Nutraceutical International Corp – IPO: ‘424B1’ on 2/23/98

As of:  Monday, 2/23/98   ·   Accession #:  950131-98-1264   ·   File #:  333-41909

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Final Prospectus                                      78    477K 

Document Table of Contents

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PROSPECTUS                                     Filed Pursuant To Rule 424(b)(1) 
FEBRUARY 19, 1998                              Registration No. 333-41909       
3,330,000 SHARES  

NUTRACEUTICAL INTERNATIONAL CORPORATION 

COMMON STOCK  

Of the 3,330,000 shares of Common Stock, par value $.01 per share ("Common  
Stock"), of Nutraceutical International Corporation ("Nutraceutical" or the     
"Company") offered hereby (the "Offering"), 2,000,000 shares are being offered  
by Nutraceutical and 1,330,000 shares are being offered by certain              
stockholders (the "Selling Stockholders"). See "Principal and Selling           
Stockholders." The Company will not receive any of the proceeds from the sale   
of the shares of Common Stock by the Selling Stockholders.                      

Prior to the Offering, there has been no public market for the Common Stock.
For a discussion relating to the factors considered in determining the initial  
public offering price, see "Underwriting."                                      

An aggregate of 166,500 shares of Common Stock, or approximately 5.0% of the
shares offered hereby, have been reserved for sale to certain employees,        
customers, independent sales representatives and affiliates of the Company.     
The price per share of Common Stock to be sold to these persons is equal to     
the initial public offering price. See "Underwriting."                          

The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "NUTR," subject to official notice of issuance.                

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN INFORMATION THAT SHOULD 
BE CONSIDERED BY PROSPECTIVE INVESTORS.                                         

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

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                                                        [Enlarge/Download Table]

                                      PRICE     UNDERWRITING   PROCEEDS     PROCEEDS TO  
                                     TO THE    DISCOUNTS AND    TO THE      THE SELLING  
                                     PUBLIC    COMMISSIONS(1) COMPANY(2)  STOCKHOLDERS(3)
-----------------------------------------------------------------------------------------
                                                                                         
Per Share........................    $17.500       $1.225       $16.275       $16.275    
Total(3).........................  $58,275,000   $4,079,250   $32,550,000   $21,645,750  

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

(1) See "Underwriting" for indemnification arrangements with the Underwriters.  

(2) Before deducting estimated expenses of $1,400,000, which will be paid by    
the Company.                                                            

(3) The Company and certain Selling Stockholders have granted the Underwriters  
 options, exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 499,500 shares of Common Stock solely to   
 cover over-allotments, if any. If such options are exercised in full, the
 total Price to Public, Underwriting Discount, Proceeds to the Company and
Proceeds to Selling Stockholders will be $67,016,250, $4,691,138,       
$34,903,657 and $27,421,455, respectively. See "Underwriting."          

The shares of Common Stock are offered by the several Underwriters, when, as
and if delivered to and accepted by the Underwriters and subject to various     
prior conditions, including their right to reject orders in whole or in part.   
It is expected that delivery of the shares of Common Stock will be made in New  
York, New York on or about February 25, 1998.                                   

DONALDSON, LUFKIN & JENRETTE                               SALOMON SMITH BARNEY 
SECURITIES CORPORATION                                                

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[PHOTOGRAPH DEPICTING CERTAIN OF THE COMPANY'S PRODUCTS]  

Beefense(TM), Beyond Garlic(TM), CranActin(R), KAL(R), NaturalMax(TM),      
Peaceful Planet(TM), Premier One(R), Raw Energy(R), Solar Green(R),             
Solaray(TM), Spectro(TM), Super Diet Max(R), Thin-Thin(TM) and VegLife(TM) are  
trademarks of the Company.                                                      

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS   
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,     
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION  
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."     

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,       
including the notes thereto, appearing elsewhere in this Prospectus. Unless     
otherwise noted or where the context otherwise requires, all information herein 
(i) assumes the Underwriters' over-allotment option is not exercised and (ii)   
reflects the reclassification of all classes of the Company's capital stock     
into Common Stock and a 7.5291-for-one Common Stock split to be effected        
immediately after such reclassification (the "Reclassification"). References to 
the "Company" and "Nutraceutical" refer to Nutraceutical International          
Corporation and its direct and indirect subsidiaries unless otherwise stated or 
the context otherwise requires. References to fiscal years refer to the         
Company's fiscal year ended September 30 of the year indicated.                 

THE COMPANY 

Nutraceutical is one of the nation's largest manufacturers and marketers of 
quality branded nutritional supplements sold to health food stores. The Company 
sells its branded products under the Solaray, KAL, NaturalMax, VegLife, Premier 
One and Solar Green brand names directly and exclusively to health food stores  
in the United States and internationally primarily to distributors and          
retailers. In addition to branded products, the Company manufactures premium    
bulk formulations for sale to other manufacturers and marketers in the          
nutritional supplement industry. Since its formation in 1993, the Company has   
achieved rapid growth. See "Summary Historical and Pro Forma Consolidated       
Financial Data."                                                                

The Company's strategy of selling its branded products directly and         
exclusively to the approximately 9,700 health food stores in the United States  
(the "Healthy Foods Channel") has enabled it to benefit from the rapid growth   
of the Healthy Foods Channel. The Company believes that it is among the largest 
suppliers of nutritional supplements to the Healthy Foods Channel that          
develops, manufactures, markets and directly distributes a majority of its own  
products. The Company offers one of the broadest branded product lines in the   
industry with approximately 800 products and 1,400 stock keeping units          
("SKUs"), including approximately 200 SKUs exclusively sold internationally.    
None of the Company's products represented more than 2% of fiscal 1997 net      
sales. The Company markets its branded products through the industry's largest  
sales force dedicated to the Healthy Foods Channel. The Company seeks to be the 
market leader in the development of new and innovative products, introducing    
172 new SKUs (including 147 new formulations) in fiscal 1997. The Company       
manufactured over 90% of its products in fiscal 1997 and believes that the      
quality of its products is among the highest in the industry.                   

The total U.S. retail market for nutritional supplements (the "VMS Market") 
is highly fragmented and rapidly growing, generating $6.5 billion in 1996       
sales, as compared to $5.0 billion in 1994. The Company believes that this      
rapid growth is due to a number of factors, including (i) increased interest in 
healthier lifestyles, (ii) the publication of research findings supporting the  
positive health effects of certain nutritional supplements and (iii) the aging  
of the "Baby Boom" generation combined with the tendency of consumers to        
purchase more nutritional supplements as they age.                              

 The Healthy Foods Channel consists of approximately 9,700 retailers including
(i) independent health food stores, (ii) health food stores affiliated with     
local, regional and national health food chains (including healthy food         
supermarket chains, such as Whole Foods Market and Wild Oats Markets) and (iii) 
General Nutrition Center ("GNC") stores. The Company believes that the Healthy  
Foods Channel will continue to experience strong growth based on the continued  
expansion of independent health food stores and local, regional and national    
health food chains in response to strong demand from consumers who desire       
product education, service and high quality natural ingredients. The Company    
believes there are significant differences between mass market retailers (such  
as drugstores, warehouse clubs and supermarkets), which typically offer a       
limited selection of discounted and lower potency items, and the Healthy Foods  
Channel, where natural ingredients, quality, potency, selection                 

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and customer support are more important. The Company benefits from              
substantially greater customer diversification than most of its larger          
competitors, with no single customer representing more than 5.5% of fiscal 1997 
net sales.                                                                      

Based in part on data contained in a widely disseminated report of          
significance within the VMS Industry (as defined below) prepared by Packaged    
Facts, Inc., an independent market research firm (the "Packaged Facts Report"), 
the Company believes that the VMS Market and the Healthy Foods Channel are      
large and growing rapidly and that the Company is well positioned to capitalize 
on such growth. According to the Packaged Facts Report:                         

.  The VMS Market grew at a 14.2% compound annual rate from 1994 to 1996    
and is projected to grow at a 13.6% compound annual rate from 1996 to 
2001, to $12.3 billion;                                               

.  The Healthy Foods Channel generated $2.5 billion of retail sales in      
 1996, or 38.2% of the total VMS Market, representing the largest single
channel;                                                              

.  The Healthy Foods Channel has been growing faster than the total VMS     
  Market, achieving a 16.7% compound annual growth rate from 1994 to 1996;
and                                                                   

.  Sales of supplements (as defined in the Packaged Facts Report) in the    
VMS Market grew at a 35.6% compound annual rate from 1994 to 1996 and 
 are expected to grow at a 25.0% compound annual rate from 1996 to 2001.
Sales of supplements, the fastest growing segment of the VMS Market,  
represented 61.7% of the Company's fiscal 1997 net sales of branded   
products, as compared to 35.2% of the total VMS Market.               

The Company was formed in 1993 by senior management and Bain Capital, Inc.  
("Bain Capital") to effect a consolidation strategy in the highly fragmented    
vitamin, mineral, herbal and other nutritional supplements industry (the "VMS   
Industry"), which consists of over 400 manufacturers and marketers              
domestically. Since its formation, the Company has successfully completed four  
acquisitions, including Solaray, Premier One, KAL and Monarch (each as defined  
herein). As a result of these acquisitions and internal growth, the Company has 
achieved rapid growth in net sales and operating income. Management believes    
that the Company is well positioned to continue to capitalize on the            
consolidation occurring in the VMS Industry. To increase the Company's          
operating efficiency and provide capacity for additional expansion, the Company 
is in the process of negotiating a lease for a 250,000 square foot facility     
into which the Company intends to consolidate seven of its current facilities.  

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BUSINESS STRATEGY                                                               

The Company's strategy is to enhance its position as a leader in supplying  
quality branded products to the Healthy Foods Channel while continuing to       
generate rapid growth in sales and profitability. Unlike many of its            
competitors, the Company has chosen to focus exclusively on the Healthy Foods   
Channel. Specifically, the Company seeks to:                                    

.  INCREASE MARKET SHARE IN THE RAPIDLY GROWING HEALTHY FOODS CHANNEL. The  
Company's strategy is to increase its share in the rapidly growing    
 Healthy Foods Channel by (i) continuing to emphasize exclusive sales of
its existing branded products to the Healthy Foods Channel, (ii)      
utilizing multiple brands and (iii) expanding its salesforce and its  
geographic coverage:                                                  

--Exclusivity to the Healthy Foods Channel. The Company believes that   
retailers in the Healthy Foods Channel favor brands that are sold     
exclusively to the Healthy Foods Channel (i.e., that are not available
through mass marketers) and that, as a result, retailers will continue
to allocate additional shelf space to the Company's products.         

--Multiple Brand Strategy. The Company currently markets its products   
through a multiple brand strategy that the Company believes has been  
successful in encouraging retailers to allocate additional shelf space
to the Company's brands. The Company intends to continue expanding its
brands by extending existing product lines and developing new product 
lines. See "Business--Products."                                      

--Largest Sales Force Targeting the Healthy Foods Channel. The Company  
markets its products through a substantially larger direct sales force
 dedicated to the Healthy Foods Channel than that of any competitor. The
Company currently anticipates adding additional individuals to its    
sales force to increase its sales efforts in certain highly populated 
 areas that are currently underpenetrated by the Company. In particular,
the Company seeks to increase its presence in the Northeast and Mid-  
Atlantic states including such markets as New York City, Long Island, 
Boston, Philadelphia and Washington D.C. In 1997, the Company         
implemented a new payment structure for its sales force that provides 
additional incentives for sales growth.                               

.  CONTINUE TO MAKE STRATEGIC ACQUISITIONS. The Company was founded in 1993 
to effect a consolidation strategy in the fragmented VMS Industry. The
  Company plans to continue to capitalize on the significant opportunities
for consolidation available in the VMS Industry. To date, the Company 
has successfully completed four acquisitions and will seek additional 
  acquisitions that serve to expand the Company's brand names, broaden its
product offerings or facilitate entry into complementary distribution 
channels.                                                             

.  CONTINUE TO DEVELOP NEW PRODUCTS AND PRODUCT EXTENSIONS. The Company is  
a market leader in the development of new and innovative products.    
During fiscal 1997, the Company introduced 147 new formulations of    
branded products compared to 46 in fiscal 1996. Branded products      
introduced in 1996 and 1997 represented 16.8% of fiscal 1997 net sales
of branded products. The Company plans to continue developing new     
products as a significant element of its future growth.               

.  CAPITALIZE ON STRONG INTERNATIONAL GROWTH. The Company believes that     
international sales represent a significant growth opportunity.       
Currently, the Company markets its products in over 30 countries,     
  principally through international distributors. Net sales by Au Naturel,
Inc., the Company's international subsidiary, grew 21.4% from 1996 to 
1997 and represented 6.5% of the Company's fiscal 1997 net sales. The 
 Company plans to continue to aggressively pursue international sales by
adding additional salespeople, expanding its distribution and retailer
network in high growth regions and continuing its efforts to register 
products and trademarks in attractive foreign markets.                

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 The Company's implementation of the foregoing business strategy is subject to
a number of risks and may cause the Company to incur additional expenses in     
future periods. See "Risk Factors--Risks Associated with Implementation of      
Business Strategy," "Risk Factors--Risks Associated with Acquisitions," "Risk   
Factors--Risks Associated with International Markets" and "Management's         
Discussion and Analysis of Financial Condition and Results of Operations--      
Liquidity and Capital Resources."                                               

RECENT DEVELOPMENTS                                                             

For the three months ended December 31, 1997, the Company's net sales       
increased approximately 15.6% to $25.9 million compared to $22.4 million in the 
corresponding period in 1996. Adjusted EBITDA for the three months ended        
December 31, 1997 was $5.1 million or approximately 15.9% higher than $4.4      
million for the corresponding period in 1996. Operating income for the three    
months ended December 31, 1997 was $3.9 million, a 14.7% increase from $3.4     
million for the corresponding period in 1996.                                   

For the twelve months ended December 31, 1997, the Company's net sales      
increased approximately 17.3% to $101.6 million compared to $86.6 million in    
the corresponding period in 1996. Adjusted EBITDA for the twelve months ended   
December 31, 1997 was $20.3 million or approximately 40.4% higher than $14.4    
million for the corresponding period in 1996. Adjusted EBITDA as a percent of   
sales increased to 19.9% in the twelve months ended December 31, 1997 from      
16.7% in the corresponding period in 1996. Operating income for the twelve      
months ended December 31, 1997 was $14.1 million or approximately 29.7% higher  
than $10.9 million for the corresponding period in 1996. Operating income as a  
percent of sales increased to 13.9% in the twelve months ended December 31,     
1997 from 12.5% in the corresponding period in 1996.                            

The principal executive offices of the Company are located at 1400 Kearns   
Boulevard, 2nd Floor, Park City, Utah 84060 and its telephone number is (435)   
655-6000.                                                                       

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THE OFFERING

                                                                [Download Table]
                                                                              
Common Stock Offered by                                                       
 the Company............. 2,000,000 shares                                    
Common Stock Offered by                                                       
 the Selling Stockhold-                                                       
 ers..................... 1,330,000 shares                                    
                                -----------                                   
Total.................... 3,330,000 shares                                    
Common Stock To Be Out-                                                       
 standing After the Of-                                                       
 fering (1).............. 11,466,911 shares                                   
Use of Proceeds.......... The net proceeds to be received by the Company from 
                          the Offering, estimated to be approximately $31.2   
                          million, net of expenses (approximately $33.5       
                          million if the Underwriters' over-allotment options 
                          are exercised in full), together with borrowings    
                          under the New Credit Agreement (as defined below)   
                          and available cash resources of the Company, will be
                          used to repay the outstanding indebtedness under the
                          Existing Credit Agreement (as defined below). The   
                          Company will not receive any proceeds from the sale 
                          of shares by the Selling Stockholders. See "Use of  
                          Proceeds."                                          
Proposed Nasdaq National                                                      
 Market Symbol........... "NUTR"                                              

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

(1) Excludes 175,804 shares reserved for issuance upon the exercise of options  
outstanding pursuant to the Company's 1995 Stock Plan (as defined below)
and 1,300,206 shares reserved for issuance upon the exercise of other   
outstanding warrants and options. Also excludes 1,050,000 shares and    
750,000 shares which, prior to the consummation of the Offering, will be
reserved for issuance under the Company's Stock Incentive Plans and     
Employee Stock Purchase Plan (each as defined below), respectively. See 
   "Management--Stock Plans." The number of shares to be outstanding after the
Offering is subject to change. See "Reclassification."                  

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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

Set forth below are summary historical and pro forma consolidated financial 
data of the Company and of Solaray, Inc. ("Solaray" or the "Predecessor") for   
the periods and dates indicated. The summary historical consolidated financial  
data for the year ended September 30, 1993 were derived from the audited        
financial statements of the Predecessor. The summary historical consolidated    
financial data for the year ended September 30, 1994 were determined by         
combining information derived from the unaudited financial statements of the    
Predecessor for the period from October 1, 1993 through October 27, 1993 with   
information derived from the audited financial statements of the Company for    
the year ended September 30, 1994. The summary historical consolidated          
financial data as of September 30, 1997 and for the years ended September 30,   
1995, 1996 and 1997 were derived from the audited financial statements of the   
Company. Combined and pro forma data are not audited. The following summary     
historical and pro forma consolidated financial data should be read in          
conjunction with, and are qualified by reference to, "Unaudited Pro Forma       
Consolidated Financial Data," "Selected Historical Consolidated Financial       
Statements," "Management's Discussion and Analysis of Financial Condition and   
Results of Operations" and the audited consolidated financial statements and    
accompanying notes thereto included elsewhere in this Prospectus.               

                                                        [Enlarge/Download Table]

                           PREDECESSOR   COMBINED(A)                COMPANY(B)                 
                          ------------- ------------- -----------------------------------------
                                                                                    PRO FORMA  
                           YEAR ENDED    YEAR ENDED   YEAR ENDED SEPTEMBER 30,     YEAR ENDED  
                          SEPTEMBER 30, SEPTEMBER 30, --------------------------  SEPTEMBER 30,
                              1993          1994        1995     1996     1997       1997(C)   
                                                                                               
CONSOLIDATED STATEMENT                                                                         
 OF OPERATIONS DATA:                                                                           
Net sales...............     $20,541      $ 28,095    $ 62,932  $83,923  $98,096     $98,096   
Gross profit............       9,439        13,673      27,047   38,824   45,819      45,819   
Selling, general and                                                                           
 administrative.........       7,486         8,961      21,409   27,608   29,179      28,879   
Amortization of                                                                                
 intangibles............         --            394       1,059    1,483    1,346       1,346   
One-time payment to                                                                            
 executive officer......         --            --          --       --     1,700       1,700   
Income from operations..       1,953         4,318       4,579    9,733   13,594      13,894   
Interest expense, net...         116         1,804       4,478    7,126    6,572       2,373   
Net income before                                                                              
 extraordinary loss.....       1,164         1,532          78    1,551    4,248       6,970   
Net income (loss).......       1,164         1,532        (400)   1,551    4,248         N/A   
Pro forma net income per                                                                       
 share(d)...............                                                 $  0.39               
Pro forma weighted                                                                             
 average shares                                                                                
 outstanding(d).........                                                  10,781               
Supplemental pro forma                                                                         
 net income per                                                                                
 share(d)...............                                                 $  0.46               
Supplemental pro forma                                                                         
 weighted average shares                                                                       
 outstanding(d).........                                                  12,781               
Pro forma as adjusted                                                                          
 net income per share...                                                             $  0.55   
Pro forma as adjusted                                                                          
 weighted average shares                                                                       
 outstanding............                                                              12,781   
OTHER FINANCIAL DATA:                                                                          
Adjusted EBITDA(e)......     $ 2,188      $  6,088    $ 11,831  $13,118  $19,563     $19,563   
Capital expenditures                                                                           
 (excluding                                                                                    
 acquisitions)..........         217           465       2,837    5,498    3,652       3,652   
Cash flows provided by                                                                         
 (used in):                                                                                    
 Operating activities...       1,286         2,152         (64)   4,559    9,363      12,085   
 Investing activities...        (214)      (10,078)    (49,155)  (5,498)  (3,652)           (f)
 Financing activities...        (802)        8,173      49,645    2,600   (3,617)           (f)

                                                                [Download Table]

                                                       AT SEPTEMBER 30, 1997    
                                                       -------------------------
                                                       ACTUAL     AS ADJUSTED(G)
                                                                                
BALANCE SHEET DATA:                                                             
Cash and cash equivalents............................. $ 4,415       $   --     
Working capital.......................................  15,616        20,723    
Total assets..........................................  90,110        86,998    
Total debt............................................  60,259(h)     29,729    
Stockholders' equity..................................  16,354        43,772    

--------------------                                                            
(a) The summary historical consolidated financial data for the year ended       
September 30, 1994 were determined by combining information derived from
 the unaudited financial statements of the Predecessor for the period from
  October 1, 1993 through October 27, 1993 with information derived from the
audited financial statements of the Company for the year ended September
   30, 1994 as presented in "Selected Historical Consolidated Financial Data."
 Such information was determined by adding the amount in each line item of
the unaudited financial statements of the                               

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Predecessor to the respective amount in the corresponding line item of the
audited financial statements of the Company. Such computations do not give
effect to any pro forma adjustments that may be required to reflect pro   
forma consolidated financial data of the Company as if the acquisition of 
all the capital stock of the Predecessor by the Company (the "Solaray     
Acquisition") had been consummated on October 1, 1993. The Company's      
audited financial statements for the year ended September 30, 1994        
primarily reflect operations from the date of the Solaray Acquisition. The
Company's operations prior to such date were immaterial.                  

(b) The Company was formed in 1993 for the purpose of completing the Solaray    
Acquisition, which was consummated on October 28, 1993. In October 1994,
the Company, through its wholly-owned subsidiary Premier One Products,  
Inc., a Delaware corporation ("Premier"), acquired substantially all the
assets and assumed certain liabilities of Premier One Products, Inc., a 
Nebraska corporation ("Old Premier") (the "Premier Acquisition"). In    
  January 1995, the Company, through its wholly-owned subsidiaries Makers of
KAL, Inc., a Delaware corporation ("KAL"), and NaturalMax, Inc., a      
  Delaware corporation ("NaturalMax"), acquired substantially all the assets
and assumed certain liabilities of Makers of KAL, Inc., a California    
corporation ("Old KAL") (the "KAL/Max Acquisition"). In September 1995, 
the Company, through its wholly-owned subsidiary Monarch Nutritional    
Laboratories, Inc., a Delaware corporation ("Monarch"), acquired        
substantially all the assets and assumed certain liabilities of Monarch 
  Nutritional Laboratories, a Utah corporation ("Old Monarch") (the "Monarch
Acquisition"). The Solaray Acquisition was accounted for as a purchase, 
resulting in a new accounting basis for the Predecessor's assets. As a  
  result, financial information for the periods prior to October 28, 1993 is
not directly comparable to information for subsequent periods.          

(c) Gives effect to (i) the Reclassification, (ii) the consummation of the      
  Offering (without giving effect to the exercise of the Underwriters' over-
allotment options) and the application of the estimated net proceeds    
therefrom, together with borrowings under a new senior credit agreement,
which the Company anticipates executing in connection with the Offering 
(the "New Credit Agreement"), and available cash resources to repay     
indebtedness, as described under "Use of Proceeds," and (iii) the       
elimination of annual fees paid pursuant to the Restated Advisory       
Agreement (as defined below), as if each such event had occurred on     
October 1, 1996. See "Unaudited Pro Forma Financial Data."              

(d) For the year-ended September 30, 1997, gives effect to the                  
Reclassification. Historical earnings per common share amounts are not  
presented as they are not considered to be meaningful. Pro forma net    
income per share was determined by dividing net income by the pro forma 
  weighted average number of common and common stock equivalent shares which
the Company estimates will be outstanding after giving effect to the    
  Reclassification. Common stock equivalents consist of the Company's Common
 Stock issuable upon the exercise of stock options and warrants (using the
  treasury stock method). In addition, in accordance with the Securities and
 Exchange Commissions' Staff Accounting Bulletin No. 83, shares issued and
stock options granted within one year of the Offering have been included
 in the calculation of weighted average shares outstanding as if they were
outstanding from inception of the Company (using the treasury stock     
method).                                                                

Supplemental pro forma net income per share was determined in the same    
 manner as that used to determine pro forma net income per share, except the
pro forma weighted average number of common and common equivalent shares  
which the Company estimates will be outstanding after giving effect to the
Reclassification was increased by the number of shares of common stock    
(2,000,000) to be issued to generate the net proceeds necessary to retire 
 $31,150 of the Company's borrowings under the Existing Credit Agreement (as
defined below) (without giving effect to the exercise of the Underwriters'
over-allotment options), and historical net income was increased by $2,776
 related to the elimination of interest resulting from the assumed reduction
of $31,150 of indebtedness, net of tax of $1,097.                         

(e) "Adjusted EBITDA" is defined herein as net income (as presented) plus       
provision for income taxes, net interest expense, depreciation and      
amortization and other non-recurring items. Management believes that    
Adjusted EBITDA, as presented, represents a useful measure of assessing 
the performance of the Company's ongoing operating activities as it     
reflects the earnings trends of the Company without the impact of the   
purchase accounting applied in connection with the Company's history of 
acquisitions, the financing required to consummate such transactions or 
 other non-recurring items. Targets and positive trends in Adjusted EBITDA
are used as the performance measure for determining management's bonus  
compensation and are also used by the Company's creditors in assessing  
debt covenant compliance. The Company understands that while Adjusted   
EBITDA is frequently used by securities analysts in the evaluation of   
nutritional supplement companies, it is not necessarily comparable to   
other similarly titled captions of other companies due to potential     
inconsistencies in the method of calculation. Adjusted EBITDA is not    
intended as an alternative to cash flow from operating activities as a  
  measure of liquidity or as an alternative to net income as an indicator of
  the Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.               

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The following table sets forth a reconciliation of net income before    
extraordinary loss to Adjusted EBITDA for each period included herein:  

                                                        [Enlarge/Download Table]

                         PREDECESSOR    COMBINED                   COMPANY               
                        ------------- ------------- -------------------------------------
                                                     YEAR ENDED SEPTEMBER     PRO FORMA  
                         YEAR ENDED    YEAR ENDED             30,            YEAR ENDED  
                        SEPTEMBER 30, SEPTEMBER 30, ----------------------- SEPTEMBER 30,
                            1993          1994       1995    1996    1997       1997     
                                                                                         
Net income before                                                                        
 extraordinary                                                                           
 loss (1)..............    $1,164        $1,532     $    78 $ 1,551 $ 4,248    $ 6,970   
Provision for income                                                                     
 taxes.................       673           982          23   1,056   2,774      4,551   
Interest expense, net                                                                    
 (2)...................       116         1,804       4,478   7,126   6,572      2,373   
Depreciation and                                                                         
 amortization (3)......       235         1,583       6,983   3,085   3,969      3,969   
Certain non-recurring                                                                    
 items (4).............       --            187         269     300     300        --    
One-time payment to                                                                      
 executive officer(5)..       --            --          --      --    1,700      1,700   
                           ------        ------     ------- ------- -------    -------   
Adjusted EBITDA........    $2,188        $6,088     $11,831 $13,118 $19,563    $19,563   
                           ======        ======     ======= ======= =======    =======   

--------------------                                                    
(1) Net income before extraordinary loss is equivalent to net income for
all periods presented except the year ended September 30, 1995, 
during which the Company incurred an extraordinary loss on early
   extinguishment of debt of $478, net of tax benefit. Actual net loss
for the year ended September 30, 1995 was $400.                 
(2)Includes amortization of capitalized debt issuance costs.            
(3)Includes non-recurring amortization of inventory write up.           
(4) Represents management fees paid to Bain Capital and F.W. Gay & Sons 
     pursuant to the Restated Advisory Agreement, which will be terminated
    in connection with the Offering. As is often the case in stand-alone
   acquisition scenarios such as the Company's original acquisition of
Solaray, during the early stages of the Company's development it
    relied heavily on an affiliate of its equity sponsors, Bain Capital,
     to provide certain management services, paying a recurring annual fee
pursuant to the Restated Advisory Agreement in respect of such  
    services. Over time, the Company has developed the infrastructure to
  provide these services internally and, as a result, will terminate
  the Restated Advisory Agreement (and the recurring management fees
   payable thereunder) upon consummation of the Offering. See "Certain
Relationships and Related Transactions."                        
(5) Reflects a one-time payment to the Company's Chief Executive Officer
for successfully positioning the Company for the Offering. Such 
payment is in excess of the Chief Executive Officer's annual    
   compensation (salary and bonus), and the Company does not expect to
    make any further payments of this nature or magnitude in the future.

(f) Because of the subjectivity inherent in the assumptions concerning the  
timing and nature of the uses of cash provided by the pro forma     
operating activities, cash flows from investing and financing       
activities are not presented for the pro forma period.              
(g) Gives effect to (i) the consummation of the Offering (without giving    
   effect to the exercise of the Underwriters' over-allotment options) and
  the application of the estimated net proceeds therefrom, together with
   borrowings under the New Credit Agreement and available cash resources,
 as described under "Use of Proceeds," and (ii) the termination of the
Restated Advisory Agreement and the payment of fees for services    
performed in connection with the Offering, as if each such event had
occurred on September 30, 1997. See "Unaudited Pro Forma Financial  
Data."                                                              
(h) Total debt is presented net of $2,560 of unamortized debt issuance      
discount.                                                           

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RISK FACTORS  

In addition to the other information contained in this Prospectus, the      
following factors should be considered in evaluating an investment in the       
Common Stock offered hereby.                                                    

GOVERNMENT REGULATION                                                           

The formulation, manufacturing, processing, packaging, labeling,            
advertising, distribution and sale of nutritional supplements such as those     
sold by the Company are subject to regulation by a number of federal, state     
and foreign agencies, principally, the Food and Drug Administration ("FDA")     
and the Federal Trade Commission ("FTC"). 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. Federal and state agencies have in the past    
used these remedies in regulating participants in the nutritional supplements   
industry, including the imposition by federal agencies of civil penalties in    
the millions of dollars against a few industry participants. In addition,       
increased sales and publicity of nutritional supplements may result in          
increased regulatory scrutiny of the nutritional supplements industry. 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 taken against the Company, will not result in a material adverse effect  
on the Company's business, financial condition or results of operations.        

The FDA is currently proposing to regulate the sale of nonprescription      
products containing ephedra, a natural product that contains a small            
percentage of ephedrine alkaloids, which are used in some prescription and      
over the counter stimulants and antihistamines. Less than 4% of the Company's   
fiscal 1997 net sales were derived from products that contain ephedra. Various  
state legislatures and agencies have also expressed concern, and in some cases  
have proposed or passed legislation or regulations regarding ephedra-based      
products. The loss of sales of these products or further limitations in the     
states and other jurisdictions where these products now may be sold could have  
an adverse effect on the Company.                                               

In October 1997, the Company and a number of other suppliers, processors and
marketers of nutritional supplements received warning letters from the FDA      
relating to an allegedly contaminated batch of an herb called plantain. These   
letters claimed that the plantain, which had been shipped to the United States  
from Europe, had been contaminated with another botanical product with          
potentially harmful side effects. The letter that the Company received alleged  
that some of this plantain had been included in a shipment of products that     
Great Basin had processed for a third party on a contract basis. The Company    
has replied to the FDA, explaining that, among other things, it did not own     
the products or market them for human consumption but simply provided grinding  
services for the owner of the herbs. The Company further noted to the FDA that  
it did not process any plantain that could have been incorporated into any      
products that were actually consumed as the only batch it processed was         
returned to the supplier/owner following the FDA's initial press releases on    
this matter. The Company has denied responsibility for any adverse effects and  
affirmed its commitment to good manufacturing practices. The Company has        
received a notice that it may be a defendant along with a number of other       
participants in the VMS Industry in a threatened action by certain private      
litigants or the Attorney General of the State of California, which alleges     
that the sale in California of certain products containing fish and salmon      
oils may be in violation of a California law known as "Proposition 65" for      
failure to include required warning labels. The Company has also received       
notice from another private litigant that the Company's sale of bulk            
quantities of copper gluconate was in violation of Proposition 65 for failure   
to provide warning statements with respect to the level of lead contained in    
such product. In March 1993, the staff of the Cleveland Regional Office of the  
FTC began an investigation into advertising claims made by the seller in the    
KAL/Max Acquisition, and made a follow up inquiry to the Company in August      
1995 concerning certain products and claims associated with the                 

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KAL and NaturalMax product lines. The Company has responded to the FTC and, to  
the Company's knowledge, the FTC has taken no further action. There can be no   
assurance that such proceedings or investigations or any future proceedings or  
investigations will not have a material adverse effect on the Company. See      
"Business--Government Regulation."                                              

PRODUCT LIABILITY; POTENTIAL ADVERSE PRODUCT PUBLICITY                          

The Company, like any other retailer, distributor or manufacturer of        
products that are designed to be ingested, faces an inherent risk of exposure   
to product liability claims in the event that the use of its products results   
in injury. In the event that the Company does not have adequate insurance or    
contractual indemnification, product liability claims could have a material     
adverse effect on the Company. The Company is not currently a named defendant   
in any product liability lawsuit; however, Old KAL, Old Premier and Old         
Monarch, like other manufacturers and distributors of nutritional supplements,  
currently are or have been named as defendants in such lawsuits. The            
successful assertion or settlement of any uninsured claim, a significant        
number of insured claims, or a claim exceeding the Company's insurance          
coverage could have a material adverse effect on the Company.                   

The Company is highly dependent upon consumers' perception of the safety and
quality of its products as well as similar products distributed by other        
companies. Thus, the mere publication of reports asserting that such products   
may be harmful could have a material adverse effect on the Company, regardless  
of whether such reports are scientifically supported and regardless of whether  
the harmful effects would be present at the dosages recommended for such        
products.                                                                       

LIMITED AVAILABILITY OF CONCLUSIVE CLINICAL STUDIES                             

Although many of the ingredients in the Company's products are vitamins,    
minerals, herbs and other substances for which there is a long history of       
human consumption, some of the Company's products contain innovative            
ingredients or combinations of ingredients. Although the Company believes all   
of its products to be safe when taken as directed by the Company, there is      
little long-term experience with human consumption of certain of these          
innovative product ingredients or combinations thereof in concentrated form.    
Although the Company performs research and/or tests the formulation and         
production of its products, it has only sponsored limited clinical studies.     
See "--Product Liability; Potential Adverse Product Publicity."                 

COMPETITION                                                                     

The VMS Industry is highly competitive. The Company's principal competitors 
in the Healthy Foods Channel include a number of large nationally known         
manufacturers (such as Twinlab Corporation, Solgar Vitamin and Herb Company,    
Inc. and Nature's Way Products, Inc.) and many smaller manufacturers and        
marketers of nutritional supplements. Certain of the Company's principal        
competitors are larger than the Company, have greater access to capital and     
may be better able to withstand volatile market conditions. Moreover, because   
the VMS Industry generally has low barriers to entry, additional competitors    
could enter the market at any time. In that regard, although the VMS Industry   
to date has been characterized by many relatively small participants, there     
can be no assurance that national or international companies (which may         
include pharmaceutical companies or other suppliers to mass merchandisers)      
will not seek to enter or to increase their presence in this industry.          
Increased competition in the industry could have a material adverse effect on   
the Company.                                                                    

RISK OF LIMITED SUPPLY SOURCES; DEPENDENCE ON FOREIGN SUPPLIERS                 

The Company believes that its continued success will depend upon the        
availability of raw materials that permit the Company to meet its labeling      
claims, quality control standards and desire for unique ingredients. Due to     
issues relating to quality or third party intellectual property rights, a       
number of the Company's branded products (which accounted for approximately     
31% of the Company's fiscal 1997 net sales) contain one or more of              
approximately 72 ingredients that may only be available from a single source    
or supplier. In addition, the supply of herbal products is subject to the same  
risks normally associated with agricultural production, such as climactic       
conditions, insect infestations and availability of manual labor or equipment   
for harvesting. Any significant delay in or disruption of the supply of raw     
materials could substantially increase the cost of such materials, could        
require product reformulations, the qualification of new suppliers and          
repackaging and could result in a substantial reduction or termination by the   
Company of its sales of certain products, any of which could have a material    
adverse effect upon the Company. Accordingly, while no single product           
accounted for                                                                   

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more than 2% of the Company's net sales in fiscal 1997, there can be no         
assurance that the disruption of the Company's supply sources will not have a   
material adverse effect on the Company.                                         

Although the Company acquires the majority of its raw materials from U.S.   
suppliers, the ingredients of a number of the Company's products (which         
accounted for approximately 38% of the Company's fiscal 1997 net sales)         
include one or more of approximately 188 ingredients that originate outside of  
the United States. The Company's business is therefore subject to the risks     
generally associated with doing business outside the United States, such as     
delays in shipments, embargoes, changes in economic and political conditions,   
tariffs, foreign exchange rates and trade disputes. The Company's business is   
also subject to the risks associated with the enactment of United States and    
foreign legislation and regulations relating to imports and exports, including  
quotas, duties, taxes or other charges or restrictions that could be imposed    
upon the importation of products into the United States. See "Business--        
Materials and Suppliers." These factors could result in a delay in or           
disruption of the supply of certain raw materials and could have the            
consequences described in the preceding paragraph, any of which could have a    
material adverse effect on the Company.                                         

RELIANCE ON KEY MANAGEMENT                                                      

The operation of the Company requires managerial and operational expertise. 
In particular, the Company is dependent upon the management and leadership      
skills of a number of its senior managers, including Frank W. Gay II, Bruce R.  
Hough, Jeffrey A. Hinrichs, William T. Logan and Leslie M. Brown, Jr.           
Substantially all of the Company's employees are employed "at will." None of    
the key management employees has a long-term employment contract with the       
Company and there can be no assurance that such individuals will remain with    
the Company. The failure of such key personnel to continue to be active in      
management could have a material adverse effect on the Company. After the       
consummation of the Offering, the Company's executive officers, including key   
management employees, will beneficially own 2,608,283 shares of Common Stock,   
representing approximately 21.9% of the outstanding Common Stock on a fully     
diluted basis, excluding shares purchased in the Offering pursuant to the       
reserved share program and options to be granted under the 1998 Stock Plan in   
connection with the Offering. See "Management."                                 

RISKS ASSOCIATED WITH IMPLEMENTATION OF BUSINESS STRATEGY                       

Implementation of the Company's business strategy is subject to risks and   
uncertainties, including certain factors that are within the Company's control  
and other factors that are outside of the Company's control. In addition,       
certain elements of the Company's business strategy, notably the acquisition    
of complementary businesses or product lines, could result in significant       
expenditures of cash and management resources. See "--Risks Associated with     
Acquisitions." Finally, implementation of the Company's business strategy is    
subject to risks associated with market and competitive conditions. See "--     
Competition" and "--No Assurance of Future Industry Growth."                    

RISKS ASSOCIATED WITH ACQUISITIONS                                              

The Company has completed four acquisitions, including the Solaray          
Acquisition, since 1993 and expects to pursue additional acquisitions in the    
future as a key component of the Company's business strategy. See "Business--   
Business Strategy." There can be no assurances that attractive acquisition      
opportunities will be available to the Company, that the Company will be able   
to obtain financing for or otherwise consummate any future acquisitions or      
that any acquisitions which are consummated will prove to be successful.        
Moreover, acquisitions involve numerous risks, including the risk that the      
acquired business will not perform in accordance with expectations,             
difficulties in the integration of the operations and products of the acquired  
businesses with the Company's other businesses, the diversion of management's   
attention from other aspects of the Company's business, the risks associated    
with entering geographic and product markets in which the Company has limited   
or no direct prior experience and the potential loss of key employees of the    
acquired business. The acquisition of another business can also subject the     
Company to liabilities and claims arising out of such business. In addition,    
future acquisitions would likely require additional financing, which would      
likely result in an increase in the Company's indebtedness or the issuance of   
additional capital stock which could be dilutive to holders of shares issued    
in the Offering. See "Management's Discussion and Analysis of Financial         
Condition and Results of Operations--Liquidity and Capital Resources."          

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NO ASSURANCE OF FUTURE INDUSTRY GROWTH                                          

Although market data referred to in this Prospectus and otherwise available 
to prospective investors regarding the size and projected growth rates of the   
VMS Market and the Healthy Foods Channel indicate that such markets are large   
and rapidly growing, there can be no assurance that such markets are as large   
as reported or that such projected growth will occur or continue. Market data   
and projections, such as those presented in this Prospectus, are inherently     
uncertain and subject to change. In addition, the underlying market conditions  
are subject to change based on economic conditions, consumer preferences and    
other factors that are beyond the Company's control. There can be no assurance  
that an adverse change in size or growth rate of the VMS Market or the Healthy  
Foods Channel will not have a material adverse effect on the Company.           

RISKS ASSOCIATED WITH INTERNATIONAL MARKETS                                     

The Company's continued growth is dependent in part upon its ability to     
expand its operations into new markets, including international markets. The    
Company may experience difficulty entering new international markets due to     
greater regulatory barriers, the necessity of adapting to new regulatory        
systems and problems related to entering new markets with different cultural    
bases and political systems. 6.5% of the Company's net sales for fiscal 1997    
were generated outside the United States. Operating in international markets    
exposes the Company to certain risks, including, among other things: (i)        
changes in or interpretations of foreign regulations that may limit the         
Company's ability to sell certain products or repatriate profits to the United  
States, (ii) exposure to currency fluctuations, (iii) the potential imposition  
of trade or foreign exchange restrictions or increased tariffs and (iv)         
political instability. As the Company continues to expand its international     
operations, these and other risks associated with international operations are  
likely to increase. See "Business--Business Strategy."                          

RELIANCE ON INDEPENDENT CONTRACTORS                                             

The Company places significant reliance on a network of 56 independent      
contractors to act as its primary sales force and sell its products to health   
food retailers. As with any independent contractor, such contractors are not    
employed or otherwise controlled by the Company and are generally free to       
conduct their businesses at their own discretion. Although these contractors    
enter into contracts with the Company, such contracts typically can be          
terminated at any time by the Company or the independent contractor. The        
simultaneous loss of the services of a number of these independent contractors  
could have a material adverse effect on the Company.                            

CONTROL BY EXISTING STOCKHOLDERS                                                

Upon completion of the Offering, investment funds (the "Bain Capital Funds")
controlled by Bain Capital will beneficially own approximately 43.0% of the     
outstanding Common Stock (40.1% if the Underwriters' over-allotment option is   
exercised in full). By virtue of such stock ownership, Bain Capital will be     
able to control the election of the members of the Company's Board of           
Directors and to generally exercise control over the affairs of the Company.    
Such concentration of ownership could also have the effect of delaying,         
deterring or preventing a change in control of the Company that might           
otherwise be beneficial to stockholders. In addition, three representatives of  
Bain Capital currently serve on the Company's Board of Directors. There can be  
no assurance that conflicts of interest will not arise with respect to such     
Directors or that such conflicts will be resolved in a manner favorable to the  
Company. See "Principal and Selling Stockholders."                              

COMPUTER SYSTEMS AND YEAR 2000 ISSUES                                           

The "Year 2000" issue concerns the potential exposures related to the       
automated generation of business and financial misinformation resulting from    
the application of computer programs which have been written using two digits,  
rather than four, to define the applicable year of business transactions. The   
Company does not anticipate any significant costs, problems or uncertainties    
associated with becoming Year 2000 compliant and is currently developing a      
plan to ensure that its computer systems are modified to be compliant on a      
timely basis. Failure of the Company or its software providers to adequately    
address the Year 2000 issue could result in misstatement of reported financial  
information or otherwise adversely affect the Company's business operations.    

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POSSIBLE VOLATILITY OF STOCK PRICE                                              

The market price of the Common Stock may fluctuate significantly. These     
fluctuations could result from, among other things, variations in the           
Company's results of operations, which could be adversely affected by a number  
of factors (some of which are beyond the Company's control), including          
economic downturns, variations in demand for nutritional supplements, changes   
in the mix of products sold, price changes in response to competition,          
increases in the cost of raw materials and possible supply shortages. In        
particular, the market price of the Common Stock could be materially adversely  
affected by reports by official or unofficial health and medical authorities    
and the general media regarding the potential health benefits or detriments of  
products sold by the Company or of similar products distributed by other        
companies regardless of whether such reports are scientifically supported and   
regardless of whether the Company's operating results are likely to be          
affected by such reports, as well as by consumer perceptions regarding the      
safety and efficacy of nutritional supplements and consumer preferences         
generally. In addition, the stock market in general has experienced wide price  
and volume fluctuations in recent periods, and these fluctuations are often     
unrelated to the operating performance of the specific issuers whose stock is   
affected.                                                                       

ABSENCE OF PUBLIC MARKET; SUBSTANTIAL DILUTION                                  

Prior to the Offering, there has been no public market for the Common Stock.
Although the Company has applied to list the Common Stock on the Nasdaq         
National Market, there can be no assurance that an active trading market for    
the Common Stock will develop or be sustained. The initial public offering      
price of the Common Stock offered hereby will be determined by negotiations     
among the Company, the Selling Stockholders and the Underwriters and should     
not be considered as an indication of the market price for the Common Stock     
after the Offering. See "--Possible Volatility of Stock Price" and              
"Underwriting." Purchasers of the Common Stock in the Offering will be subject  
to immediate and substantial dilution. See "Dilution."                          

SHARES ELIGIBLE FOR FUTURE SALE                                                 

Upon consummation of the Offering, the Company will have 11,466,911 shares  
of Common Stock outstanding. The 3,330,000 shares of Common Stock sold in the   
Offering will be freely tradeable without restriction or further registration   
under the Securities Act of 1933 (the "Securities Act"), unless held by an      
"affiliate" of the Company, as that term is defined in the Securities Act. The  
Company, and all persons holding Common Stock, or warrants or options to        
purchase Common Stock, prior to the Offering, have agreed not to sell, offer    
to sell, grant any option for the sale of or otherwise dispose of any shares    
of Common Stock or securities convertible into or exchangeable or exercisable   
for Common Stock, without the prior written consent of Donaldson, Lufkin &      
Jenrette Securities Corporation ("DLJ") on behalf of the Underwriters, for a    
period of 180 days after the date of this Prospectus, other than shares sold    
in the Offering; in addition, the Company will be permitted to issue shares of  
Common Stock upon the exercise of outstanding options or warrants and to issue  
stock options to employees pursuant to employee stock option plans. Commencing  
180 days after the date of this Prospectus, upon the expiration of certain      
lock-up agreements with DLJ, approximately 7,965,654 shares of Common Stock     
(7,755,391 shares if the Underwriters' over-allotment options are exercised in  
full) issued and outstanding as of the date of this Prospectus will be          
eligible for immediate sale in the public market subject in certain cases to    
compliance with certain volume and other limitations under Rule 144 of the      
Securities Act ("Rule 144"). In addition, pursuant to the Company's             
registration agreement (the "Registration Agreement"), holders of 9,437,116     
shares of Common Stock and options to purchase shares of Common Stock           
(9,082,234 shares if the Underwriters' over-allotment options are exercised in  
full) will have the right to require the Company to register their shares       
under the Securities Act. See "Shares Eligible for Future Sale--Registration    
Rights." No prediction can be made as to the effect, if any, that sales of      
shares of Common Stock or the availability of shares of Common Stock for sale   
will have on the market price of the Common Stock from time to time. The sale   
of a substantial number of shares held by existing stockholders, whether        
pursuant to subsequent public offerings or otherwise, or the perception that    
such sales could occur, could adversely affect the market price of the Common   
Stock and could materially impair the Company's future ability to raise         
capital through an offering of equity securities. See "Shares Eligible For      
Future Sale" and "Underwriting."                                                

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CERTAIN ANTI-TAKEOVER EFFECTS                                                   

Certain provisions of the Company's Restated Certificate of Incorporation   
(the "Restated Certificate") and Amended and Restated By-laws (the "By-laws")   
may inhibit changes in control of the Company not approved by the Company's     
Board of Directors. These provisions include (i) a classified Board of          
Directors, (ii) a prohibition on stockholder action through written consents,   
(iii) a requirement that special meetings of stockholders be called only by     
the Board of Directors, (iv) advance notice requirements for stockholder        
proposals and nominations, (v) limitations on the ability of stockholders to    
amend, alter or repeal the By-laws and (vi) the authority of the Board to       
issue without stockholder approval preferred stock with such terms as the       
Board may determine. The Company will also be afforded the protections of       
Section 203 of the Delaware General Corporation Law, which could have similar   
effects. See "Description of Capital Stock."                                    

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

Certain statements contained herein under "Prospectus Summary," "Risk       
Factors," "Business," and "Management's Discussion and Analysis of Financial    
Condition and Results of Operations," including statements concerning (i) the   
Company's strategy, (ii) the Company's expansion plans, (iii) the market for    
the Company's products, (iv) the effects of government regulation of the        
Company's products and (v) the effects on the Company of certain legal          
proceedings, contain certain forward-looking statements concerning the          
Company's operations, economic performance and financial condition. Because     
such statements involve risks and uncertainties, actual results may differ      
materially from those expressed or implied by such forward-looking statements.  
Factors that could cause such differences include, but are not limited to,      
those discussed under "Risk Factors."                                           

RECLASSIFICATION  

Prior to the consummation of the Offering, the Company will reclassify all  
of its outstanding shares of capital stock into a single class of common stock  
("Common Stock") and will authorize a single class of undesignated preferred    
stock ("Preferred Stock"). The Company currently has five classes of            
authorized capital stock: Common Stock, Non-Voting Common Stock, Class A        
Common Stock, Class A Non-Voting Common Stock and Class P Common Stock. Prior   
to consummation of the Offering, the Non-Voting Common Stock, Class P Common    
Stock, Class A Non-Voting Common Stock and Class A Common Stock will cease to   
be authorized and all outstanding shares of such classes of capital stock (or   
rights to purchase such shares) will be reclassified into shares of Common      
Stock (or rights to purchase such shares). After giving effect to the           
foregoing transactions, a 7.5291-for-one stock split will be effected as to     
all of the outstanding shares of Common Stock and a corresponding adjustment    
to the number of shares issuable upon exercise of all outstanding warrants and  
options will be made. Such reclassification and the subsequent stock split are  
referred to herein collectively as the "Reclassification."                      

The following discussion describes the transactions pursuant to which all   
existing classes of the Company's capital stock will be reclassified into       
Common Stock. Each share of Class P Common Stock, Class A Common Stock and      
Class A Non-Voting Common Stock is entitled to a preferential payment (the      
"Preference Amount") upon any distribution by the Company to holders of its     
capital stock (whether by dividend, liquidating distribution or otherwise)      
equal to the original cost of such share plus an amount which accrues on a      
daily basis at a rate of 10% per annum on such cost, compounded quarterly. As   
of February 25, 1998, the Preference Amount of the outstanding Class P Common   
Stock will be $31.05 per share, based on an original cost per share of $20.25.  
In connection with the Reclassification, each outstanding share of such         
classes of capital stock will be reclassified into one share of Common Stock    
plus an additional number of shares of Common Stock determined by dividing the  
applicable Preference Amount for such share by the value of a share of Common   
Stock based on the initial public offering price in the Offering. Based on the  
initial public offering price of $17.50 per share and the assumed closing date  
of February 25, 1998 and after giving effect to the stock split referred to     
above, an aggregate of 948,959 shares of Common Stock will be issued upon the   
conversion of all shares of Class P Common Stock and 112,872 shares of Common   
Stock would be reserved for issuance upon the conversion of all outstanding     
warrants to purchase shares of Class A Non-Voting Common Stock. There are no    
shares of Class A Non-Voting Common Stock or shares (or rights to purchase      
shares) of Class A Common Stock outstanding. Fractional shares otherwise        
issuable will be rounded to the nearest whole number. See "Description of       
Capital Stock."                                                                 

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DILUTION  

The deficit in net tangible book value of the Company as of September 30,   
1997 was approximately $27.9 million, or $3.00 per share of Common Stock. Net   
tangible book value per share represents the amount of the Company's total      
tangible assets less its total liabilities, divided by the number of shares of  
Common Stock outstanding (after giving effect to the Reclassification). After   
giving effect to (i) the receipt of approximately $31.2 million of estimated    
net proceeds from the sale by the Company of shares of Common Stock in the      
Offering, net of expenses (without giving effect to the exercise of the         
Underwriters' over-allotment options) and (ii) the use of such net proceeds to  
repay indebtedness as described under "Use of Proceeds," the pro forma net      
tangible book value of the Company at September 30, 1997 would have been        
approximately $0.6 million, or $0.05 per share of Common Stock. This            
represents an immediate dilution in net tangible book value of $17.45 per       
share to new investors purchasing shares in the Offering. The following table   
illustrates this dilution:                                                      

                                                                [Download Table]
                                                                            
Assumed initial public offering price per share..............         $17.50
Deficit in net tangible book value per share at September 30,               
 1997........................................................  (3.00)       
Increase in net tangible book value per share attributable to               
 the Offering................................................   3.05        
                                                               -----        
Pro forma net tangible book value per share after the Offer-                
 ing.........................................................           0.05
                                                                      ------
Dilution of net tangible book value per share to purchasers                 
 of shares in the Offering...................................         $17.45
                                                                      ======

The foregoing computations assume no exercise of any stock options or       
warrants after September 30, 1997. As of September 30, 1997, there were         
outstanding options and warrants to purchase an aggregate of 1,634,338 shares   
of Common Stock (after giving effect to the Reclassification) at exercise       
prices from $0.001 to $9.30 per share. If all of the foregoing options and      
warrants had been exercised at September 30, 1997, the deficit in net tangible  
book value per share of Common Stock at such date would have been $2.29, and    
the pro forma net tangible book value per share after giving effect to the      
Offering would have been $0.27, representing an immediate dilution to           
purchasers of shares in the Offering of $17.23 per share and an immediate       
increase in net tangible book value of $2.56 per share to existing              
stockholders.                                                                   

The following table summarizes, on a pro forma basis as of September 30,    
1997, the number of shares of Common Stock purchased from the Company, the      
total consideration paid and the average price per share paid by the existing   
stockholders and new investors purchasing shares in the Offering, adjusted to   
give effect to the sale of the shares of Common Stock offered hereby at the     
initial public offering price of $17.50 per share and before deducting the      
underwriting discount and the estimated expenses of the Offering payable by     
the Company:                                                                    

                                                                [Download Table]

                                                                AVERAGE PRICE
                          SHARES PURCHASED  TOTAL CONSIDERATION   PER SHARE  
                         ------------------ ------------------- -------------
                           NUMBER   PERCENT   AMOUNT    PERCENT              
                                                                             
Existing                                                                     
 stockholders(a)........  8,136,911    71%  $ 8,282,535    12%     $ 1.02    
Investors purchasing                                                         
 shares in the                                                               
 Offering(b)............  3,330,000    29%   58,275,000    88%      17.50    
                         ----------   ---   -----------   ---      ------    
Total................... 11,466,911   100%  $66,557,535   100%     $ 5.80    
                         ==========   ===   ===========   ===      ======    

The foregoing data has been computed based upon the estimated number of     
shares to be outstanding after the Offering without giving effect to the        
exercise of the Underwriters' over-allotment options. See "Reclassification."   
---------------------                                                           
(a) Includes 158,328 shares of Common Stock (after giving effect to the         
 Reclassification) issued pursuant to the exercise of warrants to purchase
such shares and the aggregate consideration to the Company of $46,619.  
 Does not include 1,330,000 shares of Common Stock (after giving effect to
 the Reclassification) offered for sale hereby by the Selling Stockholders
and the aggregate consideration to the Company for the original purchase
of such shares of $1,174,517.                                           
(b) Includes (i) 2,000,000 shares of Common Stock (after giving effect to the   
  Reclassification) offered hereby and gross consideration to the Company of
$35,000,000 for such shares and (ii) 1,330,000 shares of Common Stock   
(after giving effect to the Reclassification) offered hereby and gross  
 consideration to the Selling Stockholders of $23,275,000 for such shares.

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DIVIDEND POLICY 

The Company has never paid any dividends on its capital stock. The Company  
presently intends to retain all available funds for use in the business and     
therefore does not anticipate paying cash dividends in the foreseeable future.  
Payment of future dividends, if any, will be at the discretion of the           
Company's Board of Directors after taking into account various factors,         
including the Company's financial condition, operating results, current and     
anticipated cash needs and plans for expansion. As a holding company, the       
ability of the Company to pay dividends is dependent upon the receipt of        
dividends or other payments from its operating subsidiaries. In addition, the   
Company is currently prohibited from paying dividends on its capital stock      
under its senior credit agreement (the "Existing Credit Agreement") with        
Jackson National Life Insurance Company ("Jackson National"). The Company       
expects that the New Credit Agreement will contain similar restrictions. See    
"Management's Discussions and Analysis of Financial Condition and Results of    
Operations--Liquidity and Capital Resources."                                   

USE OF PROCEEDS 

The net proceeds to the Company from the sale of shares of Common Stock     
offered by the Company will be approximately $31.2 million, net of expenses     
(approximately $33.5 million if the Underwriters' over-allotment options are    
exercised in full). The Company expects to replace the Existing Credit          
Agreement, under which the Company had outstanding borrowings of $61.2 million  
(not including unamortized discount of $2.6 million) at September 30, 1997,     
with the New Credit Agreement, which will make $70.0 million of revolving       
credit borrowings available to the Company, in connection with the              
consummation of the Offering. The Company intends to use the net proceeds of    
the Offering, together with borrowings under the New Credit Agreement and all   
available cash resources of the Company ($4.4 million at September 30, 1997),   
to repay all existing indebtedness under the Existing Credit Agreement as well  
as fees totaling $2.5 million in connection with (i) the termination of the     
Restated Advisory Agreement and services rendered in connection with the        
Offering, (ii) prepayment penalties on the Term B Loan (as defined below)       
resulting from replacing the Existing Credit Agreement and (iii) origination    
fees arising from the establishment of the New Credit Agreement. On a pro       
forma basis, the Company will have outstanding borrowings of $29.4 million      
under the New Credit Agreement after the use of proceeds as discussed above.    
The Company will not receive any proceeds from the sale of shares by the        
Selling Stockholders in the Offering. See "Management's Discussion and          
Analysis of Financial Condition and Results of Operations--Liquidity and        
Capital Resources."                                                             

At September 30, 1997, the outstanding indebtedness under the Existing      
Credit Agreement consisted of (i) a $37.0 million term "A" loan (the "Term A    
Loan"), which currently bears interest at a rate equal to the London Inter-     
Bank Offered Rate ("LIBOR") plus 3.25% (8.88% per annum at September 30,        
1997), (ii) a $15.0 million term "B" loan (the "Term B Loan"), which currently  
bears interest at a rate equal to LIBOR plus 4.0% (9.63% per annum at           
September 30, 1997) and (iii) $9.2 million of outstanding borrowings under a    
revolving credit facility (the "Revolving Credit Facility"), which currently    
bears interest at a rate equal to LIBOR plus 3.0% (8.63% per annum at           
September 30, 1997).                                                            

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CAPITALIZATION  
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

The following table sets forth the consolidated capitalization of the       
Company at September 30, 1997 and as adjusted to give effect to the             
Reclassification and the sale by the Company of the 2,000,000 shares of Common  
Stock offered hereby and the application of the estimated net proceeds          
therefrom, together with borrowings under the New Credit Agreement and          
available cash resources of the Company, to repay indebtedness and pay certain  
other fees. See "Use of Proceeds" and "Unaudited Pro Forma Financial Data."     

                                                        [Enlarge/Download Table]

                                                                  AS OF SEPTEMBER 30, 1997          
                                                                  --------------------------------  
                                                                   ACTUAL         AS ADJUSTED(A)    
                                                                                                    
Cash and cash equivalents........................................ $      4,415       $        --    
                                                                  ============       ============   
Total debt:                                                                                         
 Senior bank debt................................................      $58,680(b)         $29,415(c)
 Capital leases and other obligations............................        1,579                314   
                                                                  ------------       ------------   
  Total debt.....................................................       60,259             29,729   
                                                                  ------------       ------------   
Stockholders' equity:                                                                               
 Common stock prior to the Reclassification......................           12                -- (d)
 Preferred stock, $.01 par value, 5,000,000 shares authorized, no                                   
  shares issued and outstanding..................................          --                 --    
 Common stock, $.01 par value, 50,000,000 shares authorized,                                        
  11,466,911 shares issued and outstanding(e)....................          --                 115(d)
 Additional paid-in capital......................................        9,690             40,737(d)
 Subscriptions receivable........................................          (55)               (55)  
 Retained earnings...............................................        6,707              2,975(f)
                                                                  ------------       ------------   
  Total stockholders' equity.....................................       16,354             43,772   
                                                                  ------------       ------------   
    Total capitalization......................................... $     76,613       $     73,501   
                                                                  ============       ============   

---------------------                                                           
(a) Amounts give effect to the Reclassification and the sale by the Company of  
the 2,000,000 shares of Common Stock offered hereby, the exercise of    
warrants to purchase 158,328 shares of Common Stock (after giving effect
to the Reclassification) by a Selling Stockholder and the application of
the estimated net proceeds from the Offering, together with borrowings  
under the New Credit Agreement and available cash resources of the      
Company, to repay indebtedness and pay certain other fees, including (i)
  fees of $1,000 in connection with the termination of the Restated Advisory
Agreement and for other services rendered, (ii) prepayment penalties of 
$525 on the Term B Loan resulting from the early retirement of          
indebtedness and (iii) loan origination fees and other fees of $950 in  
conjunction with the establishment of the New Credit Agreement. See "Use
of Proceeds" and "Unaudited Pro Forma Financial Data."                  
(b) Includes indebtedness under the Revolving Credit Facility of $9,240, the    
 Term A Loan of $37,000 and the Term B Loan of $12,440 (net of unamortized
discount of $2,560).                                                    
(c) The Company intends to replace the Existing Credit Agreement with the New   
 Credit Agreement in connection with the consummation of the Offering. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."                        
(d) Amounts give effect to the Reclassification through which (i) 102,000       
outstanding shares of Class P Common Stock with a Preference Amount of  
 $31.05 per share will be reclassified into 126,039 shares of Common Stock
using a factor of 1.2357 shares of Common Stock to one share of Class P 
Common Stock, outstanding warrants to purchase 12,994 shares of Class A 
 Non-Voting Common Stock with a Preference Amount of $20.25 per share will
be reclassified into warrants to purchase 14,991 shares of Common Stock 
using a factor of 1.1537 shares of Common Stock to one share of Class A 
Non-Voting Common Stock, 84,309 outstanding shares of Non-Voting Common 
  Stock will be reclassified into 84,309 shares of Common Stock and warrants
  to purchase 116,949 shares of Non-Voting Common Stock will be reclassified
into warrants to purchase 116,949 shares of Common Stock; and, after    
 giving effect to the foregoing, (ii) a 7.5291-for-one stock split will be
effected as to all of the outstanding shares of Common Stock and options

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and warrants to purchase Common Stock, Common Stock outstanding subsequent
to the Reclassification has been reflected at par value and additional    
paid-in capital has been reduced by $81, the difference between the par   
value of Common Stock prior to the Reclassification and the par value of  
Common Stock subsequent thereto.                                          
(e) Excludes 175,804 shares reserved for issuance upon the exercise of options  
granted pursuant to the Company's 1995 Stock Plan and 1,300,206 shares  
reserved for issuance upon the exercise of other outstanding options and
warrants. Also excludes 1,050,000 shares and 750,000 shares which, prior
to the consummation of the Offering, will be reserved for issuance under
  the Company's Stock Incentive Plans and Stock Purchase Plan, respectively.
See "Management--Stock Plans." The number of shares to be outstanding   
after the Offering is subject to change. See "Reclassification."        
(f) Reflects a nonrecurring charge for retirement of debt (write-off of debt    
issuance costs and prepayment penalties) of $5,169, net of a tax benefit
of $2,042, and payment of fees upon the termination of the Restated     
Advisory Agreement and for services rendered in connection with the     
Offering of $1,000, net of a tax benefit of $395.                       

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UNAUDITED PRO FORMA FINANCIAL DATA  

The Unaudited Pro Forma Consolidated Statements of Operations for the year  
ended September 30, 1997 give pro forma effect to (i) the Reclassification,     
(ii) the consummation of the Offering (without giving effect to the exercise    
of the Underwriters' over-allotment options) and the application of the net     
proceeds therefrom, together with borrowings under the New Credit Agreement     
and available cash resources, to repay indebtedness as described under "Use of  
Proceeds" and (iii) the elimination of annual fees paid pursuant to the         
Restated Advisory Agreement, as if each such event had occurred on October 1,   
1996.                                                                           

The Unaudited Pro Forma Consolidated Balance Sheet at September 30, 1997    
gives pro forma effect to (i) the Reclassification, (ii) the consummation of    
the Offering (without giving effect to the exercise of the Underwriters' over-  
allotment options) and the application of the net proceeds therefrom, together  
with borrowings under the New Credit Agreement and available cash resources,    
to repay indebtedness, as described under "Use of Proceeds," and (iii) the      
payment of fees in connection with the termination of the Restated Advisory     
Agreement and for services rendered in connection with the Offering, as if      
each such event had occurred on such date.                                      

The Unaudited Pro Forma Financial Data are provided for informational       
purposes only and are not necessarily indicative of the results of operations   
or financial position of the Company had the transactions assumed therein       
occurred, nor are they necessarily indicative of the results of operations      
which may be expected to occur in the future. Furthermore, the unaudited pro    
forma financial data are based upon assumptions that the Company believes are   
reasonable and should be read in conjunction with the financial statements and  
the accompanying notes thereto included elsewhere in this Prospectus.           

The Unaudited Pro Forma Consolidated Statement of Operations does not       
reflect an extraordinary loss on the early extinguishment of debt estimated at  
$5.2 million resulting from the write off of debt issuance costs in connection  
with the pay down of debt upon completion of the Offering or the payment of     
$1.0 million in fees in connection with the termination of the Restated         
Advisory Agreement and for services rendered in connection with the Offering.   
The Unaudited Pro Forma Consolidated Balance Sheet, however, does reflect such  
charges and the related tax benefit of $2.4 million.                            

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED SEPTEMBER 30, 1997 

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                       PRO FORMA      PRO     
                                         HISTORICAL   ADJUSTMENTS   FORMA     
                                                                              
Net sales...............................  $98,096       $   --      $98,096   
Cost of sales...........................   52,277           --       52,277   
                                          -------       -------     -------   
  Gross profit..........................   45,819           --       45,819   
                                          -------       -------     -------   
Operating expenses:                                                           
  Selling, general and administrative...   29,179          (300)(a)  28,879   
  Amortization of intangibles...........    1,346           --        1,346   
  One-time payment to executive                                               
   officer..............................    1,700           --        1,700   
                                          -------       -------     -------   
                                           32,225          (300)     31,925   
                                          -------       -------     -------   
Income from operations..................   13,594           300      13,894   
                                          -------       -------     -------   
Interest expense, net...................    6,572        (4,199)(b)   2,373   
Income before provision for income                                            
 taxes..................................    7,022         4,499      11,521   
Provision for income taxes..............    2,774         1,777 (c)   4,551   
                                          -------       -------     -------   
Net income..............................  $ 4,248       $ 2,722     $ 6,970   
                                          =======       =======     =======   
Net income per share....................  $  0.39(d)                          
Weighted average shares outstanding.....   10,781(d)                          
Supplemental pro forma net income per                                         
 share..................................  $  0.46(d)                          
Supplemental pro forma weighted average                                       
 shares outstanding.....................   12,781(d)                          
Pro forma as adjusted net income per                                          
 share..................................                            $  0.55(d)
Pro forma as adjusted weighted average                                        
 shares outstanding.....................                             12,781(d)

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

The Unaudited Pro Forma Consolidated Statement of Operations gives effect to
the following unaudited pro forma adjustments:                                  

(a) Reflects the permanent elimination of recurring external management fees    
 (other than out-of-pocket expenses) resulting from the termination of the
Restated Advisory Agreement in connection with the Offering. As is often
the case in stand-alone acquisitions such as the Company's original     
acquisition of Solaray, during the early stages of the Company's        
  development it relied heavily on an affiliate of its equity sponsors, Bain
  Capital, to provide certain management services, paying a recurring annual
fee pursuant to the Restated Advisory Agreement in respect of such      
services. Over time, the Company has developed the infrastructure to    
provide these services internally and, as a result, will terminate the  
Restated Advisory Agreement (and the recurring management fees payable  
thereunder) upon consummation of the Offering.                          

(b) Reflects the decrease in interest expense in connection with the            
refinancing of the Existing Credit Agreement and the use of net proceeds
 from the Offering and available cash to repay $33,090 of outstanding debt
as follows:                                                             

                                                                [Download Table]

                                                                  PRO   
                                                                 FORMA  
                                                                ------- 
                                                                        
Elimination of interest under the Existing Credit Agreement...  $(5,731)
Elimination of penalty on unused Revolving Credit Facility....      (21)
Elimination of interest on note payable.......................     (110)
Elimination of amortization of debt issuance costs............     (817)
Interest on debt under the New Credit Agreement:                        
 Revolving credit facility at LIBOR plus a variable margin              
  based on Adjusted EBITDA and outstanding borrowings (average          
  rate of 6.75% on an assumed average balance of $31,235).....    2,110 
 Interest on unutilized revolving credit facility commitment            
  (average rate of .34% on an assumed average unused balance            
  of $38,765).................................................      130 
 Annual Syndicate Fee.........................................       50 
 Amortization of deferred financing fees related to the New             
  Credit Agreement ($950 over five years).....................      190 
                                                                ------- 
Net decrease in pro forma interest expense....................  $(4,199)
                                                                ======= 

The above calculation assumes an average rate of 6.75% for fiscal 1997      
based on historical Adjusted EBITDA and average borrowing levels. At the    
consummation of the Offering, the Company expects the interest rate under   
the New Credit Agreement to be LIBOR plus 0.875% (6.51%, assuming a 5.63%   
LIBOR rate). See "Use of Proceeds."                                         

(c) Reflects the increase in the provision for income taxes resulting from the  
pro forma adjustments to pro forma income before provision for income   
taxes, applying an estimated effective tax rate of 39.5%.               

(d) Pro forma net income per share is computed using historical net income and  
10,780,590 common and common equivalent shares outstanding after giving 
effect to the Reclassification through which (i) 102,000 outstanding    
  shares of Class P Common Stock will be reclassified into 126,039 shares of
 Common Stock using a factor of 1.2357 shares of Common Stock to one share
  of Class P Common Stock, outstanding warrants to purchase 12,994 shares of
Class A Non-Voting Common Stock will be reclassified into warrants to   
 purchase 14,991 shares of Common Stock using a factor of 1.1537 shares of
Common Stock to one share of Class A Non-Voting Common Stock, 84,309    
outstanding shares of Non-Voting Common Stock will be                   

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reclassified in 84,309 shares of Common Stock, and warrants to purchase   
116,949 shares of Non-Voting Common Stock will be reclassified into       
warrants to purchase 116,949 shares of Common Stock; and, after giving    
 effect to the foregoing, (ii) a 7.5291-for-one stock split will be effected
as to all 1,236,348 of the outstanding shares of Common Stock and 195,509 
of the outstanding common equivalent shares. Common equivalent shares     
consist of the Company's Common Stock issuable upon the exercise of stock 
options and warrants (using the treasury stock method). In addition, in   
accordance with the Securities and Exchange Commissions's Staff Accounting
 Bulletin No. 83, shares issued and stock options granted within one year of
the Offering have been included in the calculation of weighted average    
shares outstanding as if they were outstanding from inception of the      
Company (using the treasury stock method).                                

Supplemental net income per share is determined in the same manner as that  
used to determine pro forma net income per share, except the pro forma      
weighted average number of common and common equivalent shares which the    
Company estimates will be outstanding after giving effect to the            
Reclassification has been increased by 2,000,000, the number of shares of   
Common Stock to be issued to generate the proceeds necessary to retire      
$31,150 of the Company's borrowings under the Existing Credit Agreement,    
and historical net income has been increased by $2,776 related to the       
elimination of interest resulting from the assumed reduction of $31,150 of  
indebtedness, net of tax of $1,097.                                         

Pro forma as adjusted net income per share is determined using pro forma    
net income and common and common equivalent shares considered to be         
outstanding after giving effect to the Reclassification and the Offering.   

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AT SEPTEMBER 30, 1997 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                         PRO FORMA              
                                             HISTORICAL ADJUSTMENTS    PRO FORMA
                                                                                
                   ASSETS                                                       
Current assets:                                                                 
  Cash......................................  $ 4,415    $ 31,150 (a)   $   --  
                                                          (33,090)(b)           
                                                           (1,525)(c)           
                                                             (950)(d)           
  Accounts receivable, net..................    8,001         --          8,001 
  Inventories, net..........................   20,753         --         20,753 
  Prepaid expenses and other assets.........    1,018         603 (c)     3,455 
                                                            1,834 (d)           
  Deferred income taxes.....................      897         --            897 
                                              -------    --------       ------- 
    Total current assets....................   35,084      (1,978)       33,106 
Property plant and equipment, net...........   10,711         --         10,711 
Goodwill, net...............................   42,008         --         42,008 
Other assets, net...........................    2,307      (1,134)(d)     1,173 
                                              -------    --------       ------- 
                                              $90,110    $ (3,112)      $86,998 
                                              =======    ========       ======= 
    LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                            
  Current portion of long-term debt.........  $ 7,085    $ (7,085)(b)   $   --  
  Current portion of capital lease                                              
   obligations..............................      181         --            181 
  Accounts payable..........................    6,932         --          6,932 
  Accrued expenses..........................    5,270         --          5,270 
                                              -------    --------       ------- 
    Total current liabilities...............   19,468      (7,085)       12,383 
Long-term debt..............................   52,860     (26,005)(b)    29,415 
                                                            2,560 (d)           
Capital lease obligations...................      133         --            133 
Deferred income taxes, net..................    1,295         --          1,295 
                                              -------    --------       ------- 
    Total liabilities.......................   73,756     (30,530)       43,226 
                                              -------    --------       ------- 
Stockholders' equity:                                                           
  Preferred Stock...........................      --          --            --  
  Class P Common Stock......................        1          (1)(a)       --  
  Common Stock..............................       11         104 (a)       115 
  Additional paid-in capital................    9,690      31,047 (a)    40,737 
  Subscriptions receivable..................      (55)        --            (55)
  Retained earnings.........................    6,707        (922)(c)     2,975 
                                                           (2,810)(d)           
                                              -------    --------       ------- 
    Total stockholders' equity..............   16,354      27,418        43,772 
                                              -------    --------       ------- 
                                              $90,110    $ (3,112)      $86,998 
                                              =======    ========       ======= 

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the      
following unaudited pro forma adjustments:                                      

(a) Reflects (i) the Reclassification, (ii) the exercise of warrants to         
purchase 158,328 shares of Common Stock (after giving effect to the     
Reclassification) by a Selling Stockholder and (iii) the sale by the    
Company of 2,000,000 shares of Common Stock and the receipt of the net  
proceeds therefrom of $31,150.                                          

(b) Reflects the use of the net proceeds to the Company from the Offering of    
$31,150 to repay outstanding debt. Also reflects the estimated use of   
  available cash to pay an additional $1,940 of outstanding debt for a total
debt reduction of $33,090, net of the elimination of the unamortized    
discount on the Term B Loan of $2,560.                                  

(c) Reflects (i) fees of $1,000 paid in connection with the termination of the  
Restated Advisory Agreement and for other services and (ii) $525 of     
 prepayment penalties on the Term B Loan resulting from the refinancing of
 the debt outstanding under the Existing Credit Agreement and the increase
in the income tax receivable arising from the respective tax benefits   
thereof (each computed assuming an effective rate of 39.5%).            

(d) Reflects the write-off of deferred financing fees of $2,084, offset by      
$950 of estimated loan origination and other fees, and the unamortized  
discount on the Term B Loan of $2,560 in connection with the refinancing
of debt under the Existing Credit Agreement and the establishment of the
  New Credit Agreement and the increase in the income tax receivable arising
  from the respective tax benefits thereof (each computed using an effective
rate of 39.5%).                                                         

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

Set forth below are selected historical consolidated financial data of the  
Company and the Predecessor for the periods and dates indicated. The selected   
historical consolidated financial data for the year ended September 30, 1993    
were derived from the audited financial statements of the Predecessor. Data     
for the period from October 1 through October 27, 1993 are not audited. The     
selected historical consolidated financial data as of and for the years ended   
September 30, 1994, 1995, 1996 and 1997 were derived from the audited           
financial statements of the Company. The following selected historical          
consolidated financial data should be read in conjunction with, and are         
qualified by reference to, "Management's Discussion and Analysis of Financial   
Condition and Results of Operations" and the audited consolidated financial     
statements and accompanying notes thereto included elsewhere in this            
Prospectus.                                                                     

                                                        [Enlarge/Download Table]

                                 PREDECESSOR                  COMPANY(A)               
                          ------------------------- ---------------------------------- 
                                         OCTOBER 1                                     
                           YEAR ENDED     THROUGH      YEAR ENDED SEPTEMBER 30,        
                          SEPTEMBER 30, OCTOBER 27, ---------------------------------- 
                              1993         1993      1994     1995     1996     1997   
                                                                                       
CONSOLIDATED STATEMENT                                                                 
 OF OPERATIONS DATA:                                                                   
Net sales...............     $20,541      $2,012    $26,083  $62,932  $83,923  $98,096 
Cost of sales...........      11,102       1,012     13,410   35,885   45,099   52,277 
                             -------      ------    -------  -------  -------  ------- 
 Gross profit...........       9,439       1,000     12,673   27,047   38,824   45,819 
Operating expenses:                                                                    
 Selling, general and                                                                  
  administrative........       7,486         658      8,303   21,409   27,608   29,179 
 Amortization of                                                                       
  intangibles...........         --          --         394    1,059    1,483    1,346 
 One-time payment to                                                                   
  executive officer.....         --          --         --       --       --     1,700 
                             -------      ------    -------  -------  -------  ------- 
Income from operations..       1,953         342      3,976    4,579    9,733   13,594 
Interest expense, net...         116         (16)     1,820    4,478    7,126    6,572 
                             -------      ------    -------  -------  -------  ------- 
Income before provision                                                                
 for income taxes.......       1,837         358      2,156      101    2,607    7,022 
Provision for income                                                                   
 taxes..................         673         134        848       23    1,056    2,774 
                             -------      ------    -------  -------  -------  ------- 
Net income before                                                                      
 extraordinary loss.....       1,164         224      1,308       78    1,551    4,248 
Extraordinary loss on                                                                  
 early extinguishment of                                                               
 debt, net of tax.......         --          --         --      (478)     --       --  
                             -------      ------    -------  -------  -------  ------- 
Net income (loss).......     $ 1,164      $  224    $ 1,308  $  (400) $ 1,551  $ 4,248 
                             =======      ======    =======  =======  =======  ======= 
Pro forma net income per                                                               
 share(b)...............                                                       $  0.39 
Pro forma weighted                                                                     
 average shares                                                                        
 outstanding(b).........                                                        10,781 
Supplemental pro forma                                                                 
 net income per                                                                        
 share(b)...............                                                       $  0.46 
Supplemental pro forma                                                                 
 weighted average shares                                                               
 outstanding(b).........                                                        12,781 
OTHER FINANCIAL DATA:                                                                  
Adjusted EBITDA(c)......     $ 2,188      $  364    $ 5,724  $11,831  $13,118  $19,563 
Capital expenditures                                                                   
 (excluding                                                                            
 acquisitions)..........         217          13        452    2,837    5,498    3,652 
Cash flows provided by                                                                 
 (used in):                                                                            
 Operating activities...       1,286         194      1,958      (64)   4,559    9,363 
 Investing activities...        (214)        (13)   (10,065) (49,155)  (5,498)  (3,652)
 Financing activities...        (802)       (168)     8,341   49,645    2,600   (3,617)
BALANCE SHEET DATA (AT                                                                 
 PERIOD END):                                                                          
Cash and cash                                                                          
 equivalents............     $   278      $  291    $   234  $   660  $ 2,321  $ 4,415 
Working capital.........       2,350       2,416      2,814   17,165   19,727   15,616 
Total assets............       6,422       6,465     16,076   83,498   84,755   90,110 
Total debt(d)...........         849         662      8,769   60,881   63,657   60,259 
Stockholders' equity....       2,970       3,194      3,738   10,512   12,091   16,354 

---------------------                                                           
(a) The Company's audited financial statements for the year ended September     
 30, 1994 primarily reflect operations after October 27, 1993, the date of
 the Solaray Acquisition. The Company's operations prior to such date were
immaterial. The Solaray Acquisition was accounted for as a purchase,    
resulting in a new accounting basis for the Predecessor's assets. As a  
  result, financial information for the periods prior to October 28, 1993 is
not directly comparable to information for subsequent periods.          

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(b) Gives effect to the Reclassification. Historical earnings per common share  
  amounts are not presented as they are not considered to be meaningful. Net
  income per share was determined by dividing the net income by the weighted
average number of common and common stock equivalent shares which the   
Company estimates will be outstanding after giving effect to the        
  Reclassification. Common stock equivalents consist of the Company's Common
 Stock issuable upon the exercise of stock options and warrants (using the
  treasury stock method). In addition, in accordance with the Securities and
 Exchange Commissions' Staff Accounting Bulletin No. 83, shares issued and
stock options granted within one year of the Offering have been included
 in the calculation of weighted average shares outstanding as if they were
outstanding from inception of the Company (using the treasury stock     
method). Supplemental net income per share was determined in the same   
manner as that used to determine pro forma net income per share, except 
the pro forma weighted average number of common and common equivalent   
  shares which the Company estimates will be outstanding after giving effect
to the Reclassification was increased by the number of shares of common 
stock (2,000,000) to be issued to generate the proceeds necessary to    
retire $31,150 of the Company's borrowings under the Existing Credit    
Agreement ($33,500 if the Underwriters' over-allotment options are      
exercised in full), and historical net income was increased by $2,776   
related to the elimination of interest resulting from the assumed       
reduction of $31,150 of indebtedness, net of tax of $1,097.             
(c) "Adjusted EBITDA" is defined herein as net income before extraordinary      
loss plus provision for income taxes, net interest expense, depreciation
and amortization and other non-recurring items. Management believes that
Adjusted EBITDA, as presented, represents a useful measure of assessing 
the performance of the Company's ongoing operating activities as it     
reflects the earnings trends of the Company without the impact of the   
purchase accounting applied in connection with the Company's history of 
acquisitions, the financing required to consummate such transactions or 
 other non-recurring items. Targets and positive trends in Adjusted EBITDA
are used as the performance measure for determining management's bonus  
compensation, and are also used by the Company's creditors in assessing 
debt covenant compliance. The Company understands that while Adjusted   
EBITDA is frequently used by securities analysts in the evaluation of   
nutritional supplement companies, it is not necessarily comparable to   
other similarly titled captions of other companies due to potential     
inconsistencies in the method of calculation. Adjusted EBITDA is not    
intended as an alternative to cash flow from operating activities as a  
  measure of liquidity or as an alternative to net income as an indicator of
  the Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.               

The following table sets forth a reconciliation of net income from          
operations before extraordinary loss to Adjusted EBITDA for each period     
included herein:                                                            

                                                                [Download Table]

                                PREDECESSOR                   COMPANY            
                         ------------------------- ------------------------------
                                        OCTOBER 1                                
                          YEAR ENDED     THROUGH      YEAR ENDED SEPTEMBER 30,   
                         SEPTEMBER 30, OCTOBER 27, ------------------------------
                             1993         1993      1994   1995    1996    1997  
                                                                                 
Net income before                                                                
 extraordinary loss.....    $1,164        $224     $1,308 $    78 $ 1,551 $ 4,248
Provision for income                                                             
 taxes..................       673         134        848      23   1,056   2,774
Interest expense                                                                 
 (income), net (1)......       116         (16)     1,820   4,478   7,126   6,572
Depreciation and                                                                 
 amortization (2).......       235          22      1,561   6,983   3,085   3,969
Certain non-recurring                                                            
 items (3)..............       --          --         187     269     300     300
One-time payment to                                                              
 executive officer(4)...       --          --         --      --      --    1,700
                            ------        ----     ------ ------- ------- -------
Adjusted EBITDA.........    $2,188        $364     $5,724 $11,831 $13,118 $19,563
                            ======        ====     ====== ======= ======= =======

--------                                                                    
(1) Includes amortization of capitalized debt issuance costs.               
(2) Includes non-recurring amortization of inventory write up.              
(3) Represents management fees paid to Bain Capital and F.W. Gay & Sons     
 pursuant to the Restated Advisory Agreement, which will be terminated
in connection with the Offering. As is often the case in stand-alone
acquisition scenarios such as the Company's original acquisition of 
   Solaray, during the early stages of the Company's development it relied
heavily on its equity sponsor, Bain Capital, to provide certain     
management services, paying a recurring annual fee pursuant to the  
   Restated Advisory Agreement in respect of such services. Over time, the
Company has developed the infrastructure to provide these services  
internally and, as a result, will terminate the Restated Advisory   
 Agreement (and the recurring management fees payable thereunder) upon
consummation of the Offering. See "Certain Relationships and Related
Transactions."                                                      
(4) Reflects a one-time payment to the Company's Chief Executive Officer    
   for successfully positioning the Company for the Offering. Such payment
is in excess of the Chief Executive Officer's annual compensation   
   (salary and bonus), and the Company does not expect to make any further
payments of this nature or magnitude in the future.                 

(d) Total debt for the Company is presented net of unamortized debt issuance    
discount.                                                               

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

The following discussion and analysis of the Company's financial condition  
and results of operations should be read in conjunction with the Company's      
audited consolidated financial statements and accompanying notes thereto        
included elsewhere in this Prospectus.                                          

OVERVIEW                                                                        

The Company was formed in 1993 by key members of the current management team
and Bain Capital to effect a consolidation strategy in the fragmented VMS       
Industry. The Company purchased Solaray in October 1993 with a view toward      
using it as a platform for future acquisitions of businesses in the VMS         
Industry. In fiscal 1995, the Company completed three additional significant    
acquisitions, the Premier Acquisition in October 1994, the KAL/Max Acquisition  
in January 1995 and the Monarch Acquisition in September 1995, collectively     
referred to as the "Fiscal 1995 Acquisitions."                                  

RESULTS OF OPERATIONS                                                           

The following table sets forth certain consolidated statement of operations 
data as a percentage of net sales for the periods indicated:                    

                                                                [Download Table]

                                              YEAR ENDED SEPTEMBER 30,     
                                             ----------------------------- 
                                               1995       1996      1997   
                                                                           
Net sales...................................    100.0%     100.0%    100.0%
Cost of sales...............................     57.0       53.7      53.3 
                                             --------   --------  -------- 
Gross profit................................     43.0       46.3      46.7 
Selling, general and administrative ........     34.0       32.9      29.7 
Amortization of intangibles.................      1.7        1.8       1.4 
One-time payment to executive officer.......       --         --       1.7 
                                             --------   --------  -------- 
Income from operations......................      7.3       11.6      13.9 
Interest expense, net.......................      7.1        8.5       6.7 
                                             --------   --------  -------- 
Income before provision for income taxes....      0.2        3.1       7.2 
Provision for income taxes..................      0.0        1.3       2.8 
                                             --------   --------  -------- 
Net income from operations before                                          
 extraordinary loss.........................      0.2        1.8       4.4 
Extraordinary loss on early extinguishment                                 
 of debt, net of tax........................     (0.8)       --        --  
                                             --------   --------  -------- 
Net income (loss)...........................     (0.6)%      1.8%      4.4%
                                             ========   ========  ======== 

COMPARISON OF FISCAL 1997 TO FISCAL 1996                                        

Net Sales. Net sales increased by $14.2 million, or 16.9%, to $98.1 million 
for fiscal 1997 from $83.9 million for fiscal 1996. The increase in net sales   
was primarily the result of increased sales volume and, to a lesser extent,     
minimal increases in the prices of the Company's products. Such price           
increases were immaterial to revenue growth. The Company believes that the      
increased volume was primarily attributable to industry growth as well as to    
the success of the Company's new growth-based incentive compensation structure  
for independent sales representatives and the success of new product            
introductions.                                                                  

Gross Profit. Gross profit increased by $7.0 million, or 18.0%, to $45.8    
million for fiscal 1997 from $38.8 million for fiscal 1996. This increase in    
gross profit was primarily attributable to growth in sales volume. As a         
percentage of net sales, gross profit increased to 46.7% for fiscal 1997 from   
46.3% for fiscal 1996. This increase in gross profit as a percentage of net     
sales was primarily attributable to decreased material costs associated with    
new vendor sourcing.                                                            

Selling, General and Administrative Expenses. Selling, general and          
administrative expenses increased by $1.6 million, or 5.7%, to $29.2 million    
for fiscal 1997 from $27.6 million for fiscal 1996. As a percentage of net      

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sales, selling, general and administrative expenses decreased to 29.7% for      
fiscal 1997 from 32.9% for fiscal 1996. This decrease in selling, general and   
administrative expenses as a percentage of net sales was primarily              
attributable to the Company's efforts to implement new incentive and cost       
control programs.                                                               

Amortization of Intangibles. Amortization of intangibles decreased by $0.2  
million, or 9.2%, to $1.3 million for fiscal 1997 from $1.5 million for fiscal  
1996. As a percentage of net sales, amortization of intangibles decreased to    
1.4% for fiscal 1997 from 1.8% for fiscal 1996. This decrease in amortization   
of intangibles was primarily attributable to the use of the declining balance   
method of amortization associated with certain non-compete covenants arising    
from the Fiscal 1995 Acquisitions.                                              

One-Time Payment to Executive Officer. One-time payment to executive officer
of $1.7 million for fiscal 1997 represents a payment to the Company's Chief     
Executive Officer for successfully positioning the Company for the Offering.    

Interest Expense, Net. Interest expense decreased by $0.5 million, or 7.8%, 
to $6.6 million for fiscal 1997 from $7.1 million for fiscal 1996. As a         
percentage of net sales, interest expense decreased to 6.7% for fiscal 1997     
from 8.5% for fiscal 1996. This decrease in interest expense was primarily      
attributable to decreased indebtedness associated with the Revolving Credit     
Facility.                                                                       

Provision for Income Taxes. The Company's effective tax rate decreased to   
39.5% for fiscal 1997 from 40.5% for fiscal 1996. In each fiscal year, the      
effective tax rate is higher than statutory rates primarily due to the non-     
deductibility for tax purposes of goodwill amortization arising from the        
Solaray Acquisition. The impact of Solaray goodwill on the effective tax rate   
for 1997 decreased compared to fiscal 1996 as a result of the Company's higher  
income before provision for taxes.                                              

COMPARISON OF FISCAL 1996 TO FISCAL 1995                                        

Net Sales. Net sales increased by $21.0 million, or 33.4%, to $83.9 million 
for fiscal 1996 from $62.9 million for fiscal 1995. The increase in net sales   
was primarily the result of increased sales volume. The Company believes that   
the increased volume was primarily attributable to the Fiscal 1995              
Acquisitions as well as to industry growth and the success of new product       
introductions. The Company is unable to quantify the increase in revenues       
attributable to acquisitions because it has fully integrated the acquired       
businesses and does not maintain data that would allow it to separately report  
growth from acquisitions.                                                       

Gross Profit. Gross profit increased by $11.8 million, or 43.5%, to $38.8   
million for fiscal 1996 from $27.0 million for fiscal 1995. This increase in    
gross profit was primarily attributable to growth in sales volume. As a         
percentage of net sales, gross profit increased to 46.3% for fiscal 1996 from   
43.0% for fiscal 1995. This increase in gross profit as a percentage of net     
sales was primarily attributable to the negative impact on fiscal 1995 gross    
profit of the one-time step-up in inventory value related to the Solaray and    
Premier acquisitions, offset somewhat by a shift in sales mix attributable to   
the Fiscal 1995 Acquisitions.                                                   

Selling, General and Administrative Expenses. Selling, general and          
administrative expenses increased by $6.2 million, or 29.0%, to $27.6 million   
for fiscal 1996 from $21.4 million for fiscal 1995. As a percentage of net      
sales, selling, general and administrative expenses decreased to 32.9% for      
fiscal 1996 from 34.0% for fiscal 1995. This decrease in selling, general and   
administrative expenses as a percentage of net sales was primarily              
attributable to the Company's efforts related to the consolidation of the       
Fiscal 1995 Acquisitions.                                                       

Amortization of Intangibles. Amortization of intangibles increased by $0.4  
million, or 40.0%, to $1.5 million for fiscal 1996 from $1.1 million for        
fiscal 1995. As a percentage of net sales, amortization of intangibles          
increased to 1.8% for fiscal 1996 from 1.7% for fiscal 1995. This increase in   
amortization of intangibles was primarily attributable to the Fiscal 1995       
Acquisitions. During fiscal 1996, twelve months of amortization expense         
related to these acquisitions was incurred compared to less than twelve months  
for fiscal 1995.                                                                

Interest Expense, Net. Interest expense increased by $2.6 million, or 59.1%,
to $7.1 million for fiscal 1996 from $4.5 million for fiscal 1995. As a         
percentage of net sales, interest expense increased to 8.5% for fiscal 1996     

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from 7.1% for fiscal 1995. This increase in interest expense was primarily      
attributable to increased term debt arising from the Fiscal 1995 Acquisitions.  
During fiscal 1996, twelve months of interest expense related to this debt was  
incurred compared to less than twelve months for fiscal 1995. The Company also  
incurred increased interest expense for additional borrowings under the         
Revolving Credit Facility used to finance the Monarch Acquisition and the       
Company's operating needs.                                                      

Provision for Income Taxes. The Company's effective tax rate was 40.5% for  
fiscal 1996 as compared to a benefit rate of 22.5% for fiscal 1995. In each     
fiscal year, the effective tax rate varied from the statutory rate primarily    
due to the non-deductibility for tax purposes of amortization arising from the  
Solaray Acquisition.                                                            

Extraordinary Loss on Early Extinguishment of Debt. An extraordinary loss on
early extinguishment of debt of $0.5 million, net of tax, was recognized in     
fiscal 1995. This loss was incurred in connection with the Fiscal 1995          
Acquisitions when new financing under the Existing Credit Agreement was used    
to extinguish previous debt arising from the Solaray Acquisition.               

SEASONALITY                                                                     

The Company believes that its business is characterized by minor            
seasonality. Historically, the Company has recorded higher sales volume during  
the second and third quarters due to increased interest in health-related       
products among consumers following the holiday season and in anticipation of    
the summer months. The Company does not believe that the impact of seasonality  
on its results of operations is material. In addition, the Company's sales of   
premium bulk formulations are characterized by periodic shipments to certain    
customers and can vary from quarter to quarter.                                 

LIQUIDITY AND CAPITAL RESOURCES                                                 

For the fiscal year ended September 30, 1997, net cash provided by (used in)
operations was $9.4 million compared to $4.6 million for the year ended         
September 30, 1996 and $(0.1 million) for the year ended September 30, 1995.    
The increase in fiscal 1997 was primarily attributable to higher net income     
and reflects higher levels of accounts payable and deferred income taxes,       
offset by higher accounts receivable and inventory balances arising from        
higher sales volume. The increase in fiscal 1996 from fiscal 1995 was           
primarily attributable to higher net income and reflects a lower level of       
accounts receivable combined with a higher level of deferred income taxes,      
offset by lower levels of accounts payable and accrued expenses and a higher    
level of inventory.                                                             

Net cash used in investing activities was $3.7 million, $5.5 million and    
$49.2 million for the years ended September 30, 1997, 1996 and 1995,            
respectively. The Company's investing activities consist primarily of           
acquisitions and, to a lesser extent, costs associated with capital             
expenditures. The higher level of cash used in investing activities for fiscal  
1995 reflects the Company's purchase of net assets related to the Fiscal 1995   
Acquisitions. Capital expenditures during fiscal 1997 and fiscal 1996 related   
primarily to manufacturing equipment and information systems required to        
expand capacity and improve overall operating efficiency. The Company           
anticipates additional capital expenditures during fiscal 1998 of               
approximately $4.0 million to purchase additional manufacturing equipment and   
information systems in connection with the Company's consolidation of the       
existing facilities into the new facility. The Company intends to finance       
these anticipated capital expenditures through internally generated cash flow   
and, if necessary, through funds provided under the Existing Credit Agreement   
or the New Credit Agreement.                                                    

Net cash provided by (used in) financing activities was $(3.6) million, $2.6
million and $49.6 million for the years ended September 30, 1997, 1996 and      
1995, respectively. The Company's financing activities consist primarily of     
the borrowings incurred in connection with the Fiscal 1995 Acquisitions and,    
to a lesser extent, borrowings and repayments on the Revolving Credit Facility  
related to operating needs.                                                     

The Existing Credit Agreement currently consists of three components: the   
Term A Loan, the Term B Loan and the Revolving Credit Facility. The Company     
had borrowings of $37.0 million, $15.0 million (before unamortized discount of  
$2.6 million) and $9.2 million outstanding under the Term A Loan, the Term B    
Loan                                                                            

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and the Revolving Credit Facility, respectively, at September 30, 1997. The     
Revolving Credit Facility permits the Company to make borrowings in a           
principal amount not to exceed $15.0 million at any time outstanding. The       
Revolving Credit Facility is to be repaid not later than January 31, 2003. The  
Term A Loan is required to be repaid in quarterly installments beginning April  
30, 1998 with final maturity of January 31, 2003. The Term B Loan is to be      
repaid not later than January 31, 2004.                                         

Borrowings under the Existing Credit Agreement for the Revolving Credit     
Facility may, at the Company's option, bear interest at either LIBOR plus       
3.00% or the lenders base rate plus 1.50%. With respect to borrowings under     
the Term A Loan, the Company may select either LIBOR plus 3.25% or the          
lender's base rate plus 1.75%. For the Term B Loan, the Company may select      
either LIBOR plus 4.00% or the lender's base rate plus 2.50%.                   

Borrowings under the Existing Credit Agreement are secured by a perfected   
first priority security interest in substantially all of the assets of the      
Company and its subsidiaries. The Existing Credit Agreement contains            
restrictive covenants, including restrictions on the incurrence of other        
indebtedness, limitations on capital expenditures, requirements that the        
Company maintain a minimum level of consolidated net worth, a minimum ratio of  
cash flow to fixed charges, a minimum level of Adjusted EBITDA, and a maximum   
ratio of debt to Adjusted EBITDA. Upon the occurrence of an event of default    
under the Existing Credit Agreement, the lender may require the Company to      
repay all amounts borrowed thereunder and may proceed against the collateral.   
The Existing Credit Agreement also restricts the Company's ability to make      
certain payments, including the payment of dividends on its Common Stock and    
payments with respect to certain capital expenditures, without the approval of  
its lenders.                                                                    

The Company has negotiated a commitment letter with respect to the proposed 
execution of the New Credit Agreement, with which it expects to refinance its   
existing indebtedness under the Existing Credit Agreement in connection with    
the Offering. The Company expects that the New Credit Agreement will provide    
for revolving credit borrowings of up to $70.0 million and have a scheduled     
maturity in 2003. Borrowings under the New Credit Agreement are expected to     
bear interest at rates equal to LIBOR plus a margin ranging from 0.5% to 2.0%,  
based on the Company's then-current leverage ratio. At the consummation of the  
Offering, the Company expects the interest rate under the New Credit Agreement  
to be LIBOR plus 0.875%. The New Credit Agreement is also expected to provide   
for alternate rates based upon prime. The Company anticipates that the New      
Credit Agreement will be secured by substantially all of the assets of the      
Company and generally will contain restrictive covenants, financial tests and   
events of default similar to those in the Existing Credit Agreement. To date,   
no definitive agreements have been executed and, as a result, no assurance can  
be given that the New Credit Agreement will be executed on such terms or        
entered into at all. In the event the Company does not renegotiate, amend or    
replace the Existing Credit Agreement prior to the consummation of the          
Offering, net proceeds of the Offering will be used to repay approximately      
$31.2 million of the outstanding indebtedness under the Term A Loan             
(approximately $33.5 million if the Underwriters' over-allotment options are    
exercised in full).                                                             

A key component of the Company's business strategy is to seek to make       
additional acquisitions, which will likely require that the Company obtain      
additional financing, which could include the incurrence of substantial         
additional indebtedness. The Company believes that following the Offering,      
based on current levels of operations and anticipated growth, borrowings under  
the Existing Credit Agreement or a replacement credit facility, together with   
cash flow from operations, will be sufficient to make required payments under   
the Existing Credit Agreement or any such replacement facility, make its        
anticipated capital expenditures and fund working capital needs for fiscal      
1998.                                                                           

INFLATION                                                                       

Inflation affects the cost of raw materials, goods and services used by the 
Company. In recent years, inflation has been modest. The competitive            
environment somewhat limits the ability of the Company to recover higher costs  
resulting from inflation by raising prices. Overall product prices have         
generally been stable and the Company seeks to mitigate the adverse effects of  
inflation primarily through improved productivity and cost containment          
programs. The Company does not believe that inflation has had a material        
impact on its results of operations for the periods presented.                  

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BUSINESS  

GENERAL                                                                         

Nutraceutical is one of the nation's largest manufacturers and marketers of 
quality branded nutritional supplements sold to health food stores. The         
Company sells its branded products under the Solaray, KAL, NaturalMax,          
VegLife, Premier One and Solar Green brand names directly and exclusively to    
health food stores in the United States and internationally primarily to        
distributors and retailers. In addition to branded products, the Company        
manufactures premium bulk formulations for sale to other manufacturers and      
marketers in the nutritional supplement industry. Since its formation in 1993,  
the Company has achieved rapid growth. See "Selected Historical Financial       
Information."                                                                   

The Company's strategy of selling its branded products directly and         
exclusively to the approximately 9,700 stores in the Healthy Foods Channel has  
enabled it to benefit from the rapid growth of the Healthy Foods Channel. The   
Company believes that it is among the largest suppliers of nutritional          
supplements to the Healthy Foods Channel that develops, manufactures, markets   
and directly distributes a majority of its own products. The Company offers     
one of the broadest branded product lines in the industry with approximately    
800 products and 1,400 SKUs, including approximately 200 SKUs exclusively sold  
internationally. None of the Company's products represented more than 2% of     
fiscal 1997 net sales. The Company markets its branded products through the     
industry's largest sales force dedicated to the Healthy Foods Channel. The      
Company seeks to be the market leader in the development of new and innovative  
products, introducing 172 new SKUs (including 147 new formulations) in fiscal   
1997. The Company manufactured over 90% of its products in fiscal 1997 and      
believes that the quality of its products is among the highest in the           
industry.                                                                       

The VMS Market is highly fragmented and rapidly growing, generating $6.5    
billion in 1996 sales, as compared to $5.0 billion in 1994. The Company         
believes that this rapid growth is due to a number of factors, including (i)    
increased interest in healthier lifestyles, (ii) the publication of research    
findings supporting the positive health effects of certain nutritional          
supplements and (iii) the aging of the "Baby Boom" generation combined with     
the tendency of consumers to purchase more nutritional supplements as they      
age.                                                                            

The Healthy Foods Channel consists of approximately 9,700 retailers         
including (i) independent health food stores, (ii) health food stores           
affiliated with local, regional and national health food chains (including      
healthy food supermarket chains, such as Whole Foods Market and Wild Oats       
Markets) and (iii) GNC stores. The Company believes that the Healthy Foods      
Channel will continue to experience strong growth based on the continued        
expansion of independent health food stores and local, regional and national    
health food chains in response to strong demand from consumers who desire       
product education, service and high quality natural ingredients. The Company    
believes there are significant differences between mass market retailers (such  
as drugstores, warehouse clubs and supermarkets), which typically offer a       
limited selection of discounted and lower potency items, and the Healthy Foods  
Channel, where natural ingredients, quality, potency, selection and customer    
support are more important. The Company benefits from substantially greater     
customer diversification than most of its larger competitors, with no single    
customer representing more than 5.5% of fiscal 1997 net sales.                  

The Company believes that the VMS Market and the Healthy Foods Channel are  
large and growing rapidly and that the Company is well positioned to            
capitalize on such growth. According to the Packaged Facts Report:              

.  The VMS Market grew at a 14.2% compound annual rate from 1994 to 1996    
and is projected to grow at a 13.6% compound annual rate from 1996 to 
2001, to $12.3 billion;                                               

.  The Healthy Foods Channel generated $2.5 billion of retail sales in      
 1996, or 38.2% of the total VMS Market, representing the largest single
channel;                                                              

.  The Healthy Foods Channel has been growing faster than the total VMS     
  Market, achieving a 16.7% compound annual growth rate from 1994 to 1996;
and                                                                   

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.  Sales of supplements (as defined in the Packaged Facts Report) in the    
VMS Market grew at a 35.6% compound annual rate from 1994 to 1996 and 
 are expected to grow at a 25.0% compound annual rate from 1996 to 2001.
Sales of supplements, the fastest growing segment of the VMS Market,  
represented 61.7% of the Company's fiscal 1997 net sales of branded   
products, as compared to 35.2% of the total VMS Market.               

The Company was formed in 1993 by senior management and Bain Capital to     
effect a consolidation strategy in the highly fragmented VMS Industry, which    
consists of over 400 manufacturers and marketers domestically. Since its        
formation, the Company has successfully completed four acquisitions, including  
Solaray, Premier One, KAL and Monarch. As a result of these acquisitions and    
internal growth, the Company has achieved rapid growth in net sales and         
operating income. Management believes that the Company is well positioned to    
continue to capitalize on the consolidation occurring in the VMS Industry. To   
increase the Company's operating efficiency and provide capacity for            
additional expansion, the Company is in the process of negotiating a lease for  
a 250,000 square foot facility into which the Company intends to consolidate    
seven of its current facilities.                                                

BUSINESS STRATEGY                                                               

The Company's strategy is to enhance its position as a leader in supplying  
quality branded products to the Healthy Foods Channel while continuing to       
generate rapid growth in sales and profitability. Unlike many of its            
competitors, the Company has chosen to focus exclusively on the Healthy Foods   
Channel. Specifically, the Company seeks to:                                    

.  INCREASE MARKET SHARE IN THE RAPIDLY GROWING HEALTHY FOODS CHANNEL. The  
Company's strategy is to increase its share in the rapidly growing    
 Healthy Foods Channel by (i) continuing to emphasize exclusive sales of
its existing branded products to the Healthy Foods Channel, (ii)      
utilizing multiple brands and (iii) expanding its salesforce and its  
geographic coverage:                                                  

--Exclusivity to the Healthy Foods Channel. The Company believes that   
retailers in the Healthy Foods Channel favor brands that are sold     
exclusively to the Healthy Foods Channel (i.e., that are not available
through mass marketers) and that, as a result, retailers will continue
to allocate additional shelf space to the Company's products.         

--Multiple Brand Strategy. The Company currently markets its products   
through a multiple brand strategy that the Company believes has been  
successful in encouraging retailers to allocate additional shelf space
to the Company's brands. The Company intends to continue expanding its
brands by extending existing product lines and developing new product 
lines. See "--Products."                                              

--Largest Sales Force Targeting the Healthy Foods Channel. The Company  
markets its products through a substantially larger direct sales force
dedicated to the Healthy Foods Channel than that of any competitor.   
The Company currently anticipates adding additional individuals to its
sales force to increase its sales efforts in certain highly populated 
areas that are currently underpenetrated by the Company. In           
particular, the Company seeks to increase its presence in the         
Northeast and Mid-Atlantic states including such markets as New York  
City, Long Island, Boston, Philadelphia and Washington D.C. In 1997,  
the Company implemented a new payment structure for its sales force   
that provides additional incentives for sales growth.                 

.  CONTINUE TO MAKE STRATEGIC ACQUISITIONS. The Company was founded in 1993 
to effect a consolidation strategy in the fragmented VMS Industry. The
  Company plans to continue to capitalize on the significant opportunities
for consolidation available in the VMS Industry. To date, the Company 
has successfully completed four acquisitions and will seek additional 
  acquisitions that serve to expand the Company's brand names, broaden its
product offerings or facilitate entry into complementary distribution 
channels.                                                             

.  CONTINUE TO DEVELOP NEW PRODUCTS AND PRODUCT EXTENSIONS. The Company is  
a market leader in the development of new and innovative products.    
During fiscal 1997, the Company introduced 147 new                    

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 formulations of branded products compared to 46 in fiscal 1996. Branded
products introduced in 1996 and 1997 represented 16.8% of fiscal 1997 
 net sales of branded products. The Company plans to continue developing
new products as a significant element of its future growth.           

.  CAPITALIZE ON STRONG INTERNATIONAL GROWTH. The Company believes that     
international sales represent a significant growth opportunity.       
Currently, the Company markets its products in over 30 countries,     
  principally through international distributors. Net sales by Au Naturel,
Inc., the Company's international subsidiary, grew 21.4% from 1996 to 
1997 and represented 6.5% of the Company's fiscal 1997 net sales. The 
 Company plans to continue to aggressively pursue international sales by
adding additional salespeople, expanding its distribution and retailer
network in high growth regions and continuing its efforts to register 
products and trademarks in attractive foreign markets.                

The Company's implementation of the foregoing business strategy is subject  
to a number of risks and may cause the Company to incur additional expenses in  
future periods. See "Risk Factors--Risks Associated with Implementation of      
Business Strategy," "--Risks Associated with Acquisitions" and "--Risks         
Associated with International Markets."                                         

PRODUCTS                                                                        

The Company currently sells approximately 800 different branded products and
1,400 SKUs, including approximately 200 SKUs exclusively sold internationally.  
The Company's products generally fall into one of three categories: (i)         
supplements, (ii) vitamins and minerals and (iii) diet, energy and other,       
representing approximately 820, 510 and 70 SKUs, respectively. The Company's    
products come in various formulations and delivery forms, including tablets,    
capsules, softgels, liquids, powders and whole herbs. Many of the Company's     
products are marketed under two or more brand names. For example, saw palmetto  
berry and coenzyme Q-10 are both sold through the KAL and Solaray product       
lines, as are many of the Company's other popular items such as gingko biloba,  
various minerals, single vitamins and digestive supplements. The Company's      
most popular products include the following: CranActin, Echinacea, Gingko       
Biloba, Pygeum/Saw Palmetto, Royal Jelly, St. John's Wort, Super DietMax and    
multivitamin/mineral formulas, such as Spectro.                                 

The Company currently markets its products through a multiple brand strategy
that the Company believes has been successful in encouraging retailers to       
allocate additional shelf space to the Company's brands. The Company has        
enhanced the strength of all of its brands since their respective acquisitions  
by (i) consolidating sales forces and increasing the brands' geographic         
coverage through an expanded sales force, (ii) instituting performance and      
growth based incentives for brand managers and sales representatives, (iii)     
introducing more sophisticated management information systems and (iv)          
updating the brand's packaging.                                                 

The Company's portfolio of established brand names consists of the          
following:                                                                      

Solaray. Solaray began manufacturing and selling herbal products in 1973,   
originally as a pioneer in formulating and marketing blended herbal products,   
which contain two or more herbs with complementary effects. From its            
inception, Solaray focused on encapsulated products, which offer rapid          
disintegration and are easy to swallow, and for over ten years has sold its     
products through independent sales representatives to the Healthy Foods         
Channel. By 1984, Solaray had become a full line manufacturer, carrying not     
only herbs, but also a full line of vitamins and minerals. Solaray has become   
one of the most popular and well-known brands of nutritional supplements in     
the Healthy Foods Channel, and has developed a reputation for quality,          
consistency and innovation. Three of the most popular products developed by     
Solaray include (i) Spectro, considered by many to be the premier               
multivitamin/mineral supplement, (ii) CranActin, which the Company believes is  
the best-selling cranberry supplement in the Healthy Foods Channel, and (iii)   
Pygeum/Saw Palmetto, two ingredients intended to help maintain a healthy        
prostate. As of September 30, 1997, the Solaray line consisted of 629 SKUs.     
Solaray's brand packaging is consistently distinguished by white bottles with   
a rainbow of seven colors across the top of the label as a backdrop to the      
distinctive Solaray logo.                                                       

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KAL. The KAL product line was established in Southern California in 1932 as 
one of the first nutritional supplement lines in the United States. Although    
KAL's first products were in powdered form, KAL soon shifted its focus to       
tableted products, which are more economical than capsules as a delivery form   
and which allow for fewer units per dose than encapsulated products. KAL has    
been a pioneer in the introduction of new and innovative products, as well as   
new and unique delivery forms. Among its innovative product introductions was   
Beyond Garlic, which remains a popular garlic product in the Healthy Foods      
Channel and was the first "enteric coated softgel" garlic product. This unique  
delivery form allowed for fresh garlic oil inside of a softgel to pass through  
the stomach into the intestine before being digested, thereby virtually         
eliminating any potential garlic odor. KAL was also the first nutritional       
supplement marketer in the Healthy Foods Channel to introduce pycnogenol and    
melatonin. More recently, KAL has been an innovator in introducing lipospray    
products, a new delivery form that allows for quick absorption through a        
liquid spray. As of September 30, 1997, the KAL line consisted of 593 SKUs.     
KAL's brand packaging consists of a white bottle with a red and platinum label  
distinguished by a diagonal white stripe, platinum borders and a circular red   
and black KAL logo.                                                             

NaturalMax. The NaturalMax brand began as a product line of the KAL brand in
approximately 1993, with a focus on diet products (with diet plans) as well as  
energy and rest products. The NaturalMax brand uses tablets, softgels,          
capsules and liquids, depending on the most desired form for the particular     
product. After the KAL/Max Acquisition, the Company established NaturalMax as   
a separate brand in order to bring special focus to the NaturalMax product      
line. The product line includes such innovative and popular products as Super   
DietMax (which recently received the Vity Award as the number one diet product  
in the Healthy Foods Channel) and Thin-Thin, a nutritional supplement and diet  
plan with natural 5-HTP derived from griffonia beans. As of September 30,       
1997, the NaturalMax line consisted of 85 SKUs. The packaging of NaturalMax     
products always includes the distinctive NaturalMax logo.                       

Premier One. The Premier One brand was founded in July 1984 in Omaha,       
Nebraska as one of the first product lines devoted entirely to natural,         
nutritional supplements derived from bee products. The Premier One brand uses   
various delivery forms, each chosen for its particular benefits, including      
capsules, chewable wafers, granules, energy bars, tinctures and products in a   
honey base. The Company believes that by 1995 the Premier One Royal Jelly       
products had become the best-selling royal jelly products in the Healthy Foods  
Channel. As of September 30, 1997, the Premier One line consisted of 42 SKUs.   
Aside from Royal Jelly in Honey, some of Premier One's other popular products   
include Raw Energy, an energy product that includes royal jelly, bee pollen     
and a variety of herbs, and Beefense, a popular product which includes bee      
propolis and echinacea. Premier One's brand packaging includes a distinctive    
logo of a bee harvesting scene in a mountain setting, with gold highlights on   
the label.                                                                      

VegLife. VegLife is relatively new brand which began in 1992 as a product   
line under the Solaray brand. The goal was to create a line of products that    
would be suitable for strict vegetarians, who will not consume any products     
which include any animal-derived ingredients, including gelatin capsules.       
VegLife was among the first to introduce a line of nutritional supplements      
using a cellulose-based capsule with substantially equivalent characteristics   
to traditional gelatin capsules. Vegetarian consumers showed substantial        
interest in this product line, and the Company established it as a separate     
brand in 1995 in order to allow a management team to focus on the development   
of a full line of vegetarian products. This team scrutinizes every element of   
each product developed, as well as the materials used in formulation, to        
ensure that strict vegetarian standards are met. The VegLife brand focuses      
primarily on encapsulated products, but also now includes a popular soy-based   
protein drink supplement sold under the trademark Peaceful Planet. As of        
September 30, 1997, the VegLife brand included 38 SKUs. VegLife's brand         
packaging includes a distinctive green and blue label, as well as a logo with   
an attractive depiction of a budding plant.                                     

Solar Green. Solar Green was launched in April of 1997 as the Company's     
newest brand. The Solar Green brand is focused on chlorophyll-laden "green      
foods," such as algaes (including chlorella, spirulina and blue green algae)    
and cereal grasses (such as barley and wheat grass). These products are         
currently offered in tablet forms. Solar Green also recently introduced three   
separate "green food" drink mixes which can be                                  

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combined with juice or water to create a nutritious beverage supplement. As of  
September 30, 1997, the Solar Green brand included five tableted products and   
three green drink mixes. Solar Green's brand packaging includes a distinctive   
Solar Green logo and a label with green borders and accents.                    

SALES AND MARKETING                                                             

The Company promotes demand for its products by educating retailers, who in 
turn educate consumers, as to the qualities of its natural vitamin, mineral     
and herbal nutritional supplements and the wide range of its products. The      
Company's branded products are currently sold in the United States exclusively  
to retailers in the Healthy Foods Channel, which consists of approximately      
9,700 stores, including approximately (i) 5,700 independent health food         
stores, (ii) 1,000 health food stores affiliated with local, regional and       
national health food chains (including healthy food supermarket chains such as  
Whole Foods Market and Wild Oats Markets) and (iii) 3,000 GNC stores. Unlike    
many of its competitors, the Company sells its branded products in the United   
States exclusively to the Healthy Foods Channel. The Company believes that its  
products are attractive to retailers due to factors such as the strength of     
its brand names, the quality and potency of its products, service and the       
availability of sales support and educational materials regarding the           
products.                                                                       

The Company markets its products through a substantially larger direct sales
force dedicated to the Healthy Foods Channel than that of any competitor. The   
Company's 56 independent sales representatives regularly visit each assigned    
health food store in their respective territories to provide product sales      
assistance. In addition, to service its largest customers, the Company employs  
nine key account representatives to provide sales and product support. The      
Company's sales force educates retailers regarding the Company's products,      
communicates special promotions, monitors inventory levels, performs in-store   
demonstrations and assists retailers in other ways to promote sales of the      
Company's products. In 1997, the Company implemented a new payment structure    
for its sales force that provides additional incentives for sales growth. The   
Company believes that this structure has resulted in improved customer service  
and increased sales. The Company currently anticipates adding additional        
individuals to its sales force to increase its sales efforts in certain highly  
populated areas that are currently underpenetrated by the Company. In           
particular, the Company seeks to increase its presence in the Northeast and     
Mid-Atlantic states including such markets as New York City, Long Island,       
Boston, Philadelphia and Washington D.C.                                        

The Company also sells products directly to certain retailers through its   
telephone marketing organization. The telephone marketing organization is       
generally assigned accounts not covered by a sales representative or the key    
accounts department and provides the retailer with information regarding        
special promotions or pricing on certain products. The telephone marketing      
organization is particularly well-suited for the rapid dissemination of         
information regarding new products or programs.                                 

The Company's marketing efforts are focused on educating retailers to enable
them to then educate the ultimate consumer about the Company's products. The    
Company sponsors a retailer seminar program, which the Company believes has     
made an important contribution to the growth of its brands. These seminars are  
held both in Utah and in the field, on a regional and state by state basis.     
The Company also sponsors seminars for consumers. Participants receive product  
education presentations with background information relating to existing        
products and with special emphasis given to new products. The Company's         
seminars are designed to foster relationships with the Company's customers in   
the Healthy Foods Channel and to increase retailer and consumer awareness of    
the Company's products.                                                         

Au Naturel, Inc. ("Au Naturel") is a wholly-owned subsidiary of the Company 
which was formed in fiscal 1995 for the purpose of marketing the Company's      
branded products internationally. During fiscal 1997, Au Naturel marketed       
products to distributors and customers in approximately 30 foreign countries.   
As of September 30, 1997, it had approximately 200 branded formulations         
labeled and designed for various foreign customers. Although Au Naturel is not  
a product brand, it functions as a separate business unit. Au Naturel markets   
standard and unique formulations that must meet specific requirements of        
certain foreign countries, including minor product formulation and labeling     
changes for Au Naturel's international customers. Au Naturel uses specialized   

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labels to meet the specific requirements of each country. The Company believes  
that international sales represent a significant growth opportunity. Net sales  
by Au Naturel grew 21.4% from 1996 to 1997 and represented 6.3% and 6.5% of     
the Company's fiscal 1996 and 1997 net sales, respectively.                     

RESEARCH AND DEVELOPMENT; QUALITY CONTROL                                       

The Company has a strong commitment to research and development. The Company
believes that product quality and innovation are fundamental to its long-term   
growth and success. Through its research and development efforts, the Company   
seeks to (i) identify the active ingredients in current and potential new       
products, (ii) test the safety, potency and efficacy of products, (iii)         
develop more effective and efficient means of extracting ingredients for use    
in products, (iv) develop testing methods for ensuring and verifying the        
consistency of the dosage of ingredients included in the Company's products,    
(v) develop new, more effective product delivery forms and (vi) develop new     
products either by combining existing ingredients used in nutritional           
supplements or identifying new ingredients that can be used in nutritional      
supplements. The Company's efforts are designed to lead not only to the         
development of new and improved products, but also to ensure effective          
manufacturing quality control measures.                                         

The Company has entered into a cooperative arrangement with Weber State     
University in Ogden, Utah through which, among other things, the University     
provides the Company with access to certain laboratory space and equipment.     
The University has assigned one faculty member as a project director to         
coordinate the use of any projects undertaken at the University facility. The   
Company also conducts research and development in Company-owned laboratories.   
The Company currently employs 13 professionals in its research and development  
and quality control departments, including three with post-graduate degrees,    
of which two are Ph.D.'s. These 13 professionals have degrees in chemistry,     
botany, microbiology, nutrition and engineering and, in many cases, have        
received training in natural health food products. In addition, the Company     
retains the services of outside laboratories from time to time to validate its  
product standards and manufacturing protocols.                                  

The Company's quality control program seeks to ensure the superior quality  
of the Company's products and that they are manufactured in accordance with     
current Good Manufacturing Practices. The Company's processing methods are      
monitored closely to ensure that only quality ingredients are used and to       
ensure product purity. The Company has been a leader in establishing industry   
product quality guidelines.                                                     

MANUFACTURING                                                                   

The Company's manufacturing process generally consists of the following     
operations (i) extracting the ingredients contained in a particular product     
from a bulk source of such ingredient and measuring the ingredient for          
inclusion in such product, (ii) blending the measured ingredients into a        
mixture with a homogeneous consistency and (iii) encapsulating or tableting     
the blended mixture into the appropriate dosage form using either automatic or  
semiautomatic equipment. The next step, bottling and packaging, involves        
placing the encapsulated or tableted product in packaging with appropriate      
tamper-evident features and sending the packaged product to the distribution    
point for delivery to retailers. The Company places special emphasis on         
quality control and conducts inspections throughout the manufacturing process,  
including raw material verification, homogeneity tests, weight deviation        
measurements and package quality sampling. See "--Research and Development;     
Quality Control."                                                               

The Company manufactured over 90% of its products in fiscal 1997, based on  
net sales. By manufacturing the majority of its own products, the Company       
believes it maintains better control over product quality and availability      
while also reducing production costs. The Company's manufacturing operations    
are performed in its facilities located in the greater Ogden, Utah area. Total  
manufacturing square footage is approximately 60,000 square feet. In addition,  
the Company currently performs more than 90% of all packaging of its branded    
products, based on SKUs. The Company also has a working relationship with       
numerous outside manufacturers and packagers and utilizes these outside         
sources from time to time. The Company does not have a material amount of       
backlogged orders for its products.                                             

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Monarch Nutritional Laboratories and Great Basin Botanicals source raw      
material components, provide contract grinding and milling services,            
manufacture premium bulk formulations and supply these to the Company and       
other marketers of nutritional supplements, including, in certain cases,        
competitors of the Company. Monarch was acquired in September 1995, and         
certain assets of Great Basin were purchased in March 1997. As of September     
30, 1997, Monarch/Great Basin manufactured and sold 789 different products and  
combinations.                                                                   

MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS                                

Beginning in November 1995, the Company installed an upgraded client server 
computer system for handling order entry and invoicing, shipping, warehouse     
operations and customer service inquiries. The new system provides more         
efficient product delivery and more detailed order information and allows for   
better inventory management. The Company believes that this system has          
improved operating efficiencies and customer service. In addition, the Company  
has installed a state-of-the-art telephone communication system which provides  
the platform for computer-telephone integration and facilitates intra-company   
communication.                                                                  

The "Year 2000" issue concerns the potential exposures related to the       
automated generation of business and financial misinformation resulting from    
the application of computer programs which have been written using two digits,  
rather than four, to define the applicable year of business transactions. The   
Company does not anticipate any significant costs, problems or uncertainties    
associated with becoming Year 2000 compliant and is currently developing a      
plan to ensure that its computer systems are modified to be compliant on a      
timely basis.                                                                   

MATERIALS AND SUPPLIERS                                                         

The Company utilizes a centralized purchasing staff, employing individuals  
with extensive product knowledge and experience related to herbs, minerals,     
bulk products, bottles, caps, labels, packaging and advertising, marketing and  
selling material and merchandise. The purchasing department, in cooperation     
with the quality control department, maintains supplier relationships and       
gathers market information to inform management of issues that might adversely  
impact the Company's ability to acquire sufficient quantities of raw materials  
to meet customer demand. The Company engages in extensive sample testing of     
raw materials to be incorporated in the Company's products.                     

The Company believes that its continued success will depend upon the        
availability of raw materials that permit the Company to meet its labeling      
claims, quality control standards and demand for unique ingredients. Due to     
issues related to quality, efficacy, safety or third-party intellectual         
property protection, a number of the Company's branded products (which          
accounted for approximately 31% of the Company's fiscal 1997 net sales)         
contain one or more of approximately 72 ingredients that may only be available  
from a single source or supplier. In addition, the supply of herbal products    
is subject to the same risks normally associated with agricultural production,  
such as climatic conditions, insect infestations and availability of manual     
labor for harvesting. Any significant delay in or disruption of the supply of   
raw materials could substantially increase the cost of such materials and       
could require product reformulations, as well as the qualification of new       
suppliers and repackaging. Accordingly, while no single product accounted for   
more than 2% of the Company's net sales in fiscal 1997, there can be no         
assurance that the disruption of the Company's supply sources will not have a   
material adverse effect on the Company.                                         

Although the Company acquires the majority of its raw materials from U.S.   
suppliers, the ingredients of a number of the Company's products (which         
accounted for approximately 38% of the Company's fiscal 1997 net sales)         
include one or more of approximately 188 ingredients that originate outside of  
the United States. The Company's business is therefore subject to the risks     
generally associated with doing business outside the United States, such as     
delays in shipments, embargoes, changes in economic and political conditions,   
tariffs, foreign exchange rates and trade disputes. The Company's business is   
also subject to the risks associated with the enactment of United States and    
foreign legislation and regulations relating to imports and exports, including  
quotas, duties, taxes or other charges or restrictions that could be imposed    
upon the importation of products into the United States.                        

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The Company seeks to mitigate the risk of the shortage of certain raw       
materials through its relationships with approximately 100 principal            
suppliers. To help reduce the possibility of shortages, the Company acquired    
Monarch, a manufacturer of premium bulk formulations, in fiscal 1995 and in     
fiscal 1997 purchased manufacturing equipment and hired personnel to allow      
more extensive vertical integration and to improve the quality and consistency  
of ingredients.                                                                 

DISTRIBUTION                                                                    

The Company ships the majority of its products directly to retailers via    
Federal Express. Shipments are generally made from the Company's primary        
distribution facilities in Clearfield, Utah and Memphis, Tennessee. These       
distribution facilities have been strategically located to reduce the           
Company's expenses relating to outbound freight charges without sacrificing     
delivery times. Each facility has approximately 25,000 square feet of floor     
space. Certain of the Company's largest customers receive shipments directly    
from the Company's central warehouse, located in a separate facility in         
Clearfield, Utah, which also services the Company's two primary distribution    
centers.                                                                        

The Company is in the process of negotiating a lease for a 250,000 square   
foot facility in the Ogden, Utah area in which it intends to consolidate        
distribution and certain other operations which are currently being performed   
in seven different buildings and locations. This facility will be designed to   
respond quickly to customer demands for the Company's products with a minimum   
of out-of-stocks and a minimum of finished goods inventory. By integrating the  
bulk product inventory distribution operation with the bottling and packaging   
operation, the Company believes it will be able to bottle and package finished  
goods on a more selective customer demand basis. The Company expects that its   
Memphis, Tennessee facility will continue to operate for Eastern distribution.  

GOVERNMENT REGULATION                                                           

The formulation, manufacturing, processing, packaging, labeling,            
advertising, distribution and sale of nutritional supplements such as those     
sold by the Company are subject to regulation by one or more federal agencies,  
principally the FDA and the FTC, and to a lesser extent the Consumer Product    
Safety Commission and United States Department of Agriculture. These            
activities are also regulated by various governmental agencies for the states   
and localities in which the Company's products are sold, as well as by          
governmental agencies in certain foreign countries in which the Company's       
products are sold. Among other matters, regulation of the Company by the FDA    
and FTC is concerned with claims made with respect to a product which refer to  
the value of the product in treating or preventing disease or other adverse     
health conditions.                                                              

Federal agencies, primarily the FDA and FTC, 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, requiring that a company  
offer to repurchase products previously sold to consumers), seeking injunctive  
relief or product seizure and imposing civil penalties or commencing criminal   
prosecution. In addition, certain state agencies have similar authority, as     
well as the authority to prohibit or restrict the manufacture or sale of        
products within their jurisdiction. These federal and state agencies have in    
the past used these remedies in regulating participants in the nutritional      
supplements industry, including the imposition by federal agencies of civil     
penalties in the millions of dollars against a few industry participants. In    
addition, certain product lines now manufactured by the Company had been the    
subject of investigations prior to the acquisition of those product lines by    
the Company. Although none of these investigations has had a material adverse   
effect on the Company, there can be no assurance that future regulatory action  
will not have such an effect. 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 taken against the Company, will  
not result in a material adverse effect on the Company's business, financial    
condition or results of operations. In addition, increased sales and publicity  
of nutritional supplements may result in increased regulatory scrutiny of the   
nutritional supplements industry.                                               

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The Dietary Supplement Health and Education Act of 1994 (the "Act") was     
enacted in October 1994, amending the Food, Drug and Cosmetic Act. The Company  
believes this law is generally favorable to the dietary supplement industry.    
The Act establishes a new statutory class of "dietary supplements," which       
provide vitamins, minerals, herbs, amino acids and other dietary ingredients    
for human use to supplement the diet. Dietary ingredients on the market as of   
October 15, 1994 will not require the submission by the manufacturer or         
distributor of evidence of a history of use or other evidence of safety         
establishing that the supplement will reasonably be expected to be safe, but a  
dietary supplement which contains a dietary ingredient which was not on the     
market as of October 15, 1994 does require such submission of evidence of a     
history of use or other evidence of safety. Among other things, this law        
prevents the further regulation of dietary ingredients as "food additives" and  
allows the use of statements of nutritional support on product labels.          

The FDA is currently proposing to regulate the sale of nonprescription      
products containing ephedra, a natural product that contains a small            
percentage of ephedrine alkaloids which are used in some prescriptions and      
over the counter stimulants and antihistamines. Approximately 3.9% of the       
Company's fiscal 1997 net sales were derived from products that contain         
ephedra. Various state legislatures and agencies have also expressed concern    
regarding ephedra-based products. For example, Arkansas, Hawaii, Missouri,      
Ohio, Florida and Texas have passed legislation or adopted regulations          
regulating the over-the-counter sale of certain ephedra products or are         
considering doing so. The Company believes that other states are considering    
or will consider taking similar action and may take such action in the future.  
The loss of sales of these products or a further limitation in the states and   
other jurisdictions where these products may be sold could have a material      
adverse effect on the Company.                                                  

In October 1997, the Company and a number of other suppliers, processors and
marketers of nutritional supplements received warning letters from the FDA      
relating to an allegedly contaminated batch of an herb called plantain. These   
letters claimed that the plantain, which had been shipped to the United States  
from Europe, had been contaminated with another botanical product with          
potentially harmful side effects. The letter that the Company received alleged  
that some of this plantain had been included in a shipment of products that     
Great Basin had processed for a third party on a contract basis. The Company    
has replied to the FDA, explaining that, among other things, it did not own     
the products or market them for human consumption but simply provided grinding  
services for the owner of the herbs. The Company further noted to the FDA that  
it did not process any plantain that could have been incorporated into any      
products that were actually consumed as the only batch it processed was         
returned to the supplier/owner following the FDA's initial press releases on    
this matter. The Company has denied responsibility for any adverse effects and  
affirmed its commitment to good manufacturing practices. There can be no        
assurances that the FDA will not take further action and that, if taken, such   
action will not result in a material adverse effect on the Company.             

The Company has received a notice that it may be a defendant along with a   
number of other participants in the dietary supplement industry in a            
threatened action by certain private litigants or the Attorney General of the   
State of California, which alleges that certain products containing fish and    
salmon oils also may be in violation of a California law known as "Proposition  
65" for failure to include required warning labels. Proposition 65 allows       
private litigants or the California Attorney General to recover monetary        
penalties or injunctive relief under certain circumstances. The Company         
intends to dispute the allegations, and is considering joining a joint defense  
group with other participants in the nutritional supplements industry who have  
been named as defendants in such action. The Company also intends to explore    
the possibility of seeking indemnification from the suppliers of the products   
in question, which are simply bottled and distributed by the Company, as well   
as from Old KAL (the seller in the KAL/Max Acquisition) with respect to sales   
that occurred prior to the KAL/Max Acquisition.                                 

On January 20, 1998, the Company received a written notice from an attorney 
representing a private party that alleges that the Company violated             
Proposition 65 by not providing appropriate warning statements with respect to  
the level of lead contained in copper gluconate. This notice alleges that the   
violation arises from the sale of bulk quantities of copper gluconate to a      
wholesale customer. The private party that initiated this notice alleges that   
it purchased some of these bulk products from the Company's customer. Both of   
the foregoing                                                                   

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Proposition 65 proceedings may result in monetary penalties, adverse            
publicity, lost sales or a change in the Company's labeling as to the products  
in question and could have a material adverse effect on the Company.            

In March 1993, the staff of the Cleveland Regional Office of the FTC began  
an investigation into advertising claims made by the seller in the KAL/Max      
Acquisition, and made an inquiry to the Company in August 1995 concerning       
certain products and claims associated with the KAL and NaturalMax product      
lines. The Company has responded to the FTC and, to the Company's knowledge,    
the FTC has taken no further action.                                            

There can be no assurance that the foregoing proceedings or investigations  
or any future proceedings or investigations will not have a material adverse    
effect on the Company.                                                          

COMPETITION                                                                     

The nutritional supplements segment of the natural health food products     
industry is highly competitive. The Company's principal competitors in the      
Healthy Foods Channel include a limited number of large nationally known        
manufacturers (such as Twinlab Corporation, Solgar Vitamin and Herb Company,    
Inc. and Nature's Way Products, Inc.) and many smaller manufacturers and        
distributors of nutritional supplements. Certain of the Company's principal     
competitors are larger than the Company, have greater access to capital and     
may be better able to withstand volatile market conditions within the VMS       
Industry. Moreover, because this industry generally has low barriers to entry,  
additional competitors could enter the market at any time. In that regard,      
although the VMS Industry to date has been characterized by many relatively     
small participants, there can be no assurance that national or international    
companies (which may include pharmaceutical companies or other suppliers to     
mass merchandisers) will not seek in the future to enter or to increase their   
presence in this industry. Increased competition in the industry could have a   
material adverse effect on the Company.                                         

INTELLECTUAL PROPERTY                                                           

As of September 30, 1997, the Company owned 34 trademarks which have been   
registered with the United States Patent and Trademark Office and had filed     
applications to register an additional 27 trademarks. In addition, the Company  
claims domestic trademark and servicemark rights in numerous additional marks   
used by the Company. The Company owns a number of trademark registrations in    
foreign countries and is in the process of filing additional registration       
applications in various countries. The Company regards its trademarks and       
other proprietary rights as valuable assets and believes they make a            
significant positive contribution to the marketing of its products.             

The Company protects its legal rights concerning its trademarks by          
appropriate legal action. The Company relies on common law trademark rights to  
protect its unregistered trademarks. Common law trademark rights do not         
provide the company with the same level of protection as afforded by a United   
States federal registration of a trademark. In addition, common law trademark   
rights are limited to the geographic area in which the trademark is actually    
used, while a United States federal registration of a trademark enables the     
registrant to stop the unauthorized use of the trademark by any third party     
anywhere in the United States, even if the registrant has never used the        
trademark in the geographic area wherein the unauthorized use is being made     
(provided, however, that an unauthorized third party user has not, prior to     
the registration date, perfected its common law rights in the trademark in      
that geographic area). The Company has registered and intends to register its   
trademarks in certain foreign jurisdictions where the Company's products are    
sold. However, the protection available in such jurisdictions may not be as     
extensive as the protection available to the Company in the United States.      

The Company is currently involved in trademark infringement litigation      
relating to the Solaray rainbow logo. The Company is vigorously defending the   
suit and believes that its use of such logo does not infringe on the            
plaintiff's registered trademark. See "Legal Proceedings."                      

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EMPLOYEES                                                                       

At September 30, 1997, the Company and its subsidiaries employed over 400   
full-time and over 30 part-time employees. None of the Company's employees is   
represented by a collective bargaining unit. The Company believes that it has   
a good relationship with its employees.                                         

FACILITIES                                                                      

The Company owns a manufacturing facility located in Ogden, Utah which      
produces branded products for Solaray, KAL, NaturalMax, Premier One, VegLife    
and Solar Green. The Company leases all other facilities, which lease terms     
expire between 1997 and 2003. The following is a list of all facilities         
utilized by the Company:                                                        

                                                                [Download Table]

PURPOSE                                      LOCATION           SQUARE FOOTAGE
                                                                              
Raw material and bulk distribution*......... Ogden, Utah            40,000    
Brand manufacturing......................... Ogden, Utah            31,230    
Finished goods warehouse*................... Clearfield, Utah       28,000    
International and custom manufacturing*..... Clearfield, Utah       28,000    
Western distribution*....................... Clearfield, Utah       25,200    
Great Basin manufacturing*.................. Clearfield, Utah       24,700    
Eastern distribution........................ Memphis, Tennessee     22,400    
Monarch manufacturing*...................... Ogden, Utah            21,100    
Brand marketing and product development..... Park City, Utah         8,480    
Printing facility*.......................... Las Vegas, Nevada       7,974    
Administrative offices and customer                                           
 service.................................... Ogden, Utah             7,830    
Executive offices and corporate sales and                                     
 marketing.................................. Park City, Utah         6,103    
Research, development and quality control... Ogden, Utah             1,813    

---------------------                                                           
*  The operations currently housed in these facilities are expected to be       
moved to the Company's proposed 250,000 square foot facility, a lease for 
which is currently under negotiation.                                     

The Company believes that each of its facilities is suitable for its current
use, however, the Company's new facilities are expected to improve upon the     
suitability of its current facilities. Pending completion of the move to its    
new facilities, the Company has negotiated lease extensions for those           
facilities whose lease terms have expired or will expire prior to such move.    

LEGAL PROCEEDINGS                                                               

The Company is currently a party to various claims and legal actions which  
arise in the ordinary course of business. The Company believes such claims and  
legal actions, individually or in the aggregate, will not have a material       
adverse effect on the business, financial condition or results of operations    
of the Company. The Company carries insurance coverage in the types and         
amounts that management considers reasonably adequate to cover the risks it     
faces in the industry in which it competes. There can be no assurance,          
however, that such insurance coverage will be adequate to cover all losses      
which the Company may incur in future periods.                                  

The Company is also currently involved in a lawsuit relating to a former    
international distributor of Old Premier in which the plaintiff alleges         
damages as a result of the breach of the distribution agreement between Old     
Premier and such person relating to the supply of products. The plaintiff       
alleges that the Company assumed the contract. The Company does not believe     
such claim, if successful, would have a material adverse effect on the          
business, financial condition or results of operations of the Company.          

The Company has been sued by American Cyanimid, the manufacturer of the     
Centrum line of vitamin/mineral supplements. American Cyanimid alleges that     
the Solaray rainbow logo, as well as the KAL rainbow logo (since abandoned)     
infringes, or has infringed, on the Centrum color spectrum logo. The Company    
believes the claim is without merit and is vigorously defending the lawsuit.    
The case appears to be proceeding to trial, and although the Company expects    
to prevail, there can be no assurance of this, nor any assurance that the       
Company may not be required to pay damages or attorney fees and costs, and      
change or abandon the Solaray rainbow logo.                                     

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MANAGEMENT  

DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES                           

The following table sets forth certain information concerning the directors,
executive officers and certain other key employees of the Company.              

                                                                [Download Table]

NAME                         AGE                     POSITION                   
                                                                                
Frank W. Gay II.............  52 Director, Chairman of the Board and Chief      
                                 Executive Officer                              
Bruce R. Hough..............  43 Director, President                            
Jeffrey A. Hinrichs.........  40 Director, Chief Operating Officer and Executive
                                 Vice President                                 
William T. Logan............  55 Senior Vice President, Marketing and Sales     
Leslie M. Brown, Jr.........  33 Senior Vice President, Finance and Chief       
                                 Financial Officer                              
Stanley E. Soper............  34 Vice President, Legal Affairs                  
David M. Vance..............  56 President, Au Naturel                          
Robert C. Gay...............  46 Director                                       
Geoffrey S. Rehnert.........  40 Director                                       
Matthew S. Levin............  31 Director                                       

Frank W. Gay II has served as the Chairman of the Board of Directors of the 
Company since its inception and as Chief Executive Officer since 1994. Mr. Gay  
has been a partner of F.W. Gay & Sons, a private equity investment group, from  
1967 to present.                                                                

Bruce R. Hough has served as a member of the Board of Directors of the      
Company since its inception and was made its President in 1994. Prior to        
joining the Company, Mr. Hough acted as a consultant from 1991 to 1992 and as   
President of Keystone Communications, a telecommunications firm, from 1978 to   
1991.                                                                           

Jeffrey A. Hinrichs has served as the Chief Operating Officer and Executive 
Vice President of the Company since 1994. Prior to joining the Company, Mr.     
Hinrichs served as President of Solaray, now a subsidiary of the Company, from  
1993 to 1994 and as Chief Financial Officer and in other management positions   
with Solaray from 1984 to 1993.                                                 

William T. Logan has served as Senior Vice President, Marketing and Sales   
since February 1995. Mr. Logan served as Senior Vice President of Old Kal from  
1978 to January 1995. Prior to joining Old Kal, he held several sales and       
marketing positions with Gillette.                                              

Leslie M. Brown, Jr. joined the Company in January 1995 as Vice President   
and Controller. Mr. Brown became Senior Vice President, Finance and Chief       
Financial Officer in October 1997. Prior to joining the Company, he was         
employed by Price Waterhouse LLP. Mr. Brown is a Certified Public Accountant.   

Stanley E. Soper has been Vice President, Legal Affairs for the Company     
since July 1997. Mr. Soper graduated from Yale Law School in 1991, and was in   
private law practice from 1991 to 1997, most recently with Holland & Hart LLP.  

David M. Vance served as the Senior Vice President--Administration and Chief
Financial Officer of the Company from May 1995 to July 1997. In July 1997, he   
become President of Au Naturel. Prior to joining the Company, Mr. Vance was     
Assistant Treasurer--International of Cooper Industries, a diversified          
manufacturing company, from 1985 to 1995.                                       

Robert C. Gay has served as a Director of the Company since its inception.  
He has been a Managing Director of Bain Capital, Inc., a private equity firm,   
since 1993, and has been a general partner of Bain Capital Venture Capital      
since 1989. He is also Vice Chairman of the Board of Directors of IHF Capital,  
parent of ICON Health and Fitness Inc., a manufacturer and distributor of home  
health equipment. In addition, Mr. Gay serves as                                

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a director of American Pad & Paper Company, an office supply manufacturer;      
Cambridge Industries, Inc., a manufacturer of automotive parts; GS              
Technologies Corporation, a manufacturer of specialty steel products; Physio-   
Control International Corporation, a manufacturer of defibrillators and vital   
sign assessment devices; and GT Bicycles Inc., a manufacturer and distributor   
of bicycles.                                                                    

Geoffrey S. Rehnert has served as a Director of the Company since its       
inception. He has been a Managing Director of Bain Capital since 1993, a        
general partner of Bain Capital Venture Capital since 1987 and a general        
partner of Bain Capital Partners since 1986. Mr. Rehnert serves as a director   
of Kollmorgen Corp., a manufacturer of electric motors; ICON Health and         
Fitness, Inc., a manufacturer and distributor of home health equipment; FTD,    
Inc., a floral services company; and is Chairman of GT Bicycles, Inc., a        
manufacturer and distributor of bicycles.                                       

Matthew S. Levin served as a Director of the Company from its inception     
through January 1995 and also from December 1996 to the present. Mr. Levin is   
an associate with Bain Capital. Mr. Levin joined Bain Capital in 1992, and      
attended the Harvard Business School from 1994 to 1996. From 1988 to 1991, Mr.  
Levin was a consultant with Bain & Company, Inc.                                

At present, all directors are elected annually and serve until the next     
annual meeting of stockholders or until the election and qualification of       
their successors. Effective upon the consummation of the Offering, the Board    
of Directors will be divided into three classes, as nearly equal in number as   
possible, with each Director serving a three year term and one class being      
elected at each year's annual meeting of stockholders. Messrs. Levin and Hough  
will be in the class of directors whose term expires at the 1998 annual         
meeting of the Company's stockholders. Messrs. Rehnert and Hinrichs will be in  
the class of directors whose term expires at the 1999 annual meeting of the     
Company's stockholders. Messrs. Robert C. Gay and Frank W. Gay II will be in    
the class of directors whose term expires at the 2000 annual meeting of the     
Company's stockholders. At each annual meeting of the Company's stockholders,   
successors to the class of directors whose term expires at such meeting will    
be elected to serve for three-year terms and until their successors are         
elected and qualified. Following the consummation of the Offering, the Company  
will establish an Audit Committee consisting of at least two independent        
directors and a Compensation Committee consisting of at least two independent   
directors.                                                                      

EXECUTIVE COMPENSATION                                                          

Prior to the Offering, the Board did not have a Compensation Committee.     
Decisions concerning the compensation of executive officers and senior          
management during fiscal 1997 were made by Messrs. Frank W. Gay II and Matthew  
S. Levin with the advice of the Board. The one time payment to the Company's    
Chief Executive Officer in 1997 was approved by the Board with Messrs. Frank    
W. Gay II and Robert C. Gay abstaining. Following the consummation of the       
Offering, the Board will establish a Compensation Committee, which will         
include two or more independent directors to make decisions regarding           
salaries, incentive compensation, stock option grants and other matters with    
respect to executive officers and other key employees of the Company.           

The following table sets forth in summary form information concerning the   
compensation for all services rendered in all capacities to the Company and     
its subsidiaries for the fiscal year ended September 30, 1997 for Mr. Frank W.  
Gay II and the four other most highly compensated executive officers of the     
Company during the fiscal year ended September 30, 1997 (collectively, the      
"named executive officers").                                                    

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SUMMARY COMPENSATION TABLE  

                                                                [Download Table]

                                        ANNUAL COMPENSATION                      
                             -----------------------------------------           
                                                                       SECURITIES
                                                        OTHER ANNUAL   UNDERLYING
NAME AND PRINCIPAL POSITION  YEAR SALARY (A)  BONUS   COMPENSATION (B)  OPTIONS  
                                                                                 
Frank W. Gay II, Chief                                                           
 Executive Officer........   1997  $181,000  $303,752    $1,707,615(c)    --     
Bruce R. Hough,                                                                  
 President................   1997   161,346    78,000         7,933       --     
Jeffrey A. Hinrichs, Chief                                                       
 Operating Officer........   1997   151,538   136,409         7,481       --     
William T. Logan, Senior                                                         
 Vice President, Marketing                                                       
 and Sales................   1997   121,154    35,500         5,981       --     
David M. Vance, President,                                                       
 Au Naturel, Inc..........   1997   135,577    48,750         6,721       --     

---------------------                                                           
(a) Includes amounts earned in fiscal 1997, but deferred at each named          
executive officer's election pursuant to the Company's 401(k) Plan.     
(b) Includes matching contributions made by the Company under its 401(k) Plan.  
(c) Includes the one-time payment of $1.7 million.                              

COMPENSATION PURSUANT TO BENEFIT PLANS AND ARRANGEMENTS                         

STOCK OPTIONS                                                                 

No grants of stock options were made to any of the named executive officers 
during fiscal 1997. No stock appreciation rights ("SARs") were granted during   
fiscal 1997.                                                                    

OPTION EXERCISES AND HOLDINGS                                                 

No stock options or SARs were exercised by the named executive officers     
during fiscal 1997. The following table sets forth information with respect to  
the aggregate number of unexercised options to purchase Common Stock and SARs   
granted in all years to the named executive officers and held by them as of     
September 30, 1997, and the value of unexercised in-the-money options (i.e.,    
options that had a positive spread between the exercise price and the initial   
public offering price of the Common Stock) as of September 30, 1997:            

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END 
OPTION/SAR VALUES 

                                                        [Enlarge/Download Table]

                                                                NUMBER OF SECURITIES                             
                                                               UNDERLYING UNEXERCISED   VALUE OF UNEXERCISED IN- 
                                                                   OPTIONS/SARS AT       THE-MONEY OPTIONS/SARS  
                                                                   FISCAL YEAR END        AT FISCAL YEAR END(A)  
                          SHARES ACQUIRED                     ------------------------- -------------------------
          NAME           UPON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
                                                                                                                 
Frank W. Gay II.........        --                --               150,582/37,645          $2,115,184/528,796    
Bruce R. Hough..........        --                --                40,657/27,105             571,100/380,733    
Jeffrey A. Hinrichs.....        --                --                22,588/22,587             317,297/317,280    
William T. Logan........        --                --                   -- /--                     -- /--         
David M. Vance..........        --                --                37,646/37,645             473,813/473,800    

---------------------                                                           
(a) At the initial public offering price of $17.50 per share, minus the         
exercise price.                                                         

STOCK PLANS                                                                     

1995 STOCK PLAN                                                               

The Company's 1995 Stock Option Plan (the "1995 Stock Plan") authorizes     
grants of stock options, including options that are intended to qualify as      
"incentive stock options" within the meaning of Section 422 of the Internal     
Revenue Code, and sales of any class or classes of common stock to current or   
future employees, directors, consultants or advisors of the Company or its      
subsidiaries. The 1995 Stock Plan authorizes the granting of stock options for  
up to an aggregate of 225,873 shares of Common Stock (after giving effect to    
the                                                                             

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Reclassification), subject to adjustment upon the occurrence of certain events  
to prevent any dilution or expansion of the rights of participants that might   
otherwise result from the occurrence of such events. Under the 1995 Stock       
Plan, the Board is authorized to grant options at any time prior to the         
termination of the 1995 Stock Plan in such quantity, at such price, on such     
terms and subject to such conditions as established by the Board. Nonqualified  
options to purchase an aggregate of 175,804 shares (after giving effect to the  
Reclassification) of Common Stock are outstanding under the 1995 Stock Plan.    
Of the options to purchase an aggregate of 175,804 shares of Common Stock       
(after giving effect to the Reclassification) that are outstanding to date,     
options to purchase an aggregate of 80,749 shares of Common Stock (after        
giving effect to the Reclassification) will be exercisable at the consummation  
the Offering and the remaining options to purchase an aggregate of 95,055       
shares of Common Stock (after giving effect to the Reclassification) will vest  
over a four-year period. The exercise prices of the options granted under the   
1995 Stock Plan range from approximately $4.91 per share to $9.30 per share     
(such dollar amounts giving effect to the Reclassification).                    

1998 STOCK PLAN                                                               

The Board and stockholders of the Company have approved the Nutraceutical   
International Corporation 1998 Stock Incentive Plan (the "1998 Stock Plan").    
The 1998 Stock Plan will be administered by a Compensation Committee (the       
"Committee"), composed of at least two Directors who are Non-Employee           
Directors (as defined in Rule 16b-3 under the Exchange Act) and who are         
"outside directors" (as defined in Section 162(m) of the Internal Revenue Code  
of 1986, as amended (the "Code")), who will be appointed by the Board. Certain  
employees, advisors and consultants of the Company will be eligible to          
participate in the 1998 Stock Plan (a "Participant"). The Committee will be     
authorized under the 1998 Stock Plan to select the Participants and determine   
the terms and conditions of the awards under the 1998 Stock Plan. The 1998      
Stock Plan provides for the issuance of the following types of incentive        
awards: stock options, stock appreciation rights, restricted stock,             
performance grants and other types of awards that the Compensation Committee    
deems consistent with the purposes of the 1998 Stock Plan. An aggregate of      
1,050,000 shares of Common Stock of the Company will be reserved for issuance   
under the 1998 Stock Plan, subject to certain adjustments reflecting changes    
in the Company's capitalization. The 1998 Stock Plan provides that each         
Participant will be limited to receiving awards relating to no more than        
100,000 shares of Common Stock per year.                                        

Options granted under the 1998 Stock Plan may be either incentive stock     
options ("ISOs") or such forms of non-qualified stock options ("NQOs") as the   
Committee may determine. ISOs are intended to qualify as "incentive stock       
options" within the meaning of Section 422 of the Code. The exercise price of   
(i) an ISO granted to an individual who owns shares possessing more than 10%    
of the total combined voting power of all classes of stock of the Company (a    
"10% Owner") will be at least 110% of the fair market value of a share of       
common stock on the date of grant and (ii) an ISO granted to an individual      
other than a 10% Owner and an NQO will be at least 100% of the fair market      
value of a share of Common Stock on the date of grant.                          

Options granted under the 1998 Stock Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Committee. The Board   
generally will have the power and authority to amend the 1998 Stock Plan at     
any time without approval of the Company's stockholders, subject to applicable  
federal securities and tax law limitations (including regulations of the        
Nasdaq National Market).                                                        

The Company currently intends to grant options under the 1998 Stock Plan to 
purchase an aggregate of 250,000 shares of Common Stock to certain of its       
employees contemporaneously with the consummation of the Offering, at an        
exercise price equal to the initial public offering price. The following        
individuals are expected to receive such grants in the following amounts:       
Bruce R. Hough--10,000; Jeffrey A. Hinrichs--30,000; William T. Logan--10,000;  
Leslie M. Brown, Jr.--25,000; Stanley E. Soper--7,500; and other key            
employees--167,500.                                                             

EMPLOYEE STOCK PURCHASE PLAN                                                  

The Nutraceutical International Corporation Employee Stock Discount Purchase
Plan (the "Stock Purchase Plan") will be approved by the Board and              
stockholders prior to the consummation of the Offering. The Stock Purchase      
Plan is intended to give employees desiring to do so a convenient means of      
purchasing shares of                                                            

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Common Stock through payroll deductions. The Stock Purchase Plan is intended    
to provide an incentive to participate by permitting purchases at a discounted  
price. The Company believes that ownership of stock by employees will foster    
greater employee interest in the success, growth and development of the         
Company.                                                                        

Subject to certain restrictions, each employee of the Company who is a U.S. 
resident or a U.S. citizen temporarily on location at a facility outside of     
the United States will be eligible to participate in the Stock Purchase Plan    
if he or she has been employed by the Company for more than one year.           
Participation will be discretionary with each eligible employee. The Company    
will reserve 750,000 shares of Common Stock for issuance in connection with     
the Stock Purchase Plan. Each eligible employee will be entitled to purchase a  
maximum number of shares per quarter equal to 15% of such employee's gross pay  
for the immediately prior quarter divided by the purchase price per share.      
Elections to participate and purchases of stock will be made on a quarterly     
basis. Each participating employee contributes to the Stock Purchase Plan by    
choosing a payroll deduction in any specified amount, with a minimum deduction  
of $25 per payroll period. A participating employee may increase or decrease    
the amount of such employee's payroll deduction, including a change to a zero   
deduction as of the beginning of any calendar quarter. Elected contributions    
will be credited to participants' accounts at the end of each calendar          
quarter. In addition, employees may make lump sum contributions during a        
quarter to enable them to purchase the maximum number of shares available for   
purchase during such quarter.                                                   

Each participating employee's contributions will be used to purchase shares 
for the employee's share account within 15 days after the last day of each      
calendar quarter. The cost per share will be 90% of the lower of the closing    
price of the Company's Common Stock on the Nasdaq National Market on the first  
or the last trading day of the calendar quarter. The number of shares           
purchased on each employee's behalf and deposited in his/her share account      
will be based on the amount accumulated in such participant's cash account and  
the purchase price for shares with respect to any calendar quarter. Shares      
purchased under the Stock Purchase Plan carry full rights to receive dividends  
declared from time to time. Under the Stock Purchase Plan, any dividends        
attributable to shares in the employee's share account will be automatically    
used to purchase additional shares for such employee's share account. Share     
distributions and share splits will be credited to the participating            
employee's share account as of the record date and effective date,              
respectively. A participating employee will have full ownership of all shares   
in such employee's share account and may withdraw them for sale or otherwise    
by written request to the Committee. Subject to applicable federal securities   
and tax laws, the Board of Directors will have the right to amend or to         
terminate the Stock Purchase Plan. Amendments to the Stock Purchase Plan will   
not affect a participating employee's right to the benefit of the               
contributions made by such employee prior to the date of any such amendment.    
In the event the Stock Purchase Plan is terminated, the Committee will be       
required to distribute all shares held in each participating employee's share   
account plus an amount of cash equal to the balance in each participating       
employee's cash account.                                                        

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN                                       

The 1998 Non-Employee Director Stock Option Plan (the "Director Option      
Plan," and together with the 1998 Stock Plan, the "Stock Incentive Plans")      
will be adopted and approved by the Board and stockholders prior to the         
consummation of the Offering. The Director Option Plan is intended to           
encourage stock ownership by certain Directors of the Company and to provide    
those individuals with an additional incentive to manage the Company in the     
shareholders' best interests and to provide a form of compensation that will    
attract and retain highly qualified individuals as members of the Board. The    
Director Option Plan will provide for the granting of options to non-employee   
Directors, as defined, covering an aggregate of 150,000 shares of Common Stock  
of the Company, subject to certain adjustments reflecting changes in the        
Company's capitalization. The Committee or the full Board will be authorized    
under the Director Option Plan to make discretionary grants of options and      
determine the terms and conditions of such options. Each member of the          
Committee is eligible to participate in the Director Option Plan; however,      
grants made to a member of the Committee must be approved by the full Board     
with such member abstaining. The Director Option Plan requires that the         
exercise price for each option granted under the plan must equal 100% of the    
fair market value of the Company's Common Stock on the date the option is       
granted. Nothing contained in the Director Option Plan or any agreement to be   
executed pursuant to the Director Option Plan will obligate the Company, its    
Board or its stockholders to retain an optionee as a Director of the Company.   

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401(K) PLAN                                                                     

The Company has a tax-qualified employee savings and retirement plan (the   
"401(k) Plan") covering all of the Company's full-time employees. Pursuant to   
the 401(k) Plan, employees may elect to reduce their current compensation up    
to the statutorily prescribed annual limit ($9,500 in 1997) and have the        
amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan        
provides for contributions to the 401(k) Plan by the Company on behalf of all   
participants. The Company contributes an amount up to 5% of an eligible         
employee's base monthly earnings. The 401(k) Plan is intended to qualify under  
Section 401 of the Code so that contributions by employees or by the Company    
to the 401(k) Plan and income earned on plan contributions, are not taxable to  
employees until withdrawn from the 401(k) Plan so that contributions by the     
Company will be deductible by the Company when made. The trustees under the     
401(k) Plan, at the direction of each participant, invest such participant's    
assets in the 401(k) Plan in selected investment options.                       

COMPENSATION OF BOARD OF DIRECTORS                                              

The Company will determine the compensation to be paid to its independent   
Directors at the time of their initial appointments. Non-employee Directors     
are reimbursed for their out-of-pocket expenses incurred in connection with     
attending meetings.                                                             

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

Messrs. Robert C. Gay, Rehnert and Levin, directors of the Company, have    
professional affiliations with Bain Capital. Messrs. Robert C. Gay and Frank    
W. Gay II are brothers. See "Management."                                       

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  

MANAGEMENT AGREEMENT                                                            

Pursuant to an advisory agreement (the "Advisory Agreement") dated October  
28, 1993, among the Company, Bain Capital and F.W. Gay & Sons, Bain Capital     
and F.W. Gay & Sons agreed to provide general executive management, consulting  
and financial services to Solaray in consideration for which Bain Capital and   
F.W. Gay & Sons each were entitled to receive annual fees of $100,000 plus      
reimbursement for expenses, and one-time fees of $150,000 plus expenses with    
respect to work performed on the Solaray Acquisition. On October 31, 1994, the  
Advisory Agreement was amended to increase the annual fees payable to each of   
Bain Capital and F.W. Gay & Sons to $125,000. On January 31, 1995, the          
Advisory Agreement was amended and restated (the "Restated Advisory             
Agreement") as follows: (i) annual fees (from the Company) to Bain Capital      
were increased to $300,000, (ii) Bain Capital and F.W. Gay & Sons received      
one-time payments of $700,000 and $500,000, respectively, plus expenses, for    
certain services provided and (iii) upon payment of the one-time fees plus      
expenses to Bain Capital and F.W. Gay & Sons, F.W. Gay & Sons and Solaray       
ceased to be parties to the Restated Advisory Agreement. For the years ended    
September 30, 1996 and 1997, fees and expenses incurred by the Company or its   
affiliates to Bain Capital totaled $338,641 and $360,000, respectively. Prior   
to the consummation of the Offering, the Company and Bain Capital will          
terminate the Restated Advisory Agreement and Bain Capital will receive a       
payment of $1.0 million in exchange for such termination and services.          
Included in this payment of $1.0 million is approximately $375,000 that will    
be paid to Bain Capital for services provided to the Company in connection      
with the Offering and other financing matters. See "Underwriting." Robert C.    
Gay, Rehnert and Levin are directors of the Company and are also affiliated     
with Bain Capital. Mr. Frank W. Gay II is the Chairman of the Board, Chief      
Executive Officer and a Director of the Company as well as a partner of F.W.    
Gay & Sons.                                                                     

Prior to the completion of the Offering, the Company expects to enter into a
transaction services agreement with Bain Capital pursuant to which Bain         
Capital will agree to provide advisory services in connection with any          
potential acquisitions, dispositions or other financing transactions (whether   
debt or equity) of the Company or any of its subsidiaries in exchange for a     
transaction fee equal to 1.0% of the aggregate value of any such transaction.   
Such agreement will not provide for recurring annual management fees. Pursuant  
to the new agreement, Bain Capital will provide advisory services and           
personnel support to the Company relating to the identification, structuring,   
negotiating and financing analysis of potential acquisitions, dispositions or   
other financing transactions. The Company believes that the terms of such       
agreement are at least as favorable to the Company as those which could be      
negotiated with a third party.                                                  

INDEMNIFICATION OF DIRECTORS AND OFFICERS                                       

Prior to the consummation of the Offering, the Company expects to enter into
agreements to provide indemnification for its directors and executive officers  
in addition to the indemnification provided for in the Company's Amended and    
Restated Certificate of Incorporation and By-laws (as described under           
"Description of Capital Stock").                                                

AGREEMENTS AMONG SECURITYHOLDERS                                                

The Company, the Bain Capital Funds, Jackson National, Heller Financial,    
Inc., F.W. Gay & Sons and certain other stockholders are parties to a           
stockholders agreement, dated as of January 31, 1995 (the "Stockholders         
Agreement"). The Stockholders Agreement amends, restates and supersedes a       
prior stockholders agreement, dated as of October 28, 1993. The Stockholders    
Agreement contains provisions relating to the composition of the Board of       
Directors, restricting the transferability of the shares subject to such        
agreement and granting preemptive rights in certain circumstances to the        
parties thereto. The Stockholders Agreement, apart from certain provisions      
thereof, will be automatically terminated upon consummation of the Offering     
contemplated hereby.                                                            

The Company and certain of its stockholders are parties to a Registration   
Agreement providing for the registration of certain shares of Common Stock in   
future periods. See "Shares Eligible for Future Sale-- Registration Rights."    

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PRINCIPAL AND SELLING STOCKHOLDERS  

The table below sets forth certain information regarding the equity         
ownership of the Company (a) as of September 30, 1997 and (b) immediately       
following the Offering by: (i) each person or entity who beneficially owns      
five percent or more of a class of capital stock; (ii) each Director and each   
of the named executive officers; (iii) each Selling Stockholder; and (iv) all   
directors and executive officers of the Company as a group. Unless otherwise    
stated, each of the persons named in the table has sole or shared voting and    
investment power with respect to the securities beneficially owned by it or     
him as set forth opposite its or his name.                                      

                                                                [Download Table]

                                        SHARES OWNED                                
                                        PRIOR TO THE            SHARES OWNED AFTER  
                                        OFFERING (A)               THE OFFERING     
                                      ----------------- SHARES  ------------------  
NAME AND ADDRESS OF BENEFICIAL OWNER   NUMBER   PERCENT OFFERED   NUMBER    PERCENT 
                                                                                    
5% STOCKHOLDERS                                                                     
 Bain Capital Funds (b)(c)(d)...      5,807,858  62.4%  872,122   4,935,736    43.0%
 The Stephen and Helene Weldon                                                      
  Trust (e).....................        665,298   7.2%   66,667     598,631     5.2%
 Jackson National Life Insurance                                                    
  Company (e)...................        634,771   6.8%  100,916     533,855     4.7%
 Heller Financial, Inc. (e)(f)..        993,393   9.6%  158,328     835,065     6.8%
 Frank W. Gay (g)...............        572,372   6.2%   66,667     505,705     4.4%
DIRECTORS AND OFFICERS                                                              
 Frank W. Gay II................      1,046,785  11.0%      --    1,046,785     9.0%
 Bruce R. Hough.................        260,425   2.8%      --      260,425     2.3%
 Jeffrey A. Hinrichs............        237,838   2.5%      --      237,838     2.1%
 William T. Logan...............        147,844   1.6%      --      147,844     1.3%
 David M. Vance.................         75,291    *        --       75,291     *   
 Robert C. Gay (c)(h)...........      5,807,858  62.4%  872,122   4,935,736    43.0%
 Geoffrey S. Rehnert (c)(h).....      5,807,858  62.4%  872,122   4,935,736    43.0%
 Matthew S. Levin (c)(h)........        394,164   4.2%   59,181     334,983     2.9%
 All executive officers and                                                         
  directors as a group (six                                                         
  persons)......................      7,613,686  78.3%  872,122   6,741,564    56.7%
SELLING STOCKHOLDERS                                                                
 Combined Jewish Philanthropies                                                     
  (i)...........................         46,800     *    46,800         --      --  
 Fidelity Investments Charitable                                                    
  Gifts Fund (i)................         18,500     *    18,500         --      --  

-------------------                                                             
*  represents less than 1% of the total.                                        
(a) Calculation of percentage of beneficial ownership assumes the exercise of   
all warrants and options exercisable within 60 days of the date hereof  
only by the respective named stockholder.                               
(b) Includes 2,524,543 shares of Common Stock held by Bain Capital Fund IV,     
L.P. ("Fund IV"); 2,889,151 shares of Common Stock held by Bain Capital 
  Fund IV-B, L.P. ("Fund IV-B"); 190,348 shares of Common Stock held by BCIP
  Associates ("BCIP"); and 203,816 shares of Common stock held by BCIP Trust
Associates, L.P. ("BCIP Trust" and collectively with Fund IV, Fund IV-B 
and BCIP, the "Bain Capital Funds").                                    
(c) The address of such person is Two Copley Place, Boston, Massachusetts       
02116.                                                                  
(d) Selling Stockholders have granted to the Underwriters options to purchase   
up to 499,500 shares of Common Stock solely to cover over-allotments, if
any. See "Underwriting." In the event the Underwriters' over-allotment  
options are exercised in full, the above Selling Stockholders would own 
4,791,117, 573,593, 518,287, 690,446 and 480,667 shares of Common Stock 
(or 40.1%, 4.9%, 4.4%, 5.6% and 4.1% of the total outstanding shares of 
Common Stock), respectively, after giving effect to the Offering.       
(e) The address of the Stephen and Helene Weldon Trust is 2680 Aspen Springs    
Drive, Park City, Utah 84060. The address of Jackson National Life      
Insurance Company is c/o PPM America, Inc., 225 West Wacker Drive, Suite
1200, Chicago, Illinois 60606. The address of Heller Financial, Inc. is 
500 West Monroe, Suite 1200, Chicago, Illinois 60661.                   
(f) Represents warrants to purchase shares of Common Stock.                     
(g) Mr. Gay's address is c/o Nutraceutical International Corporation, 1400      
 Kearns Boulevard, 2nd Floor, Park City, Utah 84060. Mr. Gay is the father
of Frank W. Gay II and Robert C. Gay.                                   
(h) All of the shares shown are held by the Bain Capital Funds.                 
(i) Represents shares received by such institutions as a result of charitable   
contributions by certain principals of Bain Capital. Such institutions  
have indicated their desire to participate in the Offering.             

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DESCRIPTION OF CAPITAL STOCK  

GENERAL MATTERS                                                                 

At the time of the Offering, the total amount of authorized capital stock of
the Company will consist of 50,000,000 shares of Common Stock, par value $0.01  
per share, and 5,000,000 shares of preferred stock, par value $0.01 per share   
(the "Serial Preferred Stock"). Upon completion of the Offering, 11,466,911     
shares of Common Stock will be issued and outstanding, no shares of Serial      
Preferred Stock will be issued and outstanding and no other class of capital    
stock will be authorized, issued or outstanding. As of September 30, 1997 and   
without giving effect to the Reclassification, there were 1,026,000 shares of   
Common Stock, 102,000 shares of Class P Common Stock, 84,309 shares of Non-     
Voting Common Stock, warrants to purchase 12,994.35 shares of Class A Non-      
Voting Common Stock, warrants to purchase 116,949.15 shares of Non-Voting       
Common Stock and warrants to purchase 21,779 shares of Common Stock, held by    
14, 12, 1, 1, 1 and 3 stockholder(s) of record, respectively. All outstanding   
shares of Class P Common Stock and warrants to purchase Class A Non-Voting      
Common Stock will be converted into shares of Common Stock and warrants to      
purchase Common Stock, respectively, in the Reclassification. The following     
discussion describes the Company's capital stock, the Restated Certificate and  
By-laws as anticipated to be in effect upon consummation of the Offering. The   
following summary of certain provisions of the Company's capital stock and      
describes all material provisions of, but does not purport to be complete and   
is subject to, and qualified in its entirety by, the Restated Certificate and   
the By-laws, which are included as exhibits to the Registration Statement of    
which this Prospectus forms a part and by the provisions of applicable law.     

The Restated Certificate and By-laws will contain certain provisions that   
are intended to enhance the likelihood of continuity and stability in the       
composition of the Board of Directors and which may have the effect of          
delaying, deferring or preventing a future takeover or change in control of     
the Company unless such takeover or change in control is approved by the Board  
of Directors.                                                                   

COMMON STOCK                                                                    

The issued and outstanding shares of Common Stock are, and the shares of    
Common Stock to be issued by the Company in connection with the Offering will   
be, validly issued, fully paid and nonassessable. Subject to the prior rights   
of the holders of any Serial Preferred Stock, the holders of outstanding        
shares of Common Stock are entitled to receive dividends out of assets legally  
available therefor at such time and in such amounts as the Board of Directors   
may from time to time determine. See "Dividend Policy." The shares of Common    
Stock are not convertible and the holders thereof have no preemptive or         
subscription rights to purchase any securities of the Company. Upon             
liquidation, dissolution or winding up of the Company, the holders of Common    
Stock are entitled to receive pro rata the assets of the Company which are      
legally available for distribution, after payment of all debts and other        
liabilities and subject to the prior rights of any holders of Serial Preferred  
Stock then outstanding. Each outstanding share of Common Stock is entitled to   
one vote on all matters submitted to a vote of stockholders. There is no        
cumulative voting.                                                              

The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "NUTR, subject to official notice of issuance."                

SERIAL PREFERRED STOCK                                                          

The Company's Board of Directors may, without further action by the         
Company's stockholders, from time to time, direct the issuance of shares of     
Serial Preferred Stock in series and may, at the time of issuance, determine    
the rights, preferences and limitations of each series. Satisfaction of any     
dividend preferences of outstanding shares of Serial Preferred Stock would      
reduce the amount of funds available for the payment of dividends on shares of  
Common Stock. Holders of shares of Serial Preferred Stock may be entitled to    
receive a preference payment in the event of any liquidation, dissolution or    
winding-up of the Company before any payment is made to the holders of shares   
of Common Stock. Under certain circumstances, the issuance of shares of Serial  
Preferred Stock may render more difficult or tend to discourage a merger,       
tender offer or proxy contest, the assumption of control by a holder of a       
large block of the Company's securities or the removal of incumbent             

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management. Upon the affirmative vote of a majority of the total number of      
directors then in office, the Board of Directors of the Company, without        
stockholder approval, may issue shares of Serial Preferred Stock with voting    
and conversion rights which could adversely affect the holders of shares of     
Common Stock. There are no shares of Serial Preferred Stock outstanding, and    
the Company has no present intention to issue any shares of Serial Preferred    
Stock.                                                                          

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS     

The Restated Certificate provides for the Board to be divided into three    
classes, as nearly equal in number as possible, serving staggered terms.        
Approximately one-third of the Board will be elected each year. See             
"Management." Under the Delaware General Corporation Law, directors serving on  
a classified board can only be removed for cause. The provision for a           
classified board could prevent a party who acquires control of a majority of    
the outstanding voting stock from obtaining control of the Board until the      
second annual stockholders meeting following the date the acquiror obtains the  
controlling stock interest. The classified board provision could have the       
effect of discouraging a potential acquiror from making a tender offer or       
otherwise attempting to obtain control of the Company and could increase the    
likelihood that incumbent directors will retain their positions.                

The Restated Certificate provides that stockholder action can be taken only 
at an annual or special meeting of stockholders and cannot be taken by written  
consent in lieu of a meeting. The Restated Certificate and the By-laws provide  
that, except as otherwise required by law, special meetings of the              
stockholders can only be called pursuant to a resolution adopted by a majority  
of the Board of Directors or by the Chief Executive Officer of the Company.     
Stockholders will not be permitted to call a special meeting or to require the  
Board to call a special meeting.                                                

The By-laws establish an advance notice procedure for stockholder proposals 
to be brought before an annual meeting of stockholders of the Company,          
including proposed nominations of persons for election to the Board.            

Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the   
direction of the Board or by a stockholder who was a stockholder of record on   
the record date for the meeting, who is entitled to vote at the meeting and     
who has given to the Company's Secretary timely written notice, in proper       
form, of the stockholder's intention to bring that business before the          
meeting. Although the By-laws do not give the Board the power to approve or     
disapprove stockholder nominations of candidates or proposals regarding other   
business to be conducted at a special or annual meeting, the By-laws may have   
the effect of precluding the conduct of certain business at a meeting if the    
proper procedures are not followed or may discourage or defer a potential       
acquiror from conducting a solicitation of proxies to elect its own slate of    
directors or otherwise attempting to obtain control of the Company.             

The Restated Certificate and By-laws provide that the affirmative vote of   
holders of at least 66 2/3% of the then outstanding shares of Common Stock is   
required to amend, alter, change or repeal certain of their respective          
provisions. This requirement of a super-majority vote to approve amendments to  
the Restated Certificate and By-laws could enable a minority of the Company's   
stockholders to exercise veto power over any such amendments.                   

CERTAIN PROVISIONS OF DELAWARE LAW                                              

Following the consummation of the Offering, the Company will be subject to  
the "Business Combination" provisions of the Delaware General Corporation Law.  
In general, such provisions prohibit a publicly held Delaware corporation from  
engaging in various "business combination" transactions with any "interested    
stockholder" for a period of three years after the date of the transaction      
which the person became an "interested stockholder," unless (i) the             
transaction is approved by the Board of Directors prior to the date the         
"interested stockholder" obtained such status, (ii) upon consummation of the    
transaction which resulted in the stockholder becoming an "interested           
stockholder," the "interested stockholder," owned at least 85% of the voting    
stock of                                                                        

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the corporation outstanding at the time the transaction commenced, excluding    
for purposes of determining the number of shares outstanding those shares       
owned by (a) persons who are directors and also officers and (b) employee       
stock plans in which employee participants do not have the right to determine   
confidentially whether shares held subject to the plan will be tendered in a    
tender or exchange offer or (iii) on or subsequent to such date the "business   
combination" is approved by the Board of Directors and authorized at an annual  
or special meeting of stockholders by the affirmative vote of at least 66 2/3%  
of the outstanding voting stock which is not owned by the "interested           
stockholder." A "business combination" is defined to include mergers, asset     
sales and other transactions resulting in financial benefit to a stockholder.   
In general, an "interested stockholder" is a Person who, together with          
affiliates and associates, owns (or within three years, did own) 15% or more    
of a corporation's voting stock. The statute could prohibit or delay mergers    
or other takeover or change in control attempts with respect to the Company     
and, accordingly, may discourage attempts to acquire the Company.               

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS          

The Restated Certificate limits the liability of directors to the fullest   
extent permitted by the Delaware General Corporation Law. In addition, the      
Restated Certificate provides that the Company shall indemnify directors and    
officers of the Company to the fullest extent permitted by such law. The        
Company anticipates entering into indemnification agreements with its current   
directors and executive officers prior to the completion of the Offering and    
expects to enter into a similar agreement with any new directors or executive   
officers. In addition, the Company anticipates obtaining directors' and         
officers' insurance prior to the completion of the Offering.                    

TRANSFER AGENT AND REGISTRAR                                                    

The Transfer Agent and Registrar for the Common Stock is American Stock     
Transfer & Trust Company.                                                       

SHARES ELIGIBLE FOR FUTURE SALE 

Upon the consummation of the Offering, the Company will have outstanding    
11,466,911 shares of Common Stock (assuming no exercise of the Underwriters'    
over-allotment option). All of the shares of Common Stock sold in the Offering  
will be freely tradeable under the Securities Act, unless purchased by          
"affiliates" of the Company as that term is defined under the Securities Act.   
Upon the expiration of lock-up agreements between the Company, certain          
stockholders and the Underwriters, which will occur 180 days after the date of  
this Prospectus (the "Effective Date"), 7,965,654 shares of Common Stock        
(7,755,391 shares if the Underwriters' over-allotment option is exercised in    
full) (the "Restricted Shares") will become eligible for sale, subject to       
compliance with Rule 144 of the Securities Act as described below.              

In general, under Rule 144 as currently in effect, a person (or persons     
whose shares are aggregated) who has beneficially owned Restricted Shares for   
at least one year, will be entitled to sell in any three-month period a number  
of shares that does not exceed the greater of (i) 1% of the number of shares    
of Common Stock then outstanding (approximately 114,669 shares immediately      
after the Offering) or (ii) the average weekly trading volume of the Common     
Stock on the Nasdaq National Market during the four calendar weeks immediately  
preceding the date on which the notice of sale is filed with the Securities     
and Exchange Commission. Sales pursuant to Rule 144 are subject to certain      
requirements relating to manner of sale, notice and availability of current     
public information about the Company. A person (or persons whose shares are     
aggregated) who is not deemed to have been an affiliate of the Company at any   
time during the 90 days immediately preceding the sale and who has              
beneficially owned Restricted Shares for at least two years is entitled to      
sell such shares pursuant to Rule 144(k) without regard to the limitations and  
requirements described above.                                                   

Certain stockholders have agreed with the Underwriters that until 180 days  
after the Effective Date not to directly or indirectly, offer, sell, contract   
to sell, grant any option to purchase or otherwise dispose of any Common Stock  
or any securities convertible into or exercisable or exchangeable for Common    
Stock, or in any                                                                

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manner transfer all or a portion of the economic consequences associated with   
the ownership of the Common Stock, or cause a registration statement covering   
any shares of Common Stock to be filed, without the prior written consent of    
DLJ, subject to certain limited exceptions. The Company has also agreed not to  
directly or indirectly, offer, sell, contract to sell, grant any option to      
purchase or otherwise dispose of any Common Stock or any securities             
convertible into or exercisable or exchangeable for Common Stock or, in any     
manner, transfer all or a portion of the economic consequences associated with  
the ownership of the Common Stock or cause a registration statement covering    
any shares of Common Stock to be filed, for a period of 180 days after the      
Effective Date, without the prior written consent of DLJ, subject to certain    
limited exceptions including grants of options pursuant to, and issuance of     
shares of Common Stock upon exercise of options under, the 1998 Stock Plan.     
The lock-up agreements may be released at any time as to all or any portion of  
the shares subject to such agreements at the sole discretion of DLJ. See "Risk  
Factors--Shares Eligible for Future Sale."                                      

The Company intends to file a registration statement covering the sale of   
175,804 shares of Common Stock reserved for issuance under the 1995 Stock       
Plan, 1998 Stock Plan, Director Option Plan and Stock Purchase Plan. See        
"Management--Stock Plans." Such registration statement is expected to be filed  
as soon as practicable after the date of this Prospectus and will               
automatically become effective upon the filing. Accordingly, shares registered  
under such registration statement will be available for sale in the public      
market unless such shares are subject to vesting restrictions and subject to    
limitations on resale by "affiliates" pursuant to Rule 144. It is anticipated   
that approximately 80,749 shares of Common Stock issuable upon exercise of      
currently outstanding options will become eligible for sale in the public       
market without restrictions 180 days after the date of this Prospectus upon     
expiration of the lock-up agreements, pursuant to registration under such       
registration statement and subject to volume limitations and other              
restrictions under Rule 144.                                                    

REGISTRATION RIGHTS                                                             

Pursuant to the Registration Agreement, the Bain Capital Funds (who in the  
aggregate will hold 6,505,350 shares (6,335,693 shares if the Underwriters'     
over-allotment options are exercised in full) upon consummation of the          
Offering) have the right, subject to certain terms and conditions, to require   
the Company to register their shares under the Securities Act for offer and     
sale to the public (including by way of underwritten public offering) on three  
Long-Form Registrations or an unlimited number of Short-Form Registrations      
(each as defined in the Registration Agreement). Upon such demand, all holders  
of Registrable Securities (as defined in the Registration Agreement) may sell   
in such public offering, pro rata according to the amount of Registrable        
Securities owned by such holder. Upon consummation of the Offering, Heller      
(which will hold Warrants to purchase 835,065 shares of Common Stock (690,446   
shares if the Underwriters' over-allotment options are exercised in full) upon  
consummation of the Offering) will have the right, subject to certain terms     
and conditions, to require the Company to register its Registrable Securities   
for offer and sale to the public (including by way of an underwritten public    
offering) on one Long-Form Registration or one Short-Form Registration. See     
"Certain Relationships and Related Transactions--Agreements Among               
Securityholders." Exercise by the Bain Capital Funds or Heller of their rights  
under such agreement could result in the distribution of substantial amounts    
of Common Stock, including distributions in underwritten public offerings. See  
"Risk Factors--Shares Eligible for Future Sale."                                

In addition, certain other holders of Common Stock and options to purchase  
Common Stock (who in the aggregate will hold 2,096,700 shares (2,056,094        
shares if the Underwriters' over-allotment options are exercised in full)       
after the Offering), as well as the Bain Capital Funds and Heller, will have    
unlimited "piggyback" registration rights, which, subject to certain terms and  
restrictions, entitle them to join in any registration of securities by the     
Company. See "Certain Relationships and Related Transactions--Agreements Among  
Securityholders." Exercise of such "piggyback" rights could also result in the  
distribution of substantial amounts of Common Stock, including distributions    
in underwritten public offerings. See "Risk Factors--Shares Eligible for        
Future Sale."                                                                   

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UNDERWRITING  

Subject to certain terms and conditions contained in an underwriting        
agreement (the "Underwriting Agreement"), the Underwriters named below for      
whom DLJ and Smith Barney Inc. are acting as representatives (the               
"Representatives") have severally agreed to purchase from the Company the       
number of shares of Common Stock set forth opposite their names below.          

                                                                [Download Table]

                                                                    NUMBER OF
        UNDERWRITER                                                  SHARES  
                                                                             
Donaldson, Lufkin & Jenrette Securities Corporation................ 1,315,000
Smith Barney Inc. ................................................. 1,315,000
Bear, Stearns & Co. Inc............................................    40,000
Credit Suisse First Boston Corporation.............................    40,000
Goldman, Sachs & Co................................................    40,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.................    40,000
Morgan Stanley & Co. Incorporated..................................    40,000
NationsBanc Montgomery Securities LLC..............................    40,000
PaineWebber Incorporated...........................................    40,000
SBC Warburg Dillon Read Inc........................................    40,000
Adams, Harkness & Hill, Inc........................................    20,000
Crowell, Weedon & Co...............................................    20,000
EVEREN Securities, Inc.............................................    20,000
Fahnestock & Co., Inc..............................................    20,000
Janney Montgomery Scott Inc........................................    20,000
Johnston, Lemon & Co. Incorporated.................................    20,000
C.L. King & Associates, Inc........................................    20,000
Legg Mason Wood Walker, Incorporated...............................    20,000
McDonald & Company Securities, Inc.................................    20,000
Parker/Hunter Incorporated.........................................    20,000
Pennsylvania Merchant Group LTD....................................    20,000
Piper Jaffray Inc..................................................    20,000
Ragen Mackenzie Incorporated.......................................    20,000
Raymond James & Associates, Inc....................................    20,000
Roney & Co., LLC...................................................    20,000
Ryan, Beck & Co....................................................    20,000
Sands Brothers & Co., Ltd..........................................    20,000
Sutro & Co. Incorporated...........................................    20,000
Tucker Anthony Incorporated........................................    20,000
                                                                    ---------
  Total............................................................ 3,330,000
                                                                    =========

The Underwriting Agreement provides that the obligations of the several     
Underwriters to purchase shares of Common Stock are subject to the approval of  
certain legal matters by counsel and to certain other conditions. If any of     
the shares of Common Stock are purchased by the Underwriters pursuant to the    
Underwriting Agreement, all such shares of Common Stock (other than the shares  
of Common Stock covered by the over-allotment option described below) must be   
so purchased.                                                                   

Prior to the Offering, there has been no established trading market for the 
Common Stock. The initial price to the public for the Common Stock offered      
hereby will be determined by negotiation between the Company and the            
Representatives. The principal factors to be considered in determining the      
initial price to the public include the information set forth in the            
Prospectus and otherwise made available to the Representatives, the history of  
and the prospects for the industry in which the Company competes, the ability   
of the Company's management, the past and present operations of the Company,    
the historical results of operations of the Company, the prospects              

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for future earnings of the Company, the general condition of the securities     
markets at the time of the Offering and the recent market prices of securities  
of generally comparable companies.                                              

The Company and the Selling Stockholders have agreed to indemnify the       
Underwriters against certain liabilities, including liabilities under the       
Securities Act, or to contribute to payments that the Underwriters may be       
required to make in respect thereof.                                            

The Company has been advised by the Representatives that the Underwriters   
propose to offer the shares of Common Stock to the public initially at the      
price to the public set forth on the cover page of this Prospectus and to       
certain dealers (who may include the Underwriters) at such price less a         
concession not to exceed $0.73 per share. The Underwriters may allow, and such  
dealers may reallow, discounts not in excess of $0.10 per share to any other    
Underwriter and certain other dealers. After the initial public offering, the   
price to the public, the concession and the discount to dealers may be changed  
by the Representatives.                                                         

The Company and certain Selling Stockholders have granted to the            
Underwriters an option to purchase up to an aggregate of 499,500 additional     
shares of Common Stock at the initial public offering price less underwriting   
discounts and commissions solely to cover over-allotments. Such option may be   
exercised in whole or in part from time to time during the 30-day period after  
the date of this Prospectus. To the extent that the Underwriters exercise such  
option, each of the Underwriters will be committed, subject to certain          
conditions, to purchase a number of option shares proportionate to such         
Underwriter's initial commitment as indicated in the preceding table.           

The Company and certain stockholders have agreed not to directly or           
indirectly offer, sell, contract to sell or otherwise dispose of any shares of  
Common Stock or any securities convertible into or exercisable or exchangeable  
for Common Stock, or in any manner transfer all or a portion of the economic    
consequences associated with the ownership of such Common Stock, or to cause a  
registration statement covering any shares of Common Stock to be filed, for     
180 days after the date of this Prospectus without the prior written consent    
of DLJ, subject to certain limited exceptions, and provided that the Company    
may grant options pursuant to, and issue shares of Common Stock upon the        
exercise of options under, the 1998 Stock Plan. See "Shares Eligible for        
Future Sale."                                                                   

Approximately $375,000 will be paid to Bain Capital for services provided to
the Company in connection with the Offering and other financing matters.        

The Representatives have informed the Company that they do not expect to    
make sales to accounts over which they exercise discretionary authority in      
excess of 5% of the number of shares of Common Stock offered hereby.            

At the request of the Company, the Underwriters have reserved a portion of  
the Common Stock for sale to certain employees of the Company and other         
persons designated by the Company. The aggregate number of shares of Common     
Stock available for sale to the public in the Offering will be reduced to the   
extent such persons purchase such shares of Common Stock. The price per share   
of Common Stock to be sold to these persons is equal to the initial public      
offering price. Any reserved shares of Common Stock not so purchased will be    
offered by the Underwriters to the public on the same basis as the other        
shares of Common Stock offered hereby.                                          

In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.     
Specifically, the Underwriters may over-allot the Offering, creating a          
syndicate short position. In addition, the Underwriters may bid for and         
purchase Common Stock in the open market to cover syndicate short positions or  
to stabilize the price of the Common Stock. Finally, the underwriting           
syndicate may reclaim selling concessions from syndicate members in the         
Offering, if the syndicate repurchases previously distributed Common Stock in   
syndicate covering transactions, in stabilization transactions or otherwise.    
Any of these activites may stabilize or maintain the market price of the        
Common Stock above independent market levels. The Underwriters are not          
required to engage in these activities, and may end any of these activities at  
any time.                                                                       

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LEGAL MATTERS 

The validity of the Common Stock being offered hereby and certain other     
legal matters relating to the Offering will be passed upon for the Company by   
Kirkland & Ellis (a partnership which includes professional corporations),      
Chicago, Illinois. A partner of Kirkland & Ellis owns 17,126 shares of Common   
Stock after giving effect to the Reclassification. Kaye, Scholer, Fierman,      
Hays & Handler, LLP, New York, New York, will act as counsel for the            
Underwriters.                                                                   

EXPERTS 

The financial statements included in this Prospectus have been audited by   
Price Waterhouse LLP. The companies and periods covered by these audits are     
indicated in the report of independent accountants. Such financial statements   
have been so included in reliance on the reports of Price Waterhouse LLP,       
independent accountants, given on the authority of said firm as experts in      
auditing and accounting.                                                        

AVAILABLE INFORMATION 

The Company has filed a Registration Statement on Form S-1 with respect to  
the Common Stock being offered hereby with the Securities and Exchange          
Commission (the "Commission") under the Securities Act. This Prospectus, which  
constitutes a part of the Registration Statement, does not contain all the      
information set forth in the Registration Statement, certain items of which     
are omitted in accordance with the rules and regulations of the Commission.     
Statements contained in this Prospectus concerning the provisions of documents  
filed with the Registration Statement as exhibits are necessarily summaries of  
such documents, and each such statement is qualified in its entirety by         
reference to the copy of the applicable document filed as an exhibit to the     
Registration Statement. The Registration Statement may be inspected and copied  
at the public reference facilities maintained by the Commission at Room 1024,   
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; at its         
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,          
Illinois 60661-2511; and at its New York Regional Office, Seven World Trade     
Center, 13th Floor, New York, New York 10048. Copies of such material can be    
obtained from the public reference section of the Commission, 450 Fifth         
Street, N.W., Washington, D.C. 20549, at prescribed rates or accessed           
electronically by means of the Commission's home page on the Internet at        
http://www.sec.gov. For further information pertaining to the Company and the   
Common Stock being offered hereby, reference is made to the Registration        
Statement, including the exhibits thereto and the financial statements, notes   
and schedules filed as a part thereof.                                          

The Company intends to furnish its stockholders with annual reports         
containing audited financial statements and quarterly reports containing        
unaudited summary financial information for the first three fiscal quarters of  
each fiscal year.                                                               

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                          PAGE
                                                                              
Report of Independent Accountants........................................ F-2 
Consolidated Balance Sheets at September 30, 1996 and 1997............... F-3 
Consolidated Statements of Operations for the years ended September 30,       
 1995, 1996 and 1997..................................................... F-4 
Consolidated Statements of Cash Flows for the years ended September 30,       
 1995, 1996 and 1997..................................................... F-5 
Consolidated Statements of Stockholders' Equity for the years ended           
 September 30, 1995, 1996 and 1997....................................... F-6 
Notes to Consolidated Financial Statements............................... F-7 

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors and Stockholders                                      
of Nutraceutical International Corporation:                                   

In our opinion, the consolidated financial statements of Nutraceutical      
International Corporation listed in the accompanying index present fairly, in   
all material respects, the financial position of Nutraceutical International    
Corporation and its subsidiaries at September 30, 1996 and 1997, and the        
results of their operations and their cash flows for each of the three years    
in the period ended September 30, 1997, in conformity with generally accepted   
accounting principles. These financial statements are the responsibility of     
the Company's management; our responsibility is to express an opinion on these  
financial statements based on our audits. We conducted our audits of these      
statements in accordance with generally accepted auditing standards which       
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, assessing the accounting principles    
used and significant estimates made by management, and evaluating the overall   
financial statement presentation. We believe that our audits provide a          
reasonable basis for the opinion expressed above.                               

Price Waterhouse LLP                                                            

Salt Lake City, Utah                                                            
October 21, 1997                                                                

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

CONSOLIDATED BALANCE SHEETS 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                                   PRO FORMA   
                                                                  AS ADJUSTED  
                                               SEPTEMBER 30,    EQUITY (NOTE 2)
                                              ----------------   SEPTEMBER 30, 
                                               1996     1997         1997      
                                                                               
                   ASSETS                                                      
Current assets:                                                                
  Cash....................................... $ 2,321  $ 4,415                 
  Accounts receivable, net...................   7,207    8,001                 
  Inventories, net...........................  17,424   20,753                 
  Prepaid expenses and other assets..........   1,208    1,018                 
  Deferred income taxes......................     733      897                 
                                              -------  -------                 
    Total current assets.....................  28,893   35,084                 
Property, plant and equipment, net...........   9,620   10,711                 
Goodwill, net................................  43,227   42,008                 
Other assets, net............................   3,015    2,307                 
                                              -------  -------                 
                                              $84,755  $90,110                 
                                              =======  =======                 
    LIABILITIES AND STOCKHOLDERS' EQUITY                                       
Current liabilities:                                                           
  Current portion of long-term debt.......... $   500  $ 7,085                 
  Current portion of capital lease                                             
   obligations...............................     182      181                 
  Accounts payable...........................   4,993    6,932                 
  Accrued expenses...........................   3,491    5,270                 
                                              -------  -------                 
    Total current liabilities................   9,166   19,468                 
Long-term debt...............................  62,661   52,860                 
Capital lease obligations....................     314      133                 
Deferred income taxes, net...................     523    1,295                 
                                              -------  -------                 
    Total liabilities........................  72,664   73,756                 
                                              -------  -------                 
Commitments and contingencies (Notes 10, 13                                    
 and 16)                                                                       
Stockholders' equity:                                                          
  Class P Common Stock, $.01 par value,                                        
   cumulative yield of 10% per annum                                           
   compounded quarterly, 200,000 shares                                        
   authorized, 102,000 shares issued and                                       
   outstanding at September 30, 1996 and                                       
   1997, no shares issued and outstanding at                                   
   September 30, 1997 after giving effect to                                   
   the conversion and split on an as adjusted                                  
   basis.....................................       1        1         --      
  Class A Common Stock, $.01 par value,                                        
   cumulative yield of 10% per annum                                           
   compounded quarterly, 13,000 shares                                         
   authorized, no shares issued at September                                   
   30, 1996 and 1997, no shares issued and                                     
   outstanding at September 30, 1997 after                                     
   giving effect to the conversion and split                                   
   on an as adjusted basis...................     --       --          --      
  Class A Non-Voting Common Stock, $.01 par                                    
   value, cumulative yield of 10% per annum                                    
   compounded quarterly, 13,000 shares                                         
   authorized, no shares issued at September                                   
   30, 1996 and 1997, no shares issued and                                     
   outstanding at September 30, 1997 after                                     
   giving effect to the conversion and split                                   
   on an as adjusted basis...................     --       --          --      
  Common Stock, $.01 par value, 2,000,000                                      
   shares authorized, 1,026,000 shares issued                                  
   and outstanding at September 30, 1996 and                                   
   1997, 9,308,583 shares issued and                                           
   outstanding at September 30, 1997 after                                     
   giving effect to the conversion and split                                   
   on an as adjusted basis...................      10       10          93     
  Non-Voting Common Stock, $.01 par value,                                     
   620,000 shares authorized, 84,309 shares                                    
   issued and outstanding at September 30,                                     
   1996 and 1997, no shares issued and                                         
   outstanding at September 30, 1997 after                                     
   giving effect to the conversion and split                                   
   on an as adjusted basis...................       1        1         --      
  Additional paid-in capital.................   9,690    9,690       9,609     
  Subscriptions receivable...................     (70)     (55)        (55)    
  Retained earnings..........................   2,459    6,707       6,707     
                                              -------  -------      ------     
    Total stockholders' equity...............  12,091   16,354      16,354     
                                              -------  -------      ------     
                                              $84,755  $90,110                 
                                              =======  =======                 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

CONSOLIDATED STATEMENTS OF OPERATIONS 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                      YEAR ENDED SEPTEMBER 30,  
                                                     ---------------------------
                                                      1995     1996      1997   
                                                                                
Net sales..........................................  $62,932  $83,923 $   98,096
Cost of sales......................................   35,885   45,099     52,277
                                                     -------  ------- ----------
  Gross profit.....................................   27,047   38,824     45,819
                                                     -------  ------- ----------
Operating expenses:                                                             
  Selling, general and administrative..............   21,409   27,608     29,179
  Amortization of intangibles......................    1,059    1,483      1,346
  One-time payment to executive officer............      --       --       1,700
                                                     -------  ------- ----------
                                                      22,468   29,091     32,225
                                                     -------  ------- ----------
Income from operations.............................    4,579    9,733     13,594
Interest expense, net..............................    4,478    7,126      6,572
                                                     -------  ------- ----------
Income before provision for income taxes...........      101    2,607      7,022
Provision for income taxes.........................       23    1,056      2,774
                                                     -------  ------- ----------
Net income before extraordinary loss...............       78    1,551      4,248
Extraordinary loss on early extinguishment of debt,                             
 net of tax........................................     (478)     --         -- 
                                                     -------  ------- ----------
Net income (loss)..................................  $  (400) $ 1,551 $    4,248
                                                     =======  ======= ==========
Pro forma income per common share (unaudited)......                   $     0.39
                                                                      ==========
Weighted average shares used in computation of pro                              
 forma income per common share (unaudited).........                   10,780,590
                                                                      ==========
Supplemental pro forma income per common share                                  
 (unaudited).......................................                   $     0.46
                                                                      ==========
Weighted average shares used in computation of                                  
 supplemental pro forma income per common share                                 
 (unaudited).......................................                   12,780,590
                                                                      ==========

The accompanying notes are an integral part of these consolidated financial 
statements. 

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                                                    YEAR ENDED SEPTEMBER 30,   
                                                    -------------------------- 
                                                      1995     1996     1997   
                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:                                          
Net income (loss).................................. $   (400) $ 1,551  $ 4,248 
Adjustments to reconcile net income (loss) to net                              
 cash provided by (used in) operating activities:                              
  Depreciation and amortization (includes                                      
   amortization of inventory write-up of $5,285                                
   during 1995)....................................    6,983    3,085    3,969 
  Amortization of debt issuance costs..............    1,006      785      817 
  Changes in assets and liabilities, net of effects                            
   from acquisitions:                                                          
    Accounts receivable............................   (4,478)   3,932     (794)
    Inventories....................................   (4,811)  (1,491)  (3,390)
    Prepaid expenses and other assets..............     (253)    (358)     190 
    Deferred income taxes..........................      215      909      608 
    Other assets...................................      (68)      (1)      (3)
    Accounts payable...............................    1,506   (2,838)   1,939 
    Accrued expenses...............................      236   (1,015)   1,779 
                                                    --------  -------  ------- 
      Net cash provided by (used in) operating                                 
       activities..................................      (64)   4,559    9,363 
                                                    --------  -------  ------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                          
Purchases of property and equipment................   (2,837)  (5,498)  (3,652)
Acquisitions, net of cash acquired.................  (44,560)     --       --  
Payments of exit and other costs associated with                               
 acquisitions......................................   (1,758)     --       --  
                                                    --------  -------  ------- 
      Net cash used in investing activities........  (49,155)  (5,498)  (3,652)
                                                    --------  -------  ------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                          
Proceeds from revolving credit facility............   12,890    4,250      --  
Payments on revolving credit facility..............   (3,450)  (1,500)  (2,950)
Proceeds from long-term debt.......................   52,000      --       --  
Payments on long-term debt.........................   (8,020)     --      (500)
Principal payments on capital lease obligations....     (178)    (178)    (182)
Payment of deferred financing fees.................   (3,656)     --       --  
Receipt of subscriptions receivable................       59       28       15 
                                                    --------  -------  ------- 
      Net cash provided by (used in) financing                                 
       activities..................................   49,645    2,600   (3,617)
                                                    --------  -------  ------- 
Net increase in cash...............................      426    1,661    2,094 
Cash at beginning of period........................      234      660    2,321 
                                                    --------  -------  ------- 
Cash at end of period.............................. $    660  $ 2,321  $ 4,415 
                                                    ========  =======  ======= 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                              
Cash paid during the period for:                                               
  Interest......................................... $  4,156  $ 6,164  $ 5,924 
  Income taxes..................................... $      3  $   513  $ 2,432 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                             CLASS P                       NON-VOTING                                                  
                           COMMON STOCK    COMMON STOCK   COMMON STOCK  ADDITIONAL                            TOTAL    
                          -------------- ---------------- -------------  PAID-IN   SUBSCRIPTIONS RETAINED STOCKHOLDERS'
                          SHARES  AMOUNT  SHARES   AMOUNT SHARES AMOUNT  CAPITAL    RECEIVABLE   EARNINGS    EQUITY    
                                                                                                                       
Balance at October 1,                                                                                                  
 1994...................  102,000  $  1    918,000  $ 9      --   $--     $2,577       $(157)     $1,308     $ 3,738   
Issuance of common                                                                                                     
 stock..................      --    --     108,000    1   84,309     1     7,113         --          --        7,115   
Receipt of subscriptions                                                                                               
 receivable.............      --    --         --   --       --    --        --           59         --           59   
Net loss................      --    --         --   --       --    --        --          --         (400)       (400)  
                          -------  ----  ---------  ---   ------  ----    ------       -----      ------     -------   
Balance at September 30,                                                                                               
 1995...................  102,000     1  1,026,000   10   84,309     1     9,690         (98)        908      10,512   
Receipt of subscriptions                                                                                               
 receivable.............      --    --         --   --       --    --        --           28         --           28   
Net income..............      --    --         --   --       --    --        --          --        1,551       1,551   
                          -------  ----  ---------  ---   ------  ----    ------       -----      ------     -------   
Balance at September 30,                                                                                               
 1996...................  102,000     1  1,026,000   10   84,309     1     9,690         (70)      2,459      12,091   
                          -------  ----  ---------  ---   ------  ----    ------       -----      ------     -------   
Receipt of subscriptions                                                                                               
 receivable.............      --    --         --   --       --    --        --           15         --           15   
Net income..............      --    --         --   --       --    --        --          --        4,248       4,248   
                          -------  ----  ---------  ---   ------  ----    ------       -----      ------     -------   
Balance at September 30,                                                                                               
 1997...................  102,000  $  1  1,026,000  $10   84,309  $  1    $9,690       $ (55)     $6,707     $16,354   
                          =======  ====  =========  ===   ======  ====    ======       =====      ======     =======   

The accompanying notes are an integral part of these consolidated financial 
statements. 

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

1. DESCRIPTION OF BUSINESS                                                      

Nutraceutical International Corporation (the Company) develops, manufactures
and sells high quality branded vitamin, mineral, herbal and specialty dietary   
supplements to domestic health food stores and international distributors       
under the Solaray, KAL, NaturalMax, VegLife, Premier One and Solar Green brand  
names. The Company also produces chelated minerals and processed herbs for its  
own use and sells these items to other manufacturers and marketers in the       
dietary supplement industry. The Company's wholly-owned subsidiaries consist    
of Nutraceutical Corporation; Solaray, Inc. (Solaray); Premier One Products,    
Inc. (Premier); Makers of KAL, Inc. (KAL); NaturalMax, Inc. (Max); Monarch      
Nutritional Laboratories, Inc. (Monarch); Au Naturel, Inc.; VegLife, Inc.; and  
Makers of KAL B.V.                                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

Principles of Consolidation--The consolidated financial statements include  
the accounts of the Company and its subsidiaries (Note 1). The acquired         
operations of Solaray, Premier, KAL, Max and Monarch have been consolidated     
from their respective dates of acquisition (Note 3). All significant            
intercompany transactions and balances have been eliminated.                    

Use of Estimates--The preparation of these financial statements in          
conformity with generally accepted accounting principles required management    
to make estimates and assumptions that affect the reported amounts of assets    
and liabilities and disclosure of contingent assets and liabilities at the      
dates of the financial statements and the reported amounts of net sales and     
expenses during the reporting periods. Estimates include reserves for obsolete  
and slow moving inventory, customer returns and allowances and uncollectible    
accounts receivable. Actual results could differ from these estimates.          

Unaudited Pro Forma Income Per Share--Given the changes in the Company's    
capital structure to be effected in conjunction with the anticipated initial    
public offering, historical income (loss) per common share amounts are not      
presented in the consolidated financial statements as they are not considered   
to be meaningful.                                                               

The calculation of pro forma primary income per share was determined by     
dividing net income by the pro forma weighted average common and common         
equivalent shares outstanding after giving retroactive effect to the            
conversion of Class P Common Stock into 126,039 shares of Common Stock and the  
conversion of Non-Voting Common Stock into 84,309 shares of Common Stock and    
the 7.5291-to-one stock split of Common Stock upon the anticipated              
effectiveness of the Registration Statement (collectively, the                  
Reclassification). In addition, in accordance with Securities and Exchange      
Commission Staff Accounting Bulletin No. 83, shares issued and share options    
granted within one year of the anticipated public offering have been included   
in the calculation of common share equivalents for the primary income per       
share, using the treasury stock method to determine the dilutive effect of the  
issuances, as if they were outstanding for all periods presented.               

Some of the proceeds from the Company's anticipated public offering will be 
used to retire indebtedness existing under its Senior Credit Agreement (Note    
9). Accordingly, supplemental pro forma income per share is $0.46 for the year  
ended September 30, 1997; the number of shares of Common Stock whose net        
proceeds are to be used to retire debt is 2,000,000. This calculation assumes   
the debt retirement had taken place at the beginning of the period. The amount  
of interest expense eliminated, net of tax effects, is $1,679 for the year      
ended September 30, 1997.                                                       

As Adjusted Equity--The as adjusted equity at September 30, 1997 adjusts the
historical September 30, 1997 equity to give effect to the anticipated          
Reclassification based on an initial public offering price of $17.50 per share  
to be effective prior to the closing of the anticipated initial public          
offering.                                                                       

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

Cash--Substantially all of the Company's cash is held by one bank at        
September 30, 1997. The Company does not believe that, as a result of this      
concentration, it is subject to any unusual financial risk beyond the normal    
risk associated with commercial banking relationships.                          

Inventories--Inventories include freight-in, materials, labor and overhead  
costs and are stated at the lower of cost or market, cost being determined by   
a moving weighted average under the first-in, first-out method.                 

Property, Plant and Equipment--Property, plant and equipment are stated at  
cost, less accumulated depreciation and amortization. Depreciation and          
amortization are provided using the straight-line method over the estimated     
useful lives of the respective assets. Expenditures for renewals and            
betterments are capitalized while maintenance and repairs are charged to        
operations in the period incurred.                                              

Goodwill--The excess of the purchase price over the fair market value of the
net assets acquired and liabilities assumed is classified as goodwill and is    
being amortized using the straight-line method over periods ranging from 25 to  
40 years. The Company periodically evaluates the recoverability of goodwill     
based on undiscounted future cash flows. No impairments of goodwill have been   
recorded as a result of these evaluations.                                      

Non-Compete Agreements--Included in long-term other assets are capitalized  
costs associated with non-compete agreements the Company entered into with      
certain key executives of the Acquired Businesses (Note 3). These capitalized   
costs are being amortized using the declining balance method over the lives of  
the agreements which expire during fiscal 2000.                                 

Deferred Financing Fees--As part of the Fiscal 1995 Acquisitions (Note 3),  
the Company deferred certain debt issuance costs related to the establishment   
of new financing loans (Note 9). These costs are capitalized in long-term       
other assets and are being amortized using the effective interest rate method   
over the life of the loans.                                                     

Interest Rate Cap Agreement--The Company entered into an interest rate cap  
agreement to hedge against the interest rate risk associated with its variable  
rate debt obligations (Note 9). The effect of this interest rate cap is to      
minimize the impact of interest rate fluctuations on the Company's operating    
results. Because the Company's losses are limited to the premium paid as part   
of entering into this agreement, the Company is not subject to additional       
interest rate risk. At September 30, 1997, the Company had an outstanding       
interest rate cap agreement with a notional principal amount of $26,000. The    
fair value of the interest rate cap agreement approximated its book value as    
market interest rates have not exceeded the interest rate cap during the year.  
The premium paid of $226 is being amortized over the life of the interest rate  
cap which expires during fiscal 1998.                                           

Revenue Recognition--Sales are recognized upon shipment of merchandise to a 
customer. Provision is made for estimated customer returns, discounts and       
allowances at the time of sale.                                                 

Research and Development--The Company expenses research and development     
costs as incurred. For the years ended September 30, 1995, 1996 and 1997, the   
Company incurred $472, $837 and $850, respectively, in research and             
development expenditures. These costs are included in selling, general and      
administrative expenses for the respective periods.                             

Advertising--The Company expenses advertising costs as incurred. These costs
are included in selling, general and administrative expenses for the            
respective periods in the statements of operations.                             

Income Taxes--The Company accounts for income taxes using the asset and     
liability method as prescribed by Statement of Financial Accounting Standards   
No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 requires the Company  
to record deferred tax assets and liabilities for expected future tax           
consequences of events that have been recognized in different periods for       
financial statements versus tax returns.                                        

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

Accounting for Stock-Based Compensation--The Company has adopted Statement  
of Financial Accounting Standards No. 123, Accounting for Stock-Based           
Compensation (SFAS 123). The Company measures compensation expense for its      
stock-based employee compensation plans using the intrinsic value method        
prescribed by the Accounting Principles Board Opinion No. 25, Accounting for    
Stock Issued to Employees, and will, when material, provide pro forma           
disclosures of net income and net income per share as if the fair value-based   
method prescribed by SFAS 123 had been applied in measuring compensation        
expense.                                                                        

Fair Value of Financial Instruments--The fair values of financial           
instruments, including cash, accounts receivable, other current assets,         
accounts payable, accrued expenses and debt, approximates their respective      
book values.                                                                    

Concentrations of Credit Risk--In the normal course of business, the Company
provides credit terms to its customers; however, collateral is not required.    
Accordingly, the Company performs ongoing credit evaluations of its customers   
and maintains allowances for possible losses which, when realized, have been    
within the range of management's expectations. From time to time, a higher      
concentration of credit risk may exist on outstanding accounts receivable for   
a select number of customers depending on individual buying patterns. At        
September 30, 1996 and 1997, no customer accounted for more than 10 percent of  
trade accounts receivable. Furthermore, no customer accounted for more than 10  
percent of net sales in any of the three years ended September 30, 1997.        

3. ACQUISITIONS                                                                 

Acquisitions--On October 28, 1993, the Company acquired all of the          
outstanding stock of Solaray, a manufacturer and marketer of encapsulated       
vitamin, mineral and herbal products (the Solaray Acquisition). On October 31,  
1994, January 31, 1995 and September 29, 1995, the Company acquired             
substantially all of the assets and assumed certain liabilities of each of      
Premier, a manufacturer and marketer of nutritional supplements derived from    
bee products (the Premier Acquisition), KAL, a manufacturer and marketer of     
tableted vitamins and minerals as well as diet, energy and rest products (the   
KAL Acquisition), and Monarch, a manufacturer of premium bulk formulations and  
provider of contract grinding services (the Monarch Acquisition), respectively  
(collectively referred to as the Acquired Businesses or the Fiscal 1995         
Acquisitions). These acquisitions were accounted for using the purchase method  
of accounting. Accordingly, the portion of the purchase price assigned to the   
assets acquired and liabilities assumed was equivalent to their respective      
fair market values at the respective dates of acquisition, as determined by     
valuations and studies conducted by the Company and independent third parties.  
The excess of the purchase price over the fair market value of the net assets   
acquired and liabilities assumed is classified as goodwill and is being         
amortized using the straight-line method over periods ranging from 25 to 40     
years. The consolidated statements of operations and statements of cash flows   
presented herein include the activities of the Acquired Businesses from their   
respective dates of acquisition.                                                

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

The aggregate purchase price for the Fiscal 1995 Acquisitions totaled       
$50,821, consisting of cash of $44,560, Common Stock of $3,996 and a note       
payable to a seller of $2,265. The following reflects the allocation of the     
aggregate purchase price for the Fiscal 1995 Acquisitions to the aggregate      
assets acquired and the liabilities assumed:                                    

                                                                [Download Table]

                                                                    FISCAL 1995 
                                                                    ACQUISITIONS
                                                                    ------------
                                                                                
Aggregate purchase price for Fiscal 1995 Acquisitions..............   $50,821   
                                                                      -------   
Aggregate assets acquired and liabilities assumed:                              
 Current assets....................................................    17,413   
 Property, plant and equipment.....................................       567   
 Non-compete agreements............................................       700   
 Other assets......................................................       592   
 Goodwill..........................................................    39,521   
 Current liabilities...............................................    (6,651)  
 Long-term liabilities.............................................       (40)  
 Exit costs........................................................    (1,281)  
                                                                      -------   
Total..............................................................   $50,821   
                                                                      -------   

Exit Costs--As part of the Fiscal 1995 Acquisitions, the Company developed a
plan to close certain of the Acquired Businesses' existing facilities and       
integrate their activities into the Company's operations. Pursuant to this      
plan, the Company made severance payments to approximately 72 employees and     
incurred certain expenditures related to non-cancelable contractual             
obligations arising from the Fiscal 1995 Acquisitions. The Company accrued      
$1,281 for exit costs related to the Fiscal 1995 Acquisitions. During the       
years ended September 30, 1995, 1996 and 1997, approximately $850, $150 and     
$39 were expended related to these exit costs. It is anticipated that the       
remaining $242 will be expended over the next several years as a result of      
non-cancelable contractual obligations.                                         

4. ACCOUNTS RECEIVABLE, NET                                                     

Accounts receivable, net, consist of the following:                         

                                                                [Download Table]

                                                              SEPTEMBER 30,  
                                                              -------------- 
                                                               1996    1997  
                                                                             
Accounts receivable.......................................... $8,018  $8,811 
Less allowances..............................................   (811)   (810)
                                                              ------  ------ 
                                                              $7,207  $8,001 
                                                              ======  ====== 

5. INVENTORIES, NET                                                             

Inventories, net of reserves for obsolete and slow moving inventory, are    
comprised of the following:                                                     

                                                                [Download Table]

                                                               SEPTEMBER 30, 
                                                              ---------------
                                                               1996    1997  
                                                                             
Raw materials................................................ $ 9,086 $10,090
Work-in-process..............................................   1,201   3,064
Finished goods...............................................   7,137   7,599
                                                              ------- -------
                                                              $17,424 $20,753
                                                              ======= =======

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

In connection with the Fiscal 1995 Acquisitions (Note 3), the inventories of
the Acquired Businesses were valued at fair market value to reflect the net     
realizable value of these inventories as of their respective acquisition        
dates. The amount ascribed in excess of historical cost (write-up) was $5,285   
for the year ended September 30, 1995 and was charged to cost of sales in the   
accompanying statements of operations as the inventories were sold.             

6. PROPERTY, PLANT AND EQUIPMENT, NET                                           

Property, plant and equipment, net, are comprised of the following:         

                                                                [Download Table]

                         ESTIMATED                  
                          USEFUL    SEPTEMBER 30,   
                           LIFE    ---------------- 
                          (YEARS)   1996     1997   
                                                    
Land....................    --     $   340  $   422 
Building and                                        
 improvements...........     30      2,208    2,576 
Furniture, fixtures and                             
 equipment..............   3-10      9,526   12,708 
                                   -------  ------- 
                                    12,074   15,706 
Less accumulated                                    
 depreciation and                                   
 amortization...........            (2,454)  (4,995)
                                   -------  ------- 
                                   $ 9,620  $10,711 
                                   =======  ======= 

At September 30, 1996 and 1997, furniture, fixtures and equipment includes  
$522 and $474, respectively, of leased equipment with an accumulated            
amortization balance of $275 and $304, respectively. Certain property and       
equipment collateralize debt obligations (Note 9).                              

Depreciation and amortization of property, plant and equipment totaled $639,
$1,541 and $2,561 for the years ended September 30, 1995, 1996 and 1997,        
respectively.                                                                   

7. GOODWILL, NET                                                                

Goodwill, net, is comprised of the following:                               

                                                                [Download Table]

                                                              SEPTEMBER 30,   
                                                             ---------------- 
                                                              1996     1997   
                                                                              
   Goodwill................................................. $45,237  $45,237 
   Less accumulated amortization............................  (2,010)  (3,229)
                                                             -------  ------- 
                                                             $43,227  $42,008 
                                                             =======  ======= 

8. ACCRUED EXPENSES                                                           

  Accrued expenses are comprised of the following:                            


                                                              SEPTEMBER 30,   
                                                             ---------------- 
                                                              1996     1997   
                                                                              
   Employee payroll, benefits, taxes and performance                          
    incentives.............................................. $ 1,186  $ 2,009 
   One-time payment to executive officer....................     --     1,700 
   Other....................................................   2,305    1,561 
                                                             -------  ------- 
                                                             $ 3,491  $ 5,270 
                                                             =======  ======= 

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

The one-time payment to executive officer represents a payment to the       
Company's Chief Executive Officer for successfully positioning the Company for  
an initial public offering. Such payment is in excess of the Chief Executive    
Officer's annual compensation (salary and bonus), and the Company does not      
expect to make any further payments of this nature or magnitude in the future.  

9. LONG-TERM DEBT                                                               

Long-term debt is comprised of the following:                               

                                                                [Download Table]

                                                            SEPTEMBER 30,   
                                                           ---------------- 
                                                            1996     1997   
                                                                            
Note payable, payable in three installments as follows:                     
 $500 in December 1996, $500 in October 1997 and $765 in                    
 January 1998; interest is payable with principal                           
 installments and accrues at 8% per annum................. $ 1,765  $ 1,265 
Senior Credit Agreement:                                                    
  Revolving Credit Facility...............................  12,190    9,240 
  Term A Loan.............................................  37,000   37,000 
  Term B Loan, net of unamortized discount of $2,794 and                    
   $2,560.................................................  12,206   12,440 
                                                           -------  ------- 
Total long-term debt......................................  63,161   59,945 
Less current portion......................................    (500)  (7,085)
                                                           -------  ------- 
                                                           $62,661  $52,860 
                                                           =======  ======= 

SENIOR CREDIT AGREEMENT                                                         

In connection with the KAL Acquisition (Note 3), the Company and its        
subsidiaries entered into a Senior Credit Agreement with a lender, which was    
subsequently amended at closing of the Monarch Acquisition. The Company's       
borrowings under the Senior Credit Agreement, consisting of the Revolving       
Credit Facility, the Term A Loan and the Term B Loan, are secured by a          
perfected first priority security interest in the assets of the Company and     
its subsidiaries. The Company deferred certain debt issuance costs as part of   
entering into the Senior Credit Agreement. These costs have been capitalized    
in long-term other assets and are being amortized using the effective interest  
rate method over the life of the loans. A portion of the proceeds from the      
Senior Credit Agreement were used to repay the long-term debt outstanding       
related to the Solaray and Premier Acquisitions. In connection with the         
repayment of this debt, unamortized deferred financing fees of $554 were        
written off as an extraordinary expense in determining net loss for the year    
ended September 30, 1995.                                                       

Under the terms of the Senior Credit Agreement, the Company must comply with
certain restrictive covenants which include the requirement that the Company    
maintain minimum amounts of profitability, solvency and liquidity. In           
addition, the Senior Credit Agreement restricts the Company from making         
certain payments. The Senior Credit Agreement provides that upon a change in    
control of the Company, the lender could require immediate payment of the       
Revolving Credit Facility, Term A Loan and Term B Loan.                         

Revolving Credit Facility--The agreement provides for borrowings of up to   
$15,000 based upon a percentage of eligible accounts receivable and             
inventories and expires on January 31, 2003. Advances under the Revolving       
Credit Facility bear interest at the London Inter-Bank Offered Rate (LIBOR)     
plus 3% or the lender's base rate plus 1.5% (8.63% at September 30, 1997). The  
Company is required to pay a monthly fee of 0.5% per annum on the average       
unused balance under the Revolving Credit Facility. As of September 30, 1997,   
$5,760 was available to be borrowed under the Revolving Credit Facility.        
Accrued interest on the facility is payable monthly.                            

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

Term A Loan--Under the Term A Loan, $37,000 was advanced on January 31,     
1995. Principal payments of $1,629 are due quarterly beginning April 30, 1998.  
Quarterly principal payments increase to $2,094 beginning April 30, 2002 and    
continue through maturity on January 31, 2003. In addition, pursuant to the     
Senior Credit Agreement, the Company is required to make payments on the Term   
A Loan for excess cash flow as calculated at each fiscal year end. As of        
September 30, 1997, the total amount due related to excess cash flow is         
$2,562. Advances under the Term A Loan bear interest at a rate equal to the     
LIBOR plus 3.25% or the lender's base rate plus 1.75% (8.88% at September 30,   
1997). Accrued interest on the Term A Loan is payable monthly. In addition,     
the Senior Credit Agreement permits the Company to borrow up to an additional   
$6,000 related to the Term A Loan for construction of a new facility. As of     
September 30, 1997, the Company had not made any borrowings related to this     
additional $6,000 under the Term A Loan.                                        

Term B Loan--Under the Term B Loan, $15,000 was advanced on January 31, 1995
and the entire amount is due on January 31, 2004. In connection with this       
loan, the Company issued 84,309 shares of Non-Voting Common Stock at $37.00     
per share, the estimated fair market value. The Term B Loan was recorded with   
an original discount of $3,119, equivalent to the estimated fair value of the   
Common Stock issued. This discount is being amortized using the effective       
interest method over the life of the loan. Advances under the Term B Loan bear  
interest at a rate equal to the LIBOR plus 4%, or the lender's base rate plus   
2.5% (9.63% at September 30, 1997). Accrued interest on the Term B Loan is      
payable quarterly.                                                              

FUTURE PAYMENTS                                                                 

At September 30, 1997, the scheduled future principal payments are as       
follows:                                                                        

                                                                [Download Table]

   YEAR                                                                     
  ENDING                                                                    
SEPTEMBER                                                                   
   30,                                                                      
                                                                            
 1998............................................................... $ 7,085
 1999...............................................................   6,515
 2000...............................................................   6,515
 2001...............................................................   6,515
 2002...............................................................   7,446
 Thereafter.........................................................  25,869
                                                                     -------
                                                                     $59,945
                                                                     =======

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

10. LEASE COMMITMENTS AND OBLIGATIONS                                           

The Company leases office and warehouse facilities under non-cancelable     
operating leases expiring June of 2003. These operating leases require the      
Company to pay all taxes, insurance and maintenance. The Company also leases    
certain computer, manufacturing and laboratory equipment under capital leases.  

The following summarizes future minimum lease payments required under       
capital and operating leases:                                                   

                                                                [Download Table]

   YEAR                                                                     
  ENDING                                                                    
SEPTEMBER                                              CAPITALIZED OPERATING
   30,                                                   LEASES     LEASES  
                                                                            
 1998.................................................    $ 206     $  779  
 1999.................................................       63        539  
 2000.................................................       63        319  
 2001.................................................       23         66  
 2002.................................................      --          66  
 Thereafter...........................................      --          50  
                                                          -----     ------  
Future minimum lease payments.........................      355     $1,819  
                                                                    ======  
Less amounts representing interest....................      (41)            
                                                          -----             
Present value of future minimum lease payments........      314             
Less amounts due within one year......................     (181)            
                                                          -----             
Amounts due after one year............................    $ 133             
                                                          =====             

Total rent expense incurred by the Company under non-cancelable operating   
leases for the years ended September 30, 1995, 1996 and 1997 was $715, $898     
and $950, respectively.                                                         

11. INCOME TAXES                                                                

The provision (benefit) for income taxes is comprised of the following:     

                                                                [Download Table]

                                                             YEAR ENDED      
                                                            SEPTEMBER 30,    
                                                         --------------------
                                                         1995    1996   1997 
                                                                             
Current:                                                                     
  Federal............................................... $(302) $  134 $2,058
  State.................................................   (29)     13    197
Deferred:                                                                    
  Federal...............................................   194     830    508
  State.................................................    21      79     11
                                                         -----  ------ ------
                                                         $(116) $1,056 $2,774
                                                         =====  ====== ======

The net benefit for income taxes consists of a provision of $23 resulting   
from income before provision for income taxes and a benefit of $139 resulting   
from the extraordinary loss on early extinguishment of debt.                    

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

A summary of the composition of net deferred income tax assets and          
liabilities is as follows:                                                      

                                                                [Download Table]

                                                                  SEPTEMBER 
                                                                     30,    
                                                                 -----------
                                                                 1996  1997 
                                                                            
ASSETS                                                                      
Accrued liabilities............................................. $329 $  748
Inventory differences...........................................  348    108
Accounts receivable reserves....................................   28     41
Other...........................................................   28    -- 
                                                                 ---- ------
Current deferred income tax assets.............................. $733 $  897
                                                                 ==== ======
LIABILITIES                                                                 
Amortization of intangibles..................................... $521 $1,131
Depreciation....................................................    2    164
                                                                 ---- ------
Long-term deferred income tax liabilities, net.................. $523 $1,295
                                                                 ==== ======

The differences between income taxes at the statutory federal income tax    
rate and income taxes reported in the statements of operations are as follows:  

                                                                [Download Table]

                                                           YEAR ENDED       
                                                          SEPTEMBER 30,     
                                                       ---------------------
                                                       1995    1996    1997 
                                                                            
Tax at federal statutory rate......................... $(176) $  886  $2,387
State tax, net of federal benefit.....................    (5)     94     249
Non-deductible expenses...............................    76      86     102
Other.................................................   (11)    (10)     36
                                                       -----  ------  ------
                                                       $(116) $1,056  $2,774
                                                       =====  ======  ======

12. CAPITAL STOCK                                                               

Description of Capital Stock--The Company has five classes of authorized    
capital stock: Class P Common Stock, Class A Common Stock, Class A Non-Voting   
Common Stock, Common Stock and Non-Voting Common Stock. Each share of Class P   
Common Stock, Class A Common Stock and Class A Non-Voting Common Stock is       
entitled to a preferential payment (the Preference Amount) upon any             
distribution by the Company to holders of its capital stock (whether by         
dividend, liquidating distribution or otherwise) equal to the original cost of  
such share plus an amount which accrues on a daily basis at a rate of 10% per   
annum on such cost, compounded quarterly. As of September 30, 1997, the         
aggregate Preference Amount of the outstanding Class P Common Stock was         
$3,041, based on an aggregate original cost of $2,066. Upon the occurrence of   
an initial public offering of the Company's Common Stock, each outstanding      
share of such classes of capital stock will be reclassified into one share of   
Common Stock plus an additional number of shares of Common Stock determined by  
dividing the applicable Preference Amount for such share by the value of a      
share of Common Stock based on the estimated initial public offering price.     

Holders of Class P Common Stock are entitled to receive their respective    
Preference Amounts before any distributions can be made to the holders of       
Class A Common Stock, Class A Non-Voting Common Stock, Common Stock and Non-    
Voting Common Stock. Similarly, holders of Class A Common Stock and Class A     
Non-Voting Common Stock are entitled to receive their respective Preference     
Amounts before any distributions can be made to the holders of Common Stock     
and Non-Voting Common Stock. Once holders of Class P Common Stock, Class A      
Common Stock and Class A Non-Voting Common Stock have received their            
respective                                                                      

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 
Preference Amounts, additional distributions will be divided ratably among all  
classes of Common Stockholders based upon the total number of shares            
outstanding.                                                                    

Holders of Class P Common Stock, Class A Common Stock and Common Stock are  
entitled to one vote per share on all matters to be voted on by the Company's   
stockholders, and the holders of these classes of stock vote together as a      
single class. The outstanding shares of one class of stock cannot be the        
subject of a stock split or a stock dividend unless the outstanding shares of   
the other class are similarly affected.                                         

Executive Stock Purchase Agreements--On October 28, 1993, the Company       
entered into stock purchase agreements with certain executives whereby each     
executive purchased 500 shares of Class P Common Stock and 4,500 shares of      
Common Stock at their estimated fair market values of $20.25 and $0.25 per      
share, respectively. Ten percent of the shares purchased vested upon execution  
of the agreements and the remaining shares vest between 20% and 30% at the end  
of each calendar year through December 31, 1997. Upon a sale or public          
offering of the stock of the Company, all unvested shares vest immediately.     
Each agreement includes an option for the Company to repurchase the             
executive's shares upon the executive's termination of employment. This option  
provides for vested shares to be repurchased at fair market value and unvested  
shares to be repurchased at the executive's original per share cost.            

Stock Warrants--The debt financing obtained as part of the Solaray          
Acquisition on October 28, 1993 has detachable stock warrants that entitle the  
holder to purchase 12,994.35 shares of Class A Non-Voting Common Stock and      
116,949.15 shares of Non-Voting Common Stock of the Company at an exercise      
price of $0.01 per share. The stock warrants, which expire October 28, 2003,    
were valued at their estimated fair market value of $292 on the date of         
issuance, as benchmarked against comparable transactions. This amount has been  
recorded in additional paid-in capital. As part of entering into the Senior     
Credit Agreement (Note 9), the debt financing obtained as part of the Solaray   
Acquisition was retired and the $63 unamortized portion of the discount         
arising from the detachable stock warrants was recognized as an extraordinary   
expense in determining net loss for the year ended September 30, 1995.          

Stock Options--During November 1994, the Company issued 40,000 common stock 
options to certain key executives at an exercise price of $26.00, management's  
estimate of the fair market value of the common stock at the date of grant.     
These options vest over a period of five years and expire on the tenth          
anniversary of the date of grant.                                               

Pursuant to certain broker agreements entered into in connection with the   
Premier Acquisition and the KAL Acquisition (Note 3), the Company issued        
warrants during January 1995 to purchase 21,779 shares of Common Stock at       
exercise prices ranging from $36.58 to $37.00 per share, which were considered  
to be the estimated fair market value of the Company's stock at the date of     
grant. These warrants vested immediately and expire in January 2005.            

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

Stock Option Plan--During the year ended September 30, 1995, the Company's  
Board of Directors adopted the 1995 Stock Option Plan (the 1995 Option Plan).   
The 1995 Option Plan provides for granting options to executives and key        
employees of the Company and its subsidiaries to purchase common stock. In      
aggregate, 30,000 shares have been reserved for issuance under the 1995 Option  
Plan. The following grants have been made under this plan:                      

                                                                [Download Table]

                                        NUMBER OF AVERAGE PRICE  AGGREGATE  
                                         OPTIONS    PER SHARE   OPTION PRICE
                                                                            
Outstanding at October 1, 1994.........     --        $--          $ --     
Granted................................  25,300         37           936    
Exercised..............................     --         --            --     
Canceled...............................     --         --            --     
                                         ------       ----         -----    
Outstanding at September 30, 1995......  25,300         37           936    
                                         ------       ----         -----    
Granted................................     --         --            --     
Exercised..............................     --         --            --     
Canceled...............................  (2,025)       (37)          (75)   
                                         ------       ----         -----    
Outstanding at September 30, 1996......  23,275         37           861    
                                         ------       ----         -----    
Granted................................   3,500         65           228    
Exercised..............................     --         --            --     
Canceled...............................  (4,425)       (37)         (164)   
                                         ------       ----         -----    
Outstanding at September 30, 1997......  22,350       $ 41         $ 925    
                                         ======       ====         =====    

These options were issued at exercise prices which represent management's   
estimate of the fair market value at the date of grant. The options vest over   
a period of four years and expire on the tenth anniversary of the date of       
grant.                                                                          

The Company's pro forma net income for the years ended September 30, 1996   
and 1997 would have been $1,551 and $4,239, respectively, if compensation cost  
had been measured under the fair value method of SFAS 123.                      

The fair value of the options granted during 1997 was estimated as of the   
date of grant using a Black-Scholes option pricing model with the following     
assumptions: risk free interest rate of 6.15%; expected life of 5 years;        
expected volatility of 1%; and expected dividend yield of 0%. Because the       
Company's stock options have characteristics significantly different from       
traded options and because changes in the subjective input assumptions can      
materially affect the fair value estimate, management's opinion is that the     
existing valuation models do not necessarily provide a reliable single measure  
of the fair value of its employee stock options. The Company's pro forma net    
income, computed as if compensation cost had been measured under the fair       
value method of SFAS 123, does not reflect the value of options granted prior   
to September 30, 1995. As a result, the initial impact of applying the fair     
value method of SFAS 123 on pro forma net income may not be representative of   
the impact of applying such method in future years, depending upon the amount   
of stock options awarded in the future and their related vesting periods.       

13. EMPLOYEE BENEFIT PLANS                                                      

401(k) Plan--The Company has a 401(k) defined contribution profit sharing   
plan which covers substantially all employees. Under the plan, employees can    
contribute up to 15% of their compensation, not to exceed the prescribed        
annual statutory limit ($9,500 for calendar 1997). The Company makes matching   
and discretionary contributions to the plan which approximate 5% of all         
eligible employees' salaries. The amounts contributed to the plan by the        
Company during the years ended September 30, 1995, 1996 and 1997 were $174,     
$254 and $317, respectively.                                                    

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

Self-Funded Health Insurance Plan--The Company has a self-insured health    
care program for its employees and their dependents. Under the program, the     
Company pays claims up to $30 per year for each individual, while claims        
exceeding $30 per individual, or $498 in the aggregate as of September 30,      
1997, are covered by a third party stop-loss insurance policy. The stop-loss    
insurance amounts are determined by the Company based on the number of          
employees, prior claim history and insurance premium pricing. The Company       
accrues for anticipated health care expenses which have been incurred but not   
yet reported based on historical claim experience. Total health insurance       
expense incurred by the Company, which includes claims, third party insurance   
premiums and other related costs, for the years ended September 30, 1995, 1996  
and 1997 was $240, $526 and $770, respectively. At September 30, 1997, the      
Company had accrued $105 for claims incurred but not reported and claims        
reported but not paid.                                                          

14. RELATED PARTY TRANSACTIONS                                                  

On January 31, 1995, the Company entered into a five year management        
agreement (the Agreement) with certain stockholders of the Company. The         
Agreement is automatically extended on a year-to-year basis unless written      
notice is provided by one of the parties. The Agreement requires the Company    
to pay a monthly management fee of $25 plus out-of-pocket expenses payable on   
a quarterly basis in arrears commencing March 31, 1995. For the years ended     
September 30, 1995, 1996, and 1997, the Company incurred $341, $339 and $360,   
respectively, in fees and out-of-pocket expenses for these stockholders. The    
balances due at September 30, 1996 and 1997 under the Agreement were $86 and    
$89, respectively.                                                              

In addition to the management fees described above, certain stockholders    
also received payouts of $300, $100 and $1,200 for services rendered related    
to the Solaray, Premier and KAL Acquisitions, respectively.                     

During fiscal 1994, the Company loaned a total of $157 to certain           
stockholders for the purchase of the Company's Common Stock. Loans in the       
aggregate amount of $45 were non-interest bearing and were repaid in full       
during fiscal 1995. The remaining loans in the aggregate of $112 bear interest  
at 6% per annum and are payable in four annual installments commencing October  
28, 1994 and ending October 28, 1997. The amounts outstanding under these       
loans at September 30, 1996 and 1997 were $70 and $55, respectively.            

The Company, certain stockholders, the Company's lender under the Senior    
Credit Agreement and the Company's lender in connection with the Solaray and    
Premier acquisitions are parties to a stockholders agreement, dated as of       
January 31, 1995 (the Stockholders Agreement). The Stockholders Agreement       
amends, restates and supersedes a prior stockholders agreement, dated as of     
October 28, 1993. The Stockholders Agreement contains provisions relating to    
the composition of the Board of directors, restricting the transferability of   
the shares subject to such agreement and granting preemptive rights in certain  
circumstances to the parties thereto. The Stockholders Agreement, apart from    
certain provisions thereof, will be automatically terminated upon consummation  
of the anticipated initial public offering.                                     

The Company and certain of its stockholders are parties to a Registration   
Agreement providing for the registration of certain shares of Common Stock in   
future periods.                                                                 

15. SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES     

During the year ended September 30, 1995, the Company issued 108,000 shares 
of Common Stock at $37.00 per share and a $2,265 note payable for the           
purchases of KAL and Monarch (Note 3), respectively. Additionally, warrants     
were issued pursuant to certain broker agreements entered into in connection    
with the KAL and Premier Acquisitions (Note 12).                                

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NUTRACEUTICAL INTERNATIONAL CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 
As part of entering into the Senior Credit Agreement pursuant to the KAL    
Acquisition (Note 9), the Company issued 84,309 shares of Non-Voting Common     
Stock at $37.00 per share. These shares were recorded as a discount of $3,119   
on the Term B Loan.                                                             

16. COMMITMENTS AND CONTINGENCIES                                               

The formulation, manufacturing, processing, packaging, labeling,            
advertising, distribution and sale of dietary supplements (consisting of        
vitamins, amino acids, minerals, herbs, other botanicals and other dietary      
ingredients) such as those sold by the Company are subject to regulation by     
one or more federal agencies, principally the Food and Drug Administration and  
the Federal Trade Commission and, to a lesser extent, the Consumer Product      
Safety Commission and United States Department of Agriculture. These            
activities are also regulated by various governmental agencies for the states   
and localities in which the Company's products are sold, as well as by          
governmental agencies in certain foreign countries in which the Company's       
products are sold.                                                              

Although management believes that the Company is in compliance, in all      
material respects, with the statutes, laws, rules and regulations of every      
jurisdiction in which it operates, no assurance can be given that the           
Company's compliance with applicable statutes, laws, rules and regulations      
will not be challenged by governing authorities or that such challenges will    
not have a material adverse effect on the Company's financial position or       
results of operations or cash flows.                                            

The Company, like any other retailer, distributor and manufacturer of       
products that are designed to be ingested, also faces an inherent risk of       
exposure to product liability claims in the event that the use of its products  
results in injury. With respect to product liability claims, the Company has    
liability insurance; however, there can be no assurance that such insurance     
will be adequate to cover potential liabilities. In the event that the Company  
does not have adequate insurance or contractual indemnification from parties    
supplying raw materials or marketing its products, product liabilities          
relating to defective products could have a material adverse effect on the      
Company.                                                                        

The Company has been sued by American Cyanimid, the manufacturer of the     
Centrum line of vitamin/mineral supplements. American Cyanimid alleges that     
the Solaray rainbow logo, as well as the KAL rainbow logo (since abandoned)     
infringes, or has infringed, on the Centrum color spectrum logo. The Company    
believes the claim is without merit and is vigorously defending the lawsuit.    
There can be no assurance that the Company may not be required to pay damages   
or attorney fees and costs, and change or abandon the Solaray rainbow logo.     
The Company is unable to estimate a possible loss or range of loss which could  
result from this contingency.                                                   

The Company is not currently a named defendant in any product liability     
lawsuit. However, the Company is involved in various legal matters arising in   
the normal course of business. In the opinion of management, the Company's      
liability, if any, arising from legal proceedings related to these matters is   
not expected to have a material adverse impact on the Company's financial       
position, results of operations or cash flows.                                  

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NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE  
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPEC-   
TUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR     
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING     
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS.   
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN   
OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO   
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY   
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,  
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET      
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HERE-  
OF.                                                                             

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

TABLE OF CONTENTS 

                                                                [Download Table]

                                                                          PAGE
                                                                          ----
                                                                              
Prospectus Summary.......................................................   3 
Risk Factors.............................................................  11 
Reclassification.........................................................  16 
Dilution.................................................................  17 
Dividend Policy..........................................................  18 
Use of Proceeds..........................................................  18 
Capitalization...........................................................  19 
Unaudited Pro Forma Financial Statements.................................  21 
Selected Historical Consolidated Financial  Data.........................  27 
Management's Discussion and Analysis of Financial Condition and Results       
 of Operations...........................................................  29 
Business.................................................................  33 
Management...............................................................  44 
Certain Relationships and Related Transactions...........................  50 
Principal and Selling Stockholders.......................................  51 
Description of Capital Stock.............................................  52 
Shares Eligible for Future Sale..........................................  54 
Underwriting.............................................................  56 
Legal Matters............................................................  58 
Experts..................................................................  58 
Available Information....................................................  58 
Index to Financial Statements............................................ F-1 

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

UNTIL MARCH 17, 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL- 
ERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING    
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY    
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPEC-   
TUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR  
SUBSCRIPTIONS.                                                                  

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3,330,000 SHARES  

NUTRACEUTICAL 
INTERNATIONAL 
CORPORATION 

COMMON STOCK  

----------------  
PROSPECTUS  
----------------  

DONALDSON, LUFKIN & JENRETTE  
SECURITIES CORPORATION  

SALOMON SMITH BARNEY  

FEBRUARY 19, 1998 

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Dates Referenced Herein   and   Documents Incorporated by Reference

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		1/31/03		32		71
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		4/30/98		32		71
		3/17/98		78
		2/25/98		1		16
Filed on:		2/23/98
		2/19/98		1		78
		1/20/98		41
		12/31/97		6		74			10-Q
		10/28/97		76
		10/21/97		60
		9/30/97		8		76
		10/1/96		9		21
		9/30/96		8		76
		9/30/95		8		76
		9/29/95		67
		3/31/95		76
		1/31/95		50		76
		10/31/94		50		67
		10/28/94		76
		10/15/94		41
		10/1/94		64		75
		9/30/94		8		27
		10/28/93		9		76
		10/27/93		8		27
		10/1/93		8		9
		9/30/93		8		27
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