NUTRITION FOR LIFE INTERNATIONAL INC, POS AM, 1998-06-23

NUTRITION FOR LIFE INTERNATIONAL INC
POS AM, 1998-06-23
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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<PAGE>

As filed with the Securities and Exchange Commission on June 23, 1998
Registration No. 33-92274

================================================================================

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

----------

POST-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-1

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

NUTRITION FOR LIFE INTERNATIONAL, INC.
--------------------------------------
(Name of Registrant)

Texas 5122 76-041676
----- ---- ---------
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)

9101 Jameel
Houston, Texas 77040
(713) 460-1976
(Address including zip code, and telephone number,
including area code, of registrant's principal
executive offices)

David P. Bertrand
9101 Jameel
Houston, Texas 77040
(713) 460-1976
(Name, address, including zip code, and telephone number, including
area code 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)

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( )

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( )

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ( )

-----------

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

Item in Form S-1 Caption in Prospectus
---------------- ---------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Facing Page; Outside Front Cover Page
Front Cover Page of Prospectus

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

3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk Factors
Earnings to Fixed Charges

4. Use of Proceeds Prospectus Summary; Use of Proceeds

5. Determination of Offering Price Not Applicable

6. Dilution Dilution

7. Selling Security Holders Not Applicable

8. Plan of Distribution Cover Page

9. Description of Securities to be Registered Description of Securities

10. Interests of Named Experts and Counsel Legal Matters; Experts

11. Information with Respect to the Registrant The Company; Business; Legal Proceedings;
Price Range of Securities; Selected
Financial Data; Dividend Policy; Prospectus
Summary; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Management; Principal
Shareholders; Certain Transactions

12. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities
</TABLE>
<PAGE>

SUBJECT TO COMPLETION, DATED JUNE 23, 1998
AMENDED PROSPECTUS
NUTRITION FOR LIFE INTERNATIONAL, INC.
399,887 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, 520,113 Warrants to
purchase 520,113 shares of Common Stock have been exercised. Accordingly, this
Amended Prospectus relates to the offering by the Company of 399,887 shares of
Common Stock which may be acquired by exercise of 399,887 Warrants.

In connection with the 1995 securities offering, the Company sold to
Cohig & Associates, Inc. and Neidiger/Tucker/Bruner, Inc. and their designees,
the Representatives of the Underwriters, for $100 options to purchase an
aggregate of 160,000 shares of Common Stock (of which options to purchase
150,020 shares of Common Stock have been exercised) and 80,000 warrants to
purchase 80,000 shares of Common Stock (of which warrants to purchase 27,024
shares of Common Stock have been exercised) (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 Amended Prospectus also relates to the
Representatives' Securities.

The exercise period of the Warrants commenced on July 10, 1995 and has
been extended until September 15, 1998. 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.

The Company's Common Stock and Warrants are traded on the Nasdaq
National Market under the symbols NFLI and NFLIW, respectively. On June 22,
1998, the closing prices of the Common Stock and Warrants were $6.75 per share
and $3.00 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 DISCOUNTS(1) PROCEEDS TO COMPANY(1)(2)(3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............. $ 3.75 $ 0.00 $ 3.75
- --------------------------------------------------------------------------------------------------------

Total.................. $1,499,576 $ 0.00 $1,499,576
========================================================================================================
</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
$50,000.

(3) Assumes exercise of all Warrants, of which there is no assurance.

The date of this Amended Prospectus is June ___, 1998

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 AMENDED 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 AMENDED 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 AMENDED 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. Electronic filings are publicly available through the
Commission's Web site (www.sec.gov).

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 Amended 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.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Amended 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 Amended 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" 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 Amended Prospectus, including without
limitation in conjunction with the forward-looking statements included in this
Amended Prospectus. In addition to factors that may be described elsewhere in
this Amended Prospectus, the Company specifically wishes to advise readers that
the factors listed under the caption "Risk Factors" could cause actual results
to differ materially from those expressed in any forward-looking statement.
Should one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as intended, anticipated, believed, estimated or expected
or with respect to other forward-looking statements. The Company does not
undertake to update these forward-looking statements.
<PAGE>

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. 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
88,000 distributors. The Company offers a product line of approximately 364
products in nine 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 Company assists its new distributors in
starting their business without the 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 international teleconferencing calls, international and
regional seminars, a proprietary "monthly" magazine, business training systems
and a site on the Worldwide Web of the Internet (www.nutritionforlife.com).
------------------------

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 approximately
88,000 on March 31, 1998. 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 1996 the Company's marketing program became the subject of
regulatory scrutiny and the Company was named as a defendant in class action
lawsuits. These matters have had a material effect on the Company's operations
and financial condition and could materially impact the Company in the future.
See "Risk Factors", "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Legal Proceedings".

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; (3) expanding its marketing
activities into new international markets; and (4) adding complimentary
services. The Company also intends to pursue potential opportunities for growth
through mergers and acquisitions of complementary businesses.

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

THE OFFERING
<TABLE>

<S> <C>
Securities offered........................................... Common Stock, $.01 par value

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

Common Stock outstanding prior to the
Offering .................................................... 5,882,306 shares

Common Stock outstanding after the
Offering (1)................................................. 6,282,193 shares

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

NASDAQ Symbols:

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

Warrants ........................................ NFLIW
</TABLE>
- ------

(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", "Description of Securities" and "Financial Statements".

2
<PAGE>

SUMMARY FINANCIAL DATA
(In thousands, except per share amounts and Operating Data)
<TABLE>
<CAPTION>
Years Ended Six Months Ended
September 30, March 31,
------------- ---------

Statements of Operations Data: 1997 1996 1995 1998 1997
---- ---- ---- ---- ----

(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales........................... $83,045 $97,404 $32,290 $35,963 $40,469

Gross profit........................ 22,767 29,577 8,774 10,763 10,596

Operating income (loss)............. (3,276) 13,347 2,921 744 (5,843)

Net income (loss)................... (1,981) 8,705 2,244 357 (3,770)

Earnings (loss) per share (1):

Basic............................. (.35) 1.61 .65 .06 (.68)

Diluted........................... (.35) 1.37 .51 .06 (.68)

Weighted average number of shares
outstanding(2):

Basic............................. 5,622 5,408 3,437 5,797 5,570

Diluted........................... 5,622 6,345 4,444 6,194 5,570

Operating Data:

Number of distributors (3)........ 88,500 87,400 57,300 88,000 93,900

Average monthly sales per
distributor (4)................... $79 $112 $58 $68 $74

Total products offered............ 364 320 270 364 320

<CAPTION>
March 31,
1998
----
(unaudited)
<S> <C>
Working capital.................. $ 8,864

Total assets..................... 26,690

Total liabilities................ 10,599

Stockholders' Equity............. 16,091
</TABLE>

(1) Earnings (loss) per share are in some instances different from amounts
previously reported by the Company primarily because of the application
of the recently effective Statement of Financial Accounting Standards
No. 128, Earnings Per Share.

(2) 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.

(3) Includes "active" distributors only at the end of the period indicated.
The Company regards distributors as "active" if they have purchased a
minimum of $40 of products from the Company during the preceding twelve
months.

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

3
<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

Recent Losses. Although the Company experienced rapid growth in sales and
income during its fiscal years ended September 30, 1995 and 1996, it incurred a
substantial loss in the fiscal year ended September 30, 1997. This loss was
attributable primarily to accrual of expenses related to the settlement of class
action lawsuits against the Company. However, the Company also experienced a
decline in net sales as compared to the year ended September 30, 1996. In
addition, the Company experienced significant increases in both cost of sales
and marketing, distribution and administrative expenses as a percentage of net
sales. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company has increased its infrastructure during its
growth phase. Particularly in view of the Company's increased level of
expenditures, the Company's future operating results will be negatively impacted
if the Company is not successful in regaining its growth in sales.

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 resale and/or
for their own use. Distributors typically market the Company's products on a
part-time basis, 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 and Legal Proceedings. 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 or the conduct of certain
distributors could be found not to be in compliance with applicable laws or
regulations. Failure by the Company or significant distributors 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 $49.
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
four 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 terminology 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, was 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,

4
<PAGE>

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. See "Business-Distribution and Marketing" for further
information regarding Mr. Trudeau.

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 products and by joining the
Order Assurance Program and Master Developer Series. Under the AVC, the Company
may maintain its same executive level qualifications, but to aid clarification,
it will no longer use the "Instant Executive" designation. The Company entered
into similar agreements with the States of Florida, Hawaii, Idaho, Kansas,
Kentucky, Michigan, Missouri, New Jersey and Pennsylvania. The effect of the
implementation of the measures in the AVC, including the requirement that
executive distributors must make at least five retail sales in a month, and of
any agreements the Company may make with other states, is uncertain.
Implementation of these agreements may be expensive and could make the program
less attractive to distributors. These factors could impact the Company's future
operating results. Moreover, because the Company does not have substantial
experience operating under these agreements, there may be other consequences
which are not presently ascertainable and which could adversely affect the
Company.

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 of a formal order of private investigation into possible
violations by the Company of the federal securities laws. In December 1996 the
Company received a letter from the Securities and Exchange Commission notifying
the Company that the staff inquiry had been terminated and that no enforcement
action had been recommended at that time to the Commission.

In 1996 class action lawsuits were commenced against the Company alleging,
among other things, that the Company's distributor compensation program
constituted an illegal "pyramid scheme." In 1997, the Company entered into
settlement agreements. The pendancy and settlement of these actions had a
material adverse effect upon 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 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 $49. 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 does not pay a fee or other compensation to distributors for sales
of product to their downline, thus, all product purchases are to be consumed by
the distributor or sold to the ultimate consumer. 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. Furthermore, there can be
no assurances that the Company will not be subject to other lawsuits from other
governmental authorities or private parties in state or federal court. Any such
actions could have a material adverse effect upon the Company.

5
<PAGE>

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"). Effective
October 24, 1997, the Company entered into an agreement with Mr. Trudeau
providing for the exclusive use of Mr. Trudeau's service in the network
marketing industry. See "Business-Distribution and Marketing".

Mr. Trudeau has twice been convicted of criminal charges during the past
10 years. See "Distribution and Marketing" above for biographical information
concerning Mr. Trudeau and the exclusive services agreement with Mr. Trudeau.
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
recruitment of executive level distributors. 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 believes that the negative reports in the financial media had
a negative impact on its retention and recruitment of distributors. It is
presently unknown whether there will be negative reports or adverse legal
developments in the future, but if that occurred, distributor recruitment and/or
retention could suffer and 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 associated with, and
a major shareholder of a predecessor of the Company, has embarked on a campaign
to discredit and harm the Company and Mr. Trudeau. He has published negative
statements on the Internet and elsewhere regarding the Company and Mr. Trudeau
and has contacted various regulatory agencies to complain about the Company and
Mr. Trudeau. In separate actions, the Company and Mr. Trudeau brought defamation
lawsuits against this individual. The Company was awarded a default judgment and
Mr. Trudeau was awarded damages of $10 million. This individual subsequently
filed for bankruptcy, and the Company has determined not to pursue a claim
against him for money damages. Nonetheless, 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 88,000 distributors.
Although the Company has increased its efforts to monitor its distributors'
statements and activities, there can be no assurance that the Company will not
be subject to additional regulatory scrutiny and potential claims. In addition,
distributors, including key distributors such as Kevin Trudeau, could make
predictive statements about the Company's operations or other unauthorized
remarks regarding the Company which the Company may be unable to control. Mr.
Trudeau and other distributors are not authorized to make such statements on
behalf of the Company. Nonetheless, statements or actions by Mr. Trudeau or
other distributors could also adversely affect the Company.

Product Competition; Competition for Distributors. 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

6
<PAGE>

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.

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. Since the last quarter of the fiscal year
ended September 30, 1995, one executive level distributor, Kevin Trudeau and his
marketing organization, made a significant contribution to the growth of the
Company. In October 1997, the Company entered into a long-term agreement with
Mr. Trudeau in which he has agreed not to engage in networking activities other
than through the Company. However, he is not restricted from engaging in other
business activities and he is not expected to devote his full business time to
matters related to the Company. See "Business-Distribution and Marketing." There
can be no assurance that the Company's programs for recruitment and retention of
distributors will be successful.

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 March 31, 1998, the Company employed
approximately 230 persons. Of these 230 persons, 11 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. The manufacturing, processing, formulation,
packaging, labeling, advertising, distribution and sale of the Company's
products are subject to regulation by federal, state and foreign agencies,
including the United States 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. Among other matters, such
regulation is concerned with health claims made with respect to a product that
assert the healing or nutritional value of such product. Such agencies have a
variety of remedies and processes available to them, including initiating
investigations, issuing warning letters and cease and desist orders, requiring
corrective labels or advertising, requiring consumer redress (for example, by
requiring that a Company offer to repurchase products previously sold to
consumers), seeking injunctive relief or product seizure, imposing civil
penalties, or commencing criminal prosecution.

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. The Dietary
Supplement Law broadly regulates nutritional labeling requirements for dietary
supplements. Final regulations were published September 23, 1997. Provisions
relating to FDA notification of product label claims considered "Statements of
Nutritional Support" and provisions relating to new dietary ingredients became
effective October 23, 1997. Regulations specifying product label content will
become effective March 23, 1999. The Company cannot determine what effect FDA
regulations will have on its business in the future. Such regulations may, among
other things, require expanded or different labeling, additional record keeping
and expanded documentation of the properties of certain products and scientific
substantiation. In addition, negative publicity associated with a regulatory
inquiry regarding products sold by the Company may adversely affect the Company.
There can be no assurance that the regulatory environment in which the Company
operates will not change or that such regulatory environment, or any specific
action

7
<PAGE>

taken against the Company, will not result in a material adverse effect on the
Company's business, financial condition or results of operations. The Company
cannot also 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 Regulations."

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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of recent start-up expenditures and
increased operating costs associated with expansion into the United Kingdom and
the Republic of Philippines. 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 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 in the past three fiscal years have been supplied by NION Laboratories
("NION"). See "Certain Transactions." 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 financial
loss 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.

Dividends. The Company declared an initial cash dividend of $.02 per share
of Common Stock in September 1996, and has since paid dividends quarterly.
Although it is the Company's present intent to declare dividends 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."

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 25% 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".

8
<PAGE>

Shares Eligible For Future Sale. Upon completion of this offering, the
Company will have 6,282,193 shares of Common Stock outstanding. The shares
issued in this offering and the shares previously outstanding will be freely
tradable 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 1,628,542 shares of Common Stock, of which 1,235,742 shares are
currently eligible for sale in the public market pursuant to Rule 144. Sales by
these persons may have a depressive effect on the market price of the Common
Stock.

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.

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".

Regulation M. Pursuant to Regulation M promulgated under the Securities
Exchange Act of 1934, as amended, certain persons must refrain from purchasing
and other market making activities during a distribution of securities. The
provisions of Regulation M may impact the liquidity of the market for the
Company's securities if, as contemplated, certain holders of the
Representatives' Securities acquire Common Stock pursuant to this Prospectus.
These brokerage firms may need to suspend any then existing market making
activities during the period when their affiliates are effecting sales of Common
Stock.

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 6,282,193 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 $0.95 per share or 25.3% in the net tangible book value of
their investment. See "Dilution".

9
<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.

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

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
399,887 shares of Common Stock being offered by the Company are estimated to be
$1,449,576. 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 March 31, 1998 was
$16,002,350 or $2.74 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 March 31, 1998, other than to
give effect to the sale by the Company of an additional 399,887 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 $1,449,576, the net tangible
book value of the Company at March 31, 1998 would have been $17,451,926 or $2.80
per share. This represents an immediate increase in the net tangible book value
of $.06 per share to existing stockholders and an immediate dilution of $.95 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 March 31, 1998.........$2.74
Increase per share of Common Stock attributable to purchase of
399,887 Common Stock by Warrant holders in this offering.................... .06
--
Net tangible book value per share of Common Stock at March 31, 1998, as
adjusted to reflect this offering................................................................. 2.80
-----
Dilution per share of Common Stock to new investors in this offering.................................$ .95
=====
Dilution as a percentage of offering price...........................................................25.3%
=====
</TABLE>

10
<PAGE>

DIVIDEND POLICY

The Company declared its first cash dividend on its Common Stock in
September 1996, which dividend of $.02 per share was paid in October 1996. The
Company has since continued to pay quarterly dividends of $.02 per share of
Common Stock. The Company has declared a dividend of $.02 per share payable on
July 9, 1998 to shareholders of record on June 25, 1998. 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.

PRICE RANGE OF SECURITIES

The Company's Common Stock is traded on the National Market System of The
Nasdaq Stock Market under the symbol "NFLI". The quotations have been adjusted
to give effect to a two-for-one split of the Common Stock effected on December
8, 1995.

In connection with a public offering in July 1995 the Company issued
warrants to purchase Common Stock (the "Warrants"). The Warrants are traded on
the National Market System of The Nasdaq Stock Market under the symbol "NFLIW."
The holder of one Warrant is entitled to purchase one share of Common Stock at
$3.75 per share until September 15, 1998, unless earlier redeemed by the
Company.

Common Stock Warrants
------------ --------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
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
Fiscal 1997
- -----------
December 31, 1996 .................................. 17.50 11.00 14.00 8.25
March 31, 1997 ..................................... 13.25 7.00 9.38 4.00
June 30, 1997 ...................................... 10.50 7.50 6.63 3.75
September 30, 1997 ................................. 10.75 6.00 6.88 2.00
Fiscal 1998
- -----------
December 31, 1997 .................................. 8.00 4.50 4.00 1.50
March 31, 1998 ..................................... 6.44 4.94 2.75 1.56
June 30, 1998 (through June 22, 1998) .............. 8.50 5.75 5.13 2.00
</TABLE>

On June 22, 1998, the closing prices of the Common Stock and Warrants were
$6.75 per share and $3.00 per Warrant, respectively. As of June 11, 1998, there
were 1,450 record holders of Common Stock.
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data presented below for each year in the five-
year period ended September 30, 1997 have been derived from the audited
financial statements of the Company. The data presented below should be read in
conjunction with the Company's financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
(In thousands, except Per Share and Operating Data)
---------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statements of operations
Net sales............. $83,045 $97,404 $32,290 $17,583 $13,838
Gross profit.......... 22,767 29,577 8,774 4,801 3,686
Operating income (loss) (3,276) 13,347 2,921 442 136
Net income (loss)..... (1,981) 8,705 2,244 250(5) 85
Earnings (loss) per share(1):
Basic................. (.35) 1.61 .65 .09 .03
Diluted............... (.35) 1.37 .51 .08 .03
Weighted average number of shares
outstanding(2):
Basic................. 5,622 5,408 3,437 2,825 2,846
Diluted............... 5,622 6,345 4,444 3,792 2,846
Operating data:
Number of Distributors(3) 88,500 87,400 57,300 37,800 29,500
Average monthly
sales per Distributor(4) $79 $112 $58 $44 $38
Total products offered 364 320 270 258 236
Balance Sheet Data:
Working capital....... $9,570 $14,617 $6,082 $546 $181
Total assets.......... 29,347 27,689 12,566 2,633 1,986
Total long-term debt.. 760 61 -- 650 650
Total liabilities..... 13,489 10,087 5,407 1,985 1,769
Stockholders' equity.. 15,858 17,602 7,159 648 216
</TABLE>
- ------------------

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

(5) Net income is net of a $181,243 preferred stock conversion expense.

12
<PAGE>

SELECTED QUARTERLY FINANCIAL INFORMATION

QUARTER ENDED
<TABLE>
<CAPTION>
(In Thousands, except Per Share)
--------------------------------
December 31 March 31 June 30 September 30 Fiscal Year
----------- -------- ------- ------------ -----------
Fiscal 1997
<S> <C> <C> <C> <C> <C>
Net sales ............. $ 19,269 $ 21,200 $ 22,600 $ 19,976 $ 83,045
Gross profit .......... 5,085 5,511 5,391 6,780 22,767
Operating income (loss) (6,921)(2) 1,078 218 2,349(3) (3,276)
Net income (loss) .... (4,496) 726 180 1,609 (1,981)
Earnings (loss) per
Share(1):
Basic ............. (0.81) .13 .03 .28 (.35)
Diluted ........... (0.81) .12 .03 .26 (.35)
Dividends per share ... .02 .02 .02 .02 .08

Fiscal 1996
Net sales ............. 21,263 30,315 26,281 19,545 97,404
Gross profit .......... 6,770 9,677 8,240 4,890 29,577
Operating income ...... 3,869 5,561 3,284 633(4) 13,347
Net income ............ 2,553 3,642 1,877 633 8,705
Earnings (loss) per
Share(1):
Basic ............. .49 .63 .34 .11 1.61
Diluted ........... .40 .57 .29 .10 1.37
Dividends per share ... -- -- -- .02 .02
</TABLE>
- ----------------

(1) Earnings (loss) per share are in some instances different from amounts
previously reported by the Company primarily because of the application
of the recently enacted Statement of Financial Accounting Standards No.
128, Earnings Per Share.

(2) Includes a $6,425,000 charge incurred and accrued for the settlement of
class action lawsuits.

(3) Includes an $890,000 credit to recognize a reduction in the remaining
estimated liability for the class action lawsuits.

(4) Includes a $782,000 charge for resolution of the state regulatory
issues.

13
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - OVERVIEW

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>
Six Months Ended
----------------
Years Ended September 30, March 31,
------------------------- ---------

1997 1996 1995 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 72.6 69.6 72.8 70.1 73.8
---- ---- ---- ---- ----
Gross profit 27.4 30.4 27.2 29.9 26.2
Operating expenses 31.3 16.7 18.1 27.9 40.6
---- ---- ---- ---- ----
Income (loss) from operations (3.9) 13.7 9.1 2.0 (14.4)
Other income (expense), net 1.0 0.6 0.3 0.6 0.6
--- --- --- --- ---
Income (loss) before income
tax expense (benefit) (2.9) 14.3 9.4 2.6 (13.8)
Income tax expense (benefit) (0.5) 5.4 2.4 1.6 (4.5)
----- --- --- --- -----
Net income (loss) (2.4)% 8.9% 7.0% 1.0% (9.3)%
====== ==== ==== ==== ======
</TABLE>

SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS ENDED MARCH 31, 1997

Net sales for the six months ended March 31, 1998 decreased by
$4,506,000 or 11.1% to $35,963,000 as compared to net sales of $40,469,000 for
the six months ended March 31, 1997. At March 31, 1998, the Company had
approximately 88,000 distributors as compared to approximately 87,400 at
December 31, 1997 and approximately 88,500 at September 30, 1997. The
approximate numbers of distributors in 1997 have been revised based on discovery
of a computer error. During the six months ended March 31, 1998 the number of
active international distributors increased by approximately 3,000, while active
distributors in North America decreased by approximately 3,500. Management
believes that the regulatory scrutiny and legal proceedings filed against the
Company in fiscal 1996 and concluded during fiscal 1997 as well as negative
media reports continued to have a negative impact on distributor recruitment and
retention and sales efforts by distributors during the first six months of
fiscal 1998. The ability of the Company to increase its number of active
distributors and its sales per average number of distributors is material to the
future operations and financial condition of the Company. The decrease in net
sales is recapped below:

<TABLE>
<S> <C>
Decrease in sales due to decreased average
number of distributors $ (1,077,000)
Decrease in distributor average sales (3,429,000)
----------
$ (4,506,000)
</TABLE>

The Company's net sales per average number of distributors per month
decreased from $74 during the six months ended March 31, 1997 to $68 for the six
months ended March 31, 1998.

14
<PAGE>

Cost of sales decreased by $4,674,000 or 15.7% to $25,199,000 for the
six months ended March 31, 1998 from $29,873,000 for the six months ended March
31, 1997. Cost of sales as a percentage of net sales decreased from 73.8% in the
six months ended March 31, 1997 to 70.1% in the six months ended March 31, 1998.
Cost of sales, which includes product costs, commissions and bonuses paid to
distributors, and shipping costs, is recapped below:

Six Months Ended
March 31,

1998 1997
---- ----
Products costs 28.2% 29.9%
Commissions and bonuses paid to distributors 35.5 37.6
Shipping costs 6.4 6.3
--- ---
70.1% 73.8%
===== =====

The percentage of product costs decreased 1.7% primarily as a result of
selling price adjustments initiated during December 1997. The percentage of
commissions and bonuses paid to distributors decreased 2.1% primarily because
the basis for commissions was adjusted less than the selling prices. The 0.1%
increase in shipping costs is not significant.

Gross profit increased 1.6% or $167,000 from $10,596,000 for the six
months ended March 31, 1997 to $10,763,000 for the six months ended March 31,
1998. Gross profit as percentage of net sales increased from 26.2% for the six
months ended March 31, 1997 to 29.9% for the six months ended March 31, 1998.

Operating expenses decreased $6,419,000 or 39.1% from $16,439,000 for
the six months ended March 31, 1997 to $10,020,000 for the six months ended
March 31, 1998. The primary reason for the decrease was that no class action
lawsuit costs were incurred during the six months ended March 31, 1998. The
$6,425,000 lawsuit settlement charge in the three months ended December 31, 1996
represented the Company's estimate of all costs of the lawsuit. Based upon
subsequent experience, the Company revised the estimate to $5,535,000 during the
three months ended September 30, 1997. As a percentage of net sales, marketing,
distribution, and administrative expenses increased to 27.9% for the six months
ended March 31, 1998 from 24.8% for the six months ended March 31, 1997 because
of the decline in net sales. The Company's future operating results may be
negatively impacted if the Company is not successful in regaining its growth in
sales or decreasing its expenditures below current levels.

Income (loss) from operations for the six months ended March 31, 1998
increased $6,587,000 or 112.7% to $744,000 of income from operations from
$5,843,000 of loss from operations for the six months ended March 31, 1997
principally as a result of the decrease in operating expenses as explained
above. The income (loss) from operations for the six months ended March 31, 1998
and 1997 includes approximately $524,000 and $210,000, respectively, of
operating loss from the Company's wholly-owned, consolidated subsidiaries which
operate in foreign countries.

Other income decreased to $205,000 for the six months ended March 31,
1998 from $256,000 for the six months ended March 31, 1997. The decrease was the
result of a decline in net interest income due to a decrease in interest bearing
deposits and to the recognition of interest expenses on capital lease
obligations and non-recurring credits.

Income tax expense for the six months ended March 31, 1998 is higher
than the amount computed at the statutory rate. As the Company is not currently
able to recognize any tax benefits from foreign operating losses, tax expense is
accrued on the taxable income of domestic operations.

Net income was $357,000 for the six months ended March 31, 1998,
compared to a net loss of $3,770,000 for the six months ended March 31, 1997.
The increase was principally the result of having no accrual for the settlement
of the class action lawsuits in the six months ended March 31, 1998.

15
<PAGE>

YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO YEAR ENDED SEPTEMBER 30, 1996

Net sales for the year ended September 30, 1997 decreased by
$14,359,000 or 14.7% to $83,045,000 from $97,404,000 for the year ended
September 30, 1996. At September 30, 1997, the Company had approximately 88,500
distributors compared to approximately 87,400 at September 30, 1996. Although
there was a net addition of approximately 1,100 distributors during fiscal 1997,
two additional factors contributed to the decline in net sales (1) fewer new
distributors elected to qualify promptly as executive distributors and (2)
beginning in March 1997 new distributors could qualify right away as executive
distributors for $500 rather than $1,000. The ability of the Company to increase
its number of distributors and its sales per average number of distributors is
material to the growth of the Company. Although the Company has resolved the
regulatory scrutiny and legal proceedings initiated during fiscal 1996 and the
negative media reports have diminished, the ability of the Company to regain the
rate of growth realized during fiscal 1996 cannot be predicted with certainty.
The decrease in net sales is recapped below:

Decrease in new executive initial purchases $(21,500,000)

Growth in sales due to increased number of distributors 21,022,000

Decrease in distributor average sales (13,881,000)
----------
$(14,359,000)
==========

The Company's net sales per average number of distributors per month
decreased from $112 during the year ended September 30, 1996 to $79 for the year
ended September 30, 1997. No one distributor has directly accounted for more
than 5% of the Company's net sales in any of the past three fiscal years.

Cost of sales decreased by $7,549,000 or 11.1% to $60,278,000 for the
year ended September 30, 1997 from $67,827,000 for the year ended September 30,
1996. Cost of sales as a percentage of net sales increased from 69.6% in the
year ended September 30, 1996 to 72.6% in the year ended September 30, 1997.
Cost of sales, which includes product costs, commissions and bonuses paid to
distributors, and shipping costs, is recapped below:

Year Ended
September 30,
-------------

1997 1996
---- ----
Product costs 27.1% 23.6%
Commissions and bonuses 36.2 39.2
paid to distributors
Shipping costs 9.3 6.8
--- ---
72.6% 69.6%
==== ====

The percentage of product costs increased 3.5% primarily as a result of
vendor price increases and the purchase by distributors of products and sales
aids with a higher cost to the Company. The decrease in the percentage of
commissions and bonuses paid of 3.0% was the result of a slower growing
distributor organization and the purchase by distributors of products with a
lower rate of commission and bonus payout. The increase of 2.5% in the
percentage of shipping costs resulted from increased shipping costs associated
with the shipping of back orders (without any associated revenues) caused
initially by the success of a promotional campaign and subsequently by
production delays by a major supplier.

Gross profit decreased 23.0% or $6,810,000 from $29,577,000 for the
year ended September 30, 1996 to $22,767,000 for the year ended September 30,
1997. Gross profit as a percentage of sales decreased from 30.4% for

16
<PAGE>

the year ended September 30, 1996 to 27.4% for the year ended September 30,
1997.

Operating expenses increased $9,813,000 or 60.5% from $16,230,000 for
the year ended September 30, 1996 to $26,043,000 for the year ended September
30, 1997. As a percentage of net sales, marketing distribution and
administrative expenses increased to 31.3% for the year ended September 30, 1997
from 16.7% for the year ended September 30, 1996.

Four factors contributed to the increase in operating expenses. First,
$5,535,000 was recorded to account for the settlement of class action lawsuits
filed against the Company in 1996. The settlements are more fully described in
"Legal Proceedings" and the "Financial Statements." Second, foreign operating
costs increased approximately $1,500,000 primarily as a result of a full twelve
months of operation in the United Kingdom. Third, the Company determined that,
in connection with the recruitment of certain distributors by Kevin Trudeau, a
key distributor of the Company, certain representations may have been made
regarding entitlement to benefits or prizes, principally cruises, as performance
incentives to these distributors. Although the Company does not believe that it
is legally responsible for any such representations, in the interest of
promoting good distributor relations, the Company offered certain distributors
the right to participate in cruises at the Company's expense. The Company
estimates that its cost will be approximately $1,200,000 for this program, which
has been accrued in the year ended September 30, 1997. Fourth, in connection
with the Company's expansion, the Company experienced increases in personnel
costs, postage, and property taxes. As a result of the increase in marketing,
distribution and administrative costs incurred in connection with the Company's
operations, the Company's future operating results will be negatively impacted
if the Company is not successful in regaining its growth in sales experienced
during the first two quarters of the year ended September 30, 1996.

Income (loss) from operations for the year ended September 30, 1997
decreased $16,623,000 or 124.5% to a loss of $3,276,000 from income of
$13,347,000 for the year ended September 30, 1996, principally as a result of
the lower level of sales, the decrease in the gross profit as a percentage of
sales, and the increase in marketing, distribution and administrative expenses.
Income (loss) from operations as a percentage of sales decreased from 13.7% for
the year ended September 30, 1996 to a negative 3.9% for the year ended
September 30, 1997.

Other income increased 31.2% to $850,000 for the year ended September
30, 1997 from $648,000 for the year ended September 30, 1996. The increase in
other income resulted primarily from $183,000 of net other income items.

An income tax benefit of $445,000 was accrued for the year ended
September 30, 1997. Of this amount, $370,000 is to recognize the benefit of the
carryback of the operating loss for the year ended September 30, 1997 and
$119,000 is to recognize a net deferred tax benefit.

Net loss was $1,981,000 for the year ended September 30, 1997, a
decrease of 122.8% compared to net income of $8,705,00 for the year ended
September 30, 1996, principally as a result of the lower level of net sales, the
decrease in gross profit as a percentage of sales, and the settlement of the
class action lawsuits.

YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30, 1995

Net sales for the year ended September 30, 1996 increased by
$65,114,000 or 201.7% to $97,404,000 from $32,290,000 for the year ended
September 30, 1995. The increase in net sales is primarily the result of the
Company increasing its number of distributors and its sales per average number
of distributors. At September 30, 1996, the Company had approximately 87,400
distributors compared to approximately 57,300 at September 30, 1995. However,
the rate of growth in the number of distributors slowed during the three months
ended June 30, 1996 and September 30, 1996, respectively, to a net increase of
3,502 and 1,452 distributors. The ability of the Company to increase its number
of distributors and its sales per average number of distributors is material to
the growth of the Company. Management believes that the regulatory scrutiny and
legal proceedings initiated in the year ended September 30, 1996, as well as the
negative media reports, were significant factors affecting distributor
recruitment and retention and sales efforts by

17
<PAGE>

distributors during the last two quarters of the year ended September 30, 1996.
The Company has resolved certain of these issues, but the ability of the Company
to regain the rate of growth realized during the first two quarters of the year
ended September 30, 1996 cannot be predicted with certainty. The increase in net
sales is recapped below:

New executive initial purchases $30,163,000

Growth in sales due to increased number
of distributors 16,818,000

Increase in distributor average sales 18,133,000
----------
$65,114,000
==========

The Company's net sales per average number of distributors per month
increased from $58 during the year ended September 30, 1995 to $112 for the year
ended September 30, 1996. Approximately 46% 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. No one
distributor has directly accounted for more than 5% of the Company's net sales
in any of the past three fiscal years.

The Instant Executive Program had referred to an option by which a
distributor could quickly 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" terminology.

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 five consumers per month at retail, including procedures to verify
retail sales, to take additional steps to encourage distributors to redeem OAP
certificates for product and to limit the number of OAP certificates, and to
monitor customer purchases. The Company also agreed to make a contribution to
the Illinois Consumer Education Fund.

The Company also entered into agreements with the states of Florida,
Hawaii, Idaho, Kansas, Kentucky, Michigan, Missouri, New Jersey, and
Pennsylvania. See "Business--Distribution and Marketing". The Company may enter
into agreements with other states in the future.

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 year ended September 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

18
<PAGE>

communications, and the establishment of a World Wide Web site on the Internet.
In addition, uncertainty about the possible outcome of these discussions, the
SEC investigation, the class action lawsuits and certain unfavorable media
reports appears to have affected the efforts of some of the Company's
distributors during the year ended September 30, 1996. The future effect of the
resolution of these issues in Illinois, Florida and the other eight states, and
the implementation of, and continued compliance with, the AVC could negatively
impact the Company's future operating results. See "Risk Factors"; and
"Business-Distribution and Marketing".

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. 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 September 30, 1996 and 1995, respectively, there were
approximately 41,700 and 18,000 participants in this Program. On the average
during the year ended September 30, 1996, the Company issued OAP certificates
for approximately 40% of the participants. The percentage for the comparable
period in 1995 is not available.

The Company recognizes revenues on the OAP certificates when they are
redeemed for product or when they expire. The Company recognized revenues from
the redemption of certificates of $7,647,000 and $1,090,000 for the years ended
September 30, 1996 and 1995. The Company recognized revenues from expired
certificates of $3,025,000 and $876,000 during the years ended September 30,
1996 and 1995. At September 30, 1996 and 1995, the Company had a liability for
unredeemed certificates of $3,893,600 and $347,800 which is included in deferred
income in the "Financial Statements". The effect of the AVC on future revenues
from OAP certificates is uncertain, but could have a negative impact on the
Company's future operating results.

Cost of sales increased by $44,312,000 or 188.4% to $67,827,000 for the
year ended September 30, 1996 from $23,515,000 for the year ended September 30,
1995. Also included in the cost of sales for the year ended September 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 72.8% in the year ended September 30, 1995 to 69.6% in the year ended
September 30, 1996. Cost of sales, which includes product costs, commissions and
bonuses paid to distributors, and shipping costs, is recapped below:

Year Ended
September 30,
------------
1996 1995
---- ----

Product costs 23.6% 24.3%
Commissions and bonuses
paid to distributors 39.2 40.5
Shipping costs 6.8 8.0
--- ---
69.6% 72.8%
==== ====

The percentage of product costs decreased 0.7% primarily as a result of
improved pricing with higher volume. The decrease in the percentage of
commissions and bonuses paid of 1.3% was the result of the significant growth in
new executive initial purchases and the lower level of the associated
commissions and bonuses in relation to a slower growing organization. The
decrease of 1.2% in the percentage of shipping costs resulted from economies of
scale in shipping costs associated with the volume of sales from new executive
initial purchases.

Gross profit increased 237.1% or $20,802,000 from $8,775,000 for the
year ended September 30, 1995 to $29,577,000 for the year ended September 30,
1996. Gross profit as a percentage of sales increased from 27.2% for the year
ended September 30, 1995 to 30.4% for the year ended September 30, 1996.

19
<PAGE>

Marketing, distribution and administrative expenses increased
$10,377,000 or 177.3% from $5,853,000 for the year ended September 30, 1995 to
$16,230,000 for the year ended September 30, 1996. As a percentage of net sales,
marketing, distribution and administrative expenses decreased to 16.7% for the
year ended September 30, 1996 from 18.1% for the year ended September 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
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. As a result of the increase in marketing, distribution
and administrative costs incurred in connection with the Company's growth and
the increased expenses related to legal issues, the Company's future operating
results will be negatively impacted if the Company is not successful in
regaining its growth in sales experienced during the first two quarters of the
year ended September 30, 1996.

Income from operations for the year ended September 30, 1996 increased
$10,426,000 or 356.9% to $13,347,000 from $2,921,000 for the year ended
September 30, 1995, principally as a result of the higher level of sales, the
increase in income recognized from expired OAP certificates, and the increase in
the gross profit as a percentage of sales. Income from operations as a
percentage of sales increased from 9.1% for the year ended September 30, 1995 to
13.7% for the year ended September 30, 1996.

Other income increased to $648,000 for the year ended September 30,
1996 from $88,000 for the year ended September 30, 1995. The increase was
primarily a result of interest income earned.

Income tax expense increased $4,525,000 to $5,290,000 for the year
ended September 30, 1996 from $765,000 for the year ended September 30, 1995.
The dollar increase resulted from higher taxable income, an increased base tax
rate, and a reduced effect of the utilization of approximately $150,000 of net
operating loss carryforward compared to approximately $423,000 in the prior
fiscal year.

Net income was $8,705,000 for the year ended September 30, 1996, an
increase of 287.9% compared to $2,244,000 for the year ended September 30, 1995,
principally as a result of higher level of sales and the increase in gross
profit as a percentage of sales.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $6,049,000 at March 31,
1998 compared to $8,904,000 at September 30, 1997. The cash used in operating
activities of $1,097,000 for the six months ended March 31, 1998 was
significantly less than the cash provided by operating activities of $3,176,000
for the six months ended March 31, 1997. This decrease was primarily due to
payments of lawsuit settlement accrual, accrued cruise, and accrued expenses and
other liabilities. The Company used approximately $1,662,000 and $1,101,000,
respectively, to purchase property and equipment during the six month periods
ended March 31, 1998 and 1997. In addition, $233,000 was paid in dividends to
shareholders during the six months ended March 31, 1998. The Company had working
capital of $8,864,000 at March 31, 1998 compared to $9,570,000 at September 30,
1997.

The Company currently anticipates expanding into new foreign markets,
but the extent of the expansion has not been determined and will be dependent
upon results of operations and other factors. As a result of the cost of the
class action settlement discussed above, the Company's pace of expansion may be
reconsidered. While Management is hopeful that the business disruption
associated with the regulatory scrutiny and legal issues and the negative media
reports will subside, there can be no guarantee that profitable operations will
result in the future.

The Company has not been subjected to 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.

The Company has approximately $130,000 of net operating loss available
to carry forward subject to limitations imposed by Section 382 of the Internal
Revenue Code expiring through 2008. It is Management's opinion,

20
<PAGE>

based on prior operating results and expected future operating results, that it
will be more likely than not that the Company will utilize its entire net
operating loss carryforward before expiration.

Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure ("SFAS 129") effective for years ending
after December 15, 1997, establishes standards for disclosure of the pertinent
rights and privileges of various securities outstanding (stock, options,
warrants, preferred stock, debt and participating rights) including dividend and
liquidations preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 will have
no effect on the Company as it currently discloses the information specified.

In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. SFAS 130, "Reporting Comprehensive Income", establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.

SFAS 131, "Disclosure about Segments of a Business Enterprise"
establishes standards for the way that public enterprises report information
about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.

Both of these new standards are effective for financial statements for
years beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Management does not believe that either Statement
will have a material impact on the Company's financial statements.

In the next two years, many companies will face potentially serious
issues associated with computer programs being written using two digits rather
than four to define the applicable year. The Company has reviewed its computer
software systems and believes that they are year 2000 compliant. The Company is
not aware of any material exposure to the Company as a result of non-compliance
by persons with which it does business.

21
<PAGE>

BUSINESS

Background

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 offers 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 international teleconferencing calls,
international and regional seminars, a proprietary "monthly" magazine, business
training systems and a site on the World Wide Web of the Internet
(www.nutritionforlife.com)

In 1996 the Company's marketing program became the subject of
regulatory scrutiny and the Company was named as a defendant in class action
lawsuits. The Company believes that these matters have had a material effect on
the Company's operations and financial condition. See "Risk Factors," Legal
Proceedings" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

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, Canada, the United Kingdom, the Republic of Ireland, the
Republic of Philippines, Guam and Puerto Rico. The Company hopes to expand its
efforts in these countries and in other parts of the world. The Company has two
wholly-owned subsidiaries, Nutrition For Life International (UK) Ltd. and
Nutrition For Life International Philippines, Inc. Unless the context otherwise
requires, the term the "Company" as used in this Amended Prospectus includes the
Company's two wholly-owned subsidiaries.

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; (3)
expanding its marketing activities into new international markets; and (4)
adding complimentary services.

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

Distribution and Marketing

The Company's products are distributed through a network marketing
system consisting of a network of approximately 88,000 distributors.
Distributors are independent contractors who purchase products directly from the

22
<PAGE>

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. The Company encourages its distributors to use
the Company's products. No one distributor directly accounted for more than 5%
of the Company's sales in either of the past three 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, a low priced starter kit, no
inventory requirements, and low monthly purchase requirements. Management
intends to reach potential new distributors through advertising, the Company's
site on the World Wide Web, teleconferencing and regional sales meetings.

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 initially have no more than
four executives, and, until qualifying as a Platinum executive, 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 four ways of meeting this requirement which
are as follows:

. Generate cumulative qualifying product volume of $1,500 over any period
of time

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

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

. or generate cumulative qualifying product volume of $500, enroll in the
optional Order Assurance Program at the monthly level of $100,
subscribe to the $35 monthly optional Master Developer Series and the
monthly optional Virtual Voice Messaging Service, and purchase selected
business building tools for $150

"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. For distributors
who became executives prior to March 1, 1998, the only qualification to remain
an executive is to purchase $40 in product every other month, except that
distributors who have become executives by generating cumulative qualifying
product value of only $500 must continue their participation in the other
programs noted above for one year from enrollment in order to maintain executive
status. For distributors becoming executives subsequent to March 1, 1998, the
qualifications to remain an executive are to purchase $100 in product every
other month and to be enrolled in the Master Developer Series program.
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 denominated a program as the "Instant Executive
Program". The Instant Executive Program designation 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, has
been the subject of legal and regulatory scrutiny. The Company

23
<PAGE>

has determined to discontinue the use of the terminology, "Instant Executive
Program". 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.

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 may maintain its
same executive level qualifications, but to aid clarification, the Company will
no longer use the "instant executive" terminology.

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 five retail sales, or within the
preceding two month period has made ten retail sales. The Company also agreed to
take additional steps to encourage distributors to redeem OAP certificates for
product and to limit the number of OAP certificates (See "Order Assurance
Program"), to monitor customer purchases, and to make a contribution to the
Illinois Consumer Education Fund.

The Company entered into similar agreements with the states of Florida,
Hawaii, Idaho, Kansas, Kentucky, Michigan, Missouri, New Jersey and
Pennsylvania. The Company has agreed that in Florida, distributors who want to
receive commissions must state, when placing orders, that they have sold to
consumers 70% of their prior commissionable product purchase. The Company has
agreed to establish procedures to independently verify consumer sales on a
random basis and to sanction distributors submitting false information.
Implementation of these agreements by the Company could make the program less
attractive to distributors and prospective distributors. In particular, the
Company believes that the special requirements in the Florida agreement have had
a negative impact on the Company's ability to retain and attract distributors in
Florida. These factors could negatively impact the Company's future operating
results. The Company maintains an ongoing compliance program which includes
periodic reporting to the states.

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. The Company revised its official Distributor
Agreement in connection with the AVC. It is emphasized in the Distributor
Agreement that in order for a distributor to be successful in the Company's
program, the distributor must purchase and sell the Company's products at retail
and sponsor other distributors to do the same. It is also emphasized that the
distributor must retail or use in business building 70% of the product he or she
purchases before more product may be purchased from the Company. A distributor
success kit currently costs approximately $49 and provides sales aids,
brochures, order forms, audio and video cassette recordings and a subscription
to the Company's monthly publication, Lifestyles.

24
<PAGE>

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

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

1997 1996 1995 1994
---- ---- ---- ----
Approximate number of distributors(1) 88,500 87,400 57,300 37,800

- -------------------------
(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.

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 fiscal years ended September 30,
1995, 1996 and 1997, the Company expended approximately $138,000, $348,000, and
$590,000, respectively, on promotional activities related to distributors'
rallies and the annual convention. In February 1998 the Company sponsored a
cruise for certain distributors at a cost of approximately $900,000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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. Kevin Trudeau, a key distributor of the Company, is
principally responsible for DS's performance in connection with this Agreement.
Mr. Trudeau also produces self improvement tapes which are sold by Nightingale-
Conant to the Company and others.

25
<PAGE>

In July 1997 DS made a promissory note payable to the Company in the
amount of $632,000, plus interest at 8% per annum, which represented the balance
due the Company on account. The note was due in July 1998 and has been paid.

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. At March 31,
1998, the Company had 358 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 commits to the optional Order Assurance Program at
the $100 per month level and 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 $3,500 per month.

ORDER ASSURANCE PROGRAM. The Company provides a program whereby the
distributor may enroll in a minimum ordering program in order to enhance their
eligibility for commissions. Minimum orders ranging from $41 to $301 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
various levels that generally 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 promotes 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 agreed in
the AVC that, effective January 1997, a distributor would not receive additional
product certificates under the Program and would be given 30 days notice that
their Program status would be suspended if: (i) four monthly unredeemed
certificates were issued consecutively to the distributor for a maximum credit
of four times the distributors enrollment level; or (ii) the distributor had
accumulated unredeemed certificates with a total face value of six times the
distributors then designated Program amount. However, these requirements would
not be applicable if the distributor redeems one or more of the issued
certificates, or notifies the Company that he is accumulating toward a "big
ticket" item. The Company also agreed in the AVC to encourage distributors to
redeem their certificates for product. As of September 30, 1995, September 30,
1996 and September 30, 1997, respectively, there were approximately 22,800,
41,700 and 34,400 distributors enrolled in the Order Assurance Program. At March
31, 1998, there were approximately 35,300 distributors enrolled in the Order
Assurance Program.

PERSONAL RECRUITING AND SALES CAMPAIGNS. 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.

26
<PAGE>

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

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 initiated in
fiscal 1994.

VIRTUAL VOICE. The Company provides a special voice messaging program
which gives distributors voice messaging capabilities to communicate more
efficiently with their downline. This program also allows the Company to
automatically voice message all distributors on the Virtual Voice Program.

MIND AND BODY INSTITUTE. The Company developed a series of one-day
product workshops to enhance distributor understanding and appreciation of the
Company's product line.

FREEDOM MAGAZINE. The Company publishes Freedom Magazine, a
multilingual 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 and video 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.

The Company experienced significant growth in sales in the fiscal years
ended September 30, 1995 and September 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.

Commencing with the last quarter of the fiscal year ended September 30,
1995, one executive level distributor, Kevin Trudeau, was particularly
noteworthy in this regard, and he has made a significant contribution to the
growth of the Company. Effective October 24, 1997, Mr. Trudeau entered into an
exclusivity agreement with the Company for a period of eight years. Under the
agreement, Mr. Trudeau will devote substantial effort to his position as a key
distributor of the Company, which will include conducting opportunity meetings
and training seminars, producing tapes for the Company's Master Developer
Series, and consulting with Management of the Company. Mr. Trudeau has agreed
that he will not engage in any business that markets products through a network
or multilevel marketing system other than through the Company or its affiliates.
Pursuant to the agreement, Mr. Trudeau is expected to continue to engage in
other business activities (which include sales of products similar to those
offered by the Company so long as they are not offered through a network
marketing system) and it is acknowledged that he is not an employee, director or
officer of the Company and not involved in management of the Company. Mr.
Trudeau is entitled to receive approximately 0.75% of the Company's sales on a
monthly basis (which commenced in October 1997), in addition to his regular
distributor earnings.

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.

27
<PAGE>

In addition, he has served as a host of a series of infomercials
entitled "A Closer Look" and "Vantage Point". 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 has also been
featured as a prominent speaker at motivational seminars and other programs.

During the past five years, Mr. Trudeau has also been engaged in other
activities, including KT Corp., which is a distributor of the Company, the
Trudeau Marketing Group, Distributor Services, L.L.C., 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 January 1998 Mr. Trudeau and Mega
Systems, Inc. entered into a settlement with the U.S. Federal Trade Commission
("FTC"), in which Mr. Trudeau agreed to pay $500,000 in consumer redress and to
be barred from making false claims regarding the "Mega Memory" System. Mr.
Trudeau also agreed to establish a $500,000 escrow account or performance bond
to assure compliance. Mr. Trudeau also agreed with the FTC that Mr. Trudeau will
be required to have substantiation, which, when appropriate, must be scientific,
for claims about the benefits, performance or efficacy of any product he
advertises, promotes, sells or distributes in the future. He is also barred from
misrepresenting the existence, contents, validity, results, conclusions or
interpretations of any test, study or research. It is unknown whether this
consent decree with the FTC will affect Mr.Trudeau's ability to act effectively
as a distributor of the Company. It is also unknown whether this matter will
affect the Company's distribution and marketing of "Mega Memory" tapes or other
products produced by Mega Systems, Inc. See "Risk Factors".

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 credit card fraud involving the use of credit
cards belonging to others for personal use 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. Mr. Trudeau has been the subject of regulatory scrutiny and
certain legal proceedings. Mr. Trudeau is a key independent distributor of the
Company, but is not an officer or director of the Company, and is not authorized
to make statements about Company policy. See "Risk Factors".

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<PAGE>

MARKETS

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

Year Ended September 30,
------------------------
(in Thousands)
Year
Country Entered 1997 1996 1995 1994
------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
United States 1984 $73,000 $89,400 $25,800 $14,700

Canada 1993 6,800 6,400 4,200 2,400

Puerto Rico 1994 500 1,200 2,200 300

United Kingdom(1) 1996 2,500 200 --- ---

Korea(2) 1991 --- 100 100 100

Philippines(2) 1993 200 100 100 100
</TABLE>

- ---------------------
(1) The Company commenced operations in the United Kingdom in
September 1996. The Company commenced operations in Ireland in
May 1997, which results are included in the United Kingdom.

(2) The Company has historically sold its products to distributors
in Korea and the Philippines which do not use the Company's
network marketing system. The Company introduced its network
marketing system in the Philippines in July 1997.

The Company currently plans to enter additional markets outside the
continental United States. In some instances, regulatory approvals may be
required. 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.

The Company may also need to undertake the steps necessary to meet the
operational requirements of new markets, including plans to satisfy the
inventory, distribution, personnel and transportation requirements of the new
market. The Company may also need to modify its distributor manuals, cassette
recordings, videocassette and other training materials as necessary to be
suitable for the new markets. The Company has prepared manuals in English,
French and Spanish. Currently, the Company's products are initially distributed
to all markets from the Company's Houston, Texas distribution center. The
Company has established an office and warehouse center in Warrington, England to
provide administrative, shipping and warehouse support for the Company's
operations in the United Kingdom and Ireland. The Company has also established
an office in Pasig City, Philippines in addition to warehouse centers in Quezon,
Davao and Cebu, Philippines.

29
<PAGE>

PRODUCTS

The Company markets and distributes an extensive product line of
approximately 364 items in nine different categories: (1) vitamins, 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; (8) self-improvement programs; and (9)
services. The product 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 49 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 29 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 70 food and
weight management products. These include a whey beverage in five flavors, the
Nutri-Mac line of pastas, the Nutri-Blend flour and baking mixes, instant food
shakes, fiber products, the Nutri-Cookie(R), Lean Life(R), a herbal weight
management formulation, and a new line called Heartful Gourmets, which are
soy-based meals and snacks.

HERBAL FORMULAS. The Company's 33 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, garlic,
Cat's Claw, and St. John's Wort, as well as special blends developed by the
Company.

HOMEOPATHIC AND SPECIAL FORMULAS. Homeopathic remedies, when prepared
in minute amounts, mimic disease symptoms and stimulate the body's defense
systems. The Company offers 74 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 21 products, including a
liquid hand and body soap, dishwasher concentrate, laundry concentrates, laundry
softener, a heavy duty cleaner-degreaser, a pine disinfectant, and a line of
anti-microbial and anti-viral disinfectants.

FILTRATION SYSTEMS. The Company markets 31 products designed to test or
improve the quality of air and water, including electrostatic air filters and
water filtration systems.

SELF IMPROVEMENT PROGRAMS. The Company markets approximately 55
motivational and self improvement tapes and other products, including "Mega
Memory" tapes. The self improvement tapes are purchased primarily through
arrangements with Nightingale-Conant Corporation.

30
<PAGE>

SERVICES. The Company began a ninth marketing category in the fiscal
year ended September 30, 1997 called "Services." Two new services are currently
being offered to distributors and customers, Lifedial 1 Plus(TM) and Adnetic.
Lifedial 1 Plus(TM) is a discounted long distance package. Distributors may
sign-up for the service and sell it to customers. Cellular and Internet access
may be added to the program in 1998 along with service to Canada. Adnetic is a
web-page design and maintenance service. Distributors are able to use the web
sites themselves and sell this service to others. A third service, Body Check,
is scheduled for introduction in early 1998. Body Check is a hair analysis which
tests the level of 21 elements normally found in the body. The resulting report
also includes information regarding exposure to toxic substances. The Body Check
report can then be used to make recommendations for the individual's specific
nutritional supplements.

During the last three fiscal years, no single product has accounted for
10 percent or more of the Company's revenue. The Company continually seeks to
identify, develop and introduce innovative, effective and safe products. During
the fiscal years ended September 30, 1995, 1996 and 1997, the approximate number
of new products and services introduced by the Company was 25, 70 and 44,
respectively. Management believes that its ability to introduce new products
increases its distributors' visibility and competitiveness in the marketplace.

The Company maintains significant amounts of products in its inventory
to meet rapid delivery requirements of customers and to minimize product back
orders, which historically have not been significant. However, the Company
experienced significant backorders in the fiscal year ended September 30, 1997.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." Due to the nature of the Company's business, the Company typically
does not carry a substantial backlog of orders.

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, 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.

CONSUMER 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.

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

31
<PAGE>

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 makes available to the Company's
distributors a detailed monthly accounting of sales and recruiting activity.
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 frequently to an off-site location for safekeeping.

The Company recently installed a White(R) automated inventory storage
and retrieval system in its warehouse/shipping facilities in Houston. The system
is expected to improve operator productivity, reduce error rates and speed
throughput. The Company should be able to handle substantially increased sales
volumes without material staffing increases.

The Company is currently installing SAP(R), an enterprise wide
state-of-the-market computer information system. The system is expected to
provide improved administrative cost control, enhanced customer service and
improved multinational support. The total cost, including implementation and
training, will be approximately $3,000,000. The Company has entered into a lease
arrangement for a portion of this system.

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 in the approximate amounts of $2,258,000,
$5,234,000 and $4,190,000 for the fiscal years ended September 30, 1995, 1996
and 1997, respectively. See "Risk Factors" and "Certain Transactions."

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. In
addition, such delays could interrupt momentum in growth of product sales and
distributor recruitment.

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),
E-Lemonator(R), Phytogreen(R), BioGlow(R), M2(R)PowerPlay and Nutrition For
Life(R). It has applied for trademark registration for its BioRub(TM), Heartful
Gourmets(TM), Lifedial 1 Plus(TM), Arthro Support(TM) Tri-Pak, Enviro Defense
System(TM), NutriBuddies(TM), and Serenity(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. The Company's
ability to remain competitive depends, in significant part, on the Company's
success in recruiting and retaining distributors. Since the last quarter of the
fiscal year ended September 30, 1995, one executive level distributor, Kevin
Trudeau and his marketing organization, made a significant contribution to the
growth of the Company. See "Distribution and Marketing" above. There can be no
assurance that the Company's programs for recruitment and retention of
distributors will be successful.

32
<PAGE>

There are many network marketing companies with which the Company
competes for distributors. Some of the largest of these are Amway, Nature's
Sunshine Products, 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 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 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 United States 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, localities and other countries
in which the Company's products are sold.

The Dietary Supplement Law broadly regulates nutritional labeling
requirements for dietary supplements. The final regulations were published
September 23, 1997. Provisions relating to notification to FDA of product label
claims considered "Statements of Nutritional Support" and provisions relating to
new dietary ingredients became effective October 23, 1997. Regulations
specifying product label content will become effective March 23, 1999.

The Dietary Supplement Law provides for regulation of Statements of
Nutritional Support. These Statements may be made if they are truthful and not
misleading and if "adequate" substantiation for the claims is available.
Statements can describe claims of enhanced well-being from use of the dietary
supplement or product statements that relate to affecting a structure or
function of the body. However, Statements of Nutritional Support cannot claim to
diagnose, treat, cure, or prevent any disease, regardless of the possible
existence of scientific reports substantiating such claims.

Statements of Nutritional Support appearing in dietary supplement
labeling must be accompanied by a disclaimer stating that the FDA has not
evaluated the Statements. Notification to the FDA of these Statements is not
considered approval of the Statements or products. If the FDA determines in
possible future proceedings that dietary supplement Statements of Nutritional
Support fail to meet the requirements of the Dietary Supplement Law, a product
may be subject to regulation as a drug. The FDA retains all enforcement means
available to it (i.e., seizure, civil or criminal penalties, etc.), when
investigating or enforcing labeling claims.

The Dietary Supplement Law also provided for the formation of a
Presidential Commission on Dietary Supplement Labels, requiring it to consider
and comment upon informational dietary supplement issues. The Commission issued
its non-binding final report on November 24, 1997. The report's findings are
similar, yet distinct

33
<PAGE>

from, the regulations enacted by the Dietary Supplement Law. The report
addressed a broad range of issues, including the need for increased consumer
education of dietary supplement products and increased responsibility on the
part of manufacturers and distributors regarding the safety of dietary
supplement products. The Company cannot determine what effect the report will
have on its business in the future, or whether the report will lead to any
additional legislative or regulatory intervention.

The FDA also regulates the formulation and manufacture of dietary
supplements, cosmetics and over-the-counter drugs distributed by the Company.
The FDA has published proposed regulations for the manufacture of dietary
supplements called cGMP's. Final cGMP regulations are not expected any earlier
than the fourth quarter of 1998. The Company believes it complies with good
manufacturing practices for foods, as currently required by the FDA. The Company
cannot predict whether this new legislation regulating manufacturing activities
could have a material adverse effect on the Company.

The Federal Trade Commission ("FTC") regulates advertising of the
Company's nutritional and dietary supplement products, cosmetics and
over-the-counter drugs. The Federal Trade Commission Act prohibits unfair or
deceptive trade practices and false or misleading advertising. The FTC has
recently been very active in its enforcement of advertising against
manufacturers and distributors of nutritional dietary supplements, having
instituted several enforcement actions resulting in signed agreements and
payments of large fines. Although the Company has not been the target of a FTC
investigation, there can be no assurance that the FTC will not investigate the
Company's advertising in the future.

The Company is unable to predict the nature of any future laws,
regulations, interpretations or applications, nor can it predict what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. They could, however,
require the reformulation of certain products not possible to be reformulated,
imposition of additional record keeping requirements, expanded documentation of
the properties of certain products, expanded or different labeling and
scientific substantiation regarding product ingredients, safety or usefulness.
Any or all such requirements could have a material adverse effect on the
Company's results of operations and financial condition.

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 FTC regulations include the federal securities
laws, matters administered by the FTC 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 or the conduct of certain distributors could be found not to be in
compliance with applicable laws or regulations. Failure by the Company or
significant distributors to comply with these laws and regulations could have an
adverse material effect on the Company in a particular market or in general. See
"Risk Factors" and "Distribution and Marketing" for further discussion regarding
the AVC with the Illinois Attorney General and other states, and "Legal
Proceedings" regarding the class action litigation against the Company which was
recently resolved.

EMPLOYEES AND PROPERTIES

At March 31, 1998, the Company employed approximately 230 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.

The Company's executive offices and principal warehouse facilities
consists of approximately 83,000 square feet located in Houston, Texas. These
facilities are leased from a non-affiliate pursuant to a lease which expires in
July, 2001.

34
<PAGE>

LEGAL PROCEEDINGS

As more fully discussed in "Risk Factors" and "Business" and Note 8 to
the Notes to "Financial Statements", the Company entered into an "Assurance of
Voluntary Compliance" with the Illinois Attorney General and similar agreements
with other states. In the future, inquiries may continue from various state
agencies concerning the marketing of the Company's programs.

A formal investigation was commenced during the fiscal year September
30, 1996 by the Securities and Exchange Commission regarding possible violations
by the Company of the federal securities laws. In December 1996 the Company
received a letter from the Securities and Exchange Commission notifying the
Company that the staff inquiry had been terminated and that no enforcement
action had been recommended at that time to the Commission.

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 on behalf of 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 were
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 alleged illegality of the program
and Mr. Trudeau's past.

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 were
substantially similar to the Federal Action, i.e., 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.

In January 1997, the Company reached two preliminary settlement
agreements which resolved the class action lawsuits. The settlement agreements
in these class action lawsuits are discussed in Note 8 to the Notes to
"Financial Statements." In August 1997, the Federal Court approved as fair,
reasonable and adequate the settlement involving the Company's distributors, and
in September 1997, the settlement agreement involving purchasers of the
Company's securities was approved by the Federal Court as fair, reasonable and
adequate. The State Action was dismissed in November 1997.

In February 1998, the Company was named as a defendant in an action
commenced in the United States District Court for the District of Wyoming by a
distributor of the Company. Also named as defendants are Kevin Trudeau, the
Trudeau Marketing Group and Veridien Corp. Veridien Corp. is a manufacturer of
Virahol, a disinfectant which is distributed by the Company. The plaintiff
claims that the defendants misrepresented facts pertaining to Virahol in an
attempt to entice her and others like her to join an illegal pyramid scheme. The
plaintiff's claim is for out of pocket expenses of $1,913, the "benefit of the
bargain" she made with defendants in an amount ranging from $240,000 to $4
million, medical expenses of $161 and damages to be determined for
embarrassment, humiliation and emotional distress. The Company denies the
allegations of the plaintiff and intends to vigorously defend this action. No
reserve for loss contingency has been accrued in the Company's Financial
Statements as of March 31, 1998.

35
<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 54 President, Director and Chairman of the Board of Directors

Jana Mitcham 50 Executive Vice President, Secretary and Director

David O. Rodrigue 50 Vice-President and Chief Financial Officer

John R. Brown, Jr. 60 Vice-President-Finance, Treasurer and Assistant Secretary

F. Wayne Ballenger 50 Director

M. F. Florence 61 Director

Richard S. Kashenberg 42 Director

Gregory Pusey 45 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.

DAVID O. RODRIGUE became Vice President and Chief Financial Officer of
the Company in January, 1998. From 1993 until he joined the Company, Mr.
Rodrigue served as Vice President-Finance and Chief Financial Officer of
Positron Corporation, a publicly-held company engaged in medical imaging. From
1989 to 1993, he functioned as a consultative chief financial officer to several
privately-held companies. Mr. Rodrigue is a Certified Public Accountant and was
previously employed by Coopers & Lybrand, LLP. He received B.S. and M.B.A.
degrees from Louisiana State University.

JOHN R. BROWN, JR. became Vice President-Finance of the Company in
September, 1996. He assumed the positions of Treasurer and Assistant Secretary
in January 1998. 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 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.

F. WAYNE BALLENGER has served as President of First Commercial Capital
since 1995. He has also

36
<PAGE>

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 a B.B.A. degree from the University of
the South in 1968. Mr. Ballenger became a director of the Company in November
1995.

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 of
Commerce 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 Adam Nutrition, Inc.
since November 1997. He served as President at NION Laboratories from 1982 to
1996, and as a consultant to NION through October 1997. NION 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 Executive Vice President and a director of Naturally
Direct, Inc., a company recently formed to consolidate companies in the
nutritional supplement industry. 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 Compensation 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 Compensation Committee. The Compensation Committee reviews stock option and
other compensation policies and programs.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding
compensation paid by the Company to the officers whose total annual compensation
exceeded $100,000 during the fiscal years ended September 30, 1995, 1996 and
1997.

37
<PAGE>

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------------------------
------------------------------------------- AWARDS PAYOUTS
------ -------
Name and Principal Year Salary Bonus Other Restricted Options LTIP All other
------------------ ---- ------ ----- ---- ---------- ------- ---- ---------
Position ($) Annual Stock /SARs Payouts Compen-
-------- --- ------ ----- ----- ------- -------
Compen- Awards sation(1)
------ ------ ---------
sation
------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David P. Bertrand(1) 1995 162,006 143,829 5,250 0 80,400 0 12,885
Chief Executive Officer 1996 162,000 530,812 15,750 0 0 0 12,885
1997 412,434 0 0 0 40,200 0 6,485

Jana Mitcham(1) 1995 157,316 143,829 5,250 0 75,600 0 9,013
Executive Vice President 1996 156,000 526,649 15,500 0 0 0 9,013
1997 387,793 0 0 0 37,800 0 4,985

Barry C. Loder(2) 1995 51,404 7,790 1,500 0 50,000 0 0
Vice President and Chief 1996 121,184 57,500 11,208 0 0 0 0
Financial Officer 1997 161,243 0 0 0 55,000 0 0

Ronnie D. Meaux(1) 1995 81,350 10,000 6,900 0 36,000 0 6,392
Vice President, 1996 87,430 53,160 9,400 0 0 0 6,392
Treasurer and Assistant 1997 87,101 0 6,000 0 12,250 0 2,619
Secretary

John R. Brown, Jr.(3) 1995 0 0 0 0 0 0 0
Vice-President-Finance 1996 30,030 6,900 0 0 10,000 0 0
1997 76,357 0 0 0 0 0 0
</TABLE>
- ----------------

(1) The Company has obtained insurance policies on the lives of Mr.
Bertrand, Ms. Mitcham and Mr. Meaux, of which benefit amounts of
$1,060,000, $660,000 and $467,000 on the lives of Mr. Bertrand, Ms.
Mitcham and Mr. Meaux, respectively, constitute "keyman" insurance and
are payable to the Company. Approximately 51% of the aggregate
insurance benefits on the lives of Mr. Bertrand, Ms. Mitcham and Mr.
Meaux are payable to beneficiaries designated by Mr. Bertrand, Ms.
Mitcham and Mr. Meaux. 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. Mr.
Meaux resigned as an employee of the Company in March 1998.

(2) Mr. Loder joined the Company as Vice President and Chief Financial
Officer in March 1995, and became Chief Operating Officer in April
1997. He resigned in January 1998.

(3) Mr. Brown commenced work with the Company on a part-time basis in
December 1995 and became a full-time employee and officer of the
Company in September 1996.

38
<PAGE>

EMPLOYMENT AGREEMENTS

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.

Effective October 1, 1996, the Company entered into new employment
agreements with Mr. Bertrand and Ms. Mitcham. The terms of these agreements are
essentially identical, except that Mr. Bertrand's annual salary is $400,000 and
Ms. Mitcham's annual salary is $376,000. Mr. Bertrand and Ms. Mitcham are each
also entitled to a bonus if the Company has pre-tax annual income between $3
million and $20 million. Each is entitled to receive 5% of any annual pre-tax
income between $3 million and $5 million; four percent of the annual pre-tax
income between $5 million and $10 million; and three percent of the annual
pre-tax income between $10 million and $20 million. The term of each agreement
is three years. Each of the agreements may be earlier terminated upon mutual
agreement, death, disability or conviction of the officer, or a material breach
of the agreement by the officer. In March 1998, Mr. Bertrand and Ms. Mitcham
each agreed to reduce their salaries by 25% and each was granted options to
purchase 20,000 shares of Common Stock. The exercise price for the options is
$5.13 per share, which was the fair market value of the Common Stock on the date
of grant. See "Principal Shareholders."

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. At March 31, 1998, there were outstanding or reserved
for issuance options to acquire up to 508,800 shares of Common Stock. Under the
Plans, the Company may issue options to purchase up to an additional 295,356
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.

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.

39
<PAGE>

Option Grants in Fiscal Year Ended September 30, 1997
- -----------------------------------------------------

The following table sets forth information with respect to stock option
grants to the named executive officers during the fiscal year ended September
30, 1997:
<TABLE>
<CAPTION>
Potential realizable value at
-----------------------------
Assumed Annual Rates of
-----------------------
Stock Price Appreciation
Individual Grants ------------------------
----------------- For Option Term
---------------
Number of Percent of
--------- ----------
Securities Total options/ Exercise or
---------- -------------- -----------
Name underlying SARs granted Base price Expiration 5% ($) 10% ($)
---- ---------- ------------ ---------- ---------- ------ -------
Options/SARs to employees ($/Sh) Date
------------ ------------ ------ ----
granted (#) in fiscal year
----------- --------------
<S> <C> <C> <C> <C> <C> <C>
David P. Bertrand 40,200 16.3 13.00 11/06 288,124 709,663
Jana Mitcham 37,800 15.3 13.00 11/06 270,923 667,295
Barry C. Loder 25,000 10.1 13.00 11/06 179,182 441,333
30,000 12.2 10.38 04/07 181,685 452,854
Ronnie D. Meaux 12,250 5.0 13.00 11/06 87,799 216,253
John R. Brown, Jr. 0 0 0 0 0 0
</TABLE>

Option Exercises and Year-End Values
- ------------------------------------

The following table shows option exercises by the named executive
officers during the fiscal year ended September 30, 1997 and the number and
value of unexercised options at September 30, 1997.
<TABLE>
<CAPTION>
Value of
Number of Number of Unexercised
Shares Under- Value Unexercised Options In-the-Money
Name Lying Options Realized At Year End (#) Options at
---- Exercised (#) ($) Exercisable/ Year End ($)
------------- --- Unexercisable Exercisable/
------------- Unexercisable(1)
---------------
<S> <C> <C> <C> <C>
David P. Bertrand 0 0 80,400/40,200 494,070/0
Jana Mitcham 0 0 75,600/37,800 465,570/0
Barry C. Loder 0 0 50,000/55,000 265,625/0
Ronnie D. Meaux 0 0 24,500/12,250 151,631/0
John R. Brown, Jr. 0 0 3,334/6,666 0/0
</TABLE>
- ----------------------

(1) Based on the price of the Common Stock of $8.00 on September 30, 1997
as reported by The Nasdaq Stock Market.

40
<PAGE>

COMPENSATION OF DIRECTORS

Directors who are not employees of the Company receive $18,000 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, 1996, the Company paid Mr. Pusey $58,000, and
$12,000 to each of Mr. Kashenberg and Mr. Florence. During the fiscal year ended
September 30, 1997, Mr. Pusey was paid $77,200.

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.")
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. The
shares acquired upon exercise of these options cannot be sold for six months
following the date of grant. In November 1995, 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. In December 1996
the Company granted options to purchase 5,000 shares of Common Stock at a price
of $12.38 per share to each of F. Wayne Ballenger, M.F. Florence and Richard S.
Kashenberg. These persons each received options to purchase 5,000 shares of
Common Stock at a price of $7.00 per share in December 1997. 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 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.

41
<PAGE>

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 foregoing 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.

42
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 11, 1998 and as adjusted to
reflect the sale of 399,887 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>
Apotex Foundation 650,000(1) 11.1 10.4
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9

Bernard Sherman 1,215,390(1) 20.7 19.4
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9

Shermfin Corp. 565,390(1) 9.6 9.0
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9

M. F. Florence 586,390(1)(2) 10.0 9.3
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9

Jana Mitcham 418,704(3) 7.1 6.7
10618 Great Plains
Houston, Texas 77064

David P. Bertrand 332,492(4) 5.7 5.3
10622 Great Plains
Houston, TX 77064

Gregory Pusey 175,584(5) 3.0 2.8
1722 Buffehr Creek Road
Vail, Colorado 81657

Richard S. Kashenberg 65,372(6) 1.1 1.0
11010 Hopkins Street, Unit B
Mira Loma, CA 91752

F. Wayne Ballenger 15,000(7) .3 .2
3134 Meadway Drive
Houston, Texas 77082

All Officers and Directors 1,628,542(8) 27.7 25.9
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. Mr.
Sherman may be deemed a beneficial owner of the shares held by Apotex
Foundation as he is a Trustee of the Apotex Foundation. 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

43
<PAGE>

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.

(2) Includes options to acquire (i) 6,000 shares of Common Stock at $1.665 per
share, (ii) options to acquire 5,000 shares of Common Stock at $19.75 per
share, (iii) options to acquire 5,000 shares of Common Stock at $12.38 per
share and (iv) options to acquire 5,000 shares of Common Stock at $7.00 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, (iii) 16,800 shares of Common Stock at $2.25 per share and (iv)
37,800 shares of Common Stock at $13.00 per share, of which options to
acquire 12,600 shares become exercisable in each of November 1998 and
November 1999. 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 and 3,600 shares of Common Stock at $13.00 per share, of which
options to acquire 1,200 shares become exercisable in each of November 1998
and November 1999. Does not include options to purchase 20,000 shares of
Common Stock at $5.13 per share, which become exercisable in September
1998.

(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, (iii) 19,200
shares of Common Stock at $2.25 per share and (iv) 40,200 shares of Common
Stock at $13.00 per share, of which options to acquire 13,400 shares become
exercisable in each of November 1998 and November 1999. 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 and 3,600 shares of Common
Stock at $13.00 per share, of which options to acquire 1,200 shares become
exercisable in each of November 1998 and November 1999. Does not include
options to purchase 20,000 shares of Common Stock at $5.13 per share, which
become exercisable in September 1998.

(5) Includes 3,000 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, (iii) 6,000 shares of Common Stock at $2.25 per share and (iv) 9,000
shares of Common Stock at $13.00 per share, of which options to acquire
3,000 shares become exercisable in each of November 1998 and November 1999.
Also includes 20,880 shares of Common Stock and 14,000 Warrants held by
entities which are affiliates of Mr. Pusey, and 14,104 shares of Common
Stock and 1,000 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, (ii) 5,000 shares of Common Stock at $19.75 per share, (iii) 5,000
shares of Common Stock at $12.38 per share and (iv) 5,000 shares of Common
Stock at $7.00 per share.

(7) Includes options to acquire (i) 5,000 shares of Common Stock at $19.75 per
share; (ii) 5,000 shares of Common Stock at $12.38 per share, and (iii)
5,000 shares of Common Stock at $7.00 per share.

(8) Includes the following options held by persons who are officers, but not
directors, of the Company: Options to acquire (i) 10,000 shares of Common
Stock at $11.50 per share, of which options to acquire 3,333 shares become
exercisable in each of September 1998 and September 1999, and (ii) 25,000
shares of Common Stock at $5.75 per share, of which options to acquire
8,333 shares become exercisable in each of January 1999, January 2000 and
January 2001.

44
<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). The
Company filed a registration statement in 1997. 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. Shermfin Corp. designated M.F. Florence to serve on the Board.

A substantial portion of the products purchased by the Company during
the past three fiscal years have been supplied by NION Laboratories, which was a
subsidiary of Shermfin Corp. until June 1995. NION Laboratories is a
manufacturer of pharmaceutical and consumer-related products. During the fiscal
years ended September 30, 1995, 1996 and 1997, the Company purchased
approximately $2,258,000, $5,234,000 and $4,190,000 of goods, respectively, from
NION Laboratories. Richard S. Kashenberg, a director of the Company, served as
the chief executive officer of NION until December 1996, and as a consultant to
NION through October 1997. The Company believes that the terms it obtained from
NION 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 were to become
exercisable on April 15, 1996 and to 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.

45
<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
5,882,306 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 AND OPTIONS

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 September 15, 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

46
<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 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 options 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.

In March 1998, the Company entered into a Consulting Agreement with
Piedmont Consulting, Inc. ("Piedmont") pursuant to which Piedmont will provide
public and investor relations services for the Company for a twelve-month
period. The Company has agreed to pay Piedmont $4,000 per month and to issue to
Piedmont warrants to purchase up to 100,000 shares of Common Stock. Warrants to
purchase up to 30,000 shares vested upon signing of the Agreement, and warrants
to purchase up to 40,000 shares at $7 per share vested when the Common Stock
traded at an average price of $7 per share or higher for a 20-day period.
Warrants to purchase up to an additional 30,000 shares at $10 per share are
subject to vesting upon the Common Stock trading at a 20-day average at $10 or
higher. The exercise period for all of the warrants granted to Piedmont will
expire in March 2001. The Company has agreed to file a registration statement
registering the shares of Common Stock underlying the warrants. The Company
anticipates that it will file this registration statement in the fall of 1998.
Beginning in April 1998, the $66,000 value of the initial 30,000 shares will be
amortized into operations as professional services over the twelve months period
ending March 31, 1999.

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.

47
<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.

EXPERTS

Financial statements of the Company as of September 30, 1997 and 1996
and for each of the years in the two year period ended September 30, 1997
included in this Amended Prospectus and in the Registration Statement have been
audited by BDO Seidman, LLP, independent certified public accountants, to the
extent set forth in their report appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of said firm as experts in accounting and auditing. Financial
statements of the Company for the year 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.

48
<PAGE>

INDEX TO FINANCIAL STATEMENTS
<TABLE>

<S> <C>
Interim Financial Statements (unaudited):

Consolidated Balance Sheets .....................................................................................F-2

Consolidated Statements of Operations............................................................................F-3

Consolidated Statements of Stockholders' Equity..................................................................F-4

Condensed Consolidated Statements of Cash Flows..................................................................F-5

Notes to Consolidated Financial Statements.......................................................................F-6

Fiscal Financial Statements:

Independent Auditors' Reports ...................................................................................F-8

Consolidated Balance Sheets ....................................................................................F-10

Consolidated Statements of Operations...........................................................................F-11

Consolidated Statements of Stockholders' Equity.................................................................F-12

Consolidated Statements of Cash Flows...........................................................................F-13

Notes to Consolidated Financial Statements......................................................................F-14
</TABLE>

F-1
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1998 September 30,
(Unaudited) 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,049,280 8,903,957
Cash-restricted -- 513,195
Receivables 1,103,619 1,547,479
Inventories 8,099,475 7,920,454
Deferred tax asset, net 1,543,000 1,888,442
Refundable federal income taxes 1,048,008 1,029,277
Prepaid expenses and other assets 818,462 496,517
---------- ----------
Total current assets 18,661,844 22,299,321

Property and equipment, net 7,592,843 6,534,042
Intangible assets, net 88,999 199,047
Other assets 346,532 315,026
---------- ----------
$ 26,690,218 29,347,436
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 3,301,955 3,707,930
Accrued bonuses and commissions 1,669,706 1,973,646
Current portion of capital lease obligation 192,477 157,739
Accrued expenses and other liabilities 601,336 1,072,883
Accrued cruise -- 1,195,150
Lawsuit settlement accrual 93,070 1,332,314
Deferred income 3,531,438 3,130,524
Federal and franchise tax payable 290,216 43,216
Dividends payable 117,150 115,798
---------- ----------
Total current liabilities 9,797,348 12,729,200

Deferred tax liability 300,000 282,000
Long-term portion of capital lease obligation 501,521 478,220

Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; 5,840,935 and 5,775,835 shares, respectively 58,409 57,758
Additional paid-in capital 10,864,294 10,688,951
Retained earnings 5,300,527 5,176,539
Cumulative foreign currency translation adjustment (58,071) 8,578
---------- ----------
16,165,159 15,931,826
Less: Treasury stock - 9,000 shares at cost (73,810) (73,810)
---------- ----------
Total stockholders' equity 16,091,349 15,858,016
---------- ----------
$ 26,690,218 29,347,436
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-2
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $35,962,705 40,469,268

Cost of sales 25,199,265 29,873,040
---------- ----------

Gross profit 10,763,440 10,596,228

Operating expenses:
Marketing, distribution and administrative expenses 10,019,704 10,014,352
Lawsuit settlement -- 6,425,000
---------- ----------
10,019,704 16,439,352
---------- ----------

Income (loss) from operations 743,736 (5,843,124)
Other income (expense):
Interest, net 92,713 334,672
Other, net 112,486 (78,592)
---------- ----------
205,199 256,080
---------- ----------

Income (loss) before income tax expense (benefit) 948,935 (5,587,044)
Income tax expense (benefit) 592,000 (1,817,130)
---------- ----------

Net income (loss) $ 356,935 (3,769,914)
========== ==========

Basic income (loss) per common share $ 0.06 (0.68)
========== ==========

Diluted income (loss) per common share $ 0.06 (0.68)
========== ==========

Weighted average common shares:
Basic 5,797,120 5,569,661
========== ==========
Diluted 6,193,810 5,569,661
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Additional Retained Foreign Total
Common Paid-In Earnings Currency Treasury Stockholders'
Stock Capital (Deficit) Adjustment Stock Equity
---------- ---------- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, at September 30, 1996 $ 55,686 9,939,059 7,611,580 (4,609) -- $ 17,601,716

Net (loss) -- -- (3,769,914) -- -- (3,769,914)

Cash dividends -- -- (222,741) -- -- (222,741)

Foreign currency adjustment -- -- -- 64,576 -- 64,576

Exercise of stock options 72 11,952 -- -- -- 12,024
---------- ---------- --------- ------- ------- ------------

Balance, at March 31, 1997 $ 55,758 9,951,011 3,618,925 59,967 -- $ 13,685,661
========== ========== ========= ======= ======= ============

Balance, at September 30, 1997 $ 57,758 10,688,951 5,176,539 8,578 (73,810) $ 15,858,016

Net income -- -- 356,935 -- -- 356,935

Cash dividends -- -- (232,947) -- -- (232,947)

Foreign currency adjustment -- -- -- (66,649) -- (66,649)

Exercise of stock options 536 132,333 -- -- -- 132,869

Exercise of warrants 115 43,010 -- -- -- 43,125
---------- ---------- --------- ------- ------- ------------

Balance, at March 31, 1998 $ 58,409 10,864,294 5,300,527 (58,071) (73,810) $ 16,091,349
========== ========== ========= ======= ======= ============
</TABLE>

F-4
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS
ENDED DECEMBER 31,
-------------------------------
1998 1997
----------- ----------
<S> <C> <C>
Net cash provided by (used in) operating activities $(1,097,010) 3,175,942

Net cash used in investing activities (1,693,456) (1,101,274)

Net cash provided by (used in) financing activities 2,438 (210,716)

Cumulative foreign currency translation adjustment (66,649) 64,576
----------- ----------

Net increase (decrease) in cash and cash equivalents (2,854,677) 1,928,528

Cash and cash equivalents at beginning of period 8,903,957 15,588,504
----------- ----------

Cash and cash equivalents at end of period $ 6,049,280 17,517,032
=========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTERIM FINANCIAL STATEMENTS

The accompanying financial statements of Nutrition For Life International,
Inc. (the Company) have been prepared in accordance with the instructions to
quarterly reports on Form 10-Q. 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 March 31, 1998, 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 summary of
significant accounting policies and notes to financial statements included in
the Company's Annual Report on Form 10-K. The results of operations for the
period ended March 31, 1998 are not necessarily an indication of operating
results for the full year.

Subsequent to September 30, 1997 the Company adopted Statements of
Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. SFAS
128 provides for the calculation of basic and diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing net income
available to stockholders by the weighted number of common shares outstanding
for the period. Dilutive earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share.

Earnings per share amounts as required by Statements of Financial
Accounting Standards No 128 are calculated as follows:
<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1998
--------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Net income $356,935
=======
Basic EPS:
Net income available
to common stockholders 356,935 5,797,120 $ 0.06
=======
Effect of dilutive warrants
and options -- 396,690
------- ---------
Diluted EPS:
Net income available to common
stockholders + assumed
conversions $356,935 6,193,810 $ 0.06
======= ========= =======
</TABLE>

F-6
<PAGE>

<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1997
-----------------------------------------------
Income (loss) Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ------
<S> <C> <C> <C>
Net income (loss) $ (3,769,914)
=========
Basic EPS:
Net income (loss) available
to common stockholders $ (3,769,914) 5,569,661 $ (0.68)
====
Effect of dilutive warrants
and options -- -- *
--------- ---------
Diluted EPS:
Net income (loss) available to common
stockholders + assumed
conversions $ (3,769,914) 5,569,661 $ (0.68)
========= ========= ====

*Warrants and options totalling 721,892 are not incorporated in calculating
Diluted EPS as the effect is anti-dilutive.

<CAPTION>
For the Three Months Ended March 31, 1998
-----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Net income $ 605,419
=======
Basic EPS:
Net income available
to common stockholders $ 605,419 5,804,528 $ 0.10
====
Effect of dilutive warrants
and options -- 357,002
-------- ---------
Diluted EPS:
Net income available to common
stockholders + assumed
conversions $ 605,419 6,161,530 $ 0.10
======= ========= ====
<CAPTION>

For the Three Months Ended March 31, 1997
-----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Net income $ 726,414
=======
Basic EPS:
Net income available
to common stockholders $ 726,414 5,570,785 $ 0.13
====
Effect of dilutive warrants
and options -- 689,642
------- ---------
Diluted EPS:
Net income available to common
stockholders + assumed
conversions $ 726,414 6,260,427 $ 0.12
======= ========= ====
</TABLE>

The Company has not yet adopted Statements of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", nor No. 131, "Disclosure about Segments
of a Business Enterprise". The Company will be required to adopt these
Statements during the fiscal year ended September 30, 1998. The Company does not
believe either Statement will have a material impact on the financial
statements.

F-7
<PAGE>

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
------------------------------------------------

To the Board of Directors
and Shareholders of
Nutrition for Life International, Inc.

We have audited the consolidated balance sheets of Nutrition for Life
International, Inc. as of September 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Nutrition for Life International, Inc. at September 30, 1997 and 1996 and the
results of its operations and its cash flows for each of the years then ended in
conformity with generally accepted accounting principles.

BDO Seidman, LLP

Houston, Texas
December 16, 1997,
except for note 1
which is as of
June 19, 1998

F-8
<PAGE>

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

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

We have audited the accompanying statements of operations, stockholders' equity
and cash flows of Nutrition For Life International, Inc. for the year 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

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

KPMG PEAT MARWICK LLP

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

F-9
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents ............................... $ 8,903,957 $ 15,588,504
Cash-restricted ......................................... 513,195 --
Receivables ............................................. 1,547,479 368,062
Inventories ............................................. 7,920,454 6,365,350
Deferred tax asset, net (Note 5) ........................ 1,888,442 1,561,000
Refundable federal income taxes (Note 5) ................ 1,029,277 500,000
Prepaid expenses and other assets ....................... 496,517 260,091
------------ ------------

Total Current Assets ................................... 22,299,321 24,643,007

Property and equipment, net (Note 3) ..................... 6,534,042 2,493,759
Intangible assets, net ................................... 199,047 340,063
Other assets ............................................. 315,026 212,031
------------ ------------
$ 29,347,436 $ 27,688,860
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable ........................................ $ 3,707,930 $ 2,577,101
Accrued bonuses and commissions ......................... 1,973,646 2,041,678
Current portion of capital lease obligation (Note 4) .... 157,739 --
Deferred income (Note 7) ................................ 3,130,524 3,893,570
Accrued cruise (note 8) ................................. 1,195,150 --
Lawsuit settlement accrual (note 8) ..................... 1,332,314 --
Accrued expenses and other liabilities .................. 1,072,883 552,424
Federal and franchise tax payable (Note 5) .............. 43,216 850,000
Dividends payable (Note 2) .............................. 115,798 111,371
------------ ------------

Total Current Liabilities ............................. 12,729,200 10,026,144

Deferred tax liability (Note 5) .......................... 282,000 61,000
Long-term portion of capital lease obligation (Note 4) ... 478,220 --

Commitments and contingencies (Note 8)

Stockholders' Equity (Note 2):
Preferred stock, $.001 par value; 1,000,000
authorized; none issued and outstanding ............... -- --
Common stock; $.01 par value; 20,000,000
shares authorized ..................................... 57,758 55,686
Additional paid-in capital .............................. 10,688,951 9,939,059
Retained earnings ....................................... 5,176,539 7,611,580
Cumulative foreign currency translation adjustment ...... 8,578 (4,609)
------------ ------------
15,931,826 17,601,716
------------ ------------

Less: Treasury stock-9,000 shares at cost .............. (73,810) --
------------ ------------
Total Stockholders' Equity ............................ 15,858,016 17,601,716
------------ ------------
$ 29,347,436 $ 27,688,860
============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales (Notes 7 and 10) ......................... $ 83,044,577 $ 97,403,757 $ 32,289,752

Cost of sales (Note 9) ............................. 60,277,742 67,826,803 23,515,259
------------ ------------ ------------
Gross profit ....................................... 22,766,835 29,576,954 8,774,493
------------ ------------ ------------
Operating expenses:
Marketing, distribution and administrative expenses 20,508,294 16,230,023 5,853,330
Lawsuit settlement (Note 8) ....................... 5,535,000 -- --
------------ ------------ ------------
26,043,294 16,230,023 5,853,330
------------ ------------ ------------
Income (loss) from operations ...................... (3,276,459) 13,346,931 2,921,163
------------ ------------ ------------
Other income (expense)
Interest, net ..................................... 667,338 711,563 (51,499)
Other, net ........................................ 182,600 (63,533) 139,189
------------ ------------ ------------
849,938 648,030 87,690
------------ ------------ ------------
Income (loss) before income tax expense (benefit) .. (2,426,521) 13,994,961 3,008,853
Income tax expense (benefit) (Note 5) .............. (445,420) 5,289,797 764,595
------------ ------------ ------------

Net income (loss) .................................. $ (1,981,101) $ 8,705,164 $ 2,244,258
============ ============ ============
Basic earnings (loss) per common share ............. $ (.35) $ 1.61 $ .65
============ ============ ============
Diluted earnings (loss) per common share ........... $ (.35) $ 1.37 $ .51
============ ============ ============

Weighted average common shares outstanding:
Basic ............................................. 5,621,526 5,407,957 3,437,258
============ ============ ============
Diluted ........................................... 5,621,526 6,344,682 4,443,532
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY TREASURY STOCK TOTAL
------------ PAID-IN EARNINGS TRANSLATION -------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT SHARES AMOUNT EQUITY
------ ------ ------------ ------------ ----------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at
October 1, 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
stock warrants 1,000 10 3,740 -- -- -- -- 3,750
----------- ------------ ------------ ------------ --------- --------- ------------ ------------
Balance, at
September 30, 1995 5,056,524 50,565 8,089,992 (982,213) -- -- -- 7,158,344

Net income -- -- -- 8,705,164 -- -- -- 8,705,164

Cash dividends
(Note 2) -- -- -- (111,371) -- -- -- (111,371)

Foreign currency
translation adjustment -- -- -- -- (4,609) -- -- (4,609)

Exercise of stock
options 27,454 275 36,723 -- -- -- -- 36,998

Exercise of stock
warrants 484,584 4,846 1,812,344 -- -- -- -- 1,817,190
----------- ------------ ------------ ------------ --------- --------- ------------ ------------
Balance, at
September 30, 1996 5,568,562 55,686 9,939,059 7,611,580 (4,609) -- -- 17,601,716

Net loss -- -- -- (1,981,101) -- -- -- (1,981,101)

Cash dividends
(Note 2) -- -- -- (453,940) -- -- -- (453,940)

Issuance of common
stock options for
services (Note 6) -- -- 105,362 -- -- -- -- 105,362

Registration expenses -- -- (43,872) -- -- -- -- (43,872)

Foreign currency
translation adjustment -- -- -- -- 13,187 -- -- 13,187

Purchase of
treasury stock (Note 2) -- -- -- -- -- (9,000) (73,810) (73,810)

Exercise of
stock options 157,220 1,571 522,084 -- -- -- -- 523,655

Exercise of
stock warrants 50,053 501 166,318 -- -- -- -- 166,819
----------- ------------ ------------ ------------ --------- --------- ------------ ------------
Balance, at
September 30, 1997 5,775,835 $ 57,758 $ 10,688,951 $ 5,176,539 $ 8,578 (9,000) $ (73,810) $ 15,858,016
=========== ============ ============ ============ ========= ========= ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-12
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................... $ (1,981,101) $ 8,705,164 $ 2,244,258
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization ................... 801,039 400,368 211,469
Bad debt expense ................................ 653,458 671,198 93,744
Deferred tax benefit ............................ (118,636) (1,420,858) (79,142)
Stock options issued for services ............... 105,362 -- --
Changes in assets and liabilities:
Cash-restricted ............................ (513,195) -- --
Receivables ................................ (1,756,875) (866,498) (171,025)
Inventories ................................ (1,555,104) (4,097,733) (1,241,050)
Refundable federal income taxes ............ (529,277) (500,000) --
Prepaids and other assets .................. (236,426) (170,840) 30,795
Other assets ............................... (102,995) (63,606) (48,976)
Accounts payable ........................... 1,130,829 187,395 1,847,497
Consigned inventory deposits ............... -- -- (48,881)
Deferred income ............................ (763,046) 3,545,776 245,023
Accrued expenses and other liabilities ..... 2,979,891 768,070 1,205,013
Federal and franchise tax payable .......... (806,784) 6,263 843,737
------------ ------------ ------------
Net cash provided by (used in) operating activities ....... (2,692,860) 7,164,699 5,132,462
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment ................ (4,076,384) (2,174,214) (407,882)
Purchase of intangible assets ........................ (51,769) (211,660) --
------------ ------------ ------------
Net cash used in investing activities ..................... (4,128,153) (2,385,874) (407,882)
------------ ------------ ------------
Cash flows from financing activities:
Exercise of stock options ............................ 523,655 36,998 24,375
Exercise of warrants ................................. 166,819 1,817,190 3,750
Principal repayments on long-term debt ............... -- -- (519,500)
Principal repayments on notes payable - bank ......... -- -- (20,000)
Dividends paid ....................................... (449,513) -- --
Net proceeds from public offering .................... -- -- 4,107,731
Registration fees .................................... (43,872) -- --
Purchase of treasury stock ........................... (73,810) -- --
------------ ------------ ------------
Net cash provided by financing activities ................. 123,279 1,854,188 3,596,356
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents ...... (6,697,734) 6,633,013 8,320,936
Cash and cash equivalents, beginning of year .............. 15,588,504 8,960,100 639,164
Cumulative foreign currency translation adjustment ........ 13,187 (4,609) --
------------ ------------ ------------
Cash and cash equivalents, end of year .................... $ 8,903,957 $ 15,588,504 $ 8,960,100
============ ============ ============
Supplemental disclosure of noncash financing activities:

Conversion of convertible long-term debt to
common stock ........................................ $ -- $ -- $ 130,500
============ ============ ============
Purchase of property and equipment under capital
lease................................................ $ 635,959 $ -- $ --
============ ============ ============

Declaration of dividends ............................. $ 115,798 $ 111,371 $ --
============ ============ ============
Supplemental disclosure of cash flow information:
Federal and state income taxes paid .................. $ 140,000 $ 7,210,000 $ --
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-13
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND BUSINESS

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. The effect of the merger was 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 were
merged and the business operations have been conducted through one corporation,
NFLI. The assets and liabilities of the Partnership became the assets and
liabilities of the Company, and the business operations have continued as they
were conducted previously.

The Company operates as a wholesale distributor through its 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 360 products in nine categories,
including nutritional supplements, health foods, weight management items, skin
care products, other consumer products, and services.

The Company develops products that it believes will have market appeal to
its distributors and their customers, and assist its distributors in building
their own businesses. The Company provides product development, marketing aids,
customer service and essential record keeping functions for its distributors.

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's
operations depend to a significant degree on the Company's 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 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 than investments in the organization.

The Company has two wholly-owned subsidiaries, Nutrition For Life
International (UK) Ltd. ("UK"), and Nutrition for Life International
Philippines, Inc. ("Philippines") that were formed primarily to operate as
wholesale distributors of the Company's products throughout the United Kingdom
and the Philippines.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its two wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.

RESTRICTED CASH

In accordance with the settlement of the Federal Class Action Lawsuit (See
Note 8), the Company was required to set up a reserve fund of $1,500,000 for
reimbursements to certain distributors. As of September 30, 1997, the Company
made reimbursements totaling $986,805.

F-14
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RECEIVABLES

Receivables at September 30, 1997, consists primarily of amounts due from
the Canadian government from overpayment of goods and services taxes and to a
company that supplies promotional goods and services to NFLI. All amounts are
considered collectible.

INVENTORIES

Inventories consist mainly of health and skin care products, dietary
supplements, food products and household cleaning products. Inventories are
valued at the lower of cost or market. Cost is determined on a first-in,
first-out basis.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation on property and
equipment are provided using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized over the terms of the
respective leases, not in excess of their estimated useful lives. For income tax
purposes, depreciation on fixed assets are calculated using accelerated methods.

The Company reviews the carrying values of its long-lived assets for
possible impairment whenever events or change in circumstance indicate that the
carrying amount of the assets may not be recoverable.

CAPITAL LEASE

The Company is the lessee of computer equipment under a capital lease
expiring August 2001. The asset and liability under this capital lease are
recorded at the lower of the present value of the minimum lease payments or the
fair value of the asset. The asset will be amortized beginning in fiscal 1998
over the lesser of the related lease term or its estimated useful life.

INTANGIBLE ASSETS

Intangible assets represent organizational costs and the value assigned to
nutrition and homeopathic product formulations. These assets are being amortized
over 2-10 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.

NFLI sells product redemption certificates to distributors who are enrolled
in the Company's order assurance program. Revenues are recorded when these
certificates are redeemed for product. However, if the certificates are not
redeemed for product, the Company records revenues ratably over a 150 day period
commencing with the ending of the expiration period of 120 days (see Note 7).
Such revenues are recorded as part of the Company's net sales.

INCOME TAXES

The Company recognizes income tax expense using the liability method of
accounting for deferred income taxes. A deferred tax asset or liability is
recorded based upon the tax effect of temporary differences between the tax
basis of assets and liabilities and their carrying value for financial reporting
purposes. Deferred tax expense or benefit is the result of changes in the
deferred tax assets and liabilities during the year. The

F-15
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company adjusts the deferred tax asset valuation allowance based upon the
anticipated future realization of the deferred tax benefits supported by
demonstrated trends in the Company's operating results.

STOCK OPTIONS AND WARRANTS

The Company has elected to continue to account for stock options issued to
employees in accordance with APB No. 25. During the year ended September 30,
1997, all options issued to officers and employees were granted at an exercise
price, which equaled or exceeded the market price per share at the date of grant
and accordingly, no compensation was recorded.

Effective for the year ended September 30, 1997, the Company was required
to adopt the disclosure requirements of SFAS No. 123 "Accounting for Stock-based
Compensation". This statement requires the Company to provide proforma
information regarding net income (loss) and income (loss) per share as if
compensation cost for the Company's stock options granted had been determined in
accordance with the fair value based method prescribed in SFAS No. 123. SFAS No.
123 requires that the Company record options issued to directors of the Company
as directors fees in accordance with the fair value based method. Directors fees
charged to operations for the year ended September 30, 1997 were $105,362.

EARNINGS (LOSS) PER COMMON SHARE

Subsequent to September 30, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. SFAS 128 provides
for the calculation of basic and diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing net income available to
stockholders by the weighted number of common shares outstanding for the period.
Dilutive earnings per share reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully diluted earnings per
share.

Earnings per share amounts as required by Statement of Financial Accounting
Standards No. 128 are calculated as follows:
<TABLE>
<CAPTION>
For the Year Ended September 30, 1997
---------------------------------------------
(Loss) Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ------
<S> <C> <C> <C>
Net income (loss) $ (1,981,101)
=========
Basic EPS:
Net income (loss) available
to common stockholders (1,981,101) 5,621,526 $(.35)
===
Effect of dilutive warrants
and options - - *
--------- ---------
Diluted EPS:
Net income (loss) available
to common stockholders
+ assumed conversions $ (1,981,101) 5,621,526 $(.35)
========= ========= ===
</TABLE>

*Warrants and options totalling 616,952 are not incorporated in calculating
Diluted EPS as the effect is anti-dilutive.

<TABLE>
<CAPTION>
For the Year Ended September 30, 1996
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
<S> <C> <C> <C>
Net income $ 8,705,164
=========
Basic EPS:
Net income available
to common stockholders $ 8,705,164 5,407,957 $ 1.61
====
Effect of dilutive warrants
and options - 936,725
--------- ---------
Diluted EPS:
Net income available
to common stockholders
+ assumed conversions $ 8,705,164 6,344,682 $ 1.37
========= ========= ====

For the Year Ended September 30, 1995
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
<S> <C> <C> <C>
Net income $ 2,244,258
=========
Basic EPS:
Net income available
to common stockholders $ 2,244,258 3,437,258 $ .65
===
Effect of dilutive warrants
and options - 1,006,274
--------- ---------
Diluted EPS:
Net income available
to common stockholders
+ assumed conversions $ 2,244,258 4,443,532 $ .51
========= ========= ===
</TABLE>
As certain debt was retired with the proceeds of the Company's public
offering (see Note 2) 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 $0.59. 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 on hand and in short-term, interest bearing deposits with original
maturities of three months or less.

FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include accounts receivable, accounts
payable and capital lease obligations. The fair market value of accounts
receivable and accounts payable approximates their carrying values because their
maturities are generally less than one year. The carrying value of the capital
lease obligation approximates market value because the Company's incremental
borrowing rate at the inception of the lease was used.

F-16
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MANAGEMENT'S ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affects the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. The actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK

At September 30, 1997, the Company's cash in financial institutions
exceeded the federally insured deposit limit by approximately $4,675,000.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure ("SFAS 129") effective for periods ending
after December 15, 1997, establishes standards for disclosing information about
an entity's capital structure. SFAS 129 requires disclosure of the pertinent
rights and privileges of various securities outstanding (stock, options,
warrants, preferred stock, debt and participating rights) including dividend and
liquidations preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 will have
no effect on the Company as it currently discloses the information specified.

In June 1997, the Financial Accounting Standards Board issued two new
reporting and disclosure standards. Results of operations and financial position
will be unaffected by implementation of these new standards.

SFAS 130, "Reporting Comprehensive Income" , established standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all items that are required to
be recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.

SFAS 131, "Disclosure about Segments of a Business Enterprise", establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial

F-17
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.

Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Due to the recent issuance of these standards,
management is unable to fully evaluate the impact, if any, they may have on
future financial statement disclosures.

RECLASSIFICATIONS

Certain reclassifications were made to the 1996 accounts to conform to the
1997 financial statement presentation. These reclassifications had no impact on
net income as previously recorded.

NOTE 2 - COMMON STOCK

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
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 (Note 6) through a public offering at prices of
$2.6875 and $0.125, respectively, resulting in net proceeds (after deducting
issuance costs) of $4,107,731. 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 were repaid from the proceeds of the
offering.

On September 16, 1996 the Company's Board of Directors authorized a stock
repurchase program, whereby the Company had the discretion to purchase up to
200,000 shares of its common stock. During the year ended September 30, 1997,
the Company purchased 9,000 shares of common stock for $73,810. The repurchase
program terminated on June 30, 1997.

On September 30, 1996 the Board of Directors of NFLI declared a cash
dividend of $.02 per share of common stock outstanding. The cash dividends of
$111,371 were paid on October 15, 1996.

On December 31, 1996, March 3, 1997, June 13, 1997 and September 30, 1997,
the board of directors of NFLI declared cash dividends, totaling $453,940, or
$.02 per share of common stock outstanding. Of such dividends, $338,142 was paid
during the year ended September 30, 1997 and $115,798 was paid during October
1997.

F-18
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment and their estimated useful lives are summarized as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
LIVES 1997 1996
----- ---------- ----------
<S> <C> <C> <C>
Equipment.................................... 7 $4,364,327 $2,398,666
Computer software............................ 10 1,577,004 --
Leasehold improvements....................... 5 1,045,058 700,417
Furniture and fixtures....................... 5-10 612,498 585,056
Automobiles.................................. 5 93,905 --
Equipment held under capital lease (Note 4).. 4 635,959 --
---------- ----------
8,328,751 3,684,139
Less: Accumulated depreciation
and amortization.................... 1,794,709 1,190,380
---------- ----------
$6,534,042 $2,493,759
========== ==========
</TABLE>

NOTE 4 - CAPITAL LEASE OBLIGATION

Minimum future lease payments under capital leases as of September 30, 1997
for each of the next four years and in the aggregate are:
<TABLE>
<CAPTION>
Year ended September 30: Amount
----------------------- ---------
<S> <C>
1998 $ 181,704
1999 181,704
2000 181,704
2001 181,704
---------
Total minimum lease payments 726,816

Less: Amount representing interest 90,857
---------
Present value of net minimum lease payments $ 635,959
=========
Current portion of capital lease obligation $ 157,739
Long-term portion of capital lease obligation 478,220
---------
$ 635,959
=========
</TABLE>

An interest rate of 7.21% on the capital lease was imputed based on the
Company's incremental borrowing rate at the inception of the lease.

NOTE 5 - INCOME TAXES

Deferred income taxes are determined based on the temporary differences
between the financial statement and income tax basis of assets and liabilities
as measured by the enacted tax rates which will be in effect when these
differences reverse.

F-19
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The (benefit) provision for income taxes (benefit) for the years ended
September 30, 1997, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----------- --------
<S> <C> <C> <C>
Federal tax (benefit) - current $(370,000) $ 5,860,655 $659,015
Federal tax - deferred benefit, net.. (118,636) (1,420,858) (79,142)
State tax............................ 43,216 850,000 184,722
--------- ----------- --------
$(445,420) $ 5,289,797 $764,595
========= =========== ========

The following reconciles federal income taxes (benefit) computed at the
statutory rate with income taxes as reported for the years ended September 30:

<CAPTION>
1997 1996 1995
--------- ---------- ----------
<S> <C> <C> <C>
Expected income tax benefit expense at 34%....... $(825,017) $4,758,287 $1,023,010
Graduated tax rate effect........................ -- 140,000 --
State taxes, net of federal benefit.............. 28,523 560,155 121,916
Loss from foreign subsidiaries................... 380,000 -- --
Nondeductible amortization of intangible assets.. -- 30,694 30,694
Utilization of loss carryforwards................ -- (150,335) (422,701)
Other items, net................................. (28,926) (49,004) 11,676
--------- ---------- ----------
Income tax expense (benefit).................. $(445,420) $5,289,797 $ 764,595
========= ========== ==========

Current deferred tax assets at September 30, 1997 and 1996 were as follows:
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred income recognized for tax purposes............ $1,023,325 $1,341,000
Class action lawsuit accrual........................... 463,512 --
Additional capitalized inventory costs................. 348,332 162,000
Loss carryforwards..................................... 45,000 45,000
Allowance for doubtful accounts........................ -- 13,000
Other.................................................. 8,273 --
---------- ----------
1,888,442 1,561,000
Less valuation allowance............................... -- --
---------- ----------
Current deferred tax assets......................... $1,888,442 $1,561,000
========== ==========

Non-current deferred tax liability at September 30, 1997 and 1996 were as
follows:
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Differences between financial reporting and tax $ (282,000) $ (61,000)
depreciation ========== ==========
</TABLE>

For the year ended September 30, 1997, the Company had a taxable net
operating loss of approximately $1,100,000. This net operating loss will be
carried back to offset taxable income generated during the year ended September
30, 1996. The Company estimates that it will receive a $370,000 income tax
refund. In addition, the Company has recorded a federal income tax receivable of
$659,277 from an overpayment of 1996 taxes and estimated tax payments made
during 1997.

The Company has approximately $130,000 of net operating loss available to
carryforward subject to limitations imposed by Section 382 of the Internal
Revenue Code expiring through 2008.

F-20
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

It is management's opinion, based on past operating results and expected
future operating results, that it will be more likely than not that the Company
will utilize its entire net operating loss carryforward before expiration.

NOTE 6 - STOCK OPTIONS AND WARRANTS

1993 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
provide incentives for employees and consultants of NFLI who 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 the 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. Generally, one-third of the shares underlying the
options become exercisable in cumulative installments of 12 months, 24 months
and 36 months after the date of grant. Options terminate 5 years after the date
of grant, except that if an employee leaves the Company, the options will
terminate 30 days thereafter. The issuance of options is at the discretion of
the Company's Board of Directors.

1995 Discretionary

The Board of Directors of NFLI approved the 1995 Stock Option Plan (the
1995 Plan) in March 1995. Pursuant to the 1995 Plan, as amended in June 1996,
the Board of Directors of NFLI reserved a total of 640,000 shares of common
stock for the grant of options to purchase the Company's stock. The terms of the
options are similar to those of the 1993 Plan. As of September 30, 1997, no
options have been exercised.

1995 - Non-discretionary

In November 1995, the Board of Directors of NFLI 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"). 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 value of the common stock at the date the options are
granted. The options expire in five years and are exercisable in full at the
date of grant.

Options and warrants issued in public offering

In connection with the Public offering (see Note 2), the Company issued
920,000 stock warrants. Each 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 day written notice at a redemption price of $.05 per warrant, subject to
certain defined criteria. In addition, the Company issued warrants to
underwriters to purchase 80,000 shares of the Company's common stock at $3.75
and options to purchase 160,000 of the Company's common stock at $3.23.

F-21
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company estimates the fair value of each stock option at the grant date
by using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1996 and 1997, as follows:

Assumption
----------

Dividend Yield 1%
Risk Free Interest Rate 5.7%
Expected Life 5-10 years
Expected Volatility 67%

Had compensation cost been determined on the basis of fair value pursuant
to SFAS No. 123 for stock options issued to employees, net income (loss) and
earnings (loss) per share for years ended September 30, 1997 and 1996 would have
been reduced as follows:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Net Income (Loss):
----------------
As reported $ (1,981,101) $ 8,705,164
============ ===========
Pro Forma $ (2,457,533) $ 8,657,534
============ ===========

Primary and fully diluted earnings (loss) per share:
---------------------------------------------------
As reported $ (.32) $ 1.36
============ ===========
Pro forma $ (.39) $ 1.35
============ ===========
</TABLE>

The following is a summary of the status of option plans during the years ended
September 30:

Year ended September 30, 1997
- -----------------------------
<TABLE>
<CAPTION>
1993 Plan 1995 Discretionary 1995 Non-discretionary Public Offering Options
----------------------- ---------------------- ---------------------- -----------------------
Weighted Weighted Weighted Weighted
Number Average Number Average Number Average Number Average
of Exercise of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price Shares Price
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
September 30, 1996 148,800 $ 1.67 177,000 $ 3.96 15,000 $ 19.75 160,000 $ 3.23
Granted 5,000 10.38 246,850 12.36 15,000 12.38 -- --
Exercised (7,200) 1.67 -- -- -- -- (150,020) 3.23
-------- -------- -------- -------- -------- -------- -------- --------
Outstanding at
September 30, 1997 146,600 $ 1.96 423,850 $ 8.85 30,000 $ 16.07 9,980 $ 3.23
======== ======== ======== ======== ======== ======== ======== ========
Options exercisable at
September 30, 1997 141,600 $ 1.67 109,666 $ 3.18 30,000 $ 16.07 9,980 $ 3.23
======== ======== ======== ======== ======== ======== ======== ========
Weighted average fair
value of options
granted during 1997 $ 7.25 $ 9.03 $ 7.02 $ --
======== ======== ======== ========
</TABLE>

F-22

<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended September 30, 1996
- -----------------------------
<TABLE>
<CAPTION>
1993 Plan 1995 Discretionary 1995 Non-discretionary Public Offering Options
----------------------- ---------------------- ---------------------- -----------------------
Weighted Weighted Weighted Weighted
Number Average Number Average Number Average Number Average
of Exercise of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price Shares Price
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
October 1, 1995 179,854 $ 1.63 152,000 $ 2.27 -- $ -- 160,000 $ 3.23
Granted -- -- 25,000 14.25 15,000 19.75 -- --
Exercised (27,454) 1.42 -- -- -- -- -- --
Forfeited (3,600) 1.67 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Outstanding at
September 30, 1996 148,800 $ 1.67 177,000 $ 3.96 15,000 $ 19.75 160,000 $ 3.23
======== ======== ======== ======== ======== ======== ======== ========
Options and warrants
exercisable at
September 30, 1996 102,533 $ 1.67 59,000 $ 3.96 15,000 $ 19.75 160,000 $ 3.23
======== ======== ======== ======== ======== ======== ======== ========
Weighted average fair
value of options
granted during 1996 $ -- $ 8.66 $ 11.21 $ --
======== ======== ======== ========
</TABLE>

The following is a summary of the status of stock warrants issued in connection
with the public offering for the years ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 514,416 $ 3.75 999,000 $ 3.75
Exercised (50,053) 3.75 (484,584) 3.75
-------- -------- -------- --------
Outstanding at the
end of year 464,363 $ 3.75 514,416 $ 3.75
======== ======== ======== ========
Warrants exercisable
at end of year 464,363 $ 3.75 -- $ --
======== ======== ======== ========
</TABLE>

F-23
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Following is a summary of the status of the option and warrants outstanding at
September 30, 1997:
<TABLE>
<CAPTION>
Exercisable
Outstanding Options Options
------------------------------- -----------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
-------------- -------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$1.40 - $1.88 192,600 2 years $ 1.72 175,600 $ 1.71
$2.25 - $2.69 101,000 2 years $ 2.47 67,333 $ 2.47
$3.23 - $3.75 474,343 1 year $ 3.74 474,343 $ 3.74
$10.38 60,000 10 years $10.38 - -
$11.50 - 12.38 40,000 10 years $12.16 30,000 $12.38
$13.00 181,850 10 years $13.00 - -
$14.25 25,000 9 years $14.25 8,333 $14.25
--------- -------
1,074,793 755,609
========= =======
</TABLE>

NOTE 7 - DEFERRED INCOME

NFLI distributors earn monthly commissions based on their achieving a
pre-determined monthly minimum sales volume. To assist distributors in meeting
their monthly minimum sales volume, the Company has developed an Order Assurance
Program (OAP), which allows a distributor to purchase a product redemption
certificate, subject to certain restrictions, for the difference between the
distributor's actual monthly order and the predetermined monthly minimum sales
goal. The purchase of such a certificate by a distributor qualifies the
distributor to receive a commission in a given month even though actual product
purchases were below the required level. The Company recognizes revenues on
these certificates when they are redeemed for product or on a ratable basis over
a 150 day period after the expiration of the certificate. The Company recognized
revenues from the redemption of certificates of $14,400,000, $7,647,000 and
$1,090,000 for the years ended September 30, 1997, 1996 and 1995. The Company
recognized revenue from unredeemed expired certificates of $7,028,000,
$3,025,000 and $876,000 for the years ended September 30, 1997, 1996 and 1995.
At September 30, 1997 and 1996 the Company had a liability for unredeemed
certificates, net of applicable commissions, of $3,130,524 and $3,893,570 which
is included as deferred income in the accompanying consolidated balance sheets.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has noncancelable operating leases, primarily for office,
warehouse space and equipment. Rental expense under operating leases for the
years ended September 30, 1997, 1996 and 1995 amounted to approximately
$670,000, $365,000 and $161,000, respectively.

Future minimum rental payments required under operating leases that have an
initial or remaining noncancellable lease term in excess of one year are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, AMOUNT
<S> <C>
1998...................... $ 781,845
1999...................... 737,809
2000...................... 709,163
2001...................... 517,461
2002...................... 144,299
2003 and thereafter....... 1,101,510
-----------
$ 3,992,087
===========
</TABLE>

F-24
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Government Regulations

The Company's activities are subject to regulations by various federal and
state agencies, including the Food and Drug Administration (the "FDA"). The
Company believes that they are in compliance with all federal and state
regulations. However, the Company cannot predict whether new legislation
regulating its activities will be enacted, which could have a material adverse
effect on the Company.

Employment Agreements

During 1995, the Company entered into employment agreements with the chief
executive officer and executive vice president of the Company which expired
September 30, 1996. In addition to their annual salary during the year ended
September 31, 1996, both individuals were entitled to 5% of the first $2,000,000
of pre-tax income, 4% of the next $500,000 of pre-tax income and 3% of pre-tax
income over $2,500,000. In addition, certain key individuals are to receive
bonuses in total ranging between 2% and 4% of pre-tax income over $2,000,000.
Effective October 1, 1996, the Company entered into new employment agreements
with the chief executive officer and the executive vice-president through
September 30, 1999. Under the new agreements, both individuals will receive
their annual salary, plus 5% of pre-tax income from $3,000,000 to $5,000,000, 4%
of the next $5,000,000 of pretax income, and 3% of the next $10,000,000 of
pretax income. The Company incurred expenses of $1,554,996 and $334,317 relating
to these employment agreements for the years ended September 31, 1996 and 1995.
No bonuses were paid to these individuals for the year ended September 31, 1997,
as the Company did not achieve pretax income.

Distributor Agreement

Effective October 24, 1997, the Company entered into an eight year
agreement with a significant distributor. The distributor is required to
exclusively market the Company's products in exchange for a percentage, as
defined in the agreement of gross revenues.

Legal Proceedings

During April 1996, the Attorney General of the State of Illinois filed suit
against a significant distributor of NFLI concerning the distributors' practices
in the sale of products and in the recruiting of other distributors. On July 16,
1996, NFLI entered into an "Assurance of Voluntary Compliance" (AVC) with the
state of Illinois in order to assure that NFLI and its distributors' policies
and practices conform to Illinois law and fairly protect the interests of
consumers. In accordance with the agreement as it relates to the OAP program,
among other things, NFLI has agreed to enforce the following policies and
practices; (1) distributors may not make purchases or receive certificates
merely to earn bonuses; (2) NFLI will continue to encourage distributors to
redeem their certificates for products; (3) the Company's OAP shall remain a
wholly optional program; (4) a distributor shall not receive additional
certificates if the distributor has four unredeemed certificates or the
distributor has unredeemed certificates totalling six times the distributor's
designated OAP amount, unless the distributor is accumulating certificates for a
big ticket item; and (5) upon cancellation of a distributorship, unexpired
certificates and products purchased with certificates will be treated as any
other product for refund purposes. The Company has implemented procedures to
ensure compliance with the policies and practices described above. The Company
has entered into similar agreements with several other states.

During August 1996, an action was brought against the Company in the United
States District Court (the "Federal Action") for damages relating to an alleged
illegal pyramid scheme by; (1) NFLI distributors who enrolled in the "Instant
Executive Program" or the "Instant Executive Pack" and allegedly incurred net
economic loss; and (2) all individuals who purchased common stock and warrants
during the period ended July 11, 1995 through July 16, 1996.

In addition during 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

F-25
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 a certain
distributor's past. The state action was dismissed in November 1997.

During August 1997 and September 1997, the Federal Action was settled out
of court in two separate settlement agreements for (1) the "distributor" class
for all distributors who claimed economic loss, and (2) the "stockholder" class
for all individuals who purchased common stock and warrants of the Company from
July 11, 1995 through July 16, 1996. The settlements provided the following
terms and conditions:

(A) As part of the distributor settlement, the Company was required to set
aside $1,500,000 in a reserve fund to pay any individuals who became
instant executives from April 1995 to January 1996. The Company would
reimburse these individuals for any unused perishable product which the
distributor returns prior to January 2, 1998 in unused condition.

(B) In addition, as part of the distributor settlement, the Company was
required to ship product, with a retail value of $3,900,000 of the
Company's choice to distributors who became instant executives during the
period from April 1995 through April 1996 and had expired, unredeemed order
assurance certificates. The Company estimates that the Company's cost
associated with these products to be approximately $534,000.

(C) As part of the stockholders agreement, the Company agreed to pay
$2,000,000 in cash to individuals who purchased common stock and warrants
from July 11, 1995 through July 16, 1996.

(D) In addition, the Company agreed to pay the plaintiffs attorney fees up
to $600,000 and $300,000 of the stockholder class and distributor class,
respectively.

The total estimated settlement, including Company legal and administrative
fees for the Federal Lawsuit was $5,535,000 which is reflected in operating
expenses in the accompanying statement of operations for the year ended
September 30, 1997. Of such amount, $1,332,314 remained unpaid as of September
30, 1997.

The Securities and Exchange Commission (SEC) had initiated an investigation
into possible violations by NFLI of the federal securities laws pursuant to a
formal order of investigation. On December 4, 1996, the SEC terminated its
investigation, resulting in no enforcement action against the Company.

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. A counterclaim
against Mr. Jordan was made by the Partnership. The court found in favor of the
Partnership on all counts and awarded damages and costs of $541,291 (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 1993, the Partnership collected NEC-Utah common stock valued at $114,458
($.03 per share) from Mr. Jordan. 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. 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 for the Central District of

F-26
<PAGE>

NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

California declared Mr. Jordan's debt to the Company non-dischargeable. 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.

Cruise

On February 11, 1997, the Board of Directors approved the rights of
certain distributors to participate in a cruise during February 1998. In
connection with this cruise, the Company will be conducting seminars for the
education and development of its distributors. The $1.2 million estimated and
accrued cost of the cruise is included in operating expenses. Of such amount,
$1,195,150 remained unpaid as of September 30, 1997.

In connection with the cruise, the Company obtained letters of credit from
a financial institution to cover the cost of the cruise, expiring February 20,
1998. At September 30, 1997, the Company had $737,830 in letters of credit
outstanding.

Product Liability

The Company does not engage in the manufacturing of any of the products it
markets and distributes; however, 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.

NOTE 9 - RELATED PARTY TRANSACTIONS

The Company purchases a significant portion of their inventory from one
vendor. Until October 1997, a director of the Company was the president or
consultant of the vendor, and until June 1995, the vendor was owned by a major
stockholder of the Company. The items purchased are readily available from other
vendors. During the years ended September 30, 1997, 1996 and 1995, the Company
purchased $4,190,000, $5,234,000 and $2,258,000 of goods, respectively, from
this vendor.

NOTE 10 - FOREIGN SALES

For the years ended September 30, 1997, 1996, and 1995 the Company's net
sales from foreign operations were $10,060,000, $7,982,000 and 6,482,000,
respectively, including sales to customers in Canada totaling $6,795,000,
$6,422,000 and $4,157,000, respectively. The gross profit percentages on all
foreign sales are consistent with the overall gross profit percentages, however
exchange rate fluctuations could have a future impact on the Company's gross
profit margins.

F-27
<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
Amended Prospectus and, if given or made, such information or representations
must not be relied on as having been authorized by the Company. This Amended
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 Amended
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 Amended Prospectus.

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

TABLE OF CONTENTS

Page
----

Prospectus Summary......................................................... 1
Risk Factors ............................................................. 4
The Company ...............................................................11
Use of Proceeds ...........................................................11
Dilution ..................................................................11
Dividend Policy ...........................................................12
Price Range of Securities .................................................12
Selected Financial Data....................................................13
Selected Quarterly Financial Information ..................................14
Management's Discussion and Analysis of Financial Condition and Results of
Operations...............................................................15
Business...................................................................23
Legal Proceedings .........................................................37
Management.................................................................38
Principal Shareholders.....................................................45
Certain Transactions ......................................................47
Description of Securities .................................................48
Legal Matters .............................................................50
Experts ...................................................................50
Index to Financial Statements ........................................... F-1

399,887 Shares of Common Stock

NUTRITION FOR LIFE
INTERNATIONAL, INC.

------

PROSPECTUS

------

June __, 1998
<PAGE>

PART II

INFORMATION REQUIRED IN PROSPECTUS

Item 13. 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................................................... 8,000
Accounting Fees and Expenses....................................... 16,000
Legal Fees and Expenses............................................. 16,000
Blue Sky Fees and Expenses.......................................... 4,000
Registrar and Transfer Agent........................................ 3,000
Miscellaneous....................................................... 3,000
-----
Total: $ 50,000
========
</TABLE>
- ----------------
* These fees were paid in connection with the initial filing of the
Registration Statement.

Item 14. 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.

II-1
<PAGE>

Item 15. 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 16. Exhibits and Financial Statement Schedules

(a) Exhibits
<TABLE>
<S> <C>
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.
</TABLE>

II-2
<PAGE>

<TABLE>
<S> <C>
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., 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 10.20 Employment Agreement, effective October 1, 1996, between Nutrition For Life International, Inc. and
David P. Bertrand, filed as an Exhibit to the Report on Form 10-K for the fiscal year ended September
30, 1996, which Exhibit is incorporated herein by this reference.
</TABLE>

II-3
<PAGE>

<TABLE>
<S> <C>
Exhibit 10.21 Employment Agreement, effective October 1, 1996, between Nutrition For Life International, Inc. and
Jana Mitcham, filed as an Exhibit to the Report on Form 10-K for the fiscal year ended September 30,
1996, which Exhibit is incorporated herein by this reference.

Exhibit 10.22 Agreement, effective October 24, 1997, among K.T. Corp., Kevin Trudeau and Nutrition For Life
International, Inc. filed as an Exhibit to the Report on Form 10-K for the year ended September 30,
1997 of the Registrant, which Exhibit is incorporated by this reference.

Exhibit 10.23 Consulting Agreement, dated March 1998, between Nutrition for Life International, Inc. and Piedmont
Consulting, Inc.

Exhibit 21 Subsidiaries, filed as an Exhibit to the Report on Form 10-K for the fiscal year ended September 30,
1997 of the Registrant, which Exhibit is incorporated herein by this reference.

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

Exhibit 23.2 Consent of Bearman Talesnick & Clowdus Professional Corporation

Exhibit 23.3 Consent of BDO Seidman, LLP, Certified Public Accountants
</TABLE>
---------------------------------------------

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

(b) Financial Statement Schedules.

Not Applicable.

Item 17. Undertakings.
------------

1. The undersigned Registrant 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

II-4
<PAGE>

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 Registrant 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 purposes of 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.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf in the City of Houston, State of Texas, on June 22, 1998.

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,
the Power of Attorney filed on May 19, 1995 with the Registration Statement of
this Registrant on Form SB-2 and the Power of Attorney filed on November 12,
1996 with the Post-Effective Amendment No. 1, which are 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

John R. Brown, Jr. Vice President - Finance, Treasurer and Assistant
Secretary

F. Wayne Ballenger Director

M.F. Florence Director

Richard S. Kashenberg Director

Gregory Pusey Director

/s/ David P. Bertrand
---------------------------------------
David P. Bertrand, Attorney-In-Fact

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer of the
Registrant by virtue of his signature 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.

Dated: June 22, 1998 /s/ David O. Rodrigue
-------------------------------------------
David O. Rodrigue, Vice-President and
Chief Financial Officer

II-7

<PAGE>

Exhibit 10.23
-------------

CONSULTING AGREEMENT

AGREEMENT made as of this ____ day of March 1998, between Nutrition For
Life International with offices at 9101 Jameel, Houston, Texas 77040 ("NFLI")
and Piedmont Consulting, Inc., a Georgia corporation with offices at 3131
Piedmont Road, Suite 205, Atlanta, Georgia 30305 (the "Consultant").

WHEREAS, NFLI is a publicly held corporation; and

WHEREAS, NFLI desires to retain Consultant to provide public and investor
relations services for NFLI.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, Consultant and NFLI hereby agree as follows:

1. Term: This Agreement shall commence on the date hereof and shall
----
extend thereafter for a period of twelve (12) months. Thereafter, the parties
hereto may renew this Agreement by mutual consent.

2. Consulting Services. During the Term of the contract, Consultant shall
-------------------
provide public and investor relations services (collectively, the "Services") to
NFLI, which Services shall be geared to result in improved stock trading volume,
higher stock price multiples, a broader following by analysts and institutions
and new investment recommendations and providing directly, or managing the
delivery of, a wide range of services, including, but not limited to:

(a) Proactive marketing of NFLI's common stock directly to influential
security analysts, stock brokers and portfolio managers selected from
Consultant's proprietary data base of investment leaders across the country and
in a number of overseas markets. The list is to be kept current by Consultant
by visits to, and telephone conversations with, top professionals in all major
investment centers worldwide.

(b) Arranging meetings between NFLI's management and current and/or
potential investors, either in small groups or on a one-to-one basis, to
establish ongoing relationships; and periodically supplementing these meetings
with presentations at investment industry sponsored forums, through quarterly
conference calls, and by quarterly mailings of a one or two page corporate
profile that investment professionals have found convenient and useful.

(c) Developing a publicity corporate communications program focusing
initially on the news media in areas where NFLI has operating facilities. This
local exposure should be geared to build employee pride and facilitate employee
recruitment, in addition to serving stock marketing goals. It should also lay
the basis for Consultant's approach to national
<PAGE>

business media, including specialized publications as well as the following more
prominent publications: Barron's, Business Week, Forbes, The Wall Street
Journal, and USA TODAY.

(d) Establishing a VIP list of analysts, brokers and portfolio managers
that receive facsimiles of news releases, facsimile notification of conference
calls and mailings of NFLI's 10KSB and 10QSB's, plus annual and interim reports
and quarterly corporate updates to NFLI's shareholders.

(e) Establishing a news distribution list for direct facsimile of NFLI
news releases.

(f) Monitoring wire service coverage of NFLI for accuracy.

(g) Preparing presentations relating to NFLI for meetings with
analysts, stock brokers and portfolio managers, as well as for sponsored forums.

(h) Preparing information kits about NFLI for response to press and
investor inquiries.

(i) Advising and consulting with NFLI's management concerning
marketing surveys, investor profile information, methods of expanding NFLI's
investor support and increasing investor awareness of NFLI and its products
and/or services.

(j) Creating literature (including production layout, planning,
printing and distribution to Consultant's list of investors and stock brokers)
describing NFLI's business, its products, marketing plans and financial
potential.

(k) Expanding relations with both current and new influential security
analysts, stock brokers and portfolio managers (the "Brokers") to update the
Brokers concerning recent developments of NFLI; to answer all questions asked by
the Brokers about the direction of NFLI; and, thereafter, to keep the Brokers
informed of all such developments. In addition, Consultant will seek new Brokers
for NFLI's stock by contacting Brokers with whom Consultant had worked in the
past and educate these new Brokers about NFLI; and

(l) Providing such other Services and assistance as Consultant and
NFLI shall deem necessary or appropriate to enhance NFLI's business.

3. Approval of Information: All information disseminated by Consultant
-----------------------
regarding NFLI shall be derived from information provided by NFLI to Consultant
(the "Information"). Consultant will obtain NFLI's prior approval to
distribution or dissemination of all Information.

4. Compensation: Subject to Consultant's compliance with the terms and
------------
conditions herein set forth, and in full consideration of the Services provided
by Consultant hereunder, NFLI shall pay to Consultant, as its consulting fee
(the "Fee"), and Consultant shall accept as full payment thereof, a Fee
consisting of:

<PAGE>

(a) Monthly Consulting Fee of $4,000.00. Any expenses over $500 will be
paid per prior verbal approval by NFLI. Services will begin upon receipt of
initial stipend and executed agreement.

(b) Nutrition For Life International agrees to issue to Piedmont
Consulting, Inc., upon signing agreement, 30,000 3-year warrants exercisable at
$5.25. As an incentive for performance, Piedmont Consulting, Inc. over 12
months, can earn an additional 70,000 3-year warrants. 40,000 warrants
exercisable at $7.00 will vest upon NFLI stock price trading at a 20day average
at $7.00 or higher. 30,000 warrants exercisable at $10.00 will vest upon NFLI
stock price trading at a 20-day average at $10.00 or higher. NFLI agrees to
register the underlining common stock for all 100,000 warrants on the next
registration statement the company files.

(c) NFLI agrees to pay Piedmont Consulting, Inc. a "finder fee" equal to
1% of any successful financing or successful acquisition directly referred by
Piedmont Consulting, Inc.

5. Personnel: Consultant is, and shall be, an independent contractor, and
---------
no personnel utilized by Consultant in providing Services hereunder (the
"Personnel") shall be deemed to be an employee or agent of NFLI. Moreover,
neither Consultant nor any such Personnel shall be empowered hereunder to act on
behalf of NFLI. Consultant shall have sole and exclusive responsibility and
liability for, and to, such Personnel, and Consultant alone shall be responsible
to make, and shall make, all necessary or appropriate employee contributions,
withholdings, and payments for all taxes, insurance premiums, and social
security contributions to be collected, withheld, filed and paid with respect to
all such Personnel; whether pursuant to any social security, unemployment
insurance, worker's compensation law or other federal, state or local law now in
force and effect, or hereinafter enacted.

6. Indemnification: NFLI agrees to indemnify and hold Consultant harmless
---------------
from and against any and all losses, claims, damages, expenses or liabilities
that Consultant incurs as the result of any information, representations,
reports or data furnished by, prepared by or approved by NFLI for use by
Consultant, except if such damages are the result of Consultant's default
hereunder or the unlawful conduct, negligence or gross willful misconduct of the
part of Consultant, the Personnel, Consultant's consultants, employees, officers
or directors.

7. Non-assignability: The rights, obligations and benefits established by
-----------------
this Agreement shall not be assignable by either party hereto. This Agreement
shall, however, be binding upon and shall inure to the benefits of the parties
and their successors.

8. Confidentiality. Neither Consultant nor any of the Personnel, its
---------------
consultants, other employees, or officers or directors shall disclose any
knowledge or information it has, or they have obtained in the course of
performing the Services provided for herein, which knowledge or information
concerns the confidential affairs of NFLI with respect to NFLI's business or
finances.

9. Compliance and Governing Law: Consultant, together with its agents,
----------------------------
employees and associates, shall take all necessary, appropriate and reasonable
steps to provide the Services

<PAGE>

in accordance with both the securities laws of the United States and the several
States, and pursuant to the rules and regulations promulgated thereunder, as
well as in accordance with the rules and regulations of the National Association
of Securities Dealers. The terms and provisions of this Agreement will be
enforced in accordance with the laws of the State of Texas, without regard to
its conflicts of law principles.

10. Notices: Notice hereunder shall be in writing and shall be deemed to
-------
have been given (a) at a time when deposited for mailing in a receptacle under
the control of the United States Postal Service, by registered or certified
mail, prepaid, return receipt requested, or (b) on the business day following
deposit with a reputable overnight courier for overnight delivery; each
addressed to the respective party at the address as such party may fix by notice
given pursuant to this paragraph.

11. No Other Agreements: This Agreement supersedes all prior
-------------------
understandings, written or orally given and constitutes the entire Agreement
between the parties hereto with respect to the subject matter hereof. No waiver,
modification or termination of this Agreement shall be valid unless in writing
signed by each of the parties hereto.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year first above written.

PIEDMONT CONSULTING, INC. NUTRITION FOR LIFE INTERNATIONAL, INC.

By: _________________________ By: __________________________
Keith Fetter, President David Bertrand, President

<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.

KPMG Peat Marwick LLP

Houston, Texas
June 23, 1998

<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
June 23, 1998

<PAGE>

EXHIBIT 23.3

The Board of Directors
Nutrition For Life International, Inc.

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated December 16, 1997, except for Note 1
which is dated as of June 19, 1998, relating to the consolidated financial
statements of Nutrition For Life International, Inc., which is contained in that
Prospectus. We also consent to the reference to us under the caption "Experts"
in the Prospectus.

BDO Seidman, LLP

Houston, Texas
June 23, 1998