UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-K/A

[X]  Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
     Act of 1934 for the Fiscal Year Ended September 30, 2003

[ ] Transition Report pursuant to Section 13 or 15(d) of The Securities
     Exchange Act of 1934 (No Fee Required) for the Transition Period from
     ________ to ________

                         Commission file number 0-26362

                          ADVANCED NUTRACEUTICALS, INC.
                          -----------------------------
             (Exact name of Registrant as specified in its charter)

            Texas                                   76-0642336
 ------------------------------                 -------------------
(State or other jurisdiction of                  (I.R.S. Employer
 incorporation or organization)                  Identification No.)

106 South University Blvd., Unit 14
Denver, Colorado                                        80209
---------------------------------------               ----------
(Address of principal executive office)               (Zip Code)

         Issuer's telephone number, including area code: (303) 722-4008

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                Name of each Exchange
           Title of each Class                   on Which Registered
           -------------------                  ---------------------
                 None                                   None

           Securities Registered Pursuant to Section 12(g) of the Act:

                           $.01 par value common stock
                           ---------------------------
                                (Title of Class)




                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                         ADVANCED NUTRACEUTICALS, INC.
                                                 (Registrant)

  Date: January 28, 2004                 By: /s/ Jeffrey G. McGonegal
                                            -------------------------
                                            Jeffrey G. McGonegal
                                            Senior Vice President - Finance

<PAGE>

                                    PART III

           ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Directors
---------

Set forth below is biographical information regarding the members of the Board
of Directors of Advanced Nutraceuticals, Inc. ("ANI" or the "Company"). The
Company reorganized into a holding company structure in 2000 and NFLI became a
wholly-owned subsidiary. NFLI was sold by the Company in 2001. References to the
"Company" include Nutrition For Life International, Inc. ("NFLI").

F. Wayne Ballenger, age 56, has served in various financial consulting
capacities since 2000. He served as President of First Commercial Capital from
1995 to 2000. He has also served as President of Puncture Guard LLC since
December 1994. From March 1992 to December 1994, he served as director of sales
and marketing for Petrolon, Inc., a multi-level marketing organization.
Immediately prior thereto, he served as a vice president of Southwest Bank of
Texas with commercial lending responsibilities. Mr. Ballenger received a B.B.A.
degree from the University of the South in 1968. Mr. Ballenger became a director
of the Company in November 1995.

Randall D. Humphreys, age 48, is Chairman and Managing Director of Glenwood
Capital, LLC. From 1997 to 2001 he was the Chairman and Managing Director of
Enterprise Merchant Banc, L.L.C. During 1997 he led the diversification effort
of St. Joseph Light and Power, a New York Stock Exchange listed utility. During
1996 he served as a financial consultant. From 1986 through 1995, Mr. Humphreys
served as the Senior Operations Officer of Brierly Investments Limited. Mr.
Humphreys is a graduate of Kansas State University. Mr. Humphreys became a
director of the Company in June 2001.

David E. Welch, age 56 has been a director of the Company since February 2003.
Mr. Welch is a self-employed financial consultant. From July 1999 to June 2002
Mr. Welch served as Chief Financial Officer, Secretary and Treasurer of Active
Link Communications, Inc. In September 2003 Active Link Communications Inc.
filed a petition under the Federal bankruptcy laws. During 1998 he served as
Chief Information Officer for Language Management International, Inc., a
multinational translation firm located in Denver, Colorado. From 1996 to 1997,
he was Director of Information Systems for Mircromedex, Inc., an electronic
publishing firm, located in Denver, Colorado.

Gregory Pusey, age 51, has served as Chairman of the Board of Directors of the
Company since November 1999. Mr. Pusey served as an officer and director of the
company formerly known as Advanced Nutraceuticals, Inc. ("Old ANI") since
December 1997. Old ANI was acquired by the Company in November 1999. He has
served as President of Livingston Capital, Ltd., a private venture capital firm
since 1987. From 1986 to 1994, he served as a consultant to the Company and from
1994 to 1998, he served as a director and consultant to the Company. Since 1988,
Mr. Pusey has been the President and a director of Cambridge Holdings, Ltd., a
publicly held real estate development firm. Mr. Pusey also serves as Chairman
and a director of AspenBio, Inc., a publicly traded company and A4S
Technologies, Inc. Mr. Pusey graduated summa cum laude from Boston College with
a B.S. degree in finance in 1974.
<PAGE>
Pailla M. Reddy, age 43, is currently Chairman of the Board of Directors, Chief
Executive Officer and President of Bactolac Pharmaceutical Inc. Bactolac was
acquired by us in November 1999. Dr. Reddy founded Bactolac and has served as an
officer and director of Bactolac, since 1995. From 1991 to 1995, he was
production manager for Max Pharmaceutical, Inc. From 1983 to 1991, Dr. Reddy
held various positions with Wellcome Pharmaceuticals Ltd., including research
chemist and production manager. Dr. Reddy received a B.Sc. degree in chemistry
from Osmania University in India, and M.Sc. and Ph.D. degrees in organic
chemistry from Kanpur University in India. Dr. Reddy became a director of the
Company in 1999.

Officers

Our Board has elected the following executive officer who is not a member of the
Board. It is expected that the Board will elect officers annually following each
annual meeting of Shareholders.

Jeffrey G. McGonegal, age 52, became Senior Vice President - Finance of the
Company in February 2000. Mr. McGonegal also serves as Secretary of the Company
("ANIP"). Since 1997, Mr. McGonegal has served as Managing Director of McGonegal
and Co., a company engaged in providing accounting and business consulting
services. Mr. McGonegal served as a consultant to us in connection with the
acquisitions we made in 1999. From 1974 to 1997, Mr. McGonegal was an accountant
with BDO Seidman LLP. While at BDO Seidman LLP, Mr. McGonegal served as managing
partner of the Denver, Colorado office. Mr. McGonegal is a member of the board
of directors of The Rockies Venture Club, Inc. and Colorado Venture Centers,
Inc. He received a B.A. degree in accounting from Florida State University.

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

Based solely on the Company's review of copies of Section 16(a) reports filed by
officers, directors and greater than 10% shareholders with the Securities and
Exchange Commission, which have been received by the Company and written
representations from these persons that no other reports were required for those
persons, the Company believes that all filing requirements applicable to those
persons were complied with for the fiscal year ended September 30, 2003.

Audit Committee Composition

The Company has a separately designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). David E Welch (Chairman), Randall D. Humphreys and
F. Wayne Ballenger are members of the audit committee. The Board has determined
that at least one person on the Audit Committee, David E. Welch, qualifies as a
"financial expert" as defined by SEC rules implementing Section 406 of the
Sarbanes-Oxley Act. Mr. Welch also meets the SEC definition of an "independent"
director.
<PAGE>

Code of Ethics

The Company has adopted a Code of Ethics (as defined in Item 406 of Regulation
S-K) that applies to its principal executive, financial and accounting officers.
Advanced Nutraceuticals, Inc. will provide a copy of its code of ethics, without
charge, to any investor that requests it. Requests should be addressed in
writing to Mr. Jeffrey G. McGonegal, Senior Vice President - Finance, 106 South
University Unit #14, Denver, CO 80209.




<PAGE>
                         ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation paid
by us to the chief executive officer and each of the other executive officers of
the Company (the "named executive officers") during the fiscal years ended
September 30, 2001, 2002 and 2003.

Summary Compensation Table
<TABLE>
<CAPTION>


                                          ANNUAL COMPENSATION                   AWARDS                     PAYOUTS
                                          --------------------                  -------                    -------

                                                                Other Annual
                                                                   Compen-     Restricted                               All other
 Name and Principal Position              Salary                    sation     Stock Awards   Options/SARs   LTIP      Compensation
                                  Year    ($)         Bonus                                                 Payouts
<S>                               <C>    <C>        <C>          <C>           <C>            <C>          <C>      <C>
Greg Pusey
President, Chief
Executive Officer and             2001  $ 88,696    $50,000      $       -      $     -       $ 62,500      $   -    $       -
Chairman of the Board             2002   101,122          -              -            -         75,000          -            -
of Directors of ANI               2003   144,711      4,808              -            -              -          -            -
                                                                                                                             -

Jeffrey G. McGonegal
Senior Vice President             2001    99,712     30,000              -            -         75,000          -            -
of Finance of ANI                 2002   134,776          -              -            -         75,000          -            -
                                  2003   150,000     20,769              -            -              -          -            -


Pailla Reddy (1)
President, Chief Executive        2001   221,795          -              -      103,000         75,000          -            -
Officer and Chairman of the       2002   242,298          -              -            -        100,000          -            -
Board of Directors of             2003   250,000      9,616              -            -              -          -            -
Bactolac
</TABLE>

(1)  The Company has obtained a life insurance policy on Dr. Reddy. The benefit
     amount of $7,000,000 constitutes "key-man" insurance and is payable to the
     Company.



Employment Agreements
---------------------

In connection with the acquisition of Bactolac in 1999, the Company entered into
a two year employment agreement with Dr. Pailla Reddy, the President of
Bactolac. In November 2001 a new two year agreement was signed and in March 2003
an amendment to the agreement was signed. Dr. Reddy currently receives an annual
salary of $250,000 and may receive a performance bonus at the Company's
discretion. He is also entitled to continued use of the vehicle that is leased
by Bactolac.

In February 2003 the Company entered into an employment agreement with Jeffrey
G. McGonegal, Senior Vice President for a two year term under which he currently
receives an annual salary of $150,000 and may receive a performance bonus at the
Company's discretion

<PAGE>
Equity Compensation Plan Information
------------------------------------
The following table gives information about the Company's common stock that may
be issued upon the exercise of options under all of our existing equity
compensation plans as of September 30, 2003. The Company has options outstanding
under two plans, the 1995 Stock Option Plan and 1995 Non-Discretionary Stock
Option Plan.

<TABLE>
<CAPTION>

                                                                            (c) Number of
                                                                             Securities
                                                                              Remaining
                                                                            Available for
                                 (a) Number of          (b) Weighted       Future Issuance
                                Securities to be      Average Exercise      Under Equity
                              Issued Upon Exercise        Price of       Compensation Plans
                                 of Outstanding         Outstanding          (Excluding
                             Options, Warrants and   Options, Warrants       Securities       (d) Total of Securities
                                     Rights              and Rights         Reflected in        Reflected in Columns
       Plan Category                                                         Column (a))            (a) and (c)
       -------------         ---------------------   ------------------      -----------            -----------
<S>                               <C>                       <C>           <C>                    <C>
Equity Compensation Plans
Approved by Shareowners           921,852                   $ 1.59             329,398               1,251,250

Equity Compensation Plans
Not Approved  by
Shareowners                          None                       --                  --                     --

TOTAL                             921,852                   $ 1.59             329,398               1,251,250
                                  =======                   ======            ========               =========
</TABLE>


Option Grants in Fiscal Year Ended September 30, 2003
-----------------------------------------------------

The following table sets forth information with respect to stock option grants
to the named executive officers during the fiscal year ended September 30, 2003:

<TABLE>
<CAPTION>

<PAGE>

                                                                                        Potential Realizable Value at
                                                                                           Assumed Annual Rates of
                                  Individual Grants                                       Stock Price Appreciation
                                                                                               For Option Term
                            Number of      Percent of
                            Securities     Total            Exercise or
         Name               underlying     options/SARs     base price    Expiration         5% ($)         10% ($)
                           Options/SARs    granted to          ($/Sh)         date
                           granted (#)     employees in
                                           fiscal year

<S>                        <C>                    <C>           <C>        <C>                   <C>             <C>
Greg Pusey                          -             0%            $-             -                 $-              $-
Jeffrey McGonegal                   -             0%            $-             -                 $-              $-
Pailla Reddy                        -             0%            $-             -                 $-              $-

</TABLE>


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

The following table shows option exercises by the named executive officers
during the fiscal year ended September 30, 2003 and the number and value of
unexercised options at September 30, 2003.

<TABLE>
<CAPTION>

                                                                                                     Value of
                                Number of                              Number of                   Unexercised
                              Shares Under-        Value          Unexercised Options              In-the-Money
           Name               Lying Options       Realized          At Year End (#)                 Options at
           -----              Exercised (#)         ($)              Exercisable/                  Year End ($)
                              -------------         ---             Unexercisable                  Exercisable/
                                                                    --------------                Unexercisable(1)
                                                                                                  ----------------
<S>                                 <C>              <C>             <C>    <C>                        <C>
Greg Pusey                          0                0               79,167/70,833                     0/0
Jeffrey McGonegal                   0                0              100,000/75,000                     0/0
Pailla Reddy                        0                0               83,333/91,667                     0/0
</TABLE>

------------------------
(1)  Based on the price of the common stock of $ .43 on September 30, 2003 as
     reported by The Over The Counter Bulletin Board.



Compensation Committee Report
-----------------------------

The compensation committee (the "Committee") of the Board has been established
by the Board to periodically review the compensation philosophy for our
executives, and to recommend to the Board compensation packages for our
executives. The Committee also reviews and recommends to the Board any additions
to or revisions of our stock option plans. The Committee consists exclusively of
non-employee directors, appointed by resolution of the entire Board.

The Committee's objective is to set executive compensation at levels which (i)
are fair and reasonable to the shareholders, (ii) link executive compensation to
long-term and short-term interest of the shareholders, and (iii) are sufficient
to attract, motivate and retain outstanding individuals for executive positions.

<PAGE>
Fairness to the shareholders is balanced with the need to attract, retain and
motivate outstanding individuals by comparing our executive compensation with
the compensation of executives at other companies. The Committee's overall goal
is to achieve strong performance by the Company and its executives by affording
the executives the opportunity to be rewarded for strong performance. The
Committee attempts to provide both short-term and long-term incentive pay. To
accomplish its objectives, the Committee has structured the executive
compensation program with three primary components. These primary components are
base salary, annual incentives, and long-term incentives.

The Committee periodically reviews executive salaries. In addition to the
external competitive compensation market, base salary levels reflect each
officer's performance over time and each individual's role in the Company.
Consequently, employees with higher levels of sustained performance over time
and/or employees assuming greater responsibilities will typically be paid
correspondingly higher salaries. Individual performance criteria used to assess
performance include leadership, professionalism, initiative and dependability.
However, individual performance assessments are made qualitatively and in total,
and no specific weightings are attached to these performance indicators, nor is
a formula utilized in determining appropriate salary increases or salary levels.
Information regarding salary levels is included in the Executive Compensation
Table.

The Committee periodically reviews the performance of executive officers to
determine whether bonuses should be paid to those persons. The Committee has not
established specific performance measures for determining the award of bonuses.
The Committee believes that bonuses should be provided to reward key employees
based on Company and individual performance and to provide competitive cash
compensation opportunities to the Company's executives. During June 2001,
following the closing of the sale of NFLI, bonuses of $75,000, $50,000 and
$30,000 were paid to Messrs. Bertrand, Pusey and McGonegal, respectively. In
September 2001, a bonus of 103,000 shares of our common stock (valued at
$97,850) was approved for Dr. Reddy, and the shares were issued subsequent to
the fiscal year-end. During the year ended September 30, 2003, bonuses of
$9,615, $4,808 and $20,769 were paid to Messrs. Reddy, Pusey and McGonegal,
respectively.

Our stock option plans are designed to focus executive efforts on our long-term
goals and to maximize total return to our shareholders. The Committee believes
that stock options advance the interests of employees and shareholders by
providing value to the executives through stock price appreciation only. Options
terminate if the employee's employment with us is terminated. All options
awarded must have an exercise price of at least 100% of fair market value on the
date of grant.

The exact number of shares actually granted to a particular participant reflects
both the participant's performance and role in the Company, as well as our
financial success, and our future business plans. All of these factors are
assessed subjectively and are not weighted. In determining each grant, the
Committee also considers the number of stock options which are outstanding, and
the total number of options to be awarded.

<PAGE>
In making grants during the fiscal year ended September 30, 2003, the Committee
also considered the number of outstanding options previously granted to each
officer. The Committee believes that its awards were consistent with our
compensation philosophy to increase the emphasis placed on long-term incentives
and to be competitive in its total compensation program.

Under Section 162(m) of the Internal Revenue Code of 1986, as amended, public
companies are precluded from receiving a tax deduction on compensation paid to
executive officers in excess of $1,000,000, unless the compensation is excluded
from the $1,000,000 limit as a result of being classified performance-based. At
this time, our executive officers cash compensation levels do not exceed the
payment limit and will most likely not be affected by the regulations in the
near future. Nonetheless, the Committee intends to review its executive pay
plans over time in light of these regulations.

                                            COMPENSATION COMMITTEE

                                              F. Wayne Ballenger
                                              Randall D. Humphreys

Compensation of Directors
-------------------------

Effective in November 2001, our policy is to pay directors who are not employees
of the Company $12,000 per year. Prior to November 2001, directors received
$18,000 per year, $400 for each Board meeting attended, and $200 for each
committee meeting of the Board attended. Directors who are also employees of the
Company receive no additional compensation for serving as directors. We
reimburse our directors for expenses incurred for attendance at meetings of the
Board.

During the fiscal year ended September 30, 2001, we granted options to purchase
12,500 shares of Common Stock at a price of $1.16 per share to F. Wayne
Ballenger, 12,500 shares of Common Stock at a price of $1.16 per share to M.F.
Florence, and 12,500 shares of Common Stock at a price of $1.26 per share to
Randall D. Humphreys. During the fiscal year ended September 30, 2002, we
granted options to each of these non-employee directors to purchase 10,000
shares of Common Stock at a price of $.46 per share. During the year ended
September 30, 2003, we granted options to purchase 10,000 shares of Common Stock
at a price of $.63 per share to David E. Welch, upon his becoming a director of
the Company. During the year ended September 30, 2003, M. F. Florence resigned
from the Board and his options have now expired. The option grants were made
pursuant to the Company's 1995 Stock Option Plan, as amended. Each option will
expire ten years from the date of grant, except that an option will expire, if
not exercised, 30 days after the optionee ceases to be a consultant to the
Company. Each grant was made at an expense price equivalent to the trading price
of the Common Stock at the date of grant.


<PAGE>

Corporate Performance Graph
----------------------------

The following graph compares the yearly cumulative return on the Company's
common stock since September 30, 1998, with that of the Index for The Nasdaq
Stock Market (U.S. Companies), the S&P Smallcap 600, Old Peer Group (pre-NFLI
sale) which includes the following companies: BeautiControl Cosmetics, Inc.,
Herbalife International, Inc., Nature's Sunshine Products, Inc and Reliv'
International, Inc., and New Peer Group (post-NFLI sale) which includes the
following companies: Del Laboratories, HiTech, Vatrol, Natural Alternatives,
Inc., and Nutraceuticals, Inc.

<TABLE>
<CAPTION>

                                     Total Return to Stockholders
                                 (Assumes $100 Investment on 9/30/98)

      Total Return Analysis           9/30/1999       9/30/2000     09/30/2001     09/30/2002      9/30/2003
      ---------------------           ---------       ---------     ----------     ----------      ---------
<S>                                     <C>              <C>            <C>             <C>           <C>
Advanced Nutraceuticals, Inc.         $  81.25        $   27.08     $    7.92      $     3.96      $   3.58
Peer Group                            $  78.61        $   59.76     $  115.51      $   117.98      $ 139.10
Nasdaq Composite (US)                 $ 163.15        $  216.67     $   88.55      $    69.59      $ 106.64
S & P Smallcap 600                    $ 117.54        $  145.95     $  130.45      $   128.12      $ 162.56
</TABLE>


Source:  Zacks Investment Research www.zacks.com (800) 767-3771.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of December 31, 2003, the ownership of our
common stock held by:

     (1)  Each person who owns of record or who is known by us to own
          beneficially more than 5% of such stock;

     (2)  Each of the directors and nominees for election as directors;

     (3)  Each of the current executive officers; and

     (4)  All of our directors and executive officers as a group.

     The number of shares and the percentage of the class beneficially owned by
the persons named in the table and by all directors and executive officers as a
group, includes, in addition to shares actually issued and outstanding, unissued
shares which are subject to issuance upon exercise of certain options or
warrants described in the notes of the table.

<PAGE>
   Beneficial Owner                   Number of Shares            Percentage
                                            Owned                 of Ownership
   ----------------                   ----------------            ------------

Pailla M. Reddy                            2,609,281(1)                  50.5%
255007 Williston Avenue
Floral Park, NY  11001

Gregory Pusey                                957,978(2)                  18.9%
106 S. University, #14
Denver, CO  80209

Cambridge Holdings,  Ltd.                    679,701(3)                  13.5%
106 S. University, #14
Denver, CO  80209

Jeffrey G. McGonegal                         208,363(4)                   4.0%
1905 West Valley Vista
Drive
Castle Rock, CO  80104

F. Wayne Ballenger                            28,750(5)                   0.6%
3134 Meadway Drive
Houston, TX  77082

Randall D. Humphreys                         378,001(6)                   7.5%
9150 Glenwood
Overland Park, KS  66212

David E. Welch                                10,000(7)                   0.2%
1729 E. Otero Ave.
Centennial, CO 80122

All Officers and                           3,207,171                     68.5%
Directors as a Group
(6 Persons)

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

(1)  Includes options to acquire (i) 75,000 shares of common stock at $1.16 per
     share, of which options to acquire 25,000 shares become exercisable in
     April 2004 and (ii) 100,000 shares of Common Stock at $.506 per share which
     are exercisable in one-third annual installments commencing in September
     2003. Does not include options to acquire 100,000 shares at $.715 per share
     which become exercisable in July 2004

(2)  Includes 20,328 shares held by his wife, individually and as custodian for
     their minor children, 629,701 shares held by Cambridge Holdings, Ltd., a
     corporation in which he is a principal shareholder, 50,000 shares of common
     stock which may be acquired by Cambridge by exercise of a warrant, and
     options to acquire (i) 12,500 shares of Common Stock at $11.36 per share
     (ii) 62,500 shares of Common Stock at $1.16 per share of which options to
     acquire 20,833 shares of Common Stock become exercisable in April 2004 and
     (iii) 75,000 shares of Common Stock at $.506 per share which are
     exercisable in one-third annual installments commencing in September 2003.
     Does not include options to acquire 50,000 shares at $.715 per share which
     become exercisable in July 2004.

<PAGE>
(3)  Includes 50,000 shares which may be acquired by exercise of a warrant.

(4)  Includes 2,663 shares held in the name of McGonegal Family Partnership and
     options to acquire (i) 25,000 shares of Common Stock at $9.00 per share
     (ii) 25,000 shares at $2.25 per share (iii) 50,000 shares of Common Stock
     at $1.16 per share of which options to acquire 16,666 shares of Common
     Stock become exercisable in April 2004, and (iv) 75,000 shares of Common
     Stock at $.46 per share which are exercisable in one-third annual
     installments commencing in September 2003. Does not include options to
     acquire 50,000 shares at $.65 per share which become exercisable in July
     2004.

(5)  Includes options to acquire (i) 6,250 shares of Common Stock at $11.36 per
     share, (ii) 12,500 shares at $1.16 per share of which options to acquire
     4,166 shares become exercisable in April 2004, and (iii) 10,000 shares at
     $.46 per share which are exercisable in one-third annual installments
     commencing in September 2003. Does not include options to acquire 10,000
     shares at $.52 per share which become exercisable in one third annual
     installments commencing in December 2004.

(6)  Includes 320,501 shares of common stock held by Glenwood Capital Partners
     I, LP, a partnership in which he is the general partner, 35,000 shares of
     common stock which may be acquired by Glenwood by exercise of a warrant,
     options to acquire (i) 12,500 shares of common stock at $1.26 per share, of
     which options to acquire 4,166 shares become exercisable in August 2004,
     and (ii) 10,000 shares of Common Stock at $.46 per share which are
     exercisable in one-third annual installments commencing in September 2003.
     Does not include options to acquire 10,000 shares at $.52 per share which
     become exercisable in one third annual installments commencing in December
     2004.

(7)  Includes options to acquire 10,000 shares of Common Stock at $.63 per share
     which are exercisable in one-third annual installments commencing in
     February 2004. Does not include options to acquire 10,000 shares at $.52
     per share which become exercisable in one third annual installments
     commencing in December 2004.



            ITEM 13. CERTAIN RELATIONSHPS AND RELATED TRANSACTIONS


Bactolac, headquartered in Hauppauge, New York, conducts its operations in a
facility leased from its President, Pailla M. Reddy, comprising approximately
32,700 square feet. Bactolac's current monthly rental is approximately $30,000,
of which $6,000 pertains to improvements made by an entity owned by Dr. Reddy,
that escalates over the remaining term on the lease through December 2010.
Bactolac has a five-year renewal option on the facility.

<PAGE>
During March 2003, the remaining $500,000 Note payable to Dr. P. M. Reddy, was
repaid. The Note arose from the November 1999, purchase of Bactolac.

During March 2003, Bactolac and Dr. Reddy entered into an amended employment
agreement extending to November 1, 2005. In addition to a base annual salary of
$250,000, and performance bonus features, the agreement contains customary
confidentiality and benefit provisions.

In February 2003 the Company entered into an employment agreement with Jeffrey
G. McGonegal, Senior Vice President for a two year term under which he currently
receives an annual salary of $150,000 and may receive a performance bonus at the
Company's discretion

During January 2002, the Company borrowed $250,000 from Cambridge Holdings, Ltd.
The 7% note was scheduled to mature in one year, and was convertible at the
option of the holder into shares of ANI Common Stock at $1.00 per share, which
conversion subsequently occurred. The Company also issued a warrant to allow
Cambridge to acquire 50,000 shares of ANI Common Stock at $1.00 per share,
through June 2004. Greg Pusey and Jeff McGonegal, officers of the Company, are
also officers and directors of Cambridge. These transactions were approved by a
disinterested majority of the Company's Board and the Board believes that the
terms are at least as favorable as could have been obtained from an unaffiliated
party.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

During fiscal 2002 and 2003, we retained our principal auditor, Grant Thornton
LLP ("GT"), to provide services. On September 10, 2003, the Company dismissed GT
and on September 12, 2003 the Company engaged Gelfond Hochstadt Pangburn, P. C.
as principal auditor. Aggregate fees were billed in the following categories and
amounts:

                                              Years Ended September 30,
                                              -------------------------
                                                 2003           2002
                                              ---------       ---------
          Audit Fees                          $ 120,262       $ 114,974
          Audit Related                               0               0
          Tax Related                            20,000          35,700
          Other Fees                             7,600            8,778

Other fees for 2003 and 2002 related to 401(k) plan audits. All of the services
described above were approved by the Company's audit committee and prior to
performance. The audit committee has determined that the payments made to its
independent accountants for these services are compatible with maintaining such
auditors' independence.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
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(a)  The following exhibits are filed with this report.

     10.69 Employment Agreement, dated February 28, 2003, between Advanced
           Nutraceuticals, Inc. and Jeffrey G. McGonegal.

     10.70 Amendment, dated March 14, 2003, to Employment Agreement, dated
           November 18, 2001, between Bactolac Pharmaceutical Inc. and Pailla M.
           Reddy.

     31.1 Section 302 Certification of Chief Executive Officer


     31.2 Section 302 Certification of Chief Financial Officer


     32   Section 906 Certification of Chief Executive Officer and Chief
          Financial Officer

(b)  REPORTS ON FORM 8-K

     None



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