employment agreements with Mr. Bertrand
and Ms. Mitcham which expired on September 30, 1996. The terms of the
Agreements were essentially identical. Mr. Bertrand received an annual salary
of $162,000 and Ms. Mitcham received an annual salary of $156,000. Each was
also entitled to 5% of the first $2,000,000 of annual pre-tax income of the
Company, 4% of the amount in excess of $2,000,000 but less than $2,500,000,
and 3% of the amount over $2,500,000. Mr. Bertrand was also granted the right
to create a special bonus pool for key employees to receive up to 2% of the
pre-tax income between $2,000,001 and $2,500,000 and up to 4% of the pre-tax
income greater than $2,500,000. The determination of the pre-tax income and
the total bonuses to be paid to Mr. Bertrand, Ms. Mitcham and key employees
will be made upon completion of the financial statements for the fiscal year
ended September 30, 1996. The Company intends to enter into new employment
agreements with Mr. Bertrand and Ms. Mitcham.

Option Plans

In 1993 and 1995 the Company adopted stock option plans for the grant of
options to employees and consultants (the "Plans"). The provisions for each
of the Plans are similar. There are presently outstanding or reserved for
issuance options to acquire up to 349,257 shares of Common Stock. Under the
Plans, the Company may issue options to purchase up to an additional 626,356
shares of Common Stock. Under the Plans, options may be granted in the form
of "incentive stock options" as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and non-statutory stock options. The
Board of Directors has the authority to fix the terms and number of options to
be granted and the employees to receive the options. The exercise price of
each stock option granted under the Plans may not be less than 100% of the
fair market value of the Common Stock on the date of grant (110% in the case
of incentive stock options granted to employees owning more than 10% of the
Common Stock). All of the outstanding options were granted at exercise
prices which were not less than the fair market value on the respective grant
dates. See "Principal Shareholders" regarding outstanding options to officers
and directors of the Company.

34
<PAGE>

The maximum term of options granted under the plans is 10 years. The
aggregate fair market value of the Common Stock with respect to which
incentive stock options are first exercisable in any calendar year may not
exceed $100,000 per optionee. Options granted under the Plans are non-
transferable and generally expire 30 days after the termination of any
optionee's service to the Company. In general, if an optionee is permanently
disabled or dies during his or her service to the Company, such person's
option may be exercised up to 90 days following such disability or death.

Option Grants in Fiscal Year Ended September 30, 1995

The following table provides details regarding the stock options
indicated in the Summary Compensation Table as having been granted to the
named executive officers in the fiscal year ended September 30, 1995.

<TABLE>
<CAPTION>
Percent
Number of of Total
Shares Options Exercise
Underlying Granted to Price
Options Employees ($ per Expiration
Name Granted (1) in 1995 share) Date
---- --------------- ---------- ---------- ----------

<S> <C> <C> <C> <C>
David P. Bertrand 42,000(2) 13.7 $1.665 10-06-1999
19,200(3) 6.3 1.875 03-03-2002
19,200(3) 6.3 2.25 03-03-2002

Jana Mitcham 42,000(2) 13.7 $1.665 10-06-1999
16,800(3) 5.5 1.875 03-03-2002
16,800(3) 5.5 2.25 03-03-2002
</TABLE>
----------------------
(1) All options granted to the named executive officers were granted at
exercise prices which were not less than the market price of the Common
Stock on the date of grant.
(2) Of these options, options to purchase 14,000 shares are currently
exercisable, options to purchase 14,000 shares become exercisable on
October 6, 1996 and options to purchase 14,000 shares become exercisable
on October 6, 1997.
(3) These options are currently exercisable.

Option Exercises and Year-End Values

The following table shows option exercises by the named executive
officers during the fiscal year ended September 30, 1995. Also reported are
the year-end values for their unexercised "in-the-money" options, which
represent the positive spread between the exercise price of any such option
and the market price of the Common Stock on September 30, 1995.

<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Number of Options Options at
Shares Under- Value At Year End (#) Year End ($)
lying Options Realized Exercisable/ Exercisable/
Name Exercised (#) ($) Unexercisable Unexercisable
--------- ------------- --------- ------------- -------------

<S> <C> <C> <C> <C>
David P. Bertrand -- -- 52,400/28,000 $362,540 /$201,880

Jana P. Mitcham -- -- 47,600/28,000 $329,840 /$201,880
</TABLE>

35
<PAGE>

Compensation of Directors

Directors who are not employees of the Company receive $6,000 per year,
$400 for each Board meeting attended, and $200 for each committee meeting of
the Board attended. Directors who are also employees of the Company receive no
additional compensation for serving as Directors. The Company reimburses its
Directors for travel and out-of-pocket expenses in connection with their
attendance at meetings of the Board of Directors. The Company may also utilize
the services of its outside directors as consultants to the Company. During
the fiscal year ended September 30, 1994, the Company paid Mr. Pusey $24,000
and Mr. Kashenberg $12,000 for consulting services. During the fiscal year
ended September 30, 1995 the Company paid Mr. Pusey $40,000, Mr. Kashenberg $
12,000 and Mr. Florence $2,000 for consulting services. During the nine months
ended June 30, 1996, the Company paid Mr. Pusey $41,000, and $9,000 to each of
Mr. Kashenberg and Mr. Florence.

In October 1994, in addition to option grants to the named executive
officers in the tables above, the Company granted options to purchase 6,000
shares of Common Stock at a price of $1.665 per share to each of M.F.
Florence, Richard S. Kashenberg and Gregory Pusey. In March, 1995, the
Company granted to Mr. Pusey options to purchase 6,000 shares at $1.875 per
share and options to purchase 6,000 shares at $2.25 per share.

In November 1995, the Board of Directors of the Company adopted the 1995
Non-Discretionary Stock Option Plan for directors of the Company who are not
eligible to participate in the other Plans (the "Non-Discretionary Plan.") No
options granted pursuant to the Non-Discretionary Plan may be exercised until
the Non-Discretionary Plan is approved by the shareholders of the Company.
The Non-Discretionary Plan provides that the Company grant options to purchase
5,000 shares of the Company's Common Stock to each eligible director on the
date of adoption of the Non-Discretionary Plan (November 28, 1995), to each
person who thereafter becomes a director of the Company and, as of December 1
of each year (commencing in 1996), options to purchase an additional 5,000
shares of Common Stock will be granted to each eligible director. The
exercise price of the options is the fair market value of the Common Stock on
the date the options are granted. The options are exercisable in full as of
the date of grant, except that the options which have been granted are not
exercisable until the shareholders of the Company have approved the Non-
Discretionary Plan. The shares acquired upon exercise of these options cannot
be sold for six months following the later of the date of grant or shareholder
approval of the Non-Discretionary Plan. Subject to shareholder approval, the
Company granted options to purchase 5,000 shares of Common Stock at a price of
$19.75 per share to each of F. Wayne Ballenger, M.F. Florence and Richard S.
Kashenberg. Each option granted pursuant to the Non-Discretionary Plan will
expire five years from the date of grant, except that an option will expire,
if not exercised, 30 days after the optionee ceases to be a director of the
Company.

Options granted pursuant to the Non-Discretionary Plan will not qualify
for the special tax benefits given to incentive stock options under Section
422 of the Code. Accordingly, all of the stock options granted pursuant to the
Non-Discretionary Plan may be deemed to be non-statutory stock options. The
options are generally non-transferable.

Indemnification and Limitation on Directors' and Officers' Liability

The Company's Articles of Incorporation provide for the indemnification
of directors and officers of the Company. In general, the Company will
indemnify its officers and directors against expenses incurred by them in
connection with the defense of any action, suit or proceeding in which they
are made parties, except in relation to matters to which any such director or
officer is adjudged in such action, suit or proceeding to be liable for gross
negligence or willful misconduct in the performance of duty. The Company has
no director and officer liability insurance. There are no pending claims for
indemnification, nor is the Company aware of any pending or threatened claims
which would result in a claim for indemnification.

In addition, the Company's Articles of Incorporation eliminate liability
of directors to the Company and its shareholders for monetary damages for an
act or omission in the director's capacity as a director except in the case of

36
<PAGE>

liability: (i) for a breach of the director's duty of loyalty to the Company
or its shareholders; (ii) for acts or omissions not in good faith or that
constitute a breach of duty of the director to the Company or an act or
omission that involves intentional misconduct or a knowing violation of law,
(iii) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of
the director's office or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute. It does not limit
the rights of third parties, nor does it limit or eliminate the rights of the
Company or any shareholder, to seek non-monetary relief such as an injunction
or rescission if a director breaches his duty of care. The provision applies
only to the duty of care and not to any other fiduciary duties to the Company
and its shareholders.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foreign provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.

37
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of October 18, 1996 and as adjusted
to reflect the sale of 434,416 shares of Common Stock offered hereby, by (i)
each shareholder who is known by the Company to own beneficially more than 5% of
its Common Stock, (ii) each director of the Company and (iii) all directors and
officers of the Company as a group.

<TABLE>
<CAPTION>
Number of Percentage of Ownership
Beneficial Owner Shares Owned Before Offering After Offering
- --------------------------- ---------------- ---------------------------------
<S> <C> <C> <C>
Shermfin Corp. 1,215,390(1) 21.8 20.2
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9

M. F. Florence 1,226,390(1)(2) 21.9 20.3
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9

Bernard Sherman 1,215,390(1) 21.8 20.2
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9

Jana Mitcham 377,304(3) 6.7 6.2
10618 Great Plains
Houston, Texas 77064

David P. Bertrand 328,692(4) 5.8 5.4
10622 Great Plains
Houston, TX 77064

Gregory Pusey 289,238(5) 5.1 4.8
1722 Buffehr Creek Road
Vail, Colorado 81657

Richard S. Kashenberg 55,372(6) 1.0 .9
15501 First Street
Irwindale, CA 91706

F. Wayne Ballenger 5,000(7) .1 .1
3134 Meadway Drive
Houston, Texas 77082

All Officers and 2,405,690(8) 43.1 37.9
Directors
as a Group (8 Persons)
</TABLE>

- -------------------
(1) Messrs. Sherman and Florence may be deemed beneficial owners of the
shares held by Shermfin Corp. due to their affiliations with Shermfin
Corp. In July, 1994, Mr. Sherman and Shermfin Corp. consented to the
issuance of an Order of the Securities and Exchange Commission (the
"Commission") that they cease and desist from violations of certain
reporting and anti-fraud provisions of the Securities Exchange Act of
1934. Mr. Sherman and Shermfin Corp. consented to this Order without
admitting or denying the findings of the Commission that they had failed
to file reports of beneficial ownership of the common stock of Kinesis,
Inc. with the Commission on Form 3 and Schedule 13G. The Company has no
relationship with Kinesis, Inc.

38
<PAGE>

(2) Includes options to acquire (i) 6,000 shares of Common Stock at $1.665
per share, and (ii) options to acquire 5,000 shares of Common Stock at
$19.75 per share.

(3) Includes 5,000 Warrants and options to acquire (i) 42,000 shares of
Common Stock at $1.665 per share, (ii) 16,800 shares of Common Stock at
$1.875 per share, and (iii) 16,800 shares of Common Stock at $2.25 per
share. Also includes 11,554 shares of Common Stock owned by her
daughter, 4,000 shares of Common Stock owned by her husband, and options
held by her husband to acquire 4,800 shares of Common Stock at $1.665 per
share.

(4) Includes options to acquire (i) 42,000 shares of Common Stock at $1.665
per share, (ii) 19,200 shares of Common Stock at $1.875 per share, and
(iii) 19,200 shares of Common Stock at $2.25 per share. Also includes
40,000 shares owned by his two sons and options held by his wife to
acquire 4,800 shares of Common Stock at $1.665 per share.

(5) Includes 20,000 Warrants and options to acquire (i) 6,000 shares of
Common Stock at $1.665 per share, (ii) 6,000 shares of Common Stock at
$1.875 per share, and (iii) 6,000 shares of Common Stock at $2.25 per
share. Also includes 58,840 shares of Common Stock and 14,000 Warrants
held by entities which are affiliates of Mr. Pusey, and 26,860 shares of
Common Stock and 3,000 Warrants held by his wife, individually, or as
custodian for their minor children.

(6) Includes options to acquire (i) 6,000 shares of Common Stock at $1.665
per share, and (ii) options to acquire 5,000 shares of Common Stock at
$19.75 per share.

(7) Includes options to acquire 5,000 shares of Common Stock at $19.75 per
share.

(8) Includes 9,000 Warrants and options to acquire (i) 18,000 shares of
Common Stock at $1.665 per share, (ii) 9,000 shares of Common Stock at
$1.875 per share, (iii) 9,000 shares of Common Stock at $2.25 per share,
(iv) 50,000 shares of Common Stock at $2.6875 per share, and (v) 10,000
shares of Common Stock at $11.50 per share.

39
<PAGE>

CERTAIN TRANSACTIONS

The Company and its predecessors borrowed an aggregate of $650,000 from
Shermfin Corp. during the period from 1988 to 1991. The loans were evidenced
by promissory notes with interest at rates ranging from 9% to 11% per annum
with maturity dates from October 1995 to October 1996. The promissory notes
were convertible at the option of Shermfin Corp. into an aggregate of 966,834
shares of Common Stock. In March 1995 the Company entered into an agreement
with Shermfin Corp. pursuant to which it was agreed that Shermfin Corp. would
convert $130,500 of debt from the note in the principal amount of $250,000
into 360,000 shares of the Company's Common Stock at the closing of the
Company's public offering of securities that year. It was further agreed that
the remaining principal balance of the promissory note in the principal amount
of $250,000 ($119,500), plus the entire principal balances of the other three
notes (an aggregate of $400,000) would be repaid to Shermfin Corp. at the
closing of the offering. The Company believes that the borrowing arrangements
with Shermfin Corp. were made on terms at least as favorable as could be
obtained from third parties.

In its March 1995 agreement with Shermfin Corp., the Company agreed to
register the 360,000 shares to be issued to Shermfin Corp. during the period
commencing one year after the date of commencement of the offering (July 10,
1995) and ending four years after the date of the offering (July 10, 1999).
See "Shares Eligible For Future Sale". The Company also agreed that, for so
long as Shermfin Corp. owns 10% or more of the outstanding Common Stock of the
Company, Shermfin Corp. will be entitled to designate one person to serve as a
member of the Company's Board of Directors. The current designee is M.F.
Florence who shall continue to serve in such capacity until written notice
otherwise is provided by Shermfin Corp. to the Company. See "Management".

Prior to the Merger of the Company's predecessors, Nutrition Express
Corporation of Colorado, Inc., and Nutrition Express Corporation of Utah, Inc.
("NEC-Utah"), into the Company in 1994, Shermfin Corp. held, among other
securities, all of the outstanding shares of the Series A Preferred Stock of
NEC-Utah. In exchange for the agreement of Shermfin Corp. to convert the
Series A Preferred Stock into common stock of NEC-Utah, NEC-Utah agreed to
reduce the conversion rate. As a result, the Company recognized a conversion
expense against net income applicable to common stock of $181,243 in the
fiscal year ended September 30, 1994.

The largest supplier of products to the Company is NION Laboratories, a
wholly owned subsidiary of Shermfin Corp. NION Laboratories is a manufacturer
of pharmaceutical and consumer-related products. During the fiscal years
ended September 30, 1994 and 1995, the Company purchased approximately
$1,706,000 and $2,258,000 of goods, respectively, from NION Laboratories. For
the nine months ended June 30, 1996, the Company purchased $4,179,000 of
goods. In addition, the chief executive officer of NION Laboratories, Richard
S. Kashenberg, is a director of the Company. It is anticipated that this
relationship will continue in the future and the Company believes that the
terms it has obtained from NION Laboratories are at least as favorable as
could have been obtained from third parties.

In October 1995 the Company granted warrants to purchase 500,000 shares of
Common Stock at $12.50 to Kevin Trudeau. The warrants become exercisable on
April 15, 1996 and expire on October 14, 1998. The exercise price of the
warrants on the date of grant was not less than the market price of the
Company's Common Stock on that date. In April 1996 Mr. Trudeau agreed to the
cancellation of these warrants and they are no longer outstanding.

40
<PAGE>

DESCRIPTION OF SECURITIES

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.01 (the "Common Stock"), and 1,000,000 shares of
preferred stock, $.001 par value (the "Preferred Stock").

Common Stock

As of the date of this Amended Prospectus, the Company had outstanding
5,568,562 shares of Common Stock. Holders of Common Stock are, subject to the
rights of the holders of Preferred Stock, entitled to receive dividends, when
and if declared by the Board of Directors, out of funds of the Company legally
available therefor. Each holder of Common Stock is entitled to cast one vote
per share in all matters to be voted upon by shareholders. Cumulative voting
is not allowed in the election of Directors or for any other purpose.
Therefore, the holders of more than 50% of the outstanding Common Stock can
elect all Directors. The holders of one-third of the outstanding Common Stock
constitute a quorum at any meeting of shareholders and the vote by the holders
of the majority of the outstanding shares is required to effect certain
fundamental corporate changes, such as liquidation, merger or amendment of the
Articles of Incorporation. The shares of the Company's Common Stock have no
preemptive or conversion rights, or redemption or sinking fund provisions, and
are not liable for further call or assessment. In the event of any
liquidation, dissolution or winding up of the affairs of the Company, whether
voluntary or otherwise, after payment or provision for payment of the debts
and other liabilities of the Company, including any liquidation preference on
the Preferred Stock of the Company, each holder of Common Stock will be
entitled to receive a pro rata portion of the remaining net assets of the
Company, if any.

Preferred Stock

The Board of Directors has the authority, without further action by the
shareholders, to issue up to 1,000,000 shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of
shares constituting any series or the designation of such series, without any
further vote or action by shareholders. The Board has not designated any
shares of Preferred Stock. Therefore, the full 1,000,000 shares of Preferred
Stock are available for issuance in series. The issuance of Preferred Stock
could affect adversely the voting power of holders of Common Stock and the
likelihood that such holders would receive dividends and dividend payments and
payments upon liquidation could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present
plan to issue any shares of Preferred Stock.

Warrants

The holder of one Warrant is entitled to purchase one share of the Company's
Common Stock at a price of $3.75 per share until July 10, 1998, unless earlier
redeemed by the Company. The Company may at any time and from time to time
extend the term of the Warrants or reduce the exercise price of the Warrants.
Unless exercised during the exercise period, the Warrants will expire
automatically.

Subject to compliance with applicable securities laws, Warrant certificates
may be transferred or exchanged for new certificates of different
denominations at the offices of the Warrant Agent described below. The
holders of Warrants as such, are not entitled to vote, to receive dividends or
to exercise any of the rights of shareholders for any purpose.

For a holder to exercise Warrants, there must be a current registration
statement in effect with the SEC and various state securities authorities
registering the shares of Common Stock underlying the Warrants or, at the sole
determination of the Company and its counsel, there must be a valid exemption
therefrom. The Company intends to maintain a current registration statement
which will permit the exercise of the Warrants. Maintaining a current
effective registration statement could result in substantial expense to the
Company and there is no assurance that the Company

41
<PAGE>

will be able to maintain a current registration statement covering the shares
of Common Stock issuable upon exercise of the Warrants. The Warrants may not
be exercised in any state in which the issuance of Common Stock and exercise
of the Warrants is not permitted under such state's "blue sky" or securities
laws. Holders of the Warrants may telephone the Company in order to ascertain
in which states the Warrants may be exercised. There is no minimum number of
shares that must be purchased upon exercise of the Warrants, except that no
fractional shares will be issued.

The Company has the right, at its discretion, to call all of the Warrants
for redemption on 30 days' prior written notice at a redemption price of $.05
per Warrant if: (i) the closing bid price of the Company's Common Stock
exceeds the exercise price of the Warrants by at least 50% during a period of
at least 20 of the 30 trading days immediately preceding the Notice of
Redemption; (ii) the Company has in effect a current registration statement
covering the Common Stock issuable upon exercise of the Warrants; and (iii)
the expiration of the 30 day notice period is within the term of the Warrants.
If the Company elects to exercise its redemption right, holders of Warrants
may either exercise their Warrants, sell such Warrants in the market or tender
their Warrants to the Company for redemption. Within five business days after
the end of the 30-day period, the Company will mail a redemption check to each
registered holder of a Warrant who holds unexercised Warrants as of the end of
the 30-day period, irrespective of whether such holder has surrendered the
Warrant certificates for redemption. The Warrants may not be exercised after
the end of the 30-day period.

In addition, in connection with the Company's public offering of securities
pursuant to a Prospectus dated July 10, 1995, the Company sold to Cohig &
Associates, Inc. and Neidiger/Tucker/Bruner, Inc., the Representatives of the
Underwriters, and their designees for $100 warrants to purchase an aggregate
of 160,000 shares of Common Stock and 80,000 Warrants to purchase 80,000
shares of Common Stock (the "Representatives' Securities"). The
Representatives' Securities are exercisable for a four-year period which
commenced July 10, 1996 at $3.225 per share of Common Stock and at $.15 per
Warrant. The Warrants have the same exercise price ($3.75) as the Warrants
issued to the public.

Transfer and Warrant Agent

Corporate Stock Transfer, Inc., 370 Seventeenth Street, Suite 2350, Denver,
Colorado 80202-4614, is the Transfer Agent for the Common Stock and the
Warrants and the Warrant Agent under the Warrant Agreement.

SHARES ELIGIBLE FOR FUTURE SALE

Assuming the sale of all shares offered pursuant to this Amended Prospectus,
the Company will have outstanding 6,002,978 shares of Common Stock. The
shares issued in this offering and the shares previously outstanding will be
freely tradeable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), except for any shares held by an "affiliate"
of the Company, as that term is defined in Rule 144 under the Securities Act.

The Company's officers and directors and their affiliates own beneficially
2,405,690 shares of Common Stock of which 1,834,250 shares are currently
eligible for sale in the public market pursuant to Rule 144. In addition, the
Company has agreed to register the 360,000 shares issued to Shermfin Corp. in
July 1995 at the request of Shermfin Corp. during the period commencing July
10, 1996 and ending July 10, 1999.

In general, under Rule 144, as currently in effect, a person who has
beneficially owned restricted shares for at least two years, including an
"affiliate", as that term is defined in Rule 144, is entitled to sell within
any three month period a number of shares that does not exceed the greater of
1% of the then outstanding shares of Common Stock (approximately 48,154 shares
immediately following this offering) or the average weekly trading volume of
the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are subject to certain manner of sale limitations, notice
requirements and the availability of current public information about the
Company. It is provided in Rule 144(k) that a person who is not an
"affiliate" of the issuer at any time during the three months preceding a sale
and who has beneficially owned shares for at least three years is entitled to
sell those shares at any time under Rule 144 without having to comply with the
public information, volume limitation, manner of sale and notice provisions of
Rule 144.

42
<PAGE>

The Company has agreed with Nightingale-Conant that the Company will file a
registration statement under the Securities Act to register for resale 120,000
shares of Common Stock owned by KT Corp., a major distributor of the Company
and an affiliate of Kevin Trudeau, and Nightingale-Conant Corporation, a
supplier of cassette tapes to the Company. These persons acquired their
shares from Shermfin Corp. in a private transaction in October 1995. The
Company has agreed with Nightingale-Conant Corporation that it will file this
registration statement upon the request of Nightingale-Conant Corporation.

43
<PAGE>

LEGAL MATTERS

The law firm of Bearman Talesnick & Clowdus Professional Corporation,
Denver, Colorado, has acted as counsel for the Company in connection with this
offering and has rendered an opinion concerning the legality of the Common
Stock offered hereby. Attorneys in that law firm own 9,000 shares of the
Common Stock.

EXPERTS

Financial statements of the Company as of September 30, 1995 and for each of
the years in the two-year period ended September 30, 1995 have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the September 30, 1994 financial statements
refers to a change in accounting for income taxes.

44
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report F-
Financial Statements:
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
</TABLE>
<PAGE>

Independent Auditors' Report
----------------------------

The Board of Directors
Nutrition for Life International, Inc.:

We have audited the accompanying balance sheet of Nutrition For Life
International, Inc. as of September 30, 1995 and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period ended September 30, 1995. 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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nutrition For Life
International, Inc. as of September 30, 1995 and results of its operations and
its cash flows for each of the years in the two-year period ended September 30,
1995 in conformity with generally accepted accounting principles.

As discussed in note 1 to the financial statements, the Company changed its
method of accounting for income taxes in the year ended September 30, 1994 to
adopt the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.

KPMG PEAT MARWICK LLP

Houston, Texas
November 2, 1995 except as to note 2,
which is as of December 8, 1995

<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Balance Sheets

Assets
------
September 30, June 30,
1995 1996
------------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,960,100 12,843,845
Marketable securities - held to maturity - 1,996,811
Accounts receivable 172,762 753,902
Inventory 2,267,617 6,496,916
Prepaids and other current assets 89,251 1,085,447
----------- ----------

Total current assets 11,489,730 23,176,921

Property and equipment, net (note 4) 620,818 2,051,272
Deferred tax asset, net (note 7) 79,142 857,670
Intangible asset, net (note 5) 227,498 159,791
Other noncurrent assets 148,425 189,564
----------- ----------
$12,565,613 26,435,218
=========== ==========

Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
Accounts payable $ 2,389,706 3,660,030
Accrued bonuses and commissions 1,266,616 1,679,231
Accrued expenses and other liabilities 559,415 762,337
Deferred income 347,795 2,170,603
Federal and state tax payable 843,737 1,221,493
----------- ----------

Total current liabilities 5,407,269 9,493,694

Stockholders' equity (note 2):
Preferred stock, $.001 par value;
authorized 1,000,000 shares; none issued
and outstanding
Common stock, $.01 par value; authorized
20,000,000 shares; issued and outstanding
5,056,524 shares at September 30, 1995 and
5,530,452 shares at June 30, 1996 50,565 55,305
Additional paid-in capital 8,089,992 9,796,527
Retained earnings (deficit) (982,213) 7,089,692
----------- ----------

Total stockholders' equity 7,158,344 16,941,524

Commitments and contingencies ----------- ----------
$12,565,613 26,435,218
=========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Statements Of Operations

<TABLE>
<CAPTION>
Years ended Nine months ended
September 30, June 30,
------------- --------
1994 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 17,583,195 32,289,752 77,858,600 19,189,952
----------- ---------- ---------- ----------
Cost of sales (note 10):
Cost of goods sold 5,806,727 10,450,918 23,194,929 6,370,765
Distributor commissions and bonuses 6,975,870 13,064,341 29,976,240 7,861,999
----------- ---------- ---------- ----------

12,782,597 23,515,259 53,171,169 14,232,764
----------- ---------- ---------- ----------

Gross profit 4,800,598 8,774,493 24,687,431 4,957,188

Marketing, distribution
and administrative expenses (note 9) 4,358,503 5,853,330 11,973,831 3,806,252
----------- ---------- ---------- ----------

Operating income 442,095 2,921,163 12,713,600 1,150,936
----------- ---------- ---------- ----------

Other income (expenses):
Interest expense, net (59,539) (51,499) 534,971 (35,716)
Other, net (note 9) 48,747 139,189 (57,141) (45,209)
----------- ---------- ---------- ----------
(10,792) 87,690 477,830 (80,925)
----------- ---------- ---------- ----------

Income before tax expense 431,303 3,008,853 13,191,430 1,070,011

Income tax expense (note 7) - 764,595 5,119,525 -
----------- ---------- ---------- ----------

Net income 431,303 2,244,258 8,071,905 1,070,011

Preferred stock conversion (note 3) 181,243 - - -
----------- ---------- ---------- ----------

Net income
applicable to common shares $ 250,060 2,244,258 8,071,905 1,070,011
======= ========== ========== ==========

Earnings per common share:
Primary $ 0.09 0.65 1.25 0.37
Fully diluted $ 0.08 0.51 1.25 0.29
===== ===== ==== ====

Weighted average shares outstanding:
Primary 2,824,734 3,437,258 6,450,902 2,912,240
Fully diluted 3,791,566 4,443,532 6,450,902 3,910,362
========= ========= ========= =========

</TABLE>

See accompanying notes to financial statements.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Statements of Stockholders' Equity

Common stock Additional Retained Total
------------ paid-in earnings stockholders'
Shares Amount capital (deficit) equity
------ ------ ------- --------- ------
<S> <C> <C> <C> <C> <C>
Balances - September 30, 1993 2,824,734 $28,247 3,664,711 (3,476,531) 216,427
Net income - - - 431,303 431,303
Preferred stock conversion - - 181,243 (181,243) -
---------- ------- --------- ---------- ----------
Balances - September 30, 1994 2,824,734 28,247 3,845,954 (3,226,471) 647,730
Net income - - - 2,244,258 2,244,258
Conversion of debt 360,000 3,600 126,900 - 130,500
Public offering 1,840,000 18,400 4,089,331 - 4,107,731
Exercise of stock options 30,790 308 24,067 - 24,375
Exercise of warrants 1,000 10 3,740 - 3,750
---------- ------- --------- ---------- ----------
Balances - September 30, 1995 5,056,524 50,565 8,089,992 (982,213) 7,158,344
Net income (unaudited) - - - 8,071,905 8,071,905
Exercise of stock options (unaudited) 27,454 275 36,723 - 36,998
Exercise of warrants (unaudited) 446,474 4,465 1,669,812 - 1,674,277
---------- ------- --------- ---------- ----------
Balances-June 3O, 1996 (unaudited) 5,530,452 $55,305 9,796,527 7,089,692 16,941,524
========== ======= ========= ========== ==========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Statements Of Cash Flows

<TABLE>
<CAPTION>
Years ended Nine months ended
September 30, June 30,
------------- --------
1994 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 431,303 2,244,258 8,071,905 1,070,011
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 161,112 211,469 268,820 161,907
Changes in assets and liabilities:
Accounts receivable (12,073) (77,281) (581,140) (106,114)
Inventory (70,887) (1,241,050) (4,229,298) (440,015)
Prepaids and other current assets (89,487) 30,795 (996,196) (187,344)
Deferred tax asset - (79,142) (778,528) -
Other noncurrent assets (60,094) (48,976) - -
Accounts payable 87,801 1,847,497 1,270,325 696,419
Accrued expenses, bonuses,
commissions and other liabilities 97,813 1,156,131 615,535 344,188
Deferred income 10,088 245,024 1,822,808 29,039
Federal and state tax payable - 843,737 377,756 -
--------- ---------- --------- ----------

Total adjustments 124,273 2,888,204 (2,229,918) 498,080
--------- ---------- --------- ----------

Net cash provided by operating activities 555,576 5,132,462 5,841,987 1,568,091
--------- ---------- --------- ----------

Cash flows from investing activities:
Purchases of property and equipment (167,039) (407,882) (1,631,567) (197,685)
Purchase of marketable securities - - (1,996,811) -
Increase in other assets - - (41,139) (38,185)
--------- ---------- --------- ----------

Net cash used in investing activities (167,039) (407,882) (3,669,517) (235,870)
--------- ---------- --------- ----------

Cash flows from financing activities:
Principal repayments on long-term debt - (519,500) - -
Proceeds from notes payable - bank 45,000 - - -
Principal repayments on notes payable - bank (25,000) (20,000) - (20,000)
Public offering - 4,107,731 - -
Exercise of stock options - 24,375 36,998 24,375
Exercise of warrants - 3,750 1,674,277 -
--------- ---------- --------- ----------

Net cash provided by financing activities 20,000 3,596,356 1,711,275 4,375
--------- ---------- --------- ----------

Net increase in cash and cash equivalents 408,537 8,320,936 3,883,745 1,336,596

Cash and cash equivalents at beginning of year 230,627 639,164 8,960,100 639,164
--------- ---------- --------- ----------

Cash and cash equivalents at end of year $ 639,164 8,960,100 12,843,845 1,975,760
========= ========== ========= ==========

Supplemental disclosure of noncash financing activities:
Conversion of convertible long-term debt to common stock $ - 130,500 - -
========= ========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

(1) Description of Business and Summary of Significant Accounting Policies

Formation and Business of Company

Nutrition For Life International, Inc. (NFLI or the Company), a Texas
corporation, was formed on September 15, 1993 for the purpose of being the
sole survivor of a merger between Nutrition Express Corporation of
Colorado, Inc. (NEC-Colorado) and Nutrition Express Corporation of Utah,
Inc. (NEC-Utah) and the Company, as discussed in Note 2. The effect of the
merger is that, instead of NEC-Colorado and NEC-Utah conducting operations
through their ownership of a general partnership, Nutrition For Life
International (the Partnership), these corporations have been merged and
the business operations are conducted through one corporation, NFLI. The
assets and liabilities of the Partnership are now the assets and
liabilities of the Company, and the business operations will continue as
they were conducted previously.

The Company operates as a wholesale distributor through its multi-level
network marketing organization, by selling a variety of consumer products
and services through independent distributors in the United States and
abroad. The Company develops products that are designed for health-
conscious consumers, and sells those products to consumers through its
network of independent distributors. The Company offers a product line of
approximately 250 products in eight categories, including nutritional
supplements, health foods, weight management items, skin care products, and
other consumer products.

Distributors actively recruit interested people to become new distributors
for the Company. These recruits are placed beneath the recruiting
distributor in the "network" and are referred to by the Company as that
distributor's "downline." Distributors earn commissions on sales generated
by the distributors in their downline as well as on the sales they generate
directly. The Company has a large number of distributors, and a relatively
small corporate staff to implement its marketing programs and provide
motivational support. The Company's operations depend to a significant
degree on its ability to retain and motivate its existing distributors and
to attract new distributors by continuing to offer new products and new
marketing programs.

Although the Company confines its activities to marketing and distribution,
the manufacturing, packaging, labeling and advertising of the Company's
products are subject to regulation by several federal agencies, as well as
various agencies of the states and localities in which the Company's
products are sold. In addition, the Company's network marketing system is
subject to governmental regulations generally directed at ensuring that
product sales are made to consumers of the products and that advancement
within the marketing organization is based on sales of products rather then
investments in the organization.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

Interim Financial Statements

In the opinion of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in financial position at June 30, 1996, and
for all periods presented have been made. Certain information and footnote data
necessary for fair presentation of financial position and results of operations
in conformity with generally accepted accounting principles have been condensed
or omitted. It is therefore suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto included
herein. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. The results of operations for the period
ended June 30, 1996 are not necessarily indicative of operating results for the
full year.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

Inventory

Inventory consists mainly of health and skin care products, dietary supplements,
food products, and household cleaning products and are stated at the lower of
cost (using the first-in, first-out method) or market.

Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, which range
from 5 to 10 years. Leasehold improvements are amortized over their useful lives
or the life of the related lease, if shorter.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of (SFAS No. 121). This statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment when events indicate that the carrying amount of an asset may not
be recoverable. SFAS No. 121 is effective for fiscal years beginning after
December 15, 1995. The Company does not believe the statement will have a
significant impact on its financial statements.

Intangible Asset

The intangible asset represents the value assigned to nutrition and homeopathic
product formulations and is being amortized over 10 years.

Revenue Recognition

The Company sells its products directly to independent distributors. Sales are
recorded when products are shipped.

Net sales represent orders shipped, less estimated returns and allowances.
Provisions have been made for estimated returns and allowances at the time of
sale. Included in cost of sales are rebates and other commissions which are paid
monthly and are calculated using specific rates based on actual sales volume.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

Income Taxes

The Company adopted the provisions of the Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
(Statement 109) as of October 1, 1993. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. To the extent that current available evidence about the future raises
doubt about the realization of a deferred tax asset, a valuation allowance must
be established. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. In
adopting Statement 109, there was no cumulative effect of the change in
accounting for income taxes.

Earnings Per Common Share

Earnings per common share were computed by dividing net income applicable to
common shares, which has been reduced by the charge for conversion of preferred
stock (see note 3), by the weighted average number of shares of common stock
outstanding, after giving effect to dilutive stock options and warrants. The
stock options and warrants are included as share equivalents using the treasury
stock method, based on the average market price of the common shares during the
year.

Fully-diluted earnings per common share for the years ended September 30, 1994
and 1995 are determined on the assumption that the convertible long-term debt
was converted as of the beginning of the year. Net income applicable to common
shares was adjusted for the interest on the convertible long-term debt, net of
its tax effect. In addition, stock options and warrants are included as share
equivalents using the treasury stock method, based on the market price of the
common shares as of September 30, 1995.

As certain debt was retired with the proceeds of the offering and certain debt
was converted in connection with the offering, supplementary earnings per share
information is presented herein. Supplementary earnings per share for 1995 is
$0.589. Such amount is calculated by increasing net income by the amount of
interest expense related to the debt, net of tax, and increasing the weighted
average shares outstanding by the number of shares issued on the conversion
(278,137 weighted average shares) and the number of shares whose proceeds from
the offering would be required to retire the debt (149,346 weighted average
shares).

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash
held on hand and in short-term, interest-bearing deposits with original
maturities of three months or less.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

(2) Stockholders' Equity

On May 10, 1995, the Company's Board of Directors authorized a three-for-
five stock split, which the Company's shareholders approved on June
30, 1995. In addition, par value was adjusted from $.001 per share to $.01
per share. On November 6, 1995, the Company's Board of Directors authorized
a two-for-one stock split, effected in the form of a stock dividend for
shareholders of record on December 8, 1995. Stockholders' equity has been
restated to give retroactive recognition to the stock split in prior
periods by reclassifying from additional paid-in capital to common stock
the par value of the additional shares arising from the split. In addition,
all share, per share and stock option data have been restated to reflect
these splits, including the information relating to the public offering of
securities discussed below.

On July 10, 1995 the Company completed the issuance of an additional
1,840,000 shares of common stock, after giving effect to the stock splits
noted above, and 920,000 warrants through a public offering at prices of
$2.6875 and $0.125, respectively, resulting in net proceeds (after
deducting issuance costs) of $4,108,000. In connection with the offering,
the holder of the convertible long-term debt converted $130,500 of debt
from one of the convertible notes into 360,000 shares of the Company's
common stock. The remaining principal balance of the notes was repaid from
the proceeds of the offering.

The terms of the warrants currently provide that one warrant entitles the
holder to purchase one share of common stock at a price of $3.75 during a
three-year period ending on July 10, 1998. The Company has the right to
call all of the warrants for redemption on 30 days' prior written notice at
a redemption price of $0.05 per warrant, subject to certain defined
criteria. During the year ended September 30, 1995, 1,000 warrants were
exercised for the issuance of 1,000 shares of the Company's common stock,
resulting in proceeds of $3,750. As of September 30, 1995, there are
919,000 warrants outstanding.

(3) The Merger

Effective June 27, 1994, the shareholders of NEC-Colorado, NEC-Utah and
NFLI approved the merger of the companies (the Merger). The former holders
of NEC-Utah Common Stock and NEC-Colorado Common Stock received a total of
1,383,544 and 1,441,190 shares of NFLI Common Stock, respectively, in
connection with the Merger.

This reorganization was accounted for as a combination of entities under
common control, commonly referred to "as-if pooling-of-interests"
accounting. Accordingly, the Company's financial statements were restated
for all periods prior to the Merger to reflect the financial position,
results of operations, and cash flows of the companies combined in the
Merger on a historical cost basis.

Shermfin Corporation (Shermfin), the largest shareholder of NEC-Utah Common
Stock, was the sole holder of the 500,000 shares of the NEC-Utah Series A
Preferred Stock. Shermfin agreed to convert its Series A Preferred Stock,
in connection with the Merger, if the conversion price was reduced from the
set rate of $.0724 per share to a reduced rate of $.04 per share. As a
result, Shermfin received 12,500,000 shares of NEC-Utah Common Stock,
whereas under the existing conversion rate, Shermfin would have been
entitled to receive 6,906,077 shares. For accounting purposes, the reduced
conversion rate meets the criteria of a "sweetened" conversion; therefore,
net income applicable to common shares
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

has been reduced by $181,243 (the estimated fair value of the shares in
excess of the fair value of the shares which would have been issued
pursuant to the original conversion terms) in the calculation of earnings
per common share for the year ended September 30, 1994.

(4) Property and Equipment

Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1996
---- ----
(unaudited)
<S> <C> <C>
Equipment $1,219,966 2,018,182
Furniture and fixtures 183,241 506,654
Leasehold improvements 108,194 616,656
------- -------
1,511,401 3,141,492
Less accumulated depreciation and
amortization 890,583 1,090,220
------- ---------
Property and equipment, net $ 620,818 2,051,272
======= =========

</TABLE>
(5) Intangible Asset

On April 1, 1988, NEC-Utah exchanged shares of its common stock for all of
Homeopathy, Inc.'s (HI) outstanding common stock. HI's principal assets
consisted of nutritional and homeopathic formulations, which were assessed
at the value of NEC-Utah's common stock issued at the time of the
transaction. On February 28, 1989, NEC-Utah obtained an independent
appraisal of the fair market value of the formulations. Based on this
appraisal, NEC-Utah, adjusted their books to reflect a writedown of the
intangible to the appraisal value of $820,000. The intangible asset was
contributed to the Partnership effective March 1, 1989.

(6) Convertible Long-term Debt

On July 14, 1995, a stockholder converted $130,500 of a $250,000 note
payable, pursuant to the terms of the note, into 360,000 shares of the
Company's stock, in conjunction with the stock offering discussed in note
2. In July, 1995, the Company repaid the remaining $119,500 of this note
payable and other notes payable with outstanding balances of $400,000 from
the proceeds of the offering. After the conversion and public offering, the
stockholder owns 30.4% of the Company's outstanding common stock at
September 30, 1995.

For the years ended September 30, 1994 and 1995, the Company had cash paid
for interest of $66,333 and $51,499, respectively.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

(7) Income Taxes

The following reconciles federal income taxes computed at the statutory
rate with income taxes as reported:

<TABLE>
<CAPTION>
Years ended Nine months
September 30, ended June 30,
------------- --------------
1994 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Expected income tax expense at 34% $ 146,643 1,023,010 4,485,086 363,804
State taxes - 121,916 659,572 42,800
Nondeductible amortization of
intangible assets 30,694 30,694 23,020 23,020
Nondeductible expenses
associated with the Merger 17,250 -- -- --
Utilization of loss carryforwards (197,409) (422,701) (91,800) (429,624)
Other items, net 2,822 11,676 43,647 --
----- ------ ------ -------
Income tax expense $ -- 764,595 5,119,525 --
======= ======== ========= =======
</TABLE>

The Company adopted Statement 109 as of October 1, 1993. There was no
cumulative effect to this change. Deferred tax assets are as follows:
<TABLE>
<CAPTION>

September 30, June 30,
1995 1996
---- ----
(unaudited)
<S> <C> <C>
Loss carryforwards $ 187,956 91,800
Unearned income recognized for tax purposes 76,168 775,581
Book over (under) tax depreciation 2,974 (9,711)
-------- -------
267,098 857,670
Less valuation allowance (187,956) _
------- -------
Net deferred tax assets $ 79,142 857,670
======= =======

</TABLE>
At September 30, 1995, the Company has approximately $553,000 of net
operating loss available to carryforward subject to limitations imposed by
the Tax Reform Act of 1986. This net operating loss will begin to expire in
2001. As of September 30, 1995, the Company has established a valuation
allowance related to these carryforwards. As of June 30, 1996, Management
believes future earnings levels will be sufficient to permit the Company to
realize net deferred tax assets.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

(8) Stock Option Plan

In planning the Merger, NEC-Utah and NEC-Colorado determined that a stock
option plan to provide incentives for employees and consultants of NFLI
would promote the interests of NFLI and its stockholders. The Board of
Directors of NFLI approved the 1993 Stock Option Plan (the 1993 Plan) in
connection with its approval of the Merger. Pursuant to the 1993 Plan, the
Board of Directors of NFLI reserved a total of 282,000 shares of its common
stock for the grant of options to purchase the Company's common stock.
Options to purchase 55,844 shares have been issued in exchange for
previously existing options to acquire NEC-Utah and NEC-Colorado common
stock. During 1995, the Company issued 30,790 shares to a director of NFLI
from the exercise of options, resulting in proceeds of $24,375. The
remaining options to purchase 25,054 shares are exercisable until March
31, 1996 at an exercise price of $1.40 per share. No other options are
reserved for issuance. The issuance of options is at the discretion of the
Company's Board of Directors.

In October 1994, the Company granted options to key employees and directors
to purchase an aggregate of 154,800 shares of the Company's common stock at
$1.67 per share. One-third of the shares underlying the option became
exercisable in cumulative installments 12 months, 24 months and 36 months
after the date of grant. Options terminate 5 years from the date of grant,
except that if an employee leaves the employ of the Company, the options
will terminate 30 days thereafter.

The Board of Directors of NFLI approved the 1995 Stock Option Plan (the
1995 Plan) in March 1995. Pursuant to the 1995 Plan, the Board of Directors
of NFLI reserved a total of 240,000 shares of its common stock for the
grant of options to purchase the Company's stock.

In March 1995, the Company granted options to key employees and directors
to purchase an aggregate of 102,000 shares of the Company's common stock at
prices ranging from $1.88 to $2.25 per share. The terms of the options are
similar to those granted in the 1993 Plan. In July 1995, the Company
granted options to an officer of the Company to purchase 50,000 shares of
the Company's common stock at $2.69 per share.

All options have been issued with exercise prices in excess of the market
value of the common shares at the date of grant.
<TABLE>
<CAPTION>

Details of stock options are as follows:

1995 Number of shares Option price
---- ---------------- ------------
<S> <C> <C>
Granted 306,800 $1.67-2.69
Exercised 30,790 0.79
Outstanding, end of year 331,854 1.40-2.69
</TABLE>

<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

Under the 1993 Plan and the 1995 Plan, the Company may issue options to
purchase up to an additional 159,356 shares of common stock.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
No. 123). This statement establishes a fair value based method of
accounting for an employee stock option or similar equity instrument;
however, it also allows a company to continue to measure compensation cost
for those plans using the intrinsic value based method of accounting. The
SFAS No. 123 is effective for fiscal years beginning after December 15,
1995. The Company has not determined which method of accounting they will
select.

(9) Commitments and Contingencies

Operating Leases

The Company has noncancelable operating leases, primarily for office and
warehouse space. Rental expense under operating leases for the years ended
September 30, 1994 and 1995 amounted to approximately $161,000 and
$161,000, respectively.

Future minimum lease payments under noncancelable operating leases as of
September 30, 1995 are as follows:
<TABLE>
<CAPTION>
Years ending Approximate
September 30, amount
------------- ------
<S> <C>
1996 $ 209,917
1997 264,359
1998 246,992
1999 249,726
2000 and thereafter 440,010
-------
$1,411,004
=========
</TABLE>
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

Legal Proceedings

On or about March 1, 1991, a lawsuit was filed in the Superior Court of
California, Los Angeles County, by James M. Jordan, former President of
NEC-Utah, against the Partnership and its general partners. Mr. Jordan
sought a determination that a Distribution Agreement (the Agreement), dated
February 27, 1989 was valid and enforceable against the Partnership. No
specific damage claim was made. The Partnership denied the Agreement was
binding upon it and cross-complained against Mr. Jordan for recession of
the Agreement and for damages from him for, among other things, breach of
fiduciary duty and breach of contract. The court found in favor of the
Partnership on all counts and awarded damages and costs of $541,291 (the
Judgement).

In 1993, the Partnership collected NEC-Utah common stock valued at $114,458
($.03 per share) from Mr. Jordan, which was presented as a reduction to
administrative expenses for recovery of costs incurred to litigate this
case. Upon combination of the entities in the Merger, this stock was
retired and the recognition of the $114,458 was reversed as these shares
were effectively treasury shares of NFLI.

Mr. Jordan filed an Appeal of the Judgment. The Judgment was affirmed
October 21, 1994 by the Court of Appeal of the State of California, Second
Appellate District, Division Three. In September 1995, the Company
collected $160,680 from the sale of Mr. Jordan's house which is recorded as
other income in the accompanying financial statements. On October 4, 1995,
the Bankruptcy Court of the Central District of California declared Mr.
Jordan's debt to the Company nondischargeable. Mr. Jordan did not file a
notice of appeal. The Company has only received partial collection on the
Judgment and due to Mr. Jordan's financial circumstances, it is presently
unknown whether additional amounts will be collected and, therefore, no
additional amounts have been recorded in the accompanying financial
statements. The Company intends to continue its efforts to collect on the
balance of the Judgment.

(10) Related Party Transactions

The Company purchases a significant portion of their inventory from one
vendor. The President of this vendor is a director of the Company and,
until June 1995, the vendor was owned by a major stockholder of the
Company. The Company believes the terms it has obtained from the vendor are
at least as favorable as those that could have been obtained from third
parties. The items purchased are readily available from other vendors.
During the years ended September 30, 1994 and 1995 the Company purchased
$1,440,000 and $2,258,000 of goods, respectively, from this vendor.
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
Notes to Financial Statements

(11) Foreign Sales

For the years ended September 30, 1994 and 1995, the Company's net sales
from foreign operations were $2,860,000 and $6,482,000, respectively.
During the year ended September 30, 1995, $4,157,000 of the total foreign
sales were to customers in Canada. The gross profit percentages on all
foreign sales are consistent with the overall gross profit percentages.

(12) Subsequent Events

Subsequent to year end, the Company issued warrants to purchase 500,000
shares of the Company's common shares, after giving effect to the stock
split discussed in note 2, to a distributor of the Company. The warrants
entitle the holder to purchase one share of the Company's common shares at
a price of $12.50 per share at any time during the period from April 15,
1996 to October 14, 1998. In April, 1996, the holder of these warrants
agreed to the cancellation of these warrants and they are no longer
outstanding (unaudited).

(13) Class Action Litigation (unaudited)

In August 1996, a suit was filed against the Company in the United States
District Court for the Southern District of Texas, Houston Division (the
"Federal Action"). Also named as defendants were a key distributor of the
Company, the largest beneficial owner of the Company's Common Stock,
certain officers of the Company and the investment banking firms which
previously served as underwriters of a public offering of the Company's
securities. The Federal Action was brought as a class action on behalf of
persons who became "instant" executive distributors of the Company and
persons who purchased the Company's Common Stock and Warrants between July
11, 1995 and July 16, 1996.

The principal allegations of the complaint in the Federal Action are that
certain aspects of the executive distributor compensation program
constituted an illegal pyramid scheme and the sale of an unregistered
security and that the Company failed to disclose the existence of these
aspects and the key distributor's past. The plaintiffs seek unspecified
damages, costs and fees of litigation and punitive damages.

In August 1996, a suit was also filed against the Company and the same
defendants in the Federal Action in the District Court of Harris County,
Texas (the "State Action"). The State Action was brought as a class action
on behalf of persons who purchased common stock and common stock purchase
warrants of the Company during the period from July 11, 1995 through July
16, 1996.

The principal allegations of the complaint in the State Action are that
certain aspects of the executive distributor compensation program
constituted an illegal pyramid scheme and that the Company failed to
disclose that its outstanding financial results were directly attributable
to the questioned aspects of its marketing practices. The plaintiffs seek
unspecified damages, costs and fees of litigation and punitive damages.

(14) Securities and Exchange Commission Investigation (unaudited)

In April 1996, the Company received notice from the Securities and Exchange
Commission (the "Commission") of a formal order of private investigation
into possible violations by the Company of the federal securities laws.
Although the Commission may explore various acts of, and filings by, the
Company, the inquiry appears to be concentrated on the Company's executive
level distributor program. With the assistance of special counsel, the
Company is cooperating in providing information requested by the
Commission. The Company cannot predict the ultimate outcome of the
investigation.
<PAGE>

No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus
and, if given or made, such information or representations must not be relied on
as having been authorized by the Company. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy, by any person in any
jurisdiction in which it is unlawful for such person to make such offer or
solicitation. Neither the delivery of this Prospectus nor any offer,
solicitation or sale made hereunder shall under any circumstances create an
implication that the information herein is correct as of any time subsequent to
the date of this Prospectus.

---------------------------

<TABLE>
<CAPTION>
TABLE OF CONTENTS

Page
----
<S> <C>
Prospectus Summary.............................................
Risk Factors...................................................
The Company....................................................
Use of Proceeds................................................
Dilution.......................................................
Dividend Policy................................................
Price Range of Securities......................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................
Business.......................................................
Legal Proceedings..............................................
Management.....................................................
Principal Shareholders.........................................
Certain Transactions...........................................
Description of Securities......................................
Shares Eligible for Future Sale................................
Legal Matters..................................................
Experts........................................................
Index to Financial Statements.................................. F-1
</TABLE>

434,416 Shares of Common Stock

NUTRITION FOR LIFE
INTERNATIONAL, INC.

---------------

PROSPECTUS

---------------

December __, 1996
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers
-----------------------------------------

Section 2.02-1 of the Texas Business Corporation Act authorizes the
indemnification of directors and officers under certain conditions that may
include the possibility of indemnification against liabilities that may be
incurred under the Securities Act of 1933, as amended.

It is provided in Article SIXTEENTH of the Articles of Incorporation of
Nutrition for Life International, Inc. that:

SIXTEENTH: The corporation shall indemnify any and all of its directors or
officers or former directors or officers or any person who may have served
at its request as a director or officer of any other corporation in which
it owns shares of capital stock or of which it is a creditor, against
expenses actually and necessarily incurred by them, in connection with the
defense of any action, suit or proceeding in which they, or any of them,
are made parties, or a party, by reason of being or having been directors
or officers of the corporation, or for such other corporation, except in
relation to matters to which any such director or officer or former
director or person shall be adjudged in such action, suit or proceeding to
be liable for gross negligence or willful misconduct in the performance of
duty. Such indemnification shall not be deemed exclusive of any other
rights to which those indemnified may be entitled, under any bylaw,
agreement, vote of shareholders, or otherwise.

The general effect of the foregoing provisions of Nutrition for Life
International, Inc.'s Articles of Incorporation is to provide for mandatory
indemnification of Nutrition for Life International, Inc.'s directors, officers
and employees against liabilities arising from the situations described above to
the full extent permitted by the common law, the Texas Business Corporation Act,
and any other statutory provisions.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed 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.

Item 25. Other Expenses of Issuance and Distribution
-------------------------------------------

The estimated expenses of the offering described in this Registration
Statement are as follows:

<TABLE>

<S> <C>
Registration Fee.............. $ *
NASD Filing Fee............... *
Printing Expenses............. 6,000
Accounting Fees and Expenses.. 10,000
Legal Fees and Expenses....... 20,000
Blue Sky Fees and Expenses.... 3,000
Registrar and Transfer Agent.. 3,000
Miscellaneous................. 3,000
-------
Total: $45,000
=======
</TABLE>
- ----------------
* These fees were paid in connection with the initial filing of the
Registration Statement.
<PAGE>

Item 26. Recent Sales of Unregistered Securities
---------------------------------------

During the past three years, the Registrant has not sold any securities
which were not registered under the Securities Act of 1933 as amended (the
"Act") except that: (i) options to purchase 30,790 shares were exercised in
March 1995 by a Director of the Registrant; and (ii) Shermfin Corp., received
360,000 shares of the Registrant's Common Stock in connection with the
conversion of $130,500 principal amount of convertible notes in July 1995.

With respect to the issuances of shares described above, Registrant has
relied and intends to rely on, Section 4(2) of the Act as an exemption from the
registration requirements of Section 5 of the Act. Both the optionee and
noteholder were shareholders and directors of the Registrant at the time of
acquisition of the above described shares and are sophisticated investors with
prior business relationships with the Registrant. Appropriate representations
of investment intent were received in connection with the share issuances, the
certificates evidencing the shares have been imprinted with the standard
restricted legend, and stop transfer instructions have been provided to the
transfer agent of the Registrant.

Item 27. Exhibits
--------

Exhibit 2.1 Agreement and Plan of Reorganization, filed as a Exhibit to
the Registration Statement on Form S-4 (file no. 33-70312),
which Exhibit is incorporated herein by this reference.

Exhibit 3.1 Articles of Incorporation, as amended*

Exhibit 3.2 Bylaws, filed as an Exhibit to the Registration Statement on
Form S-4 (file no. 33-70312), which Exhibit is incorporated
herein by this reference.

Exhibit 4.1 Specimen Certificate of Nutrition for Life International,
Inc.'s Common Stock*

Exhibit 4.2 Specimen Warrant*

Exhibit 4.3 Warrant Agreement with Corporate Stock Transfer, Inc.*

Exhibit 5 Opinion of Bearman Talesnick & Clowdus Professional
Corporation relating to the Nutrition for Life
International, Inc. Common Stock and Warrants that are the
subject of this Registration Statement*

Exhibit 10.1 1993 Stock Option Plan, filed as an Exhibit to the
Registration Statement on Form S-4 (file no. 33-70312),
which Exhibit is incorporated herein by this reference*

Exhibit 10.2 1995 Stock Option Plan*

Exhibit 10.3 Second Amended and Restated Convertible Debenture in the
principal amount of $275,000, dated June 29, 1992 made by
Nutrition Express Corporation of Utah, Inc. in favor of
Shermfin Corp., filed as an Exhibit to the Registration
Statement on Form S-4 (file no. 33-70312), which Exhibit is
incorporated herein by this reference.

Exhibit 10.4 Agreement, dated August 12, 1991 between Nutrition Express
Corporation of Colorado, Inc. and Shermfin Corp., filed as
an Exhibit to the Registration Statement on Form S-4 (file
no. 33-70312), which Exhibit is incorporated herein by this
reference.

Exhibit 10.5 Agreement, dated August 12, 1991 between Nutrition Express
Corporation of Utah, Inc. and Shermfin Corp., filed as an
Exhibit to the Registration Statement on Form S-4 (file no.
33-70312), which Exhibit is incorporated herein by this
reference.

Exhibit 10.6 Convertible Promissory Note, dated October 12, 1989, the
principal amount of $250,000 made by Nutrition Express
Corporation of Colorado, Inc. in favor of Shermfin Corp.,
<PAGE>

filed as an Exhibit to the Registration Statement on Form
S-4 (file no. 33-70312), which Exhibit is incorporated
herein by this reference.

Exhibit 10.7 Employment Agreement dated May 10, 1995, between Nutrition
for Life International, Inc. and David P. Bertrand*

Exhibit 10.8 Employment Agreement dated May 10, 1995, between Nutrition
for Life International, Inc. and Jana Mitcham*

Exhibit 10.9 Consulting Agreement, dated February 22, 1995, between
Nutrition for Life International, Inc. and Cohig &
Associates, Inc.*

Exhibit 10.10 Form of Consulting Agreement with Cohig & Associates, Inc.*

Exhibit 10.11 Agreement, dated March 3, 1995, between Nutrition for Life
International, Inc. and Shermfin Corp.*

Exhibit 10.13 Agreement, dated July 15, 1994 between Nutrition for Life
International, Inc. and Dr. David Santiago (N.F.P. Group,
Inc.), as amended by letter dated June 2, 1995*

Exhibit 10.14 Warrant Agreement, dated October 15, 1995 with Kevin
Trudeau, filed as an Exhibit to the Report on Form 10-KSB
for the fiscal year ended September 30, 1995 of the
Registrant, which Exhibit is incorporated herein by this
reference.

Exhibit 10.15 Lease Agreements for office and warehouse facilities with
non-affiliates, filed as an Exhibit to the Report on Form
10-KSB for the fiscal year ended September 30, 1995 of the
Registrant, which Exhibit is incorporated herein by this
reference.

Exhibit 10.16 1995 Non-Discretionary Stock Option Plan, filed as an
Exhibit to the Report on Form 10-KSB for the fiscal year
ended September 30, 1995 of the Registrant, which Exhibit is
incorporated herein by this reference.

Exhibit 10.17 Assurance of Voluntary Compliance for the State of Illinois,
dated July 16, 1996, filed on July 31, 1996 as an Exhibit to
the Report on Form 8-K, which Exhibit is incorporated herein
by this reference.

Exhibit 10.18 Administrative and Consulting Services Agreement, dated July
29, 1996, between Distributor Services, L.L.C. and Nutrition
For Life International, Inc.

Exhibit 10.19 Form of Distributor Agreements of Nutrition For Life
International, Inc.

Exhibit 23.1 Consent of KPMG Peat Marwick LLP, Certified Public
Accountants

Exhibit 23.2 Consent of Bearman Talesnick & Clowdus Professional
Corporation

Exhibit 24 Power of Attorney

___________________________________________________

* These exhibits were previously filed as exhibits to this
Registrant Statement (File No. 33-92274).

<PAGE>

Item 28. Undertakings.
------------

1. The undersigned small business issuer hereby undertakes:

(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933 (the "Act");

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereto) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;

(b) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.

2. Insofar as indemnification for liabilities arising under 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 SEC, 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
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 Act and
will be governed by the final adjudication of such issue.

3. The undersigned small business issuer hereby undertakes that:

(1) For determining any liability under the Act, the information
omitted from the form of Prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the small business issuer pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
<PAGE>

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 City of Houston,
State of Texas, on November, 11, 1996.

NUTRITION FOR LIFE INTERNATIONAL, INC., a Texas
Corporation

By: /s/ David P. Bertrand
-------------------------------------
David P. Bertrand, President

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Power of Attorney, filed on May 19, 1995 with the Registration
Statement of this Registrant on Form SB-2, which is hereby incorporated by
reference, this Registration Statement has been signed on the above date by
David P. Bertrand as attorney-in-fact for the following officers and directors
of the Registrant.

David P. Bertrand President, Chief Executive Officer, Director and
Chairman of the Board of Directors

Jana Mitcham Executive Vice President, Secretary and Director

Barry C. Loder Vice President and Chief Financial Officer.

Ronnie D. Meaux Vice President, Treasurer, Assistant Secretary,
and Principal Accounting Officer

M.F. Florence Director

Richard S. Kashenberg Director

Gregory Pusey Director

Dated: November 11, 1996 /s/ David P. Bertrand
----------------------------------------
David P. Bertrand, Attorney-In-Fact

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and directors
of the Registrant by virtue of their signatures to this Registration Statement
appearing below hereby constitutes and appoints David P.Bertrand and Jana
Mitcham, and each of them, with full power of substitution, as attorney-in-fact,
in his name place and stead to execute any and all amendments to this
Registration Statement in the capacity set forth opposite their names and hereby
ratifies that said attorneys-in-fact may do by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following person in the
capacity indicated on the date set forth opposite his signature.

/s/ F. Wayne Ballenger
Dated: November 7, 1996 __________________________________
F. Wayne Ballenger, Director

/s/ John R. Brown, Jr.
Dated: November 8, 1996 __________________________________
John R. Brown, Jr., Vice-President

<PAGE>

EXHIBIT 10.18

ADMINISTRATIVE AND
CONSULTING SERVICES AGREEMENT
-----------------------------

This Administrative and Consulting Services Agreement is made effective the
29th day of July, 1996, between Distributor Services, L.L.C., an Illinois
Limited Liability Company ("DS"), with its principal offices at 7300 North
Lehigh Avenue, Niles, Illinois 60714, and Nutrition for Life International,
Inc., a Texas corporation ("NFLI"), with its principal offices at 9101 Jameel,
Dallas, Texas.

RECITALS:
--------

WHEREAS, NFLI, a network marketing company which sells and promotes
nutritional aids, vitamins, supplements and related products, desires to engage
DS to provide certain administrative and consulting services as provided herein
and DS desires to provide those services on the terms reflected herein;

In exchange for the mutual provisions and agreements set forth below, the
parties agree as follows:

PROVISION OF SERVICES
----------------------

1. Except to the extent that NFLI produces its own material in-house, DS
shall have the exclusive right to produce and sell, at its own expense, all NFLI
recruiting and training material and in consideration for DS producing and
marketing those materials in a manner which promotes NFLI's interests, DS shall
be entitled to all revenues received from the sale thereof;
<PAGE>

2. DS shall have the exclusive right to produce, organize and sell, at its
own expense, admission to all NFLI-sponsored recruiting or promotional events
and in consideration for DS producing and organizing these meetings in a manner
which promotes NFLI's interests, that DS shall be entitled to all revenues
received from those sales of admission thereto.

3. NFLI shall have the exclusive right of approval over the content of all
material and meetings produced, organized or sold pursuant to this Agreement.
DS shall use its best efforts to ensure that all materials and program content
submitted to NFLI for approval are consistent with NFLI's policies and
practices.

4. NFLI shall provide DS on an ongoing and current basis with the names and
addresses of and all other relevant information regarding NFLI distributors,
together with such other information as is reasonably necessary to assist DS in
the provision of services pursuant to this Agreement.

5. DS will produce and provide to NFL each month at least four master
cassettes for reproduction and sale by NFLI in NFLI's Master Developer series,
which tapes shall be consistent with NFLI's policies, and the purposes of the
Master Developer series, and promote the best interest of NFLI. In
consideration for the foregoing, commencing September 15, 1996, for sales made
in August, 1996, NFLI will pay DS $17 per month per Master Developer subscriber.
Said payments shall be made on the 15th day of every month for sales made the
preceding month, shall be adjusted for returns, and shall be subject to an
annual accounting to be conducted at DS's option and expense.

6. DS and NFLI shall own a joint copyright in and other proprietary
ownership of all material produced by DS and approved by NFLI pursuant to this
Agreement.

-2-
<PAGE>

Nothing herein shall affect copyright ownership of material which is
first produced or created for a commercial purpose distinct from meeting DS's
obligations under this agreement, but which is thereafter supplied to NFLI
pursuant to this Agreement.

7. In consideration for the terms of this Agreement, and in the interests
of promoting consistency in NFLI and DS's marketing programs, DS shall provide
consulting services to NFLI, without additional compensation, with respect to
NFLI's marketing strategy and program, including comments and suggestions with
respect to NFLI's television show, weekly teleconference, distributor success
kit, catalogues, new products, product sales flyers, magazines, distributor
applications, product order forms and other communications with distributors.

8. Warranties. NFLI and DS represent that they have the power and authority
to enter into this Agreement and that entering into this Agreement will not
violate any prior understandings or agreements, and that they will comply with
all applicable federal, state and local laws and regulations in connection with
or related in any way to its distributors, potential distributors, its products
and the means and methods of the sale of those products, including any
assurances of voluntary compliance entered into by NFLI.

9. Term. The term of this Agreement shall commence on July 29, 1996, and
shall continue for a period of fifteen (15) years. The parties shall thereafter
negotiate successive fifteen year terms on substantially the same terms,
negotiating in good faith only those modifications which are appropriate in
light of any intervening change in circumstance. Either party may terminate
this Agreement for breaches of any material obligation by the other, which is
not cured within twenty (20) days after notice from the non-breaching party that
specifies the

-3-
<PAGE>

nature of the breach in reasonable detail. Notwithstanding the foregoing,
however, if the breach is subject to cure, the breaching party shall not be
deemed to be in default if it diligently begins to cure that breach within
forty-eight (48) hours of notice, and actually cures that breach within forty-
five (45) days therefrom.

10. Force Majeure. Neither party will be in default of this Agreement if
such party's performance is prevented by an external cause beyond its reasonable
control; provided that such party gives prompt written notice to the other party
and the time for such party's performance under this Agreement will be extended
by the period of time equal to the duration of the cause that prevented such
performance.

11. Assignment. No party will assign this Agreement or any portion thereof
to any third party without the prior written consent of the other, except that
either party may assign this Agreement to the other entities which are owned or
controlled by the same persons that own or control it at the time of the
assignment.

12. Notices. Any notice required or permitted to be given under this
Agreement will be given in writing to the parties at their respective address as
set forth below:

A. DS
7300 North Lehigh Avenue
Niles, Illinois 60714
Attn: Mr. Kevin McEneely

B. NFLI
9101 Jameel
Houston, Texas 77040
Attn: Mr. David Bertrand, President

-4-
<PAGE>

Any such notice will be deemed given on the earlier of (i) the date when it is
actually received, or (ii) five (5) days after mailing to the address of the
receiving party or any new address that the party has provided.

13. Entire Agreement. This Agreement constitutes the entire agreement and
----------------
understanding between the parties with respect to the subject matter and
supersedes all prior understandings, proposals and communications on the subject
matter.

14. Amendment Waiver. This Agreement may not be amended or modified without
----------------
the written consent of both parties. No rights of any party will be waived
except in writing signed by such party. No waiver of any right in this Agreement
will imply or constitute any future waiver or such right.

15. Attorneys' Fees. In the event of any legal action to enforce this
---------------
Agreement, the party that prevails in such action will be entitled, in addition
to any other relief granted, to recover from the other party the costs and
expenses of such enforcement, including reasonable attorneys' fees and the fees
and expenses of expert witnesses.

16. Governing Law. This Agreement will be governed and construed in
-------------
accordance with the laws of the State of Illinois. Each party irrevocably
consents to the personal jurisdiction and placement of venue in the state and
federal courts located within the City of Chicago, Illinois for the purposes of
enforcing this Agreement, and agrees that such courts will exclusively
constitute the permitted forums for resolving disputes under or in connection
with this Agreement.

17. Severability. If any provision of this Agreement or portion of any such
------------
provision is held invalid or unenforceable as written by a court of competent
jurisdiction, such

-5-
<PAGE>

provision or portion thereof affected by such holding will be modified, to the
extent possible, by reducing its scope or duration so that it is enforceable to
the maximum extent permissible. If said modification is not possible, the
affected provision or portion thereof will be stricken, and all remaining
provisions of this Agreement will continue in full force and effect.

18. Independent Contractors. The parties are independent contractors, and
nothing in this Agreement will be deemed to place the parties in the
relationship of employer-employee, principal-agent, or partners or joint
venturers. Neither party will under any circumstances be liable for any
withholding taxes, payroll taxes, disability insurance payments, unemployment
taxes and other similar taxes or charges on the payments made by the other party
to such other party's personnel.

19. Counterparts. This Agreement may be executed in counterparts.

The parties have executed this Agreement as of the effective date.

DISTRIBUTOR SERVICES, L.L.C. NUTRITION FOR LIFE
INTERNATIONAL, INC.

By: _______________________________ By: _______________________________

Dated: ____________________________ Dated: ____________________________

-6-

<PAGE>

EXHIBIT 10.19

NUTRITION FOR LIFE INTERNATIONAL
DISTRIBUTOR AGREEMENT

YOU:
===============================================================================

Last Name First Name Middle Initial
- -------------------------------------------------------------------------------
Address City State Zip
- -------------------------------------------------------------------------------
Telephone Social Security No.
===============================================================================

-PLEASE PRINT-

YOUR SPONSOR:
===============================================================================

<TABLE>

<S> <C>
TERMS AND CONDITIONS: INITIALS:
</TABLE>
I want to become an independent Nutrition For Life distributor. I authorize
Nutrition For Life International, Inc. to charge my credit card listed below (or
I have enclosed a check) for the Nutrition For Life Distributor Success Kit. I
understand that this is the only requirement to become a Nutrition For Life
distributor.

I would like to purchase some Nutrition For Life products. Please send me a
varied assortment of products totaling the amount of (check one) [_] $500
[_] $1,000 [_] $1,500 or see attached order for other product packages or
product mix. I understand that I do not have to purchase any products to become
a Nutrition For Life distributor, but I do so of my own accord. I further
understand that I must retail or use in business building 70% of the products
that I purchase before I purchase more products.

I hereby authorize Nutrition For Life International to enroll me in its optional
Order Assurance Program. Please send me Product Redemption Certificates for the
months that I fail to place an order by the last day of the credit month. Send
the Certificate in the amount checked below or for up to this amount (see
reverse of this form for program description). I understand that the Redemption
Certificate is redeemable for Nutrition For Life products and subject to
limitations (see Policies and Procedure Manual for complete details). I
authorize Nutrition For Life International to withdraw funds for authorized
Product Redemption Certificates directly from my Check-By-Phone or major credit
card account listed below on a monthly basis. I understand that this is
optional. *There is an additional $1 processing charge included for automatic
transactions.

Enroll me on OAP: [_] Check-By-Phone Option (enclose voided check) [_] Credit
Card Option
Amount Authorized:* [_] $41 [_] $101 [_] $301

I authorize Nutrition For Life International to enroll me in Virtual Voice
Messaging Service. For more information see the flyer in the Distributor
Success Kit.
Enroll me in Virtual Voice: [_]VIRTUAL VOICE: $7.00 a month rental, $.19 cents
per minute-U.S., $.45 cents per minute-Canada

(800 Nationwide Access-30 sec. minimum, 6 sec. increment billing.)

I authorize Nutrition For Life International to charge my credit card listed
below, or to debit my checking account (by using all the information on the
enclosed check) in the amount of $35.00 [thirty-five dollars] per month* for
the Nutrition for Life Master Developer Series. I understand that this is
optional. *There is an additional $1.00 processing charge included for automatic
transactions.

Please do deduct two cents per downline distributor, plus a $5.00 monthly fee,
from my monthly bonus check for the optional Nutrition For Life Data Processing
Service.

I have read the terms and conditions of this agreement listed on the reverse
side of this form and agree to abide by the company policies and procedures as
stated on this agreement and in the Nutrition For Life International Policies
and Procedure Manual. (Agreement will not be accepted unless this box is
initialed.)

I have read the Nutrition For Life Marketing & Compensation Plan Explanation and
understand all of my options. (Agreement will not be accepted unless this box
is initialed.)

I authorize Nutrition For Life International to enroll me in the Check-By-Phone
program using all the information that is on my enclosed check and I hereby
authorize Nutrition for Life or its authorized agent in accordance with this
Agreement to initiate debit/credit entries to our checking account as indicated
by the enclosed check. This authority is to remain in full force and effect
until Nutrition for Life has received written notification from me of its
termination in such a manner as to afford Nutrition for Life International
reasonable opportunity to act on it pursuant to this Agreement. As a convenience
to me, I hereby request and authorize you to withdraw from my Check-By-Phone,
checks made on my account and payable to the order of Nutrition For Life
International, provided there are sufficient collected funds in my account to
pay such checks upon presentation. This authority is to remain in effect until
you actually receive such notice; I agree that you shall be fully protected in
honoring such check. I further agree that if any such check be dishonored,
whether intentionally or inadvertently, you shall be under no liability
whatsoever even though such dishonor results in the forfeiture of product,
bonuses or privileges I may have been entitled to as an "Active Distributor."
<PAGE>

If a product purchase accompanies this agreement and you are a resident of
California, South Dakota, Texas, Utah or Wisconsin you must add the appropriate
sales tax based on retail value. Hawaii & Alaska charged 2nd Day shipping -
PLEASE CALL 1-800-800-7377 FOR INFORMATION.

================================================================================
[_] YES! I want to be an independent Nutrition For Life distributor! I have read
everything on the front and back of this form and understand all of my options.
I also understand that there is a 10% restocking fee should I decide to return
any unopened product I purchase.

Signature X Today's Date
------------------------------------ ----------

Visa#/MC#/Discover#/AmEx# Expiration Date:
--------------------- ------
(or check enclosed for the appropriate amount, made payable to Nutrition For
Life)
FAX OR FED EX
THIS APPLICATION TO: THIS APPLICATION TO:
713-460-8599 Nutrition For Life - 9101 Jameel - Houston, TX 77040
===============================================================================

NUTRITION FOR LIFE DISTRIBUTOR AGREEMENT TERMS OF ENROLLMENT

INITIALS
--------
1. As a Nutrition For Life Distributor, I acknowledge that
I am an independent contractor and not an agent or employee
of Nutrition For Life International, Inc.

2. As a Nutrition For Life Distributor, I will make no
statements, disclosures, or representations to sell Nutrition
For Life products or services, or in recruiting other
prospective Distributors, other than those contained in
approved Nutrition For Life literature.

3. I understand that no purchase other than a Distributor
Success Kit is necessary to become a Nutrition For Life
Distributor. I further understand that I am under no
obligation to make any financial investment to become a
Nutrition For Life Distributor.

4. I understand that if no sales volume is generated for
12 consecutive months, this Agreement shall automatically
terminate and my Distributorship will be cancelled and
any future Bonuses will be forfeited. I understand that
I may reenroll in Nutrition For Life International, Inc.
by submitting a new Distributor Agreement and purchasing
a new Distributor Success Kit. If I choose to become an
Executive, I must generate a sales volume of at least $40
DC every other month to maintain my Executive status and
stay in the 4x7 Executive Organization. If I fail to meet
this minimum, I will lose my executive statusand become a
part of my sponsor's Personal Group.

5. I understand that, in order to maintain a viable
marketing system and to comply with changes in
applicable laws, Nutrition For Life International, Inc.
reserves the right to change prices, company policies,
company literature and/or the compensation plan, without
prior notice.

6. I understand that should I wish to terminate my
distributorship, I must notify Nutrition For Life in writing.
At that time, any salable product may be returned to Nutrition
For Life for a refund equal to 100% of the original purchase
price less any commissions or bonuses paid, less a 10%
handling fee. This refund is subject to the distributor's
prior representations regarding compliance with the 70% rule,
referred to in this document and in the company's policy and
procedure manual. In any state in which a specific buyback
requirement has been enacted which may vary from the
foregoing. Nutrition For Life shall repurchase products
in accordance with the applicable statute. Perishable
items, such as food or skin care products, will not be
refunded after 90 days from date of purchase. I also
understand that all tapes, seminars, training materials
and brochures offered by Nutrition For Life are optional and
are non-refundable.

<PAGE>

NUTRITION FOR LIFE ORDER ASSURANCE PROGRAM (OAP) TERMS AND CONDITIONS

1. You may cancel the optional Order Assurance Program at any time by sending a
written notice to Nutrition For Life International, Inc. bearing your signature,
printed name, address, and social security number. This cancellation will be
effective the month after it is received by Nutrition For Life International,
Inc.

2. Nutrition For Life International, Inc. cannot obtain more funds from your
account (on a monthly basis) than those you have pre-authorized.

3. Nutrition For Life International, Inc. will charge $1.00 per month for all
OAP transactions. This processing fee is included in the amount authorized on
the OAP section on the front of this agreement.

4. CREDIT CARD AND CHECK-BY-PHONE: The OAP will automatically withdraw funds so
that your credit order is equal to the amount you have authorized on the reverse
of this form. Example: If you have a $40 order for the month, but your OAP
authorization is for $100, the OAP will automatically draw $61 from your Visa,
Mastercard, American Express, Discover or Check-By-Phone for a Product
Redemption Certificate. (Sixty dollars to reach your authorization amount, plus
$1 for processing.)

5. If your credit card or Check-By-Phone does not clear on the day withdrawals
are made, you will not have a credit month order. Nutrition For Life
International, Inc. is not responsible for notification.

6. Credit Card withdrawals are made and Check-By-Phone are activated between the
5th and 15th of the month following the credit month.

7. At the time your OAP certificate is issued, upline bonuses will be paid on
these Bonus Values: $40 ($20 BV), $100 ($50 BV) and $300 ($150 BV). If the
certificate is redeemed for a product with a higher Bonus Value, the additional
upline bonus will be paid.

ADDITIONAL TERMS AND CONDITIONS

1. I UNDERSTAND THAT IN ORDER FOR ME TO BE SUCCESSFUL IN THIS PROGRAM I MUST
PURCHASE AND SELL NUTRITION FOR LIFE PRODUCTS AT RETAIL MYSELF AND SPONSOR OTHER
DISTRIBUTORS TO DO THE SAME; AND IN ORDER FOR THEM TO BE SUCCESSFUL THEY MUST
PURCHASE AND SELL PRODUCTS AT RETAIL AND RECRUIT OTHER PEOPLE TO DO THE SAME,
AND SO ON. I UNDERSTAND I MUST RETAIL OR USE IN BUSINESS BUILDING 70% OF THE
PRODUCT I PURCHASE BEFORE I PURCHASE MORE PRODUCT.

2. When and if I qualify as an Executive, I agree and understand that new
Executives who are enrolled by my upline may be placed under me or they may be
placed further downline in my group or they may be placed under another
Executive who was enrolled by my upline.

Reports referring to large earnings of successful Nutrition For Life
Distributors are not necessarily typical or representative of what individual
Nutrition For Life Distributors may earn. INDIVIDUAL EARNINGS ARE STRICTLY
DEPENDENT UPON INDIVIDUAL TIME, EFFORT AND ENTERPRISE IN THE PARTICULAR AREA IN
WHICH THE INDIVIDUAL DISTRIBUTOR WORKS OR LIVES.

<PAGE>

EXHIBIT 23.1

The Board of Directors
Nutrition For Life International, Inc.:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus. Our report dated November 2,
1995, except as to Note 2, which is as of December 8, 1995, refers to a change
in accounting for income taxes during the year ended September 30, 1994.

KPMG PEAT MARWICK LLP

Houston, Texas
November 8, 1996

<PAGE>

EXHIBIT 23.2
CONSENT OF COUNSEL

The undersigned does hereby consent to the use of its name wherever
appearing in the Registration Statement and related Prospectus, including "Legal
Matters."

However, the undersigned disclaims any responsibility as an expert as
regards this Registration Statement except insofar as the Registration Statement
may relate to any written legal opinion from the undersigned.

BEARMAN TALESNICK & CLOWDUS
Professional Corporation

Denver, Colorado
November 11, 1996

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Nutrition
For Life International, Inc. and is qualified in its entirety by reference to
such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 12,843,845
<SECURITIES> 1,996,811
<RECEIVABLES> 753,902
<ALLOWANCES> 0
<INVENTORY> 6,496,916
<CURRENT-ASSETS> 23,176,921
<PP&E> 3,141,492
<DEPRECIATION> 1,090,220
<TOTAL-ASSETS> 26,435,218
<CURRENT-LIABILITIES> 9,493,694
<BONDS> 0
0
0
<COMMON> 55,305
<OTHER-SE> 16,886,219
<TOTAL-LIABILITY-AND-EQUITY> 26,435,218
<SALES> 77,858,600
<TOTAL-REVENUES> 77,858,600
<CGS> 53,171,169
<TOTAL-COSTS> 53,171,169
<OTHER-EXPENSES> 11,973,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,191,430
<INCOME-TAX> 5,119,525
<INCOME-CONTINUING> 8,071,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,071,905
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25

</TABLE>