<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-K

      X   Annual Report Under Section 13 or 15(d) of The Securities Exchange Act
      -
          of 1934
          Fee Required) for the Fiscal Year Ended September 30, 1999

      -   Transition Report Under 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

                    NUTRITION FOR LIFE INTERNATIONAL, INC.
                    --------------------------------------
            (Exact name of Registrant as specified in its charter)

                  Texas                                 76-0416176
                  -----                                 ----------
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
      incorporation or organization)

            9101 Jameel
           Houston, Texas                                 77040
           --------------                                 -----
     (Address of principal executive office)            (Zip Code)

        Issuer's telephone number, including area code: (713) 460-1976

          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)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X]  No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant on December 21, 1999 was $9,350,326.

The number of shares outstanding of the Registrant's common stock on
December 21, 1999 was 5,808,595.

                      DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K is incorporated by reference to the Registrant's
definitive proxy statement, which is expected to be filed within 120 days of the
end of the Registrant's fiscal year, ended September 30, 1999.

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                DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

  The Company is including the following cautionary statement in this Annual
Report on Form 10-K to make applicable and take advantage of the safe harbor
provision of the Private Securities Litigation Reform Act of 1995 for any
forward looking statements made by, or on behalf of the Company. Forward looking
statements include statements concerning plans, objectives, goals strategies,
future events or performance and underlying assumptions and other statements
which are other than statements of historical facts. Certain statements
contained herein are forward looking statements and, accordingly, involve risks
and uncertainties which could cause actual results or outcomes to differ
materially from those expressed in the forward looking statements. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result or be achieved or accomplished. Actual events or results
may differ materially as a result of risks facing the Company. Such risks
include, but are not limited to, changes in business conditions, changes in
distributor composition and the network marketing industry, the general economy,
competition, changes in product offerings, international operations, as well as
regulatory developments that could cause actual results to vary materially from
the future anticipated results indicated, expressed or implied, in such forward-
looking statements. The Company disclaims any obligation to update any forward-
looking statement to reflect events or circumstances after the date hereof.

                                    PART I

                               ITEM 1. BUSINESS

Background

  Nutrition For Life International, Inc. (the "Company" or "NFLI") develops
products that are designed for health-conscious consumers, and sells those
products to consumers through its network of independent distributors. The
Company has developed a network of approximately 67,000 distributors. The
Company offers a product line of approximately 400 products in nine categories,
including nutritional supplements, health foods, weight management items, skin
care products, and other consumer products and services.

  The Company develops products that it believes will have market appeal to its
distributors and their customers, and assists its distributors in building their
own businesses. The advantage the Company offers to distributors is that they
can start a business without normal start-up costs and other difficulties
usually associated with new ventures. The Company provides product development,
marketing aids, customer service, and essential record-keeping functions for its
distributors. The Company also provides other support programs to the
distributors including teleconferencing calls, international and regional
seminars, a proprietary "monthly" magazine, business training systems and a site
on the World Wide Web of the Internet (www.nutritionforlife.com).

  Distributors actively recruit interested people to become new distributors for
the Company. These recruits are placed beneath the recruiting distributor in the
"network" and are referred to by the Company as that distributor's "downline".
Distributors earn commissions on sales generated by the distributors in their
downline as well as on the sales they directly generate.

  The Company purchases most of its products directly from manufacturers and
sells them to its independent distributors located in all 50 states, the
District of Columbia, Canada, the United Kingdom, the Republic of Ireland,
Norway, Finland, the Netherlands, Germany, the Republic of Philippines, Guam,
Puerto Rico and Japan. The Company`s operations outside North America are
conducted principally through wholly owned subsidiaries. In addition, the
Company recently completed acquisitions and conducts manufacturing operations
through a wholly owned subsidiary. Unless the context otherwise requires, the
term the "Company" as used in this Annual Report on Form 10-K includes the
Company's subsidiaries.

  Over the past several years, public awareness of the positive effects of
nutritional supplements on health has been heightened by widely publicized
reports supporting such claims. Many studies have indicated a correlation
between the consumption of nutritional supplements and reduced incidences of a
wide range of medical conditions. Reports have indicated that the United States
government and universities have generally increased sponsorship of research
relating to nutritional supplements. In addition, Congress has established the
Office of Alternative Medicine within the National Institutes of Health to
foster research into alternative medical treatments that may include natural
remedies. Congress has also directed the Office of Dietary Supplements in the
National Institutes of Health to conduct and coordinate research into the role
of dietary supplements in maintaining health and preventing disease.

  The Company believes that the aging of the United States population, together
with a corresponding increased focus on healthcare measures, will continue to
result in increased demand for vitamins and nutritional supplement products.
According to the United States Census Bureau, the 35-and-older age group of
consumers, which represents a substantial majority of regular users of vitamins

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and nutritional supplements, is expected to grow significantly faster than the
general United States population. The Company believes that increased public
awareness of the health benefits of nutritional supplements and favorable
demographic trends toward older Americans who are more likely to consume
nutritional supplements, have contributed to the steady growth of the
nutritional supplement market during the past several years, and that these
trends may contribute to further growth of the nutritional supplement market in
the United States. Although data for international markets is not readily
available, the Company expects that these factors will also contribute to growth
in the sale of nutritional supplements to countries outside the United States,
particularly in Europe and Japan.

   The Company intends to pursue its long-term business strategy of increasing
sales and profitability by (1) attracting and retaining distributors to its
network marketing system; (2) increasing product sales to existing distributors;
(3) expanding its marketing activities into new international markets; and (4)
adding complimentary goods and services through new product offerings and
strategic acquisitions.

   The Company's executive offices are located at 9101 Jameel, Houston, TX
77040. Its telephone number is (713) 460-1976 and its Web site is
www.nutritionforlife.com.

Recent Acquisitions

   The Company recently completed three acquisitions. On November 17, 1999, the
Company finalized the acquisitions of Advanced Nutraceuticals, Inc. ("ANI") and
Bactolac Pharmaceutical Inc. ("Bactolac") ANI was formed to pursue a
consolidation and integration program in the nutrition industry, and its
operations consisted of organizational and financing activities and arrangements
for acquisitions of other companies. Bactolac manufactures nutritional
supplements for private label customers.

   On December 1, 1999, the Company completed the acquisition of Ash Corp.
("Ash"). Ash primarily manufacturers liquid pharmaceutical and nutraceutical
products. Ash will be operated as a division of Bactolac. See Item 7 for a
discussion of terms of these acquisitions.

Distribution and Marketing

   The Company's products are distributed through a network marketing system
consisting of approximately 67,000 distributors. Distributors are independent
contractors who purchase products directly from the Company for their own use
and for resale to retail consumers. Distributors may elect to work on a full-
time or part-time basis. Management believes that its network marketing system
is well suited to marketing its nutritional supplements and other products
because sales of such products are strengthened by ongoing personal contact
between retail consumers and distributors, many of whom use the Company's
products themselves. The Company encourages its distributors to use the
Company's products. No one distributor directly accounted for more than 5% of
the Company's sales in any of the past three fiscal years.

   The Company's ability to increase sales is significantly dependent on its
ability to attract, motivate and retain distributors. The Company utilizes an
innovative marketing program that provides financial incentives, distributor
training and support, low priced starter kits, no inventory requirements, and
low monthly purchase requirements. Management intends to reach potential new
distributors through the Company's site on the World Wide Web, teleconferencing
and regional sales meetings.

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

          .    Generate cumulative qualifying product volume of $1,000 over any
               period of time.

          .    Qualify to be an Executive right away by purchasing the $199 or
               $499 Executive Business Pack, enroll in the Order Assurance
               Program (the "OAP") at the monthly level of $100 and subscribe to
               the $25 monthly Business Training System.

   "Qualifying product volume" is product the distributor and his downline
distributors purchase at wholesale directly from the Company either for personal
use or for sale to other customers at retail prices. There is no time limit to
meet these qualifications, and

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distributors may choose to become executives the same day that they enroll as a
distributor or over any period of time. An executive level distributor may
attain higher levels of commission based on sales generated by distributors
within his or her organization. For distributors who became executives prior to
March 1, 1998, the only qualification to remain an executive is to purchase $100
in product every month, except that distributors who have become executives by
generating cumulative qualifying product value of only $500 must continue their
participation in the other programs noted above for one year from enrollment in
order to maintain executive status. For distributors becoming executives
subsequent to March 1, 1998, the qualifications to remain an executive are to
purchase $100 in product every month and to be enrolled in the Business Training
System. Management believes that the right of executive level distributors to
earn commissions contributes significantly to the Company's ability to retain
its productive distributors. Management also believes that the timely
introduction of new and topical programs and products will assist in increasing
its network of distributors.

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

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

                                                        At September 30,
                                                        ----------------
                                              1999  1998   1997    1996   1995
                                              ----  ----   ----    ----   ----
     Approximate number of distributors (1)  67,000 80,000 88,500 87,400 57,300

     (1)  Includes "active" distributors only. A distributor remains active by
          generating a minimum of $40 in sales volume at least once every 12
          months. In order to maintain executive status and to be eligible for
          commissions and bonuses, an executive distributor must generate a
          minimum of $100 in sales volume every month and be enrolled in the
          Company's Business Training System.

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

  The Company participates in rallies in various key cities in North America,
Puerto Rico, the United Kingdom, Europe and Pacific Rim countries and
participates in motivational and training events in key countries, all of which
are designed to inform large numbers of prospective and existing distributors
about the Company's product line and selling techniques. Distributors give
presentations relating to their experiences with the Company's products and the
methods by which they develop their distributor organizations. Specific selling
techniques are explained, and emphasis is placed on the need for consistency in
using such techniques. Participants are encouraged to ask questions regarding
selling techniques and product developments and to share information with other
distributors attending the rallies. Distributors are also given opportunities to
interact with other distributors and to develop confidence in selling and goal-
setting techniques. Motivation is offered to participants in the form of
recognition, gifts, excursions and tours, which are intended to foster an
atmosphere of excitement throughout the distributor organization. Prospective
distributors are educated about the structure, dynamics and benefits of the
Company's network marketing system. During the fiscal years ended September 30,
1999, 1998 and 1997, the Company expended approximately $1,294,000, $679,000 and
$590,000, respectively, on promotional activities related to distributors'
rallies and the annual convention. In February 1998 the Company sponsored a
cruise for certain distributors at an additional cost of approximately $900,000.
The Company is sponsoring another cruise for certain qualifying distributors
which is expected to take place in April, 2000. The Company accrued the expected
cost of approximately $250,000 in the fiscal year ended September 30, 1999. See
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

  In July 1996 the Company entered into an Administrative and Consulting
Services Agreement (the "1996 Agreement") with Distributor Services, L.L.C.
("DS"). DS is an affiliate of Nightingale-Conant ("NC"), at the time a major
supplier of self improvement materials to the Company. The 1996 Agreement
provided that, except to the extent the Company produced its own material in-
house, DS had the exclusive right to produce and sell all of the Company's
recruiting and training material. Such materials were to be produced and
marketed at the expense of DS and DS was entitled to all revenues received from
the sales of such materials. DS was also granted the exclusive right to produce,
organize and sell, at its own expense, admission to all Company sponsored

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recruiting or promotional events and to receive all revenues therefrom. The
Company purchased product and services in the aggregate of approximately
$607,000, $4,387,000 and $6,494,000 from DS and NC in the years ended
September 30, 1999, 1998 and 1997, respectively. Kevin Trudeau, formerly a key
distributor of the Company, was principally responsible for DS's performance in
connection with the 1996 Agreement.

  In August 1998, the Company and Kevin Trudeau entered into an agreement
regarding the termination of Mr. Trudeau's distributorship and in October 1998,
the Company, DS and NC entered into a severance agreement terminating the 1996
Agreement. The Company is now internally providing the services previously
performed by DS. To facilitate this the Company has hired three former employees
of DS to assist in event organization and scheduling. The Company now produces,
organizes and, when appropriate, sells admission to its recruiting and
promotional events and retains all such revenue. Additionally, existing in-house
staff, facilities and certain executive distributors are being utilized to
produce the Company's recruiting and training materials, including its monthly
Business Training System. The Company believes that it has the personnel and
facilities to perform the services previously provided by DS.

  Special Bonus Programs.  The Company offers a car bonus program, whereby it
makes car payments up to $3,500 per month for qualifying distributors. The
Company has no liability relating to the financing or purchasing of the
automobile. The car bonus program was initiated in fiscal 1990. At September 30,
1999, the Company had approximately 100 qualifying distributors in the program.
The Company also offers a house payment bonus program, whereby it makes house
payments up to $10,000 per month. The Company has no liability relating to the
financing or purchasing of the house. The house payment bonus program was
initiated in September 1998. At September 30, 1999 the Company had 22
distributors in the program.

  Order Assurance Program.  The Company provides a program whereby distributors
may enroll in a minimum ordering program in order to enhance their eligibility
for commissions. Minimum orders ranging from $41 to $301 per month are
automatically placed by credit card or check. Differing amounts for the optional
Order Assurance Program ("OAP") exist to allow generation of sales volume at
various levels that generally correspond to commission and bonus qualification
levels, i.e., $100 is the minimum sales volume to remain an active executive;
$100 is the minimum sales volume qualification level for the car bonus program;
$160 is the minimum sales volume to be eligible for gold executive; $300 is the
minimum sales volume requirement to be a platinum executive; and $300 is the
minimum sales volume qualification level for the house payment program.
Therefore, the OAP promotes sales for the Company and the distributors
participating in bonus programs. The OAP was initiated in fiscal 1993. The OAP
is voluntary and no restrictions are placed upon any participant's ability to
exit the OAP. As of September 30, 1999, 1998 and 1997, respectively, there were
approximately 29,000, 35,000, and 34,400 distributors enrolled in the OAP.

  Prior to June 1, 1999 NFLI sold product redemption certificates to
distributors who were enrolled in the Company's OAP. Revenues were recorded when
these certificates were redeemed for product. However, if the certificates were
not redeemed for product, the Company recorded revenues ratably over a 150-day
period commencing with the ending of the expiration period of 120 days.

  Subsequent to June 1, 1999 the Company began shipping product packs for most
OAP purchases, the shipment of which results in the recognition of revenue. The
Company now only sells product redemption certificates for certain "big ticket"
items. Such certificates must be redeemed for the specified item upon
accumulation of the required number of certificates.

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

  Unified Messaging System.  The Company provides a special voice messaging
program that gives distributors voice messaging capabilities to communicate more
efficiently with their downline. This program also allows the Company to
automatically voice message all distributors on the Unified Messaging System.

  Mind And Body Institute.  In January 1997, the Company began a series of
one-day product workshops designed to enhance distributor understanding and
appreciation of the Company's product line. Approximately 35 of these workshops
were held during the year ended September 30, 1999.

  Business Training System.  The Company provides a monthly subscriber service
of leading self development books and audio and video programs that serve as a
link between the philosophy and ideals of the Company and its distributors.

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

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

  Other Distributor Communication.  Management believes that a significant part
of the Company's ability to perform well is dependent upon the enthusiasm and
momentum generated by executive level distributors who are able to motivate
their downline organizations through various marketing methods, including the
use of newsletters, brochures and other sales aids and the holding of meetings
and rallies at the expense of the sponsoring distributor.

  The Company also sponsors an Annual Convention and Regional Meetings to
provide additional information and support to its distributor network. The
Company publishes The Lifestyles Magazine, Lifelines Newsletter and Platinum
                  -----------------------  --------------------     --------
Newsletter on a periodic basis to provide important product and marketing
----------
information to distributors. Additionally the Company's worldwide Web site
provides information regarding the Company and its products to distributors.

  Markets

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

<TABLE>
<CAPTION>

                                       Year Ended September 30
                                 -----------------------------------
                                           (in Thousands)
     Country           Year Entered    1999    1998     1997     1996     1995
     -------           ------------    ----    ----     ----     ----     ----
     <S>               <C>           <C>      <C>      <C>      <C>      <C>
     United States         1984      $57,900  $60,400  $73,000  $89,400  $25,800
     Canada                1993        3,100    4,800    6,800    6,400    4,200
     Puerto Rico           1994          100      200      500    1,200    2,200
     Europe(1)             1996        4,700    3,500    2,500      200      ---
     Korea(2)              1991          ---      ---      ---      100      100
     Philippines(2)        1993          800      700      200      100      100
     Japan(3)              1999           --
</TABLE>

  (1) The Company commenced operations in the United Kingdom in 1996, and
  expanded into Ireland in 1997, the Netherlands in 1998 and Norway and Finland
  in 1999.

  (2) The Company has historically sold its products in Korea and the
  Philippines which do not use the Company's network marketing system. The
  Company introduced its network marketing system through a subsidiary in the
  Philippines in July 1997. In October, 1999 the Company finalized its plan to
  divest its Philippines subsidiary. The Company expects to continue marketing
  its products in the Philippines, but does not expect sales to be substantial.

  (3) The Company commenced operations in Japan in November 1999.

  The Company's long-term plan is to enter additional markets outside the
continental United States. Regulatory approvals may be required in some
instances. During the regulatory compliance process, the Company may alter the
formulation, packaging or labeling of its products to conform to applicable
regulations as well as local variations in customs and consumer habits, and the
Company may modify certain aspects of its network marketing system as necessary
to comply with applicable regulations.

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

  The uncertain Asian economic situation has had a negative impact on the
Company's operations in the Philippines. The exchange rate between the
Philippines peso and the US dollar has declined from approximately 28 to 1 at
the formation of that subsidiary to approximately 41 to 1 as of September 30,
1999. The Company has realized exchange rate gains (losses) of approximately
$72,500, $(212,000) and $(78,500) for the years ended September 30, 1999, 1998
and 1997, respectively in the Philippines.

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Products

  The Company markets and distributes an extensive product line of approximately
400 items in nine different categories: (1) vitamins, minerals and antioxidants;
(2) Nutique personal care items; (3) food and weight management items; (4)
herbal formulas; (5) homeopathic and special formulas; (6) cleaning
concentrates; (7) filtration systems; (8) self-improvement programs; and (9)
services. The line consists of primarily consumable products that are designed
to target the growing consumer interest in natural health alternatives for
nutrition and personal care. In developing its product line, the Company has
emphasized quality, purity, potency, and safety.

  Vitamins and minerals and antioxidants.  The Company markets 49 vitamin and
mineral products that are offered in a variety of combinations including the
Company's proprietary Grand Master(R), Master-Key-Plus(R), and OraFlow Plus(R)
formulations.

  Nutique personal care items.  The Company markets 28 Nutique hair and skin
care products including skin care formulas for men and women, shampoo and
conditioner, hand and body lotions, sunscreen, an alphahydroxy acid skin
rejuvenating complex, and a thigh creme. Each of these products contains
ingredients that are formulated to promote healthier looking skin and hair. Food
and weight management items. The Company markets 84 food and weight management
products. These include a whey beverage in five flavors, the Nutri-Mac line of
pastas, the Nutri-Blend flour and baking mixes, instant food shakes, fiber
products, the Nutri-Cookie(R), and Lean Life(R), a herbal weight management
formulation, and a line called Heartful Gourmets(R), which are soy-based meals
and snacks.

  Herbal formulas.  The Company's 33 herb and herbal formulation products are
produced using only natural ingredients and are precisely measured and carefully
processed into a convenient tablet or capsule form. The line consists of many
traditionally popular herbs such as alfalfa, ginkgo biloba, garlic, Cat's Claw,
and St. John's Wort, as well as special blends developed by the Company.

  Homeopathic and special formulas.  Homeopathic remedies, when prepared in
minute amounts, mimic disease symptoms and stimulate the body's defense systems.
The Company offers 76 homeopathic remedies that have been formulated in
accordance with the Homeopathic Pharmacopoeia of the United States. In addition,
the Company markets a variety of other special formula products including shark
cartilage liquid and capsules, pain relief formulations, cough syrup, digestive
aids, sports massaging gel, a special formula dentifrice and special
phytochemical products.

  Cleaning concentrates.  The Company markets household cleaning products that
are non-volatile and biodegradable. There are 29 products, including a liquid
hand and body soap, dishwasher concentrate, laundry concentrates, laundry
softener, a heavy duty cleaner-degreaser, and a pine disinfectant, and a line of
anti-microbial and anti-viral disinfectants.

  Filtration systems.  The Company markets 52 products designed to test or
improve the quality of air and water, including electrostatic air filters and
water filtration systems.

  Self improvement programs.  The Company markets 52 motivational and self
improvement tapes and other products. The Company internally produces such tapes
to supplement tapes available from third party suppliers.

  Services.  Two services are currently being offered to distributors and
customers: LIFEdial 1 Plus and Body Check. LIFEdial 1 Plus is a discounted long
distance package. Distributors may sign-up for the service and sell it to
customers. Body Check is a hair analysis which tests the level of 21 elements
normally found in the body. The resulting report also includes information
regarding exposure to toxic substances. The Body Check report can then be used
to make recommendations for the individual's specific nutritional supplements.

  During the last three fiscal years, no single product has accounted for 10
percent or more of the Company's revenue. The Company continually seeks to
identify, develop and introduce innovative, effective and safe products. During
the fiscal years ended September 30, 1999, 1998 and 1997, the approximate number
of new products and services introduced by the Company was 36, 16, and 44,
respectively. Management believes that its ability to introduce new products
increases its distributors' visibility and competitiveness in the marketplace.

  The Company maintains significant amounts of products in its inventory to meet
rapid delivery requirements of customers and to minimize product back orders,
which historically have not been significant. Due to the nature of the Company's
business, the Company typically does not carry a substantial backlog of orders.

                                       7
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New Product Development

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

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

Consumer Product Warranties and Returns

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

Management Information System

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

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

  The Company installed a White(R) automated inventory storage and retrieval
system in 1997 in its warehouse/shipping facilities in Houston. The system has
improved operator productivity, reduced error rates and increased the speed of
throughput. The Company believes that it will be able to handle substantially
increased sales volumes without material staffing increases as a result of the
installation of the White(R) system. The total cost including implementation and
training was approximately $1,000,000.

  The Company completed the installation of SAP(R), an enterprise wide
state-of-the-market computer information system during 1998. The system is
expected to provide improved administrative cost control, enhanced customer
service and improved multinational support. The total cost, including
implementation and training, was approximately $3,000,000. The Company has
entered into a lease arrangement for a portion of this system. See Item 1.
"Business-Risk Factors" and Item 7. "Management's Discussion and Analysis of
Financial Conditions and Results of Operations".

Manufacturing and Supplies

  During the past three fiscal years the Company purchased all of its vitamins,
nutritional supplements and all other products from third parties that
manufacture such products to the Company's specifications and standards.

  In July 1998, the Company entered into an agreement with VitaRich
Laboratories, Inc. ("VitaRich") in which the Company agreed to advance VitaRich
up to $800,000 to secure the purchase of a sufficient quantity of certain
nutritional supplement raw materials to meet the Company's anticipated need for
rapid delivery of product and to obtain such product at discounted prices. The
agreement is for three years and requires that the Company provide VitaRich with
periodic estimates of anticipated needs, as well as actual use rates of the
requested product.

  The Company made an initial deposit of $400,000 to VitaRich and has agreed
that it will maintain a deposit in the amount of 40% of its outstanding purchase
orders with VitaRich. VitaRich is required to use the deposit for the purchase
of raw material and the processing of finished product in sufficient kinds and
quantifies to enable the Company to (i) meet its anticipated need for the
product,

                                       8
<PAGE>

(ii) maximize the costs savings to VitaRich and provide the Company with reduced
prices through the purchase of bulk quantities of raw materials, and (iii)
enable VitaRich to meet the Company's rapid delivery requirements.

  Unless the agreement is terminated before its expiration, the Company is not
required to make additional deposits beyond the third year. Additionally,
VitaRich is required to repay any outstanding deposits by crediting the Company
with an amount equal to 10% of each purchase order placed by the Company until
such time as all advances have been repaid. The Company has a first priority
security interest in all of VitaRich's interest in the inventory, warehouse
receipts, documents of title, accounts receivable and proceeds of insurance
related to the raw materials purchased by VitaRich on behalf of the Company. As
of September 30, 1999 the Company had advanced VitaRich a total of $400,000
which amount is included in prepaid expenses in the financial statements in
Item 8.

  The Company does not have long term supply agreements with any vendor other
than VitaRich. Although the Company believes that it could establish alternate
sources for most of its products, any delay in locating and establishing
relationships with new sources could result in product shortages and back orders
for the products, with a resulting loss of revenues to the Company. In addition,
such delays could interrupt growth of product sales and distributor recruitment.

  With the acquisitions of Ash and Bactolac, the Company has expanded its
operations to include the manufacture of pharmaceutical products and nutritional
supplements. The Company has invested in manufacturing to meet the growing
demand for pharmaceutical and nutritional supplement products, to position
itself to have a ready supply of nutritional supplement products and to
diversify and expand its operations. Ash employs approximately 90 people and
manufactures pharmaceutical products at its 132,000 square foot facility in
Gulfport, Mississippi. Its principal customer is Bayer Corporation, which
accounted for 62% and 70% of Ash's sales for the years ended December 31, 1998
and 1997, respectively. The principal product made by Ash for Bayer is Phillips
Milk of Magnesia. Ash is the sole producer of this product for Bayer in the
U.S., and produces this product pursuant to a supply agreement that expires on
October 10, 2000. It is provided in the agreement that Ash and Bayer will
negotiate in good faith regarding the renewal of the agreement. Ash also
produces Haleys' M-O and other antacid products for Bayer pursuant to this
agreement.

  Ash is committed to providing high quality products. All of Ash's products are
manufactured in accordance with the applicable current Good Manufacturing
Practices of the Food and Drug Administration ("FDA"). Ash has established
laboratory controls which encompass scientifically sound and appropriate
specifications, standards, sampling plans, and test procedures and protocols
designed to assure that components, drug product containers, closures, in-
process materials, labeling, and resultant drug products rigorously conform to
appropriate standards of identity, strength, quality and purity. Ash's
laboratory operations are constantly reviewed to assure these operations meet
standards in the industry.

  Upon receipt by Ash of a raw material or a finished product at its
manufacturing facilities, the item is placed in quarantine until tested and
passed by Ash's quality control department. Special numbering systems are used
for all components, in-process materials, and finished products to assure strict
adherence to all governing specifications and standards and to permit an audit
trail to be maintained on any product from receipt of raw input materials
through the entire production and packaging processes, to the resultant finished
products.

  Bactolac is headquartered in Westbury, New York, where it employs
approximately 24 people in the manufacture of nutritional supplements for
private labeled customers. Bactolac's operations are currently conducted in two
facilities with a total of 15,000 square feet where it produces weight loss,
anti-oxidants, formulas designed for women, formulas for men, children's
formulas, sport nutrition, energy products, stress formulas, relaxation
formulas, life extension, immune enhancement, brain products, cleansing
products, cholesterol products, liver formulas, heart formulas and many herbal
remedies. In addition, Bactolac custom formulates products in response to
customer demand. Bactolac handles the formulation, micropulverization, mixing,
blending, screening, filtering, capleting, and encapsulation of over 100
different vitamins and supplements. Bactolac does limited bottling, labeling and
packaging.

  Bactolac is committed to providing high quality products and employs quality
control standards to assure that its operations meet standards in the industry.
Bactolac anticipates finalizing arrangements to relocate to a new facility with
upgraded equipment and technological improvements. Prior to the acquisition of
Bactolac by NFLI, Bactolac was a subcontractor to a supplier to NFLI of
nutritional supplements.

Trademarks and Service Marks

  Most products are packaged under the Company's "private label". The Company
has registered trademarks with the United States Patent and Trademark Office for
its Master Key Plus(R), Oraflow Plus(R), LeanLife(R), Nutri-Cookie(R), Requin
3(R), Grand Master(R), Phytonol(R), BioWater(R), E-Lemonator(R), Phytogreen(R),
BioGlow(R), BioRub(R), Whey-To-Go(R), Heartful Gourmets(R), Lifedial Plus(R),
Arthro Support Tri-Pack(R), Enviro Defense System(R), NutriBuddies(R), ,and
Nutrition For Life(R). It has applied for trademark registration for its
Snoreless(TM), ItchBuster(TM), Healthy Chocolates(TM), Soy B-Nuts(TM),
JaNails(TM), Kholesterol-Blocker(TM), Healthy Start(TM), O2 Support(TM),
Ki.Sweet(TM), Immune Support(TM), and PyruBalance(TM).

                                       9
<PAGE>

Competition

  The Company competes with many companies marketing products similar to those
it sells and markets. It also competes intensely with other network marketing
companies in the recruitment of distributors. The Company's ability to remain
competitive depends, in significant part, on its success in recruiting and
retaining distributors. There can be no assurance that the Company's programs
for recruitment and retention of distributors will be successful in the future.

  There are many network marketing companies with which the Company competes for
distributors. Some of the largest of these are Amway, Nature's Sunshine, Inc.,
Herbalife International, Inc., and Rexall Sundown, Inc. Each of these companies
is substantially larger than the Company and has significantly greater
resources. The Company competes for distributors by means of its marketing
program that includes its commission structure, training and support services,
and other benefits.

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

     In addition, the Company's recently acquired manufacturing operations are
in competition with numerous companies in the manufacture of pharmaceutical
products and nutritional supplements.

Government Regulation

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

  In November 1991, the FDA issued proposed regulations designed to, among other
things, amend its food labeling regulations. The proposed regulations met with
substantial opposition. In October 1994, the "Dietary Supplement Health and
Education Act of 1994" (the "Dietary Supplement Law") was enacted. Section 11 of
the Dietary Supplement Law provided that the advance notice of proposed rule
making by the FDA concerning dietary supplements was null and void. FDA
regulations that became effective on June 1, 1994 would require standard format
nutrition labeling on dietary supplements.

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

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

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

  The Dietary Supplement Law also provided for the formation of a Presidential
Commission on Dietary Supplement Labels, requiring it to consider and comment
upon informational dietary supplement issues. The Commission issued its non-
binding final report on November 24, 1997. The report's findings are similar,
yet distinct from, the regulations enacted by the Dietary Supplement Law. The
report addressed a broad range of issues, including the need for increased
consumer education of dietary supplement

                                       10
<PAGE>

products. The Company cannot determine what effect the report will have on its
business in the future, or whether the report will lead to any additional
legislative or regulatory intervention.

  The FDA also regulates the formulation and manufacture of dietary supplements
distributed by the Company. In February 1997 the FDA published proposed
regulations for the manufacture of dietary supplements. These regulations, if
finalized would require at least some of the quality control provisions related
to drugs to be applied to nutritional supplements.  The Company believes that it
complies with good manufacturing practices for foods, as currently required by
the FDA.

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

  On November 18, 1998, the FTC issued it's "Dietary Supplements: An Advertising
Guide for Industry". Such guide provides an application of FTC law to dietary
supplement advertising and includes examples of how principles of advertisement
interpretation and substantiation apply in the context of dietary supplement
advertising.  The guide provides additional explanation but does not
substantially change the FTC's existing policy that all supplement marketers
have an obligation to ensure that claims are presented truthfully and to specify
the adequacy of the support behind such claims.

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

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

  The Company's products are subject to regulation by foreign countries where
they are sold. Government regulations in foreign countries where the Company
plans to commence or expand sales may prevent or delay entry into a market or
prevent or delay the introduction or require the reformulation or relabeling of
certain of the Company's products.

Employees

  At September 30, 1999, the Company employed 209 persons; 171 of whom are
employed in the U.S. The majority of the Company's employees are office,
clerical and warehouse employees.  The Company believes that its relationship
with its employees is good.

Risk Factors

  Important factors that could cause actual results to differ materially from
the Company's expectations are disclosed in this Report, including without
limitation in conjunction with the forward-looking statements included in this
Report, and the following risk factors.

Risks Related to the Company

  Recent Losses. The Company has incurred losses in each of the fiscal years
ended September 30, 1999, 1998 and 1997. The loss in 1999 resulted from lower
sales and significant losses experienced by the Company's foreign subsidiaries.
The 1998 loss was principally the result of lower sales, losses experienced by
the Company's foreign subsidiaries and the Company recognizing in September
1998, the cost associated with the termination of its 1996 Agreement with
Nightingale-Conant. The loss in 1997 was attributable primarily to accrual of
expenses related to the settlement of class action lawsuits against the Company.
The Company also experienced declines in net sales for each of the last three
years when compared to the preceding fiscal year.  In addition, the Company
experienced increased operating costs in each of those years. Particularly in
view of the Company's increased level of

                                       11
<PAGE>

expenditures, the Company's future operating results will be negatively impacted
if the Company is not successful in increasing the level of its sales. See Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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

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

  To become a distributor of the Company, a person must be sponsored by an
existing distributor, sign the official Distributor Agreement, and purchase a
"distributor success kit" from the Company, which is currently priced at $49.
The Company's distributors earn the right to receive commissions upon obtaining
the level of "executive."  Executive level distributors may earn commissions on
sales generated by other distributors in their downline organization.  There are
two ways for a distributor to meet the requirement to become an executive, which
can be met the same day he or she enrolls as a distributor or over an extended
period of time at the election of the distributor.  The Company previously used
the terminology of "Instant Executive Program" to reference the qualifications
for becoming an executive distributor on an accelerated basis.  The Instant
Executive Program, particularly as marketed by Kevin Trudeau, formerly a key
independent distributor, and his marketing organization, was the subject of
legal and regulatory scrutiny.

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

  The Company was not named as a defendant in the Illinois Suit, but the
Company's management viewed the Illinois Suit as an opportunity to discuss the
Company's marketing program and to resolve confusion surrounding the program.
On July 16, 1996, the Company entered into an "Assurance of Voluntary
Compliance" (the "AVC") with the Illinois Attorney General.  The AVC preserved
the ability of a new distributor to become an executive distributor the day that
he or she enrolls by purchasing at least $1,000 in qualifying products and by
joining the Order Assurance Program and a business training program.  Under the
AVC, the Company may maintain its same executive level qualifications, but to
aid clarification, it will no longer use the "Instant Executive" designation.
Other key features of the AVC focus on the Company's commitment to:  (a) create
an official explanation of its marketing and compensation plan and to prohibit
distributors from creating their own explanations of how the marketing and
compensation plan works; (b) make clear that there are no mandatory purchases of
product to become a distributor; (c) take further steps to stress distributor
compliance with the Company's policies and procedures; and (d) create a World
Wide Web site on the Internet to provide more information about the Company's
products and programs.  The Company also agreed to provide distributor earnings
disclosures and to make clear that executive distributors cannot earn
commissions unless they are engaged in the sale of the Company's products to
consumers at retail, including procedures to verify retail sales.  Specifically,
an executive distributor will not be entitled to receive bonuses or commissions
on downline sales unless within the preceding one month period the executive
distributor has made at least five retail sales, or within the preceding two
month period has made ten retail sales. The Company also agreed to take
additional steps to encourage distributors to redeem OAP certificates for
product, to monitor customer purchases, and to make a contribution to the
Illinois Consumer Education Fund.


                                       12
<PAGE>

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

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

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

  In 1996 class action lawsuits were commenced against the Company alleging,
among other things, that the Company's distributor compensation program
constituted an illegal "pyramid scheme." In 1997, the Company entered into
settlement agreements. The pendancy and settlement of these actions had a
material adverse effect upon the Company's operations and financial condition.
See Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

  The Company does not believe that the manner in which it markets its products
constitutes a "pyramid scheme" or a "security."  The only financial requirement
to become a distributor is to purchase a "distributor success kit" which is
currently priced at a nominal charge of $49.  The Company does not pay a fee or
other compensation to distributors as direct remuneration for enrolling
distributors in their "downline" and the Company encourages all distributors to
retail their products to consumers who are not Company executives.  In addition,
the Company does not pay a fee or other compensation to distributors for sales
of product to their downline; thus, all product purchases are to be consumed by
the distributor or sold to the ultimate consumer.  The Company believes that the
efforts it has undertaken with the Illinois Attorney General and regulatory
authorities in other states, which culminated in the AVC in Illinois and
elsewhere, will assist the Company in complying with government laws and
regulations in the future.  Nonetheless, there can be no assurance that the
appropriate authorities in any states will not initiate court proceedings
against the Company for violation of applicable laws. Furthermore, there can be
no assurances that the Company will not be subject to other lawsuits from other
governmental authorities or private parties in state or federal court. Any such
action could have a material adverse effect upon the Company.

  Adverse Publicity. The size of the distribution force and results of the
Company's operations can be particularly impacted by adverse publicity regarding
the Company, or its competitors, including the legality of network marketing,
the quality of the Company's products and product ingredients or those of the
Company's competitors, regulatory investigations of the Company or its
competitors and their products, actions by the Company's distributors and the
public's perception of the Company's distributors and network marketing
businesses generally.  Such adverse publicity could have a material adverse
effect on the Company's ability to attract and retain customers or distributors,
or in the Company's results from operations or financial condition generally.

  Statements and Other Actions by Distributors.  The Company's distributors are
required to sign the Company's official Distributor Agreement that requires them
to abide by the Company's policies.  Nonetheless, in certain instances
distributors have created promotional material which does not accurately
describe the Company's marketing program or they may have made statements
regarding potential earnings or other matters not in accordance with the
Company's policies.  Although regulatory authorities did not sue the Company,
such actions lead to increased regulatory scrutiny as described above. Although
the Company attempts to monitor its distributors' statements and activities,
there can be no assurance that it will be able to accomplish this objective and
the Company could be subject to regulatory scrutiny and potential claims.  In
addition, distributors could make predictive statements about the Company's
operations or other unauthorized remarks regarding the Company that the Company
may be unable to control. Distributors are not authorized to make such
statements on behalf of the Company.  Nonetheless, statements or actions by
distributors could also adversely affect the Company.

  Product Competition and Competition for Distributors.  The business of
distributing and marketing vitamins and minerals, personal care items, weight
management items, and other products offered by the Company is highly
competitive.  Numerous

                                       13
<PAGE>

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

  The Company is subject to significant competition from other marketing
organizations for the recruitment of distributors.  The Company's ability to
remain competitive depends, in significant part, on the Company's success in
recruiting and retaining distributors.  From the last quarter of the fiscal year
ended September 30, 1995 to the last quarter of the fiscal year ended September
30, 1998, one executive level distributor, Mr. Kevin Trudeau and his marketing
organization, were involved in recruiting distributors for the Company.  In
August 1998, the Company and Mr. Trudeau entered into an agreement to end their
business relationship. Mr. Trudeau's agreement not to compete with the Company
expired in May 1999. In October 1998 the Company also entered into a severance
Agreement with NC and DS, which had been producing and marketing recruiting and
training materials and sponsoring promotional events for the Company since July
1996. The Company is now internally providing the services previously performed
by NC and DC. See "Business - Distribution and Marketing." There can be no
assurance that the Company's programs for recruitment, training and retention of
distributors will be successful or that existing distributors will not join Mr.
Trudeau in another business venture or otherwise lose interest in the Company's
products and programs.

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

  Family Relationships.  At September 30, 1999, the Company employed
approximately 209 persons.  Of these 209 persons, 11  persons have a family
relationship, through birth or marriage, with either David P. Bertrand or Jana
B. Mitcham, executive officers of the Company.  The Company's management
believes that all of the Company's employees have been employed by the Company
on the basis of their qualifications, and that their retention by, and
advancement within, the Company has been, and will continue to be, determined by
their individual performances as an employee of the Company, and not due to any
family relationship.  Nonetheless, due to the large number of family
relationships, the potential for conflicts of interest could be significant.

  Government Regulations. The manufacturing, processing, formulation, packaging,
labeling and advertising of the Company's products are subject to regulation by
federal, state and foreign agencies, including the United States Food and Drug
Administration (the "FDA"), the Federal Trade Commission, the Consumer Product
Safety Commission, the United States Department of Agriculture, the United
States Postal Service and the United States Environmental Protection Agency.
Among other matters, such regulation is concerned with health claims made with
respect to a product that asserts 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.

  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
Company also cannot predict whether new legislation regulating its activities
will be enacted, which new legislation could have a material adverse effect on
its operations. See Item 1. "Business-Government Regulations."

  Expansion Into Foreign Markets.  Although the Company intends to continue to
expand into foreign markets, there can be no assurance that the Company can open
markets on a timely basis or that such new markets will prove to be profitable.
See Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations"  for a discussion of recent start-up expenditures and
increased operating costs associated with expansion into Europe and Japan and
the Company's recent decision to terminate operations in the Philippines.
Significant regulation and legal barriers must be overcome before marketing can
begin in any foreign market. Also, before marketing has commenced, it is
difficult to assess the extent to which the Company's products and sales
techniques will be successful in any given country. In addition to significant
regulatory barriers, the Company may also expect problems related to entering
new markets with different cultural bases and legal systems from those
encountered in the past. See Item 1. "Business-Markets." Moreover, expansion of
the Company's operations into new markets entails substantial working capital
and capital requirements associated with regulatory compliance.

                                       14
<PAGE>

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

  During the year ended September 30, 1999 the Company realized an exchange rate
gain of approximately $65,600.  During the years ended September 30, 1998 and
1997 the Company realized exchange rate losses of approximately $318,000, and
$78,500, respectively. There can be no assurance that exchange rates will
continue to improve in the future or that future exchange rate losses will not
exceed those experienced in recent periods. Further, if exchange rates fluctuate
dramatically, it may become uneconomical for the Company to establish or
continue activities in certain countries.

  Contracts with Suppliers or Manufacturers.  The Company does not have any
written contracts with any of its suppliers or manufacturers or commitments from
any of its suppliers or manufacturers to continue to sell products to the
Company other than a three year agreement with VitaRich Laboratories, Inc.
("VitaRich"). See Item 1. "Business - Manufacturing and Supplies."

  Pursuant to an agreement entered into in July 1998, the Company agreed to
advance VitaRich up to $800,000 to secure the purchase of a sufficient quantity
of certain nutritional supplement raw materials to meet the Company's
anticipated need for rapid delivery of product and to obtain such product at
discounted prices.  The agreement is for three years and requires that the
Company provide VitaRich with periodic estimates of anticipated needs, as well
as actual use rates of the requested product. Other than its agreement with
VitaRich, the Company does not have long term supply agreements with any vendor.
Accordingly, there is a risk that any of the Company's suppliers or
manufacturers could discontinue selling their products to the Company for any
reason. Although the Company believes that it could establish alternate sources
for most of its products, any delay in locating and establishing relationships
with other sources could result in product shortages and back orders for the
products, with a resulting loss of revenues to the Company.  The Company
recently completed acquisitions of Ash and Bactolac that will provide additional
sources for the manufacture of many of the Company's products.

  Product Liabilities. The Company, like other manufacturers and distributors of
products that are ingested, faces an inherent risk of exposure to product
liability claims if, among other things, the use of its products results in
injury.  The Company currently has product liability insurance for its
operations in amounts the Company believes are adequate for its operations.
There can be no assurance, however, that such insurance will continue to be
available at a reasonable cost, or if available, will be adequate to cover
liabilities.

  Dividends.  The Company declared an initial cash dividend of $.02 per share of
common stock in September 1996, and paid dividends quarterly until June 1998.
The Company has not declared any dividends subsequent to June 1998. The Company
recently entered into a credit facility that prohibits dividend payments without
the consent of the lender.  The determination of whether to pay dividends in the
future will be made by the Board of Directors and will depend on the earnings,
capital requirements, and operating and financial condition of the Company,
among other factors. It is not anticipated that the Company will pay dividends
in the fiscal year ended September 30, 2000. See Item 5. "Market for
Registrant's Common Equity and Related Stockholder Matters".

  Ability to Implement Business Strategy; Integration of Acquisitions.  The
Company's future results and financial condition are dependent on the successful
implementation of its business strategy.  A key component of the Company's long-
term business strategy involves strategic acquisitions.  With the recent
acquisitions of Ash and Bactolac, the Company has expanded its operations to
include the manufacture of pharmaceutical products and nutritional supplements.
Although the Company believes that its business strategy will enable it to
improve its financial results, there can be no assurance that its strategy will
be successful, that the anticipated benefits of its strategy will be realized,
that management will be able to implement the strategy on a timely basis, that
the Company will return to profitability levels previously experienced, or that
losses will not be incurred in the future.

  The success of the Company will depend, in part, on the Company's ability to
integrate the operations of the acquired companies.  There can be no assurance
that the Company's management team will effectively be able to oversee the
combined entity and implement the Company's business strategy.  Moreover, no
assurance can be given that the Company will be able to successfully integrate
the recently completed acquisitions of Ash and Bactolac or any future
acquisitions without substantial cost, delays or other problems.  The cost of
integration could have an adverse effect on short-term operating results.  Such
costs could include severance payments, restructuring charges associated with
the acquisitions and expenses associated with the change of control.

  There can be no assurance that the Company will be able to anticipate all the
changing demands the acquisitions will impose on its management personnel,
operational and management information systems and financial systems.  The
integration of newly acquired companies may also lead to diversion of management
attention from other ongoing business concerns.  The two operating companies
most recently acquired, Ash and Bactolac, are engaged in the manufacture of
pharmaceutical products and nutritional supplements.  Although the Company has
been engaged in marketing of nutritional supplements throughout its history, the
Company has never been engaged directly in manufacturing operations.  Any or all
of these factors could have a  material adverse effect on the Company's
business, financial condition or results of operations.

                                       15
<PAGE>

  Risks Related to Acquisition Financing; Leverage.  The financing for the
acquisitions of Ash and Bactolac was provided primarily through a new lending
arrangement that commenced in November 1999.  The loan facility is secured by
substantially all the assets of the Company and its subsidiaries.  The loan
agreement contains various covenants that require the maintenance of certain
financial ratios, as well as additional covenants, including filing of reports
and significant restrictions on dividend payments, issuance of debt and equity,
mergers, changes in business operations and sales of assets. These restrictions
could limit the Company's ability to respond to market conditions, to provide
for unanticipated capital expansions or to take advantage of business or
acquisition opportunities. If any covenant were breached without a waiver or
renegotiation of the terms of that covenant, the lender could have the right to
accelerate the payment of the indebtedness even if the Company has made all
principal and interest payments when due. If the Company breached these
covenants, or if the Company's operating revenues after the acquisitions were to
be insufficient to pay debt service, there would be a risk of default and
foreclosure on the Company's assets.

  Subject to obtaining additional financing, the availability of which is not
assured, the Company plans to seek additional acquisitions.  The timing, size
and success of the Company's acquisition efforts and any associated capital
commitments cannot be readily predicted.  The Company currently intends to
finance future acquisitions by using shares of its stock, cash, borrowed funds
(including the issuance of promissory notes to the sellers of the companies to
be acquired) or a combination thereof.  If the Company's stock does not maintain
a sufficient market value, or if potential acquisition candidates are otherwise
unwilling to accept stock as part of the consideration for the sale of their
businesses, the Company may be required to use more of its cash resources or
more borrowed funds, in each case if available, in order to acquire additional
companies.  If the Company does not have sufficient cash resources, its growth
could be limited unless it is able to obtain additional capital through debt or
equity financings.  There can be no assurance that the Company will be able to
obtain any additional financing that it may need for future acquisitions on the
terms that the Company deems acceptable.

  Other Factors.  Actual results could also differ materially from those
currently anticipated due to, among other things, the Company's inability to
implement its business strategy; lack of market acceptance of the Company's
products; the introduction of new products by the Company's competitors;
consumer perceptions of the Company's products and operations; changes in
regulations that may limit or restrict the sale of certain of the Company's
products; the expansion of the Company's operations into manufacturing and new
markets, or the introduction of the Company's products into new markets; the
Company's failure, or its distributors' failure to comply with applicable
regulations; economic downturns, a weakness in overall consumer demand,
inflation, and cyclical variations in the market for nutritional supplements;
political instability, trade sanctions or restrictions, changes in quota and
duty regulations, delays in shipping, or increased costs of transportation; and
general conditions in the nutritional supplement industry.  In addition, the
market price of the Company's common stock, which is quoted on the Nasdaq
National Market, may be subject to significant fluctuation in response to
variations in the Company's operating results and general stock market
volatility unrelated to the Company's operating performance.

  Impact of Year 2000. The Year 2000 issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any computer programs that have time sensitive software may recognize a date
using 00 as the year 1900 rather than the year 2000. The failure of the
Company's or a third party supplier's or vendor's computer system to properly
recognize the date could result in a system failure or miscalculation causing a
disruption of the Company's activities. Such a disruption could have a material
adverse impact on the Company's ability to conduct its business.

  The Company completed the installation of SAP(R), an enterprise wide state-
of-the-market computer information system in fiscal 1999. Additionally, the
Company also installed a White(R) automated inventory storage and retrieval
system in its Houston warehouse facility. The total cost of installation and
training associated with both systems was approximately $4,000,000. The Company
has received certification from SAP(R) and White(R) that their systems are Year
2000 compliant. The Company has tested each of the systems for year 2000
compliance and found them to be compliant.

  The Company also relies on certain other less significant software systems in
its day to day activities. The Company performed certain detailed tasks
necessary to properly test the Year 2000 compliance of less significant systems
and found them to generally be Year 2000 compliant. The Company presently
believes that, with the recent conversion to the new SAP(R) and White(R) systems
software and modifications to existing, less significant software, the Year 2000
problem should not pose significant operational problems for the Company's
internal information systems.

  Additionally, the Company performed an assessment of its significant vendors'
and suppliers' information and non-information systems using a broad overview
and management's informal understanding of their systems. The Company did not
perform detailed tasks necessary to directly assess their Year 2000 compliance
(such as direct coordination with those significant vendors and suppliers).

  Based on the Company's assessment of its significant vendors' and suppliers'
vulnerability to Year 2000 related systems failures, management believes that
the Company does not have significant exposure with respect to such third
parties. The Company's  assessments indicate that the worst case scenario with
regard to Year 2000 third party issues would be delays in receiving inventory
and/or shipping product to its distributors.

                                       16
<PAGE>

                        ITEM 2. DESCRIPTION OF PROPERTY

Properties

  The Company's offices and warehouse facilities in Houston, Texas are leased
from non-affiliates. The Company's office building consists of approximately
37,000 square feet and the current monthly rental is $19,945 which escalates
over the one year term remaining on the lease. Additionally, the Company's
warehouse consists of approximately 52,000 square feet and the current monthly
rental is $17,177 that escalates over the two year term remaining on the lease.
The Company also leases warehouse facilities in Alaska and Hawaii with a
combined 3,000 square feet of space for approximately $4,600 per month.
Additionally, the Company leases an office and warehouse center in Warrington,
England from a non-affiliate consisting of approximately 16,000 square feet. The
current monthly rental is $11,000 that escalates over the eight year term
remaining on the lease. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operation" and Item 8. "Financial Statements
and Supplementary Data".

  With the acquisitions of Ash and Bactolac, the Company has expanded its
operations to include the manufacture of pharmaceutical products and nutritional
supplements. Ash manufactures pharmaceutical products at its 132,000 square foot
owned facility in Gulfport, Mississippi. Bactolac headquartered in Westbury, New
York, conducts its operations in two leased facilities with a combined total of
approximately 15,000 square feet. The current monthly rent is $7,005 which
escalates over the one year term remaining on the lease.


                           ITEM 3. LEGAL PROCEEDINGS

  The Company is not a party to any legal proceedings, the adverse outcome of
which would, in management's opinion, have a material adverse effect on the
Company's business, financial condition and results of operations.

          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.

                                       17
<PAGE>

                                    PART II

              ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
                          RELATED STOCKHOLDER MATTERS

  The Company's Common Stock is traded on the National Market System of the
Nasdaq Stock Market under the symbol "NFLI"  and its warrants trade under the
symbol "NFLIW".

  In connection with a public offering in July 1995 the Company issued warrants
to purchase Common Stock (the "Warrants"). The holder of one Warrant is entitled
to purchase one share of Common Stock at $3.75 per share until October 15, 2000,
unless earlier redeemed by the Company.

<TABLE>
<CAPTION>
                                     Common Stock            Warrants
                                    ---------------       --------------
      Quarter Ended                 High       Low        High      Low
      -------------                 -----      ----       -----     ----
<S>                                 <C>       <C>        <C>       <C>
      Fiscal 1998:
      December 31, 1997             $7.88     $5.50      $3.94     $2.38
      March 31, 1998                 6.44      4.94       2.69      1.63
      June 30, 1998                  9.00      5.56       5.13      1.88
      September 30, 1998             7.13      3.00       3.63      0.50

      Fiscal 1999:
      December 31, 1998              3.94      2.00       1.06      0.38
      March 31, 1999                 3.34      2.06       1.13      0.38
      June 30, 1999                  2.63      2.06       0.88      0.25
      September 30, 1999             3.63      1.63       0.94      0.31
</TABLE>

      As of December 16, 1999, there were 1,510 record holders of common stock.

  The Company declared its first cash dividend on its common stock in September
1996, which dividend of $.02 per share was paid in October 1996. The Company
continued to pay quarterly dividends of $.02 per share of common stock until
June 1998. No dividends have been declared by the Company subsequent to June
1998. It is not likely that dividends will be paid in the fiscal year ending
September 30, 2000. The Company recently obtained a credit facility in
connection with its acquisitions of Ash and Bactolac and may not declare any
dividends without the lender's consent.  Subject to obtaining the lender's
consent the determination of the payment of dividends in the future will be
within the discretion of the Company's Board of Directors and will depend on the
earnings, capital requirements and operating and financial condition of the
Company, among other factors. See Item 1. "Business" and Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

                                       18
<PAGE>

                       ITEM 6.  SELECTED FINANCIAL DATA

  The selected financial data presented below for each year in the five-year
period ended September 30, 1999 have been derived from the audited financial
statements of the Company. The data presented below should be read in
conjunction with Company's financial statements and notes thereto and, except
for operating data included therein, Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

<TABLE>
<CAPTION>
                                                                YEARS ENDED SEPTEMBER 30,
                                                   (In thousands, except Per Share and Operating Data)
                                                   ---------------------------------------------------
                                                 1999         1998        1997         1996        1995
                                                ------       ------      -------      -------     -------
<S>                                            <C>          <C>          <C>          <C>         <C>
Statements of Operations
    Net Sales                                  $66,570      $69,658      $83,045      $97,404     $32,290
    Gross Profit                                21,828       21,719       22,767       29,577       8,774
    Operating income (loss)                       (502)         698       (3,276)      13,347       2,921
    Net income (loss)                             (848)        (867)      (1,981)       8,705       2,244
Earnings (loss) per share:
    Basic                                      $  (.15)     $  (.15)     $  (.35)     $  1.61     $   .65
    Diluted                                    $  (.15)     $  (.15)     $  (.35)     $  1.36     $   .51
Weighted average number of
shares outstanding (1):
    Basic                                        5,809        5,833        5,625        5,408       3,437
    Diluted                                      5,809        5,833        5,625        6,405       4,444
Operating data:
    Number of Distributors (2)                  67,000       80,000       88,500       87,400      57,300
    Average monthly
     sales per Distributor (3)                 $    76      $    69      $    74      $   112     $    58
    Total products offered                         400          380          364          320         270
Balance Sheet Data:
    Working capital                            $ 7,849      $ 7,019      $ 9,570      $14,617     $ 6,082
    Total assets                                22,241       27,858       29,347       27,689      12,566
    Total liabilities                            7,893       13,415       13,489       10,087       5,407
    Stockholders' equity                        14,348       14,443       15,858       17,602       7,159
</TABLE>


(1)   The weighted average number of shares of Common Stock outstanding for each
      period presented has been calculated giving effect to a three-for-five
      stock split on July 10, 1995 and two-for-one stock split on December 8,
      1995, and after giving effect to dilutive stock options and warrants.
(2)   Includes "active" distributors only at the end of the period indicated.
      See Item 1. "Business-Distribution and Marketing".
(3)   Computed using a simple average for the periods indicated.

                                       19
<PAGE>

                   SELECTED QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                            QUARTER ENDED
                                                   (In thousands, except Per Share)
                                                   --------------------------------
                              December 31    March 31        June 30     September 30    Fiscal Year
                              -----------    --------        -------     ------------    -----------
<S>                           <C>            <C>             <C>           <C>             <C>
Fiscal 1999:
   Net Sales                   $16,992       $16,536         $17,210       $15,832          $66,570
   Gross profit                  5,971         5,574           6,006         4,277           21,828
   Operating income (loss)         358           107             983        (1,950)            (502)

   Net income (loss)               404            15             493        (1,760)            (848)

   Earnings (loss) per
      Share:
      Basic                    $   .07       $   .00         $   .08       $  (.30)         $  (.15)
      Diluted                  $   .07       $   .00         $   .08       $  (.30)         $  (.15)

   Dividends per share              --            --              --            --               --

Fiscal 1998:
   Net Sales                   $18,384       $17,579         $15,415       $18,280          $69,658
   Gross profit                  5,028         5,735           4,758         6,198           21,719
   Operating income (loss)        (181)          925            (385)          339              698

   Net income (loss) (1)          (248)          605            (321)         (903)            (867)

   Earnings (loss) per
      Share:
      Basic                    $ (0.04)      $  0.10         $ (0.05)      $ (0.16)         $ (0.15)
      Diluted                  $ (0.04)      $  0.10         $ (0.05)      $ (0.16)         $ (0.15)

   Dividends per share         $  0.02       $  0.02         $  0.02            --          $  0.06

Fiscal 1997:
   Net Sales                   $19,269       $21,200         $22,600       $19,976          $83,045
   Gross profit                  5,085         5,511           5,391         6,780           22,767
   Operating income
   (loss) (2)                   (6,921)        1,078             218         2,349           (3,276)

   Net income (loss)            (4,496)          726             180         1,609           (1,981)

   Earnings (loss) per
      Share:
      Basic                    $ (0.71)      $  0.12         $  0.03       $   .21          $ (0.35)
      Diluted                  $ (0.71)      $  0.12         $  0.03       $   .21          $ (0.35)

   Dividends per share         $   .02       $   .02         $   .02       $   .02          $   .08
 </TABLE>

         (1)   Includes a $702,000 charge for warrants issued in connection with
               a severance agreement.
         (2)   Includes a $6,425,000 charge incurred and accrued for the
               settlement of class action lawsuits.
         (3)   Includes an $890,000 credit to recognize a reduction in the
               remaining estimated liability for the class action lawsuits.
         (4)   Includes a $782,000 charge for resolution of the state regulatory
               issues.

                                       20
<PAGE>

                 FINANCIAL INFORMATION RELATING TO FOREIGN AND
                     DOMESTIC OPERATIONS AND EXPORT SALES

<TABLE>
<CAPTION>
                                                          YEARS ENDED SEPTEMBER 30,
                                                               (In thousands)
                                                               --------------

                                                      1999      1998      1997      1996
                                                   -------   -------   -------   -------
<S>                                                <C>       <C>       <C>       <C>
Sales to unaffiliated customers:
  North America (1)                                $61,047   $65,387   $80,325   $97,248
  Europe (2)                                         4,690     3,533     2,549       156
  Philippines (3)                                      833       738       171        --

Sales or transfers between geographic areas:
  North America                                         --        --        --        --
  Europe                                             1,007       622       682        82
  Philippines                                          104       290       269        --

Operating profit (loss):
  North America                                        861     1,937    (2,342)   13,382
  Europe                                              (855)     (959)     (906)      (35)
  Philippines                                         (508)     (280)      (28)       --

Identifiable assets:
  North America                                     25,789    29,635    29,827    27,524
  Europe                                             1,680     1,435     1,355       871
  Philippines                                          314       883       708        --
</TABLE>

(1) Includes the United States, Canada, and Puerto Rico.
(2) First began operations in fiscal 1996.
(3) First began operations in fiscal 1997.

                                       21
<PAGE>

                ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

  The following table sets forth for the periods indicated the percentages that
selected items in the Consolidated Statement of Operations bear to net sales:

<TABLE>
<CAPTION>
                                                                 Year Ended September 30,
                                                                 -----------------------
                                                                1999      1998       1997
                                                               ------    ------     ------
          <S>                                                  <C>       <C>        <C>
          Net sales                                            100.0%    100.0%      100.0%
          Cost of sales                                         67.2      68.8        72.6
                                                               -----     -----      ------
          Gross profit                                          32.8      31.2        27.4
          Operating expenses                                    33.6      30.2        31.3
                                                               -----     -----      ------
          Income (loss) from operations                         (0.8)      1.0        (3.9)
          Other income (expense), net                            0.3      (1.1)        1.0
                                                               -----     -----      ------
          Income (loss) before income tax expense (benefit)     (0.5)     (0.1)       (2.9)
          Income tax expense (benefit)                           0.8       1.1        (0.5)
                                                               -----     -----      ------
          Net income (loss)                                     (1.3)%    (1.2)%      (2.4)%
                                                               =====     =====      ======
</TABLE>

Year Ended September 30, 1999 Compared to Year Ended September 30, 1998

  Net sales for the twelve months ended September 30, 1999 decreased by
$3,088,000 or 4.4% to $66,570,000 as compared to net sales of $69,658,000 for
the twelve months ended September 30, 1998.

  The Company has an Order Assurance Program ("OAP"), which allows a distributor
to generate sales volume and maintain qualification to receive monthly
commissions. Prior to June 1, 1999 NFLI sold product redemption certificates to
distributors who were enrolled in the OAP. Revenues were recorded when these
certificates were redeemed for product. However, if the certificates were not
redeemed for product, the Company recorded revenues ratably over a 150-day
period commencing with the ending of the expiration period of 120 days. Such
revenues are recorded as part of the Company's net sales for periods prior to
June 1, 1999.

  Subsequent to June 1, 1999 the Company began shipping product packs for most
OAP purchases, the shipment of which results in the recognition of revenue.
Approximately $2,600,000 of revenue related to the shipment of the product packs
was recognized in fiscal 1999. The Company now only sells product redemption
certificates for certain "big ticket" items. Such certificates must be redeemed
for the specified item upon accumulation of the required number of certificates.
As a result of the change in the OAP, the Company does not expect to recognize
substantial revenue from the redemption of product certificates.

  At September 30, 1999, the Company had approximately 67,000 distributors as
compared to approximately 80,000 at September 30, 1998. During the twelve months
ended September 30, 1999 the number of active international distributors
increased by approximately 1,500, while active distributors in North America
decreased by approximately 14,000. The ability of the Company to increase its
number of active distributors and its sales per average number of distributors
is material to the future operations and financial condition of the Company. The
decrease in net sales is recapped below:

<TABLE>
      <S>                                                                  <C>
      Decrease in sales due to decreased average number of distributors    $(8,912,000)
      Increase in distributor average sales                                  5,824,000
                                                                             ---------
                                                                           $(3,088,000)
                                                                             =========
</TABLE>

  The Company's net sales per average number of distributors per month increased
from $69 during the twelve months ended September 30, 1998 to $76 for the twelve
months ended September 30, 1999.

                                       22
<PAGE>

  Cost of sales decreased by $3,197,000 or 6.6% to $44,742,000 for the twelve
months ended September 30, 1999 from $47,939,000 for the twelve months ended
September 30, 1998. Cost of sales as a percentage of net sales decreased from
68.8% in the twelve months ended September 30, 1998 to 67.2% in the twelve
months ended September 30, 1999. Cost of sales, which includes product costs,
commissions and bonuses paid to distributors, and shipping costs, is recapped
below:

<TABLE>
<CAPTION>
                                                       Year Ended September 30,
                                                       ------------------------
                                                          1999        1998
                                                          -----       -----
          <S>                                          <C>            <C>
          Product costs                                   27.1%       27.6%
          Commissions and bonuses paid to distributors    33.0        35.0
          Shipping costs                                   7.1         6.2
                                                          ----        ----
                                                          67.2%       68.8%
                                                          ====        ====
</TABLE>

  Product costs as a percentage of cost of sales decreased 0.5% primarily as a
result of the Company now producing and selling certain recruiting and training
materials which were primarily sold to the Company's distributors by Distributor
Services, L.L.C. during the twelve months ended September 30, 1998. The gross
profit margin on these materials is generally greater than the gross profit
margin on many of the Company's other products. Commissions and bonuses paid to
distributors decreased 2.0% as a percentage of cost of sales as a result of
changes in the mix of higher versus lower bonus value products purchased by
distributors. Shipping costs increased 0.9% primarily from a combination of
increased shipping to continental Europe from the Company's warehouse in the
United Kingdom and the use of an outside contractor for certain shipping.

  Gross profit decreased 0.5% or $109,000 from $21,719,000 for the twelve months
ended September 30, 1998 to $21,828,000 for the twelve months ended September
30, 1999. Gross profit as percentage of net sales increased from 31.2% for the
twelve months ended September 30, 1998 to 32.8% for the twelve months ended
September 30, 1999.

  Marketing, distribution and administrative expenses increased $1,309,000 or
6.2% from $21,021,000 for the twelve months ended September 30, 1998 to
$22,330,000 for the twelve months ended September 30, 1999.  The increase
results primarily from a combination of reduced personnel expenses, increased
depreciation charges on computer hardware and software, and increased promotion
costs for meetings and rallies previously performed by Distributor Services,
L.L.C. As a percentage of net sales, marketing, distribution and administrative
expenses increased to 33.6% for the year ended September 30, 1999 from 30.2% for
the year ended September 30, 1998.

  Income (loss) from operations for the year ended September 30, 1999 decreased
$1,200,000 or 172.0% to $502,000 of loss from $698,000 of income from operations
for the year ended September 30, 1998 principally as a result of the increase in
operating expenses as explained above. The income (loss) from operations for the
twelve months ended September 30, 1999 and 1998 includes approximately
$1,363,000 and $1,340,000, respectively, of operating loss from the Company's
wholly-owned, consolidated subsidiaries that operate in foreign countries.

  Subsequent to September 30, 1999, the Company executed a letter of intent with
the current managers of RP to purchase the subsidiary. The completion of the
sale is subject to various closing conditions. The Company anticipates that the
realizable value of consideration to be received will be minimal. During the
year ended September 30, 1999, the Company recorded asset impairments and other
writedowns (principally inventory) in RP in the aggregate amount of $300,000.

  Additionally the Company began operations in Japan in October 1999. Start-up
costs are expected to be minimal since the Company's operations in Japan will
consist of providing services to Japanese members who will purchase products for
personal use only directly from the Company's US operations.

  At September 30, 1999, approximately $425,000 related to the Company's recent
acquisition of ANI, Ash and Bactolac was included in Other Assets. The Company
will amortize that amount plus other acquisition cost incurred prior to the
closing of the acquisition over a MMM year period.

  Other income (expense) increased to $211,000 for the twelve months ended
September 30, 1999 from $775,000 of expense for the twelve months September 30,
1998.  The increase was primarily the result of a decline in net interest income
due to a decrease in interest bearing deposits and a foreign exchange gain
experienced by the Company's subsidiary in the Philippines.

  Income tax expense for the year ended September 30, 1999 is higher than the
amount computed at the statutory rate. As the Company is not currently able to
recognize any tax benefits from foreign operating losses, tax expense is accrued
on the taxable income of domestic operations.

  Net loss was $848,000 for the year ended September 30, 1999, compared to a net
loss of $867,000 for the year ended September 30, 1998. The decrease was the
result of the items discussed above.

Year Ended September 30, 1998 Compared to Year Ended September 30, 1997
  Net sales for the twelve months ended September 30, 1998 decreased by
$13,387,000 or 16.1% to $69,658,000 as compared to net sales of $83,045,000 for
the twelve months ended September 30, 1997. At September 30, 1998, the Company
had approximately 80,000 distributors as compared to approximately 88,500 at
September 30, 1997. During the twelve months ended September 30, 1998 the number
of active international distributors increased by approximately 500, while
active distributors in North America decreased by approximately 9,000.
Management believes that the regulatory scrutiny and legal proceedings filed
against the Company in fiscal 1996 and concluded during fiscal 1997 as well as
negative media reports continued to have a negative impact on distributor
recruitment and retention and sales efforts by distributors during fiscal 1998.
The ability of the Company to increase its number of active distributors and its
sales per average number of distributors is material to the future operations
and financial condition of the Company. The decrease in net sales is recapped
below:

                                      23
<PAGE>

<TABLE>
      <S>                                                                   <C>
      Decrease in sales due to decreased average number of distributors     $ (8,010,000)
      Decrease in distributors average sales                                  (5,377,000)
                                                                            ------------
                                                                            $(13,387,000)
                                                                            ============
</TABLE>

  The Company's net sales per average number of distributors per month decreased
from $74 during the twelve months ended September 30, 1997 to $69 for the twelve
months ended September 30, 1998.

  Cost of sales decreased by $12,339,000 or 20.5% to $47,939,000 for the twelve
months ended September 30, 1998 from $60,278,000 for the twelve months ended
September 30, 1997. Cost of sales as a percentage of net sales decreased from
72.6% in the twelve months ended September 30, 1997 to 68.8% in the twelve
months ended September 30, 1998.  Cost of sales, which includes product costs,
commissions and bonuses paid to distributors, and shipping costs, is recapped
below:

<TABLE>
<CAPTION>
                                                       Year Ended September 30,
                                                       ------------------------
                                                             1998      1997
                                                             -----     ----
          <S>                                          <C>             <C>
          Product costs                                      27.6%     27.1%
          Commissions and bonuses paid to distributors       35.0      36.2
          Shipping costs                                      6.2       9.3
                                                             ----      ----
                                                             68.8%     72.6%
                                                             ====      ====
</TABLE>

  Reduced margins resulting from lower initial qualifications for becoming an
Executive resulted in a .5% increase in product cost from 1997 to 1998. The
percentage of commissions and bonuses paid to distributors decreased 1.2%
because of price adjustments initiated during December 1997 and changes in the
mix of higher versus lower bonus value products purchased by distributors. The
3.1% decrease in shipping costs resulted from lower carrier rates and lower cost
of backorders than the prior year.

  Gross profit decreased 4.6% or $1,048,000 from $22,767,000 for the twelve
months ended September 30, 1997 to $21,719,000 for the twelve months ended
September 30, 1998. Gross profit as percentage of net sales increased from 27.4%
for the twelve months ended September 30, 1997 to 31.2% for the twelve months
ended September 30, 1998.

  Operating expenses decreased $5,022,000 or 19.3% from $26,043,000 for the year
ended September 30, 1997 to $21,021,000 for the twelve months ended September
30, 1998. The primary reason for the decrease was that no class action lawsuit
costs were incurred during the twelve months ended September 30, 1998. The
$6,425,000 lawsuit settlement charge in the three months ended December 31, 1996
represented the Company's estimate of all costs of the lawsuit. Based upon
subsequent experience, the Company revised the estimate to $5,535,000 during the
three months ended September 30, 1997. As a percentage of net sales, marketing,
distribution, and administrative expenses exclusive of the lawsuit charge in
1997 increased to 30.2% for the twelve months ended September 30, 1998 from
24.7% for the year ended September 30, 1997 principally because of the decline
in net sales. As a result of its lower sales and higher operating expenses, the
Company's future operating results may be negatively impacted if it is not
successful in regaining its growth in sales or decreasing its expenditures below
current levels.

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

  Associated with the termination of Kevin Trudeau's distributorship in August
1998, the Company, DS and NC agreed to terminate the 1996 Agreement in October
1998. The Company agreed to pay NC and DS $2,047,000 and to issue to NC a
warrant to purchase up to 290,000 shares of the Company's common stock to
satisfy all accounts payable and other amounts claimed by them for materials
previously delivered to the Company, as well as for the purchase of all of DS's
inventory of audio and video tapes, including all of the audio production rights
for such audio and video tapes, and other materials used to promote the Company,
and for cancellation of the remaining term of the 1996 Agreement.

  Approximately $967,000 of the amount was paid upon execution of the agreement
in October 1998 with the balance of $1,080,000 represented by a promissory note
payable in 30 equal monthly interest free payments of $36,000 beginning
November 1, 1998. The note is subordinated to working capital loans obtained by
the Company in the ordinary course of business, tax and other governmental
charges, and other obligations incurred in the ordinary course of business for
obtaining goods and services. For financial accounting purposes, the Company has
discounted the non-interest bearing note at 10.25% resulting in a note payable
of $949,000.

  The warrant issued to NC entitles NC to purchase up to 290,000 shares of the
Company's common stock at $5.50 per share at any time until October 31, 2003.
The warrant is entitled to the benefit of adjustment of the exercise price and
number of shares of common stock deliverable upon exercise thereof in the event
of certain specified dilutive transactions.

  The Company accounted for the transaction as of September 30, 1998. The amount
paid for the audio production rights was approximately $1,400,000 and is being
amortized over an expected recovery period of three years. Expense relative to
the warrants issued to NC was determined by utilizing the Black-Scholes method
to be approximately $702,000. Such expense is included in the accompanying 1998
consolidated financial statements as "Other Expense - contract termination
expense" and "Accrued expense - Nightingale-Conant". The warrants were issued in
October 1998. Additionally, the cash paid upon the execution of the agreement of
approximately $967,000 was also included in "Accrued expenses -
Nightingale-Conant" in the accompanying 1998 consolidated financial statements.

  NC also agreed that for a five year period it would not directly or indirectly
seek to acquire a controlling interest, as defined under the rules and
regulations promulgated by the Securities and Exchange Commission, in the
Company without the prior written consent of the Company's Board of Directors.

  Income (loss) from operations for the year ended September 30, 1998 increased
$3,974,000 or 121.3% to $698,000 of income from operations from $3,276,000 of
loss from operations for the year ended September 30, 1997 principally as a
result of the decrease in operating expenses as explained above. The income
(loss) from operations for the twelve ended September 30, 1998 and 1997 includes
approximately $1,340,000 and $934,000, respectively, of operating loss from the
Company's wholly-owned, consolidated subsidiaries that operate in foreign
countries.

  Other income (expense) decreased to an expense of $775,000 for the year ended
September 30, 1998 from income of $850,000 for the year ended September 30,
1997. The decrease was principally the result of a decline in net interest
income due to a decrease in interest bearing deposits, to the recognition of
interest expense on capital lease obligations and to the recognition expense of
$702,000 associated with the warrants issued to Nightingale-Conant in connection
with the severance agreement described in Item 1 and, an increase in foreign
exchange losses.

  Income tax expense for the year ended September 30, 1998 is higher than the
amount computed at the statutory rate. As the Company is not currently able to
recognize any tax benefits from foreign operating losses, tax expense is accrued
on the taxable income of domestic operations.

  Net loss was $867,000 for the year ended September 30, 1998, compared to a net
loss of $1,981,000 for the year ended September 30, 1997. The decrease was the
result of the items discussed above.

                                       24
<PAGE>

Acquisitions

  On November 17, 1999 the Company finalized the acquisitions of Advanced
Nutraceuticals, Inc. ("ANI") and Bactolac Pharmaceutical Inc. ("BPI"). The
acquisition of ANI was completed through a merger with the Company's wholly
owned subsidiary, NL Acquisition Company. The acquisition of BPI was completed
through a merger with the Company's wholly owned subsidiary, BPI Acquisition
Company. In connection with the merger of BPI into BPI Acquisition Company, the
name of the surviving corporation was changed to Bactolac Pharmaceutical Inc.

  ANI was formed to pursue a consolidation and integration program in the
nutrition industry. The former ANI stockholders received an aggregate of 75,000
shares of a newly created Series A Preferred Stock of the Company. Each one
share of Series A Preferred Stock will be automatically converted into ten
shares of the Company's common stock upon approval of the Company's
shareholders. The Series A Preferred Stock has no voting rights (except as
required by law) and no dividend rights. Upon liquidation, dissolution or
winding up of the Company, the Series A Preferred Stock has a preference of
$28.40 per share, payable prior and in preference to any distribution of any
assets or surplus funds of the Company to the holders of the Company's common
stock.

  BPI headquartered in Westbury, New York, manufactures nutritional supplements
for private labeled customers. The purchase price of the Bactolac acquisition
consisted of $2,500,000 in cash, a subordinated promissory note in the principal
amount of $2,500,000 and 96,831 shares of Series A Preferred Stock.
Additionally, up to 17,606 shares of Series A Preferred Stock may be issued
pursuant to an earnout agreement BPI entered into an employment agreement and
covenant not to compete agreement with its former owner at the closing on
November 17,1999. The Company intends to continue the operations of BPI and to
use its inventory, machinery and equipment in connection with the manufacture of
nutritional supplements.

  On December 1, 1999, the Company finalized the acquisition of Ash Corp.
("ASH"). The acquisition of ASH was completed through a merger with the
Company's wholly owned subsidiary BPI.  The purchase price of ASH consisted of
$750,000 in cash, a note payable in the amount of $500,000 and 49,296 shares of
Series A Preferred Stock. Additionally, up to 105,634 shares of Series A
Preferred Stock may be issued pursuant to an earnout agreement. Each one share
of Series A Preferred Stock will be automatically converted into 10 shares of
the Company's common stock upon approval of the Company's shareholders. The
Company intends to continue the operations of ASH and to use its inventory,
machinery and equipment in connection with the manufacture of liquid
pharmaceutical and nutraceutical products. Financing for the acquisition of ASH
was provided primarily through the financing agreement entered into on November
17, 1999 with General Electric Capital Corporation, described below.

Liquidity and Capital Resources

  The Company had cash and cash equivalents of $1,395,000 at September 30, 1999
compared to $4,404,000 at September 30, 1998. The cash used in operating
activities of $1,830,000 for the year ended September 30, 1999 was significantly
more than the cash used in operating activities of $571,000 for the twelve
months ended September 30, 1998. The Company used approximately $323,000, and
$1,986,000, respectively, to purchase property and equipment during the years
ended September 30, 1999 and 1998. Working capital was $7,849,000 at September
30, 1999 compared to $7,019,000 at September 30, 1998.  The Company believes
that the cash flow generated from its operations and amounts available under its
revolving credit facility described below, should be sufficient to fund its debt
service requirements, working capital needs, anticipated capital expenditures
and other operating expenses for the near term.

  On November 17, 1999 the Company finalized the acquisitions of ANI and BPI and
on December 1, 1999, it finalized the acquisition of ASH. The acquisition of ASH
was completed through a merger with the Company's wholly owned subsidiary BPI.
Financing for the acquisitions was provided primarily through a financing
arrangement entered into on November 17,1999 with General Electric Capital
Corporation ("GECC"). The Company borrowed $2,360,000 from GECC pursuant to a
term loan payable in three years, and $6,934,000 under a $12 million revolving
credit facility. Borrowings under the revolving credit are subject to
limitations based upon eligible accounts receivable and inventory. The loan
facility is secured by substantially all of the assets of the Company and its
subsidiaries. The interest rate on borrowing is 0.5% above the prime rate. There
is a fee of 0.25% on the unused portion of the facility and an annual monitoring
fee of $10,000. It is required, among other things, that the Company maintain a
minimum net worth (on a consolidated basis including ASH and Bactolac) of $18
million at September 30, 1999, $25.5 million at September 30, 2000, and $27
million for each fiscal year after September 30, 2000. In addition, the Company
is required to maintain a fixed charge coverage ratio of 2.0 to 1.0 through July
1, 2000, and 1.5 to 1.0 at July 2, 2000 and at all times thereafter. The Company
is also subject to additional covenants, including filing of reports and
significant restrictions on dividend payments, issuance of debt and equity,
mergers, changes in business operations and sales of assets. Such restrictions
could limit the Company's ability to respond to market conditions, to provide
for unanticipated capital expenditures or to take advantage of business or
acquisitions opportunities.

                                       25
<PAGE>

Recent Accounting Pronouncements

  In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
                                        -------------------------------------
and Hedging Activities" (SFAS 133), and in July 1999 issued Financial Accounting
----------------------
Standard No. 137, "Accounting for Derivative Instruments and Hedging Activities
                   ------------------------------------------------------------
-- Deferral of the Effective Date of FASB Statement No. 133, an Amendment of
----------------------------------------------------------------------------
FASB Statement No. 133" (SFAS 137). SFAS 137 delayed the effective date for SFAS
----------------------
133 to fiscal years beginning after June 15, 2000. The Company does not believe
that this statement will have a material effect on its financial position or
results of operations.


              ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
                               ABOUT MARKET RISK

  The Company is exposed to market risks, which include changes in currency
exchange rates as measured against the U.S. dollar. The value of the US dollar
against the foreign currencies in which the Company has operations affects the
Company's financial results. Changes in exchange rates may positively or
negatively affect the Company's sales (as expressed in U.S. dollars), gross
margins, operating expenses, and retained earnings. When the U.S. dollar
sustains a strengthening position against currencies in which the Company sells
products or a weakening exchange rate against currencies in which it incurs
costs, its sales or costs are adversely affected. The Company does not believe
that its exposure to exchange rate fluctuations will have a material impact on
its results of operations.


           ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE

  On September 16, 1999, the Company determined to engage Grant Thornton LLP as
the principal accountant to audit the Company's financial statements for the
fiscal year ending September 30, 1999. The decision to change accountants was
recommended by the Audit Committee of the Board of Directors of the Company.

  The Report of BDO Seidman LLP, on the financial statements of the Company for
either of the past two fiscal years in the period ended September 30, 1998 did
not contain an adverse opinion or disclaimer of opinion nor was it modified as
to uncertainty, audit scope or accounting principles. The Company does not
believe that there were any disagreements with BDO Seidman LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, during those past two fiscal years the subsequent interim
period through September 16, 1999 which, if not resolved to BDO Seidman LLP's
satisfaction, would have caused BDO Seidman LLP to make reference to the
subject matter of the disagreement(s) in connection with its Reports. However,
during fiscal 1990 BDO Seidman informed the Company of the need to evaluate for
impairment the unamortized carrying value of the Audio Production Rights which
balance as of September 30, 1998 and June 30, 1999 was $1,400,000 and
$1,089,000, respectively. The Company evaluated such Audio Production Rights for
impairment at September 30, 1999.
<PAGE>

              ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
Nutrition For Life International, Inc. Consolidated Financial Statements                                      Page
                                                                                                              ----
<S>                                                                                                           <C>
     Independent Certified Public Accountants' Report.......................................................   F-2

     Independent Certified Public Accountants' Report.......................................................   F-3

     Consolidated Balance Sheets as of September 30, 1999 and 1998..........................................   F-4

     Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended
      September 30, 1999, 1998 and 1997.....................................................................   F-5

     Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 1999, 1998 and 1997..   F-6

     Consolidated Statements of Cash Flows for the Years Ended September 30, 1999, 1998 and 1997............   F-7

     Notes to Consolidated Financial Statements.............................................................   F-8
</TABLE>

                                      F-1
<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'


Board of Directors and Stockholders
Nutrition For Life International, Inc.


     We have audited the consolidated balance sheet of Nutrition For Life
International, Inc. and Subsidiaries as of September 30, 1999 and the related
consolidated statements of operations and comprehensive income (loss),
stockholders' equity, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Nutrition For Life International, Inc. and Subsidiaries as of September 30, 1999
and the consolidated results of their operations and their consolidated cash
flows for the year then ended, in conformity with generally accepted accounting
principles.



Grant Thornton LLP


Houston, Texas
January 3, 2000

                                      F-2
<PAGE>

               INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT



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


     We have audited the consolidated balance sheets of Nutrition For Life
International, Inc. as of September 30, 1998, and the related consolidated
statements of operations and comprehensive income (loss), stockholders' equity,
and cash flows for each of the two years in the period ended September 30, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Nutrition For Life International, Inc. at September 30, 1998 and the results of
its operations and its cash flows for each of the two years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.



BDO Seidman, LLP


Houston, Texas
December 29, 1998

                                      F-3
<PAGE>

                    NUTRITION FOR LIFE INTERNATIONAL, INC.
                          CONSOLIDATED BALANCE SHEETS
                          SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                                             1999          1998
                                                             ----          ----
<S>                                                      <C>           <C>
          ASSETS
          ------

Current Assets:
 Cash and cash equivalents                               $ 1,395,310   $ 4,404,388
 Restricted cash (Note 9)                                    585,866            --
 Marketable securities                                       996,942       968,196
 Receivables                                                 362,315       568,931
 Inventories                                               8,434,220     9,697,495
 Deferred tax asset (Note 7)                               1,647,000     1,982,000
 Refundable federal income taxes (Note 7)                         --       200,000
 Prepaid expenses and other assets                         1,062,513       953,161
                                                         -----------   -----------
   Total Current Assets                                   14,484,166    18,774,171
Property and equipment, net (Note 3)                       6,038,186     7,306,650
Audio production rights (Note 12)                            972,222     1,400,000
Other assets                                                 746,246       377,328
                                                         -----------   -----------
                                                         $22,240,820   $27,858,149
                                                         ===========   ===========

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Accounts payable                                        $ 2,517,020   $ 3,282,750
 Accrued distributor bonuses and commissions               1,384,950     1,646,638
 Deferred income (Note 8)                                    826,464     3,252,598
 Accrued expenses and other liabilities                    1,344,001     1,420,338
 Accrued liability - Nightingale Conant (Note 12)                 --     1,669,122
 Current portion of capital lease obligation (Note 4)        177,160       163,324
 Current portion of long-term debt (Note 12)                 385,304       320,263
                                                         -----------   -----------
   Total Current Liabilities                               6,634,899    11,755,033

 Deferred tax liability (Note 7)                             778,000       682,000
 Long-term portion of capital lease obligation (Note 4)      170,994       349,520
 Long-term debt (Note 12)                                    308,725       628,737
                                                         -----------   -----------

   Total Liabilities                                       7,892,618    13,415,290
                                                         -----------   -----------

Commitments and contingencies (Note 9)

Stockholders' Equity (Note 5):
 Preferred stock, $.001 par value; 1,000,000
  authorized; none issued                                         --            --
 Common stock; $.01 par value; 20,000,000 shares
  authorized                                                  58,875        58,875
 Additional paid-in capital                               11,837,156    11,074,044
 Retained earnings                                         3,110,405     3,958,757
 Other comprehensive income (loss)                          (125,749)     (116,332)
                                                         -----------   -----------
                                                          14,880,687    14,975,344
                                                            (532,485)     (532,485)
Less: Treasury stock 79,000 shares, at cost               14,348,202    14,442,859
   Total Stockholders' Equity                            $22,240,820   $27,858,149
                                                         ===========   ===========
</TABLE>
         See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                     NUTRITION FOR LIFE INTERNATIONAL, INC.
     CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
             FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                           1999           1998             1997
                                                     --------------   -------------   -------------
<S>                                                  <C>              <C>             <C>
   Net sales (Notes 8 and 10)                        $   66,569,875   $  69,658,095   $  83,044,577
   Cost of sales (Note 9)                                44,742,050      47,939,482      60,277,742
                                                     --------------   -------------   -------------
   Gross profit                                          21,827,825      21,718,613      22,766,835
                                                     --------------   -------------   -------------
   Operating expenses:
      Marketing, distribution and administrative
       expenses                                          22,329,914      21,021,056      20,508,294
                                                     --------------   -------------   -------------
      Lawsuit settlement (Note 9)                                --              --       5,535,000
                                                     --------------   -------------   -------------
                                                         22,329,914      21,021,056      26,043,294
   Income (loss) from operations                           (502,089)        697,557      (3,276,459)
                                                     --------------   -------------   -------------

   Other income (expense)
      Interest income (expense), net                        (21,478)         70,184         667,338
      Foreign exchange gain (loss)                           65,596        (336,842)        (78,561)
      Other, net (Note 12)                                  166,619        (508,305)        261,161
                                                     --------------   -------------   -------------
                                                            210,737        (774,963)        849,938
                                                     --------------   -------------   -------------

   Loss before income tax expense (benefit)                (291,352)        (77,406)     (2,426,521)

   Income tax expense (benefit) (Note 7)                    557,000         790,050        (445,420)
                                                     --------------   -------------   -------------
   Net loss                                                (848,352)       (867,456)     (1,981,101)
                                                     --------------   -------------   -------------
   Other comprehensive income (loss):
      Unrealized loss on investments, net of tax             (7,136)        (38,364)             --
      Foreign currency translation adjustment                (2,281)        (86,546)         13,187
                                                     --------------   -------------   -------------
                                                             (9,417)       (124,910)         13,187
                                                     --------------   -------------   -------------

   Total comprehensive loss                          $     (857,769)  $    (992,366)  $  (1,967,914)
                                                     ==============   =============   =============
   Basic and diluted loss per common share           $         (.15)  $        (.15)  $        (.35)
                                                     ==============   =============   =============

   Weighted average common shares outstanding:
      Basic and diluted                                   5,808,595       5,832,887       5,625,464
                                                     ==============   =============   =============
      </TABLE>

         See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                    NUTRITION FOR LIFE INTERNATIONAL, INC.
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
             FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                           Accumulated Other
                                                                                      Comprehensive Income (Loss)
                                                                                      ---------------------------
                                                                                                       Cumulative
                                                                                                         Foreign
                                  Common Stock         Additional      Retained          Loss           Currency
                               ------------------       Paid-In        Earnings           on          Translation
                               Shares      Amount       Capital        (Deficit)      Investments      Adjustment
                               ------      ------       -------        ---------      -----------      ----------
<S>                           <C>         <C>          <C>           <C>             <C>              <C>
Balance, at
October 1, 1996               5,568,562   $55,686      $ 9,939,059   $ 7,611,580     $       --       $  (4,609)
Net loss                             --        --               --    (1,981,101)            --              --
Cash dividends
 (Note 5)                            --        --               --      (453,940)            --              --
Issuance of common
 stock options
 (Note 6)                            --        --          105,362            --             --              --
Registration
 expenses                            --        --          (43,872)           --             --              --
Foreign currency
 translation adjustment              --        --               --            --             --          13,187
Purchase of treasury
 stock (Note 5)                      --        --               --            --             --              --
Exercise of stock
 options and warrants           207,273     2,072          688,402            --             --              --
                              ---------   -------      -----------   -----------     ----------       ---------
Balance, at
September 30, 1997            5,775,835    57,758       10,688,951     5,176,539             --           8,578

Net loss                             --        --               --      (867,456)            --              --
Cash dividends  (Note 5)             --        --               --      (350,326)            --              --
Purchase of treasury
stock (Note 9)                       --        --               --            --             --              --
Foreign currency
  translation adjustment             --        --               --            --             --         (86,546)
Issuance of common
  stock options (Note 6)             --        --          144,705            --             --              --
Registration expense                 --        --          (31,487)           --             --              --
Unrealized loss on
  investment                         --        --               --            --        (38,364)             --
Exercise of stock options
 and warrants                   111,760     1,117          271,875            --             --              --
                              ---------   -------      -----------   -----------     ----------       ---------
Balance at
September 30, 1998            5,887,595    58,875       11,074,044     3,958,757        (38,364)        (77,968)
Net loss                             --        --               --      (848,352)            --              --
Foreign currency
 translation adjustment              --        --               --            --             --          (2,281)

Issuance of common
 stock options and
  warrants (Note 12)                 --        --          763,112            --             --              --


Unrealized loss on
 investment, net of tax              --        --               --            --         (7,136)             --
                              ---------   -------      -----------   -----------     ----------       ---------
Balance at
September 30, 1999            5,887,595   $58,875      $11,837,156   $ 3,110,405     $  (45,500)      $ (80,249)
                             ==========  ========      ===========   ===========     ==========       =========
</TABLE>




























<TABLE>
<CAPTION>
                                     Treasury Stock               Total
                                 ----------------------       Stockholders'
                                  Shares       Amounts           Equity
                                 -------      ---------          ------
<S>                              <C>          <C>             <C>
Balance, at
October 1, 1996                      --     $        --       $ 17,601,716
Net loss                             --              --         (1,981,101)
Cash dividends
 (Note 5)                            --              --           (453,940)
Issuance of common
 stock options (Note 6)              --              --            105,362
 Registration
 expenses                            --              --            (43,872)
Foreign currency
 translation adjustment              --              --             13,187
Purchase of treasury
 stock (Note 5)                  (9,000)        (73,810)           (73,810)
Exercise of stock
 options and warrants                --              --            690,474
                                -------     -----------       ------------
Balance, at
September 30, 1997               (9,000)        (73,810)        15,858,016

Net loss                             --              --           (867,456)
Cash dividends  (Note 5)             --              --           (350,326)
Purchase of treasury
 stock (Note 9)                 (70,000)       (458,675)          (458,675)
Foreign currency
  translation adjustment             --              --            (86,546)
Issuance of common
  stock options (Note 6)             --              --            144,705

Registration expense                 --              --            (31,487)
Unrealized loss on
  investment                         --              --            (38,364)
Exercise of stock options
 and warrants                        --              --            272,992
                                -------     -----------       ------------
Balance at
September 30, 1998              (79,000)       (532,485)        14,442,859
Net loss                             --              --           (848,352)
Foreign currency
 translation adjustment              --              --             (2,281)

Issuance of common
 stock options and
    warrants (Note 12)               --              --            763,112


Unrealized loss on
 investment, net of tax              --              --             (7,136)
                                -------     -----------       ------------
Balance at
September 30, 1999              (79,000)    $  (532,485)       $14,348,202
                                =======     ===========       ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                     NUTRITION FOR LIFE INTERNATIONAL, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                        1999         1998          1997
                                        ----         ----          ----
<S>                                <C>           <C>           <C>
 Cash flows from operating
  activities:
   Net loss                        $  (848,352)  $  (867,456)  $(1,981,101)
   Adjustments to
    reconcile net
    loss to net cash
     provided by (used in)
      operating activities:
       Depreciation and
        amortization                 1,944,644     1,397,810       801,039
       Bad debt expense              1,093,119       530,880       653,458
       Deferred tax
        expense (benefit)              460,000       676,608      (488,802)
       Stock options/warrants
        issued for services             60,990       144,705       105,362
       Loss on disposition
        of property and
        equipment                       74,809            --            --
       Unrealized losses
        on available for
        sale securities                     --        38,364            --
       Changes in assets and
        liabilities:
         Cash-restricted              (585,866)      513,195      (513,195)
         Receivables                  (886,503)      447,668    (1,756,875)
         Inventories                 1,263,275    (1,777,041)   (1,555,104)
         Refundable
          federal income
           taxes                       200,000       459,111      (159,111)
         Prepaid and other
          assets                      (109,352)     (456,643)     (236,426)
         Other assets                       --         5,186      (102,995)
         Accounts payable             (765,730)     (425,181)    1,130,829
         Deferred income            (2,426,134)     (571,873)      (69,099)
         Accrued expenses
          and other
          liabilities               (1,305,025)     (642,865)    2,285,944
         Federal and
          franchise tax
          payable                           --       (43,216)     (806,784)
                                   -----------   -----------   -----------

 Net cash provided by
  (used in) operating
  activities                        (1,830,125)     (570,748)   (2,692,860)
                                   -----------   -----------   -----------

 Cash flows from investing
  activities:
   Acquisition of property
    and equipment                     (323,211)   (1,986,114)   (4,076,384)
   Purchase of marketable
    securities                         (64,882)   (1,006,560)           --
   Purchase of other assets           (368,918)           --            --
   Purchase of intangible
    assets                                  --            --       (51,769)
                                   -----------   -----------   -----------

 Net cash used in
  investing activities                (757,011)   (2,992,674)   (4,128,153)
                                   -----------   -----------   -----------
 Cash flows from financing
  activities:
   Payment of capital
    lease obligations                 (164,690)     (166,307)           --
   Payment of long term
    debt                              (254,971)           --            --
   Exercise of stock
    options                                 --       223,642       523,655
   Exercise of warrants                     --        49,350       166,819
   Dividends paid                           --      (466,124)     (449,513)
   Registration fees                        --       (31,487)      (43,872)
   Purchase of warrants                     --       (73,675)           --
   Purchase of treasury stock               --      (385,000)      (73,810)
                                   -----------   -----------   -----------
 Net cash provided by
  (used in) financing
  activities                          (419,661)     (849,601)      123,279
                                   -----------   -----------   -----------











 Effect of exchange rates on cash
  and cash equivalents                  (2,281)      (86,546)       13,187
                                   -----------   -----------   -----------

 Net increase (decrease)
  in cash and cash
  equivalents                       (3,009,078)   (4,499,569)   (6,684,547)

 Cash and cash
  equivalents, beginning
  of year                            4,404,388     8,903,957    15,588,504
                                   -----------   -----------   -----------
 Cash and cash
  equivalents, end of year         $ 1,395,310   $ 4,404,388   $ 8,903,957
                                   ===========   ===========   ===========
</TABLE>


                    See accompanying notes to consolidated
                             financial statements.

                                      F-7
<PAGE>

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

NOTE 1 -- ORGANIZATION AND BUSINESS

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

  The Company operates as a wholesale distributor through its network marketing
organization, by selling a variety of consumer products and services through
independent distributors in the United States and abroad. The Company develops
products that are designed for health-conscious consumers, and sells those
products to consumers through its network of independent distributors. The
Company offers a product line of approximately 400 products in nine categories,
including nutritional supplements, health foods, weight management items, skin
care products, other consumer products, and services.

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

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

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

  The Company has six wholly-owned subsidiaries that were formed primarily to
operate as wholesale distributors of the Company's products in various areas of
the world.

Principles Of Consolidation

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

Cash And Cash Equivalents

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

Concentration of Credit Risk

  At September 30, 1999 and 1998, the Company's cash in financial institutions
exceeded the federally insured deposit limit by approximately $893,000 and
$3,998,000, respectively.


                                      F-8
<PAGE>

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

Fair Market Value Of Financial Instruments

  The Company's financial instruments include accounts receivable, accounts
payable, long-term debt and capital lease obligations. The fair market value of
accounts receivable and accounts payable approximates their carrying values
because their maturities are generally less than one year.

Marketable Securities

  Unrealized holding gains and losses on available for sale securities are
reflected as a separate component of accumulated comprehensive income (loss)
until realized. For the purposes of computing realized and unrealized gains and
losses cost is identified on a specific identification basis.

  Marketable securities are categorized as available-for-sale securities, as
defined by Statement of Financial Accounting Standards No. 115, "Accounting for
        -----------------------------------------------------------------------
Certain Investments in Debt and Equity Securities." and are summarized as
--------------------------------------------------
follows:
<TABLE>
<CAPTION>
                                                 1999                                     1998
                                    ---------------------------------    -------------------------------------
                                    Bond     Money-market                  Bond       Money-market
                                    funds       funds        Total         funds         funds        Total
                                    -----       -----        -----        ------         -----        -----
          <S>                      <C>         <C>         <C>            <C>           <C>         <C>

          Cost                     $732,519    $338,923    $1,071,442     $674,035      $332,525    $1,006,560

          Fair Value                658,019     338,923       996,942      635,671       332,525       968,196
                                   --------    --------    ----------     --------    ----------    ----------
          Gross unrealized loss    $ 74,500    $     --    $   74,500     $ 38,364      $     --    $   38,364
                                   ========    ========    ==========     ========    ==========    ==========
</TABLE>
The unrealized loss on investment of $45,500 at September 30, 1999 is net of tax
in the amount of $29,000.

Receivables

  Receivables consist principally of amounts due from distributors resulting
from credit card sales in the normal course of business. All amounts are
considered collectible.

Inventories

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

Property And Equipment

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

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

Capital Lease

  The Company leases certain computer equipment under a capital lease agreement
that expires in 2002. The asset and liability under this capital lease are
recorded at the lower of the present value of the minimum lease payments or the
fair value of the asset. The asset is being amortized beginning in fiscal 1998
over the lesser of the related lease term or its estimated useful life.  At the
inception of the capital lease, the Company's incremental borrowing rate was
used to determine the present value of the minimum lease payment. Therefore, the
carrying value of the capital lease obligation approximates market value.

Audio Production Rights

  Audio production rights are stated at cost less accumulated amortization.
Amortization is provided using a straight-line method over the estimated three
year life of the Rights. The Company reviews the carrying value of the audio
production rights for possible impairment whenever changes in circumstances
indicate that the carrying amount of the audio production may not be
recoverable.

                                      F-9
<PAGE>

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

Stock Options and Warrants

  The Company has elected to account for stock options issued to employees in
accordance with APB No.25. During the years ended September 30, 1999, 1998 and
1997, all options issued to officers and employees were granted at an exercise
price, which equaled or exceeded the market price per share at the date of grant
and accordingly, no compensation expense was recorded relative to those grants.

  Effective for the year ended September 30, 1997, the Company adopted the
disclosure requirements of SFAS No.123 "Accounting for Stock-based
                                        --------------------------
Compensation". This statement requires that the Company provide proforma
------------
information regarding net income (loss) and income (loss) per share as if
compensation cost for the Company's stock options granted had been determined in
accordance with the fair value based method prescribed in SFAS No. 123 (see
Note 6). Additionally, SFAS No. 123 generally requires that the Company record
options issued to non-employees as an expense, calculated based on the fair
value of the options.

Revenue Recognition

  The Company sells its products directly to independent distributors. Sales are
recorded when products are shipped. Net sales represent orders shipped, less
estimated returns and allowances. Provisions are made for estimated returns and
allowances at the time of sale. Included in cost of sales are rebates and other
commissions that are paid monthly and are calculated using specific rates based
on actual sales volume.

  Prior to June 1, 1999, NFLI sold product redemption certificates to
distributors who were enrolled in the Company's order assurance program ("OAP").
Revenues were recorded when these certificates were redeemed for product.
However, if the certificates were not redeemed for product, the Company recorded
revenues ratably over a 150 day period commencing with the ending of the
expiration period of 120 days. Such revenues were recorded as part of the
Company's net sales for periods prior to June 1, 1999.

  Subsequent to June 1, 1999, the Company began shipping product packs for most
OAP purchases, the shipment of which results in the recognition of revenue.
Approximately $2,600,000 of revenue related to the shipment of the product
packs was recognized in fiscal 1999. The Company now only sells product
redemption certificates for certain "big ticket" items. Such certificates must
be redeemed for the specified item upon accumulation of the required number of
certificates. As a result of the change in the OAP the Company does not expect
to recognize substantial future revenue from the redemption of product
certificates.

Income Taxes

  The Company recognizes income tax expense using the liability method of
accounting for deferred income taxes. A deferred tax asset or liability is
recorded based upon the tax effect of temporary differences between the tax
basis of assets and liabilities and their carrying value for financial reporting
purposes. Deferred tax expense or benefit is the result of changes in the
deferred tax assets and liabilities during the year. The Company adjusts the
deferred tax asset valuation allowance based upon the anticipated future
realization of the deferred tax benefits supported by demonstrated trends in the
Company's operating results.


                                     F-10
<PAGE>

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


Earnings (Loss) Per Common Share

  Basic earnings per share includes no dilution and is computed by dividing net
earnings (loss) available to stockholders by the weighted number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the Company's earnings
similar to fully diluted earnings per share.

Earnings per share amounts as required by Statement of Financial Accounting
Standards No. 128 are calculated as follows:

<TABLE>
<CAPTION>
                                                                                   For the Year Ended September 30,
                                                                                   -------------------------------
                                                                                 1999            1998            1997
                                                                              ----------      ----------      -----------
          <S>                                                                 <C>             <C>             <C>
          Basic and diluted (loss) per share:

              Net (loss) available to common
              stockholders                                                    $ (848,352)     $ (867,456)     $(1,981,101)
                                                                              ==========      ==========      -----------
              Weighted average common shares outstanding                       5,808,595       5,832,887        5,625,464
                                                                              ==========      ==========      ===========
              Basic and diluted (loss) per share                              $     (.15)     $     (.15)     $      (.35)
                                                                              ==========      ==========      ===========
</TABLE>


  Diluted earnings per share for the years ended September 30, 1999, 1998 and
1997 did not consider the effect of the warrants and options because they were
anti-dilutive.

Foreign Currency Translation

  The asset and liability accounts of the Company's foreign subsidiaries are
translated into US dollar amounts for financial reporting purposes using year-
end exchange rates. Revenue and expense accounts are translated at the average
rates during the year. Foreign exchange rate translation adjustments are
accumulated in a separate component of stockholders' equity. Exchange gains of
approximately $65,000 and exchange losses of approximately $337,000, and $78,500
for the years ended September 30, 1999, 1998 and 1997, respectively, are
included in the accompanying consolidated financial statements as "Other income
(expense)".

Management's Estimates And Assumptions

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

                                     F-11
<PAGE>

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


Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting Standards Board issued Statement of
                                                                    ------------
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
-----------------------------------------------------------------------------
and Hedging Activities" (SFAS 133), and in July 1999 issued Financial Accounting
-----------------------                                     --------------------
Standard No. 137, "Accounting for Derivative Instruments and Hedging Activities
-------------------------------------------------------------------------------
-- Deferral of the Effective Date of FASB Statement No. 133 to fiscal years
---------------------------------------------------------------------------
beginning after June 15, 2000. The Company does not believe that this statement
------------------------------
will have a material effect on its financial position or results of operations.

NOTE 2 -- FOURTH QUARTER ADJUSTMENTS

     Aggregate yearend adjustments recorded in the fourth quarter converted
pretax income to a pretax loss by 900,000, and included an inventory writedown
of 350,000, a writedown of assets of Nutrition for Life International
Philippines, Inc. ("RP") of $300,000 (see Note 14), and a bad debts writeoff of
$250,000.

NOTE 3 -- PROPERTY AND EQUIPMENT

     Property and equipment and their estimated useful lives are summarized as
 follows:

<TABLE>
<CAPTION>
                                                                                         September 30,
                                                                                         ------------
                                                                 Lives            1999                1998
                                                                 -----           ------              ------
      <S>                                                        <C>           <C>                <C>
      Equipment                                                      7         $3,896,260         $ 4,498,928
      Computer software                                             10          3,038,391           3,038,391
      Leasehold improvements                                         5          1,075,345           1,110,167
      Furniture and fixtures                                      5-10            813,555             656,809
      Automobiles                                                    5            170,970             151,059
      Equipment held under capital
       lease (Note 4)                                                4            679,151             679,151
                                                                               ----------         -----------
                                                                                9,673,672          10,134,505

      Less: Accumulated depreciation and amortization                           3,635,486           2,827,855
                                                                               ----------         -----------
                                                                               $6,038,186         $ 7,306,650
                                                                               ==========         ===========

</TABLE>

                                      F-12
<PAGE>

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

NOTE 4 -- CAPITAL LEASE OBLIGATION

     Minimum future lease payments under capital leases as of September 30, 1999
for each of the next three years and in the aggregate are:

     Year ended September 30:
     2000                                                   $ 194,880
     2001                                                     179,738
     2002                                                         789
                                                            ---------

     Total minimum lease payments                             375,407
     Less: Amount representing interest                       (27,253)
                                                            ---------
     Present value of net minimum lease payments              348,154
     Current portion of capital lease obligation             (177,160)
                                                            ---------
     Long-term portion of capital lease obligation          $ 170,994
                                                            =========

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

NOTE 5 -- COMMON STOCK

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

     During the years ended September 30, 1998, and 1997 the Company's Board of
Directors declared cash dividends totaling $350, 326, and $453,940,
respectively. Of such dividends $466,124, and $449,513 was paid during the years
ended September 30, 1998 and 1997, respectively. No dividends have been declared
or paid on the Company's common stock subsequent to June 1998.

NOTE 6 -- STOCK OPTIONS AND WARRANTS

1993 Plan

     In planning the Merger, NEC-Utah and NEC-Colorado determined that a stock
option plan would provide incentives for employees and consultants of NFLI who
promote the interests of the Company and its stockholders. The Company's Board
of Directors approved the 1993 Stock Option Plan (the "1993 Plan") in connection
with the approval of the Merger. Pursuant to the 1993 Plan, a total of 282,000
shares of common stock were reserved for the grant of options to purchase the
Company's common stock. At September 30, 1999, there were 106,946 shares
reserved for the grant of options under the 1993 plan. Generally, one-third of
the shares underlying the options become exercisable in cumulative installments
of 12 months, 24 months and 36 months after the date of grant. The maximum term
of the options is 10 years, except that if an employee leaves the Company, the
options will terminate 30 days thereafter. The issuance of options is at the
discretion of the Company's Board of Directors.

1995 Discretionary Plan

     The Company's Board of Directors approved the 1995 Stock Option Plan (the
"1995 Plan") in March 1995. Pursuant to the 1995 Plan, as amended in June 1996,
and April 1999 the Company reserved a total of 985,000 shares of common stock
for the grant of options to purchase Common Stock of the Company. The terms of
the options are similar to those of the 1993 Plan. At September 30, 1999, there
were 234,200 shares reserved for the grant of options under the 1995 plan.

1995 Non-Discretionary Plan

     In November 1995, the Company adopted the 1995 Non-Discretionary Stock
Option Plan for non-employee directors of the Company who are not eligible to
participate in the other Plans (the "Non-Discretionary Plan"). The Non-
Discretionary Plan provides that the Company grant options to purchase 5,000
shares of the Company's common stock to each eligible director on the date of
adoption of the Non-Discretionary Plan (November 28, 1995), to each person who
thereafter becomes a director of the Company and,

                                      F-13
<PAGE>

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

as of December 1, of each year (commencing in 1996), options to purchase an
additional 5,000 shares of common stock will be granted to each eligible
director. The exercise price of the options is the fair value of the common
stock at the date of grant of the options. The options expire in five years and
are exercisable in full at the date of grant.

     During the years ended September 30, 1998 and 1997, the Company issued
15,000 options to Directors under this plan. Utilizing the Black-Scholes option-
pricing model for the year ended September 30, 1999 and 1998, the Company
determined that the value of the options was not material.

     The Non-Discretionary Plan was cancelled on October 6, 1999.

Options and Warrants Issued in Public Offering

     In connection with a public offering, the Company issued 920,000 stock
warrants. Each warrant entitles the holder to purchase one share of common stock
at a price of $3.75. The Company's Board of Directors has extended the warrant
expiration date to October 16, 2000. The Company has the right to call all of
the warrants for redemption on 30 days written notice at a redemption price of
$.05 per warrant, subject to certain defined criteria. In addition, the Company
issued warrants to underwriters to purchase 80,000 shares of the Company's
common stock at $3.75 and options to purchase 160,000 shares of the Company's
common stock at $3.23.

Other Warrants

     In April 1998, the Company retained the services of Piedmont Consulting,
Inc., ("Piedmont") a public/investor relations firm, to assist in its efforts to
gain a broader investor following. As compensation for its services Piedmont was
paid a monthly retainer and was granted a three year warrant entitling it to
purchase up to 30,000 shares of the Company's common stock at $5.25 per share
and 40,000 shares at $7.00 per share. In July 1998 the Company terminated its
relationship with Piedmont. Pursuant to the provisions of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation", the Company
recognized approximately $144,705 as compensation expense related to the
warrants in the year ended September 30, 1998.

     In October 1998, the Company issued a warrant to Nightingale Conant to
purchase up to 290,000 shares of the Company's common stock at $5.50 per share.
The warrant is exercisable at any time until October 31, 2003, and is entitled
to the benefit of adjustment of the exercise price and number of shares
deliverable upon exercise thereof in the event of certain specified dilutive
transactions. Expense of $702,000 has been accrued in the accompanying September
30, 1998 consolidated financial statements.

     The Company estimates the fair value of each stock option at the grant date
by using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1999, 1998 and 1997, a dividend yield of
0%, 1% and 1%, a risk-free interest rate of 5.0%, 5.7% and 5.7%, an expected
life ranging from 5-10 years; and, an expected volatility of 92%, 67% and 67%,
respectively.

     Had compensation cost been determined on the basis of fair value pursuant
to SFAS No. 123 for stock options issued to employees, net income (loss) and
earnings (loss) per share for years ended September 30, 1999, 1998 and 1997
would have been reduced as follows:

<TABLE>
<CAPTION>
                                                              1999          1998          1997
                                                              ----          ----          ----
          <S>                                             <C>           <C>           <C>
          Net loss:

          As reported                                     $  (848,352)  $  (867,456)  $(1,981,101)
                                                          ===========   ===========   ===========
          Pro forma                                       $(1,172,062)  $(1,063,456)  $(2,457,533)
                                                          ===========   ===========   ===========

          Basic and diluted (loss) per share:

          As reported                                     $      (.15)  $      (.15)  $      (.35)
                                                          ===========   ===========   ===========
          Pro forma                                       $      (.20)  $      (.18)  $      (.43)
                                                          ===========   ===========   ===========
 </TABLE>

                                      F-14
<PAGE>

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

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

<TABLE>
<CAPTION>

                                                                 Options                          Warrants
                                                                 -------                          --------
                                                                          Weighted                          Weighted
                                                           Number         Average            Number         Average
                                                             of           Exercise             of           Exercise
                                                           Shares          Price             Shares          Price
                                                           ------          -----             ------          -----
          <S>                                            <C>            <C>                 <C>         <C>

          Outstanding as of October 1, 1996                502,000         $  3.51            514,316       $  3.75

             Granted                                       266,850         $ 12.15                 --
             Exercised                                    (157,220)        $  3.15            (50,053)      $  3.75
             Forfeited                                      (2,300)        $ 13.00                 --
             Cancelled                                      (1,200)        $  7.33                 --
                                                         ---------                          ---------
          Outstanding as of September 30, 1997             608,130         $  7.38            464,263       $  3.75

             Granted                                        80,000         $  5.67             70,000       $  5.25
             Exercised                                     (97,400)        $  2.27            (13,160)      $  3.75
             Forfeited                                     (73,233)        $ 11.31                 --
             Cancelled                                     (12,417)        $ 11.56                 --
                                                         ---------                          ---------
          Outstanding as of September 30, 1998             505,080         $  7.39            521,103       $  3.84

             Granted                                       205,000         $  2.95            290,000       $  5.50
             Exercised
             Forfeited                                      (7,200)        $ 13.00                 --
             Cancelled                                      (3,000)        $ 13.00                 --
                                                         ---------                          ---------
          Outstanding as of September 30, 1999             699,880         $  6.01            811,103       $  4.59
                                                         =========                          =========

          Exercisable as of September 30,
             1997                                          349,146         $  3.81            464,263       $  3.75
             1998                                          362,548         $  5.83            521,103       $  3.84
             1999                                          441,615         $  6.58            811,103       $  4.59

          Weighted average fair value of grants
          during the year ended September 30,
             1997                                                          $  8.85                          $    --
             1998                                                          $  2.45                          $  3.35
             1999                                                          $  2.59                          $  2.42
 </TABLE>

                                      F-15
<PAGE>

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


     Following is a summary of the status of the options and warrants
outstanding at September 30, 1999:

<TABLE>
<CAPTION>
               Options and Warrants Outstanding                                  Options and Warrants Exercisable
               --------------------------------                                  --------------------------------

                                      Weighted-Average
                                          Remaining
          Range of                    Contractual Life   Weighted-Average                        Weighted-Average
      Exercise Prices       Number         (years)        Exercise Price             Number       Exercise Price
    ------------------      ------         -------        --------------             ------       --------------
<S>           <C>        <C>          <C>                <C>                    <C>               <C>
$   0.00 -    $  1.98      154,500           1.4              $  1.72                154,500          $   1.72
    1.98 -       3.95      706,683           3.2                 3.43                516,683              3.59
    3.95 -       5.93      385,000           4.6                 5.46                368,334              5.44
    5.93 -       7.90       55,000           1.9                 7.00                 55,000              7.00
    7.90 -       9.88       20,000           7.6                 9.00                 13,334              9.00
    9.88 -      11.85       10,000           7.1                11.50                  6,667             11.50
   11.85 -      13.83      139,800           6.6                12.93                 98,200             12.90
   13.83 -      15.80       25,000           6.6                14.25                 25,000             14.25
   15.80 -      17.78            0             0                    0                      0                 0
   17.78 -      19.75       15,000           1.2                19.75                 15,000             19.75
                         ---------        ------              -------             ----------          --------
                         1,510,983           3.8              $  5.25              1,252,718          $   5.29
                         =========        ======              =======             ==========          ========
</TABLE>

NOTE 7 -- INCOME TAXES

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

     The (benefit) provision for income taxes for the years ended September 30,
1999, 1998 and 1997 consisted of the following:

                                              1999        1998           1997
                                              ----        ----           ----
       Federal tax (benefit) - current     $ 51,000    $  68,009      $ (12,028)
       Federal tax (benefit) - deferred     460,000      676,298       (476,608)
       State tax                             46,000       45,743         43,216
                                           --------    ---------      ---------
                                           $557,000    $ 790,050      $(445,420)
                                           ========    =========      =========

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

<TABLE>
<CAPTION>
                                                                            1999          1998         1997
                                                                            ----          ----         ----
       <S>                                                                <C>          <C>           <C>
       Expected income tax (benefit) expense at 34%                       $(99,060)    $ (26,318)    $(825,017)
       State taxes, net of federal benefit                                  30,400        30,190        28,523
       Loss from foreign subsidiaries                                      592,800       498,000       380,000
       Nondeductible amortization of intangible assets                          --            --            --
       Overaccrual of 1997 lawsuit settlement and distributor cruise            --       153,000            --
       Accrual differences from 1997 taxes                                      --       113,608            --
       Other items, net                                                     32,860        21,570       (28,926)
                                                                          --------     ---------     ---------
       Income tax expense (benefit)                                       $557,000     $ 790,050     $(445,420)
                                                                          ========     =========     =========
</TABLE>

                                      F-16
<PAGE>

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


Current deferred tax assets at September 30, 1999 and 1998 were as follows:

                                                       1999           1998
                                                       ----           ----
   Deferred income - certificates                  $  132,000     $  891,000
   Additional capitalized inventory costs             561,000        584,000
   Cruise accrual                                      85,000             --
   Loss carryforwards                                 599,000        111,000
   Deferred settlement costs - Nightingale Conant          --        275,000
   Deferred income - product and literature            42,000        101,000
   Other                                              228,000         20,000
                                                   ----------     ----------
                                                    1,647,000      1,982,000
   Less valuation allowance                                --             --
                                                   ----------     ----------
   Current deferred tax assets                     $1,647,000     $1,982,000
                                                   ==========     ==========

 Non-current deferred tax liability at September 30, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                                     1999         1998
                                                                     ----         ----
 <S>                                                              <C>           <C>
 Differences between financial reporting and tax depreciation     $(778,000)    $(682,000)
                                                                  =========     =========
</TABLE>

  At September 30, 1999, the Company had a taxable net operating loss
carryforward of $1,750,000 which is available to offset future taxable income
primarily through the year 2019. It is management's opinion, based on past
operating results and expected future operating results, that it is more likely
than not that the Company will utilize its entire net operating loss
carryforward prior to expiration.

  For the year ended September 30, 1997, the Company recorded a federal income
tax receivable of $659,111 from an overpayment of taxes. Of this receivable,
approximately $459,000 was refunded during the year ended September 30, 1998 and
$200,000 remained a receivable as of September 30, 1998 and was received during
the year ended September 30, 1999.

NOTE 8 -- DEFERRED INCOME

  The Company's distributors earn monthly commissions based upon their achieving
a pre-determined monthly minimum sales volume. To assist distributors in meeting
their monthly minimum sales volume, the Company has developed an Order Assurance
Program ("OAP"), which allows a distributor to generate sales volume and
maintain qualification to receive monthly commissions. If a distributor's
monthly sales volume is below their pre-authorized OAP level they are
automatically sent a package of products equal to a pre-authorized amount. A
distributor may request that they be allowed to accumulate OAP credits for the
purchase of certain "big ticket" items. Revenue is recognized on these "big
ticket" items when the required purchase price is accumulated and the product is
shipped to the distributor.

  Prior to June 1, 1999 distributors were allowed to purchase product redemption
certificates instead of receiving product. The purchase of such certificates
qualified the distributor to receive a commission in a given month even though
actual product purchases were below the required level. The Company recognized
revenue on these certificates when they were redeemed for product or on a
ratable basis over a 150-day period after expiration of the certificates.

NOTE 9 -- COMMITMENTS AND CONTINGENCIES

401(k) Plan

  In July 1998 the Company established the Nutrition for Life 401(k) Plan and
Trust (the "Plan") which covers all of the Company's full-time employees who are
United States citizens, at least 21 years of age and have completed one quarter
of service with the Company. Pursuant to the plan, employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit and
have the amount of such reduction contributed to the Plan. The Plan provides for
discretionary contributions by the Company. As of September 30, 1999, the
Company has made no such discretionary contributions.

                                      F-17
<PAGE>

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


Operating Leases

The Company has noncancelable operating leases, primarily for office, warehouse
space and equipment. Rental expense under operating leases for the years ended
September 30, 1999, 1998 and 1997 amounted to approximately $990,000, $621,000
and $670,000, respectively.

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

          Year Ended September 30,
          ------------------------
                    2000                        $   885,000
                    2001                            643,000
                    2002                            180,000
                    2003                            142,000
                    2004                            136,000
                    2005 and thereafter             890,000
                                                -----------
                                                $ 2,876,000
                                                ===========

Government Regulations

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

Employment Agreements

  Effective October 1, 1996, the Company entered into employment agreements with
its chief executive officer and its executive vice-president through September
30, 1999. On November 1, 1999, each of the employment agreements was extended
until October 30, 2000. Under the agreements, both individuals will receive
their annual salary, plus 5% of pre-tax income from $3,000,000 to $5,000,000, 4%
of the next $5,000,000 of pretax income, and 3% of the next $10,000,000 of
pretax income. No bonuses were paid to these individuals for any of the years
ended September 30, 1999, 1998 or 1997 as the Company did not achieve sufficient
pretax income in these years.

  In March 1998, each of these individuals agreed to a 25% reduction in their
annual salaries. Concurrent with the salary reduction each individual was
granted a three year option, pursuant to the Company's 1995 Stock Option Plan,
to purchase up to 20,000 shares of the Company's Common Stock at $5.13 per
share, the closing price of the Company's Common Stock on the date of the grant.

Distributor Agreement

  Effective October 24, 1997, the Company entered into an eight year exclusivity
in network marketing agreement with a significant distributor, Mr. Kevin
Trudeau, in which the Company agreed to pay Mr. Trudeau a percentage, as defined
in the agreement, of gross revenues of the Company.

  In August 1998, the Company and Mr. Trudeau entered into an agreement to end
the Company's business relationship with Mr. Trudeau. Mr. Trudeau and the
Company agreed that their October 1997 agreement and his distributorship were
terminated and that Mr. Trudeau would not contest such terminations.
Additionally, the Company and Mr. Trudeau agreed that Mr. Trudeau would comply
with the nine-month non-competition provisions of the October 1997 agreement and
that the Company would purchase the approximate 70,000 shares of common stock
and 40,000 stock purchase warrants then owned by Mr. Trudeau. In September 1998,
the Company purchased Mr. Trudeau's common stock and stock purchase warrants for
approximately $459,000.

                                      F-18
<PAGE>
                    NUTRITION FOR LIFE INTERNATIONAL, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Cruise

  On February 11, 1997, the Company's Board of Directors approved the rights of
certain distributors to participate in a cruise during February 1998. In
connection with this cruise, the Company conducted seminars for the education
and development of its distributors. The $1.2 million estimated and accrued cost
of the cruise is included in operating expenses for the year ended September 30,
1997. During the year ended September 30, 1998, the Company paid $833,026
representing payment of all obligations related to the cruise. The $362,124 of
overaccrued cost of the cruise is reflected in operating expenses in the
accompanying consolidated financial statements for the year ended September 30,
1998.

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

  In connection with a cruise scheduled for April 2000, the Company was required
to obtain a letter of credit from a financial institution to cover the cost of
the cruise. Accordingly, the Company has pledged a certificate of deposit in the
amount of $585,866 which is included in the accompanying financial statements as
of September 30, 1999. At September 30, 1999, the Company had $583,680 in such
letter of credit outstanding that will expire on March 7, 2000. The $250,000
expected cost of the cruise has been credited to accrued expenses and other
liabilities and charged to marketing, distribution and administration expenses.

Product Liability

  As of September 30, 1999, the Company did not engage in the manufacturing of
any of the products it markets and distributes; however, it could be exposed to
product liability claims. The Company has not had any such claims to date.
Although the Company maintains product liability insurance which it believes to
be adequate for its needs, there can be no assurance that the Company will not
be subject to claims in the future or that its insurance coverage will be
adequate.

Purchase Commitment

  In July 1998, the Company entered into a supply agreement with VitaRich
Laboratories, Inc. ("VitaRich") in which the Company agreed to advance VitaRich
up to $800,000 to secure the purchase of a sufficient quantity of certain
nutritional supplement raw materials to meet the Company's anticipated need for
rapid delivery of product and to obtain such product at discounted prices. The
agreement is for three years and requires that the Company provide VitaRich with
periodic estimates of anticipated needs, as well as actual use rates of the
requested product.

  The Company made an initial deposit of $400,000 to VitaRich and has agreed
that it will maintain a deposit in the amount of 40% of its outstanding purchase
orders with VitaRich. VitaRich is required to use the deposit for the purchase
of raw material and the processing of finished product in sufficient kinds and
quantifies to enable the Company to (i) meet its anticipated need for the
product, (ii) maximize the costs savings to VitaRich and provide the Company
with reduced prices through the purchase of bulk quantities of raw materials,
and (iii) enable VitaRich to meet the Company's rapid delivery requirements.

  Unless the agreement is terminated before its expiration, the Company is not
required to make additional deposits beyond the third year.  Additionally,
VitaRich is required to repay any outstanding deposits by crediting the Company
with an amount equal to 10% of each purchase order placed by the Company until
such time as all advances have been repaid.  The Company has a first priority
security interest in all of VitaRich's interest in the inventory, warehouse
receipts, documents of title, accounts receivable and proceeds of insurance
related to the raw materials purchased by VitaRich on behalf of the Company. As
of September 30, 1999, the Company had advanced VitaRich a total of $ 400,000
which is included in prepaid expense in the accompanying consolidated financial
statements.

NOTE 10 -- RELATED PARTY TRANSACTIONS

     During 1998 and 1999, respectively, the Company purchased approximately
41,000 and 32,000 copies of a book, "Making A Difference While You're Making A
                                     -----------------------------------------
Living", written by its CEO, David P. Bertrand and his son J. Mark Bertrand,
------
also an employee of the Company, at a cost to the Company of $5.00 per book. New
Paradigm Publishing, a company established by J. Mark Bertrand, published the
book and subsequently sold it the Company. The Company sold approximately 10,000
and 3,000 copies of the book during 1999 and 1998, respectively, at an average
selling price of approximately $10.95 per copy. The book has been placed in the
Company's product catalog at per copy prices ranging from $8.95 to $12.95, based
upon quantity ordered, and in 1999 approximately 35,000 of the books were part
of the materials provided to new distributors in the Company's starter kits.
Additionally, in 1998 approximately 19,000 copies of the book were shipped to
distributors as part of the Company's Business Training Systems for that month.
New Paradigm Publishing has agreed to accept return of any books ordered, but
not sold by the Company and to refund to the Company $5.00 per returned copy.
The Company's Board of

                                      F-19
<PAGE>

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

Directors unanimously approved the purchase of the aforementioned books. As of
September 30, 1999 and 1998, no amounts were owed by the Company to New Paradigm
Publishing.

     The Company has purchased a portion of its inventory from one vendor. Until
October 1997, a director of the Company was the president or a consultant of the
vendor, and until June 1995, the vendor was owned by a major stockholder of the
Company. The items purchased are readily available from other vendors. During
the years ended September 30, 1999, 1998 and 1997, the Company purchased $-0-,
$494,000, and $4,190,000, respectively of goods, from this vendor.

NOTE 11 -- FOREIGN SALES

  For the years ended September 30, 1999, 1998, and 1997 the Company's net sales
from foreign operations were approximately $8,600,000, $9,000,000 and
$10,000,000, respectively, including sales to customers in Canada totaling
approximately $3,100,000, $4,800,000 and $6,795,000, respectively. The gross
profit percentages on all foreign sales are consistent with the Company's
overall gross profit percentages, however exchange rate fluctuations could have
an impact on the Company's future gross profit margins. Information related to
the Company's domestic and international operations is as follows:

<TABLE>
<CAPTION>
                                                YEARS ENDED SEPTEMBER 30,
                                                -------------------------
                                                     (In thousands)


                                                 1999      1998       1997
                                                -------   -------   -------
  <S>                                           <C>       <C>       <C>

  Sales to unaffiliated customers:
     North America (1)                          $61,047   $65,387   $80,325
     United Kingdom (2)                           4,690     3,533     2,549
     Philippines (3)                                833       738       171

  Sales or transfers between geographic areas:
     North America                                   --        --        --
     United Kingdom                               1,007       622       682
     Philippines                                    104       290       269

  Operating profit (loss):
     North America                                  861     1,937    (2,342)
     United Kingdom                                (855)     (959)     (906)
     Philippines                                   (508)     (280)      (28)

  Identifiable assets:
     North America                               25,789    29,635    29,827
     United Kingdom                               1,680     1,435     1,355
     Philippines                                    314       883       708
</TABLE>

  (1) Includes the United States, Canada, and Puerto Rico.
  (2) First began operations in fiscal 1996.
  (3) First began operations in fiscal 1997; see Note 2.


NOTE 12 - CONTRACT TERMINATION

  In July 1996, the Company entered into an Administrative and Consulting
Services Agreement (the "1996 Agreement") with Distributor Services, L.L.C.
("DS"). DS is an affiliate of Nightingale-Conant ("NC"), at the time a major
supplier to the Company of self-improvement programs. The 1996 Agreement
provided that, except to the extent the Company produced its own material in-
house, DS had the exclusive right to produce and sell all of the Company's
recruiting and training material. Such materials were to be produced and
marketed at the expense of DS and DS was entitled to all revenues received from
sales of such materials. DS also was granted the exclusive right to produce,
organize and sell, at its own expense, admission to all Company sponsored
recruiting or promotional events and to receive all revenues derived therefrom.
The Company had the exclusive right of approval over content of all materials
and meetings produced by DS. Without additional compensation, DS was to provide
consulting services to the Company with respect to the Company's marketing
strategy and program, including the Company's weekly teleconference, magazine
and other

                                      F-20
<PAGE>

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

communication with distributors. For a fee, DS also produced and provided to the
Company each month at least four master cassettes for sale by the Company in the
Company's Master Developer Series. The term of the 1996 Agreement was fifteen
years and the parties agreed to negotiate in good faith successive fifteen-year
terms. The 1996 Agreement could be terminated earlier for breaches of any
material obligation. Kevin Trudeau, formerly a key distributor of the Company's
products, was principally responsible for DS's performance in connection with
the 1996 Agreement.

  Associated with the termination of Kevin Trudeau's distributorship in August
1998, the Company, DS and NC agreed to terminate the 1996 Agreement in October
1998. The Company agreed to pay NC and DS $2,047,000 and to issue to NC a
warrant to purchase up to 290,000 shares of the Company's common stock to
satisfy all accounts payable and other amounts claimed by them for materials
previously delivered to the Company, as well as for the purchase of all of DS's
inventory of audio and video tapes, including all of the audio production rights
for such audio and video tapes, and other materials used to promote the Company,
and for cancellation of the remaining term of the 1996 Agreement.

  Approximately $967,000 of the amount was paid upon execution of the agreement
in October 1998 with the balance of $1,080,000 represented by a promissory note
payable in 30 equal monthly interest free payments of $36,000 beginning November
1, 1998. The note is subordinated to working capital loans obtained by the
Company in the ordinary course of business, tax and other governmental charges,
and other obligations incurred in the ordinary course of business for obtaining
goods and services. For financial accounting purposes, the Company has
discounted the non-interest bearing note at 10.25% resulting in a note payable
of $949,000.

  The warrant issued to NC entitles NC to purchase up to 290,000 shares of the
Company's common stock at $5.50 per share at any time until October 31, 2003.
The warrant is entitled to the benefit of adjustment of the exercise price and
number of shares of common stock deliverable upon exercise thereof in the event
of certain specified dilutive transactions.

  The Company accounted for the transactions as of September 30, 1998. The
amount paid for the audio production rights was approximately $1,400,000 and is
being amortized over an expected recovery period of three-years. Expense
relative to the warrants issued to NC was determined by utilizing the Black-
Scholes method to be approximately $702,000. Such expense is included in the
accompanying 1998 consolidated financial statements as "Other Expense - contract
termination expense" and "Accrued expense - Nightingale-Conant". The warrants
were issued in October  1998. Additionally, the cash paid upon the execution of
the agreement of approximately $967,000 was also included in "Accrued expenses -
Nightingale-Conant" in the accompanying 1998 consolidated financial statements.

  NC also agreed that for a five year period it would not directly or indirectly
seek to acquire a controlling interest, as defined under the rules and
regulations promulgated by the Securities and Exchange Commission, in the
Company without the prior written consent of the Company's Board of Directors.

NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                              1999       1998        1997
                                                            --------  ----------  ----------
<S>                                                         <C>       <C>         <C>
 Supplemental disclosure of noncash financing activities:

   Purchase of property and equipment under
      capital lease                                         $     --  $   43,192  $  635,959

   Declaration of dividends                                 $     --          --  $  115,798

   Settlement of Nightingale-Conant contract:

      Purchase of audio production rights                   $     --  $1,400,000          --

      Issuance of long-term debt                            $     --  $  949,000          --

      Net  increase in liabilities                          $     --  $  451,000          --

 Supplemental disclosure of cash flow information:

   Federal and state income taxes paid                      $     --          --  $1,400,000

   Interest paid                                            $128,900          --          --

</TABLE>

                                      F-21
<PAGE>

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


NOTE 14 -- SUBSEQUENT EVENTS

  Subsequent to September 30, 1999, the Company executed a letter of intent with
the current managers of RP to purchase the subsidiary. The completion of the
sale is subject to closing various conditions. The Company anticipates that the
realizable value of consideration to be received will be minimal. During the
year ended September 30, 1999, the Company recorded asset impairments and other
writedowns (principally inventory) in RP in the aggregate amount of $300,000.

  On November 17, 1999 the Company finalized the acquisitions of Advanced
Nutraceuticals, Inc. ("ANI") and Bactolac Pharmaceutical Inc. ("BPI"). The
acquisition of ANI was completed through a merger with the Company's wholly-
owned subsidiary, NL Acquisition Company. The acquisition of BPI was completed
through a merger with the Company's wholly owned subsidiary, BPI Acquisition
Company. In connection with the merger of BPI into BPI Acquisition Company, the
name of the surviving corporation was changed to Bactolac Pharmaceutical Inc.

  ANI was formed to pursue a consolidation and integration program in the
nutrition industry. The former ANI stockholders received an aggregate of 75,000
shares of a newly created Series A Preferred Stock of the Company. Each one
share of Series A Preferred Stock will be automatically converted into ten
shares of the Company's common stock upon approval of the Company's
shareholders. The Series A Preferred Stock has no voting rights (except as
required by law) and no dividend rights. Upon liquidation, dissolution or
winding up of the Company, the Series A Preferred Stock has a preference of
$28.40 per share, payable prior and in preference to any distribution of any
assets or surplus funds of the Company to the holders of the Company's common
stock.

  BPI, headquartered in Westbury, New York, manufactures nutritional supplements
for private labeled customers. The purchase price of the Bactolac acquisition
consisted of $2,500,000 in cash, a subordinated promissory note in the principal
amount of $2,500,000 and 96,831 shares of Series A Preferred Stock.
Additionally, up to 17,606 shares of Series A Preferred Stock may be issued
pursuant to an earnout agreement. BPI entered into an employment agreement and
covenant not to compete agreement with its former owner at the closing on
November 17,1999. The Company intends to continue to operate BPI and to use its
inventory, machinery and equipment in connection with the manufacture of
nutritional supplements.

  On December 1, 1999, the Company finalized the acquisition of Ash Corp.
("ASH"). The acquisition of ASH was completed through a merger with the
Company's wholly owned subsidiary BPI.  The purchase price of ASH consisted of
$750,000 in cash, a note payable in the amount of $500,000 and 49,296 shares of
Series A Preferred Stock. Additionally, up to 105,634 shares of Series A
Preferred Stock may be issued pursuant to an earnout agreement. Each one share
of Series A Preferred Stock will be automatically converted into 10 shares of
the Company's common stock upon approval of the Company's shareholders. The
Company intends to continue the operations of ASH and to use its inventory,
machinery and equipment in connection with the manufacture of liquid
pharmaceutical and nutraceutical products. Financing for the acquisition of ASH
was provided primarily through the financing agreement entered into on November
17, 1999 with General Electric Capital Corporation, described below.

  Financing for the acquisitions was provided primarily through a financing
arrangement entered into on November 17,1999 with General Electric Capital
Corporation (the "GECC"). The Company borrowed $2,360,000 from GECC pursuant to
a term loan payable in three years, and is subject to limitations based upon
eligible accounts. The loan facility is secured by substantially all of the
assets of the Company and its subsidiaries. The interest rate on borrowing is
0.5% above the prime rate. There is a fee of 0.25% on the unused portion of the
facility and an annual monitoring fee of $10,000. It is required, among other
provisions, that the Company maintain as of the end of the fiscal year ending
September 30, 1999, a minimum net worth (on a consolidated basis including ASH
and Bactolac) of $18 million and a minimum net worth of $25.5 million at
September 30, 2000, and a minimum net worth of $27 million for each fiscal year
after September 30, 2000. In addition, the Company is required to maintain a
fixed charge coverage ratio of 2.0 to 1.0 through July 1, 2000, and 1.5 to 1.0
at July 2, 2000, and at all times thereafter. The Company is also subject to
additional covenants, including filing of reports and significant restrictions
on dividend payments, issuance of debt and equity, mergers, changes in business
operations and sales of assets.

                                      F-22
<PAGE>

                                    PART III

     ITEMS 10, 11, 12 AND 13 constituting Part III of this Form 10-K have been
     omitted from this Annual Report pursuant to the provisions of Instruction
     G(3) to Form 10-K as the Company intends to file a definitive proxy
     statement pursuant to Regulation 14A under the Securities Exchange Act of
     1934 within 120 days after the close of its last fiscal year.

          ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
                   8-K

            (a)(1) and (2) See Item 8.

            (3)           Exhibits

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

            Exhibit 2.2   Agreement and Plan of Merger, dated as of November 5,
                          1999, among Nutrition For Life International, Inc.,
                          Advanced Nutraceuticals, Inc., BPI Acquisition
                          Company, Bactolac Pharmaceutical Inc. and Pailla M.
                          Reddy, filed as an Exhibit to the Report on Form 8-K,
                          filed on December 2, 1999, which Exhibit is
                          incorporated herein by this reference.

            Exhibit 2.3   Agreement and Plan of Merger, dated as of October 20,
                          1999, among Nutrition For Life International, Inc.,
                          Advanced Nutraceuticals, Inc., NL Acquisition Company,
                          Gregory Pusey and Barry C. Loder, filed as an Exhibit
                          to the Report on Form 8-K, filed on December 2, 1999,
                          which Exhibit is incorporated herein by this
                          reference.

            Exhibit 2.4   Agreement and Plan of Merger, dated as of October 25,
                          1999, among Nutrition For Life International, Inc.,
                          Advanced Nutraceuticals, Inc., AC Acquisition Company,
                          Allan I. Sirkin and Neil Sirkin (the "Ash Merger
                          Agreement"), filed as an Exhibit to the Report on Form
                          8-K, filed on December 15, 1999, which Exhibit is
                          incorporated herein by this reference.

                                      26
<PAGE>

          Exhibit 2.5   Amendment to Agreement and Plan of Merger, dated
                        November 24, 1999, to the Ash Merger Agreement, filed as
                        an Exhibit to the Report on Form 8-K, filed on December
                        15, 1999, which Exhibit is incorporated herein by this
                        reference.

          Exhibit 3.1   Articles of Incorporation, as amended*

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

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

          Exhibit 4.2   Specimen Warrant*

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

          Exhibit 4.4   Statement Establishing a Series of Shares (Series A
                        Preferred Stock), filed as an Exhibit to the Report on
                        Form 8-K, filed on December 2, 1999, which Exhibit is
                        incorporated herein by this reference.

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

          Exhibit 10.2  1995 Stock Option Plan, as amended

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

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

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

          Exhibit 10.6  Convertible Promissory Note, dated October 12, 1989, the
                        principal amount of $250,000 made by Nutrition Express
                        Corporation of Colorado, Inc. in favor of Shermfin
                        Corp., filed as an Exhibit to the Registration Statement
                        on Form S-4 (file no. 33-70312), which Exhibit is
                        incorporated herein by this reference.

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

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

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

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

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

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

                                      27
<PAGE>

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

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

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

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

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

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

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

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

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

          Exhibit 10.23    Agreement, dated August 19, 1998, among the
                           Registrant, Kevin Trudeau and K. T. Corp., filed as
                           an Exhibit to the Report on Form 8-K, which Exhibit
                           is incorporated herein by this reference.

          Exhibit 10.23.1  Settlement Agreement and Release, dated October 27,
                           1998, among the Registrant, Kevin Trudeau and K. T.
                           Corp., filed as an Exhibit to the Report Form 10-K
                           for the fiscal year ended September 30, 1998, which
                           Exhibit is incorporated herein by this reference.

          Exhibit 10.24    Settlement and Release Agreement, dated October 30,
                           1998, among the Registrant, Distributor Services,
                           L.L.C., Tru-Vantage International, L.L.C., Maximum
                           Impact, L.L.C. and Nightingale-Conant Corporation,
                           filed as an Exhibit to the Report on Form 8-K, which
                           Exhibit is incorporated herein by this reference.

          Exhibit 10.25    Agreement, dated October 30, 1998, between
                           Distributor Services, L.L.C. and the Registrant,
                           filed as an Exhibit to the Report on Form 8-K, which
                           Exhibit is incorporated herein by this reference.

          Exhibit 10.26    Earnout Agreement, dated November 17, 1999, between
                           Pailla M. Reddy and Nutrition For Life International,
                           Inc., filed as an Exhibit to the Report on Form 8-K,
                           filed on December 2, 1999, which Exhibit is
                           incorporated herein by this reference.

          Exhibit 10.26(a) Letter of agreement dated January 10, 2000, to
                           Earnout Agreement between Pailla M. Reddy and
                           Nutrition For Life International, Inc.

          Exhibit 10.27    Earnout Agreement, dated November 30, 1999, among
                           Nutrition For Life International, Inc. and the former
                           shareholders of Ash Corp. filed as an Exhibit to the
                           Report on Form 8-K, filed on December 15, 1999, which
                           Exhibit is incorporated herein by this reference.

                                      28
<PAGE>

          Exhibit 10.28   Employment Agreement, effective November 1, 1999,
                          between Nutrition For Life International, Inc. and
                          David P. Bertrand.

          Exhibit 10.29   Employment Agreement, effective November 1, 1999,
                          between Nutrition For Life International, Inc. and
                          Jana B. Mitcham.

          Exhibit 10.30   Employment Agreement, effective November 17, 1999,
                          between Nutrition For Life International, Inc. and
                          Gregory Pusey.

          Exhibit 10.31   Employment Agreement, effective November 17, 1999,
                          between Nutrition For Life International, Inc. and
                          Barry C. Loder.

          Exhibit 10.32   Employment Agreement, dated November 17, 1999, between
                          Bactolac Pharmaceutical Inc. and Pailla Reddy.

          Exhibit 10.33   Employment Agreement, dated November 30, 1999, between
                          Bactolac Pharmaceutical Inc. and Allan I. Sirkin.

          Exhibit 10.34   Employment Agreement, dated November 30, 1999, between
                          Bactolac Pharmaceutical Inc. and Neil Sirkin.

          Exhibit 10.35   Non-Competition Agreement, dated November 17, 1999,
                          among Gregory Pusey, Nutrition For Life International,
                          Inc. and NL Acquisition Company.

          Exhibit 10.36   Non-Competition Agreement, dated November 17, 1999,
                          among Barry C. Loder, Nutrition For Life
                          International, Inc. and NL Acquisition Company.

          Exhibit 10.37   Non-Competition Agreement, dated November 17, 1999,
                          among Pailla M. Reddy, Nutrition For Life
                          International, Inc. and Bactolac Pharmaceutical Inc.

          Exhibit 10.38   Non-Competition Agreement, dated November 30, 1999,
                          between Bactolac Pharmaceutical Inc. and Allan I.
                          Sirkin.

          Exhibit 10.39   Non-Competition Agreement, dated November 30, 1999,
                          between Bactolac Pharmaceutical Inc. and Neil Sirkin.

          Exhibit 10.40   Subordinated Promissory Note, dated November 17, 1999,
                          in the principal amount of $2,500,000 made by
                          Nutrition For Life International, Inc., payable to
                          Pailla Reddy.

          Exhibit 10.41   Subordinated Promissory Note, dated November 17, 1999,
                          in the principal amount of $450,000 made by Bactolac
                          Pharmaceutical Inc., payable to Pailla Reddy.

          Exhibit 10.42   Subordinated Promissory Note, dated December 1, 1999,
                          in the principal amount of $155,000 payable by
                          Nutrition For Life International, Inc., to Neil
                          Sirkin.

          Exhibit 10.43   Subordinated Promissory Note, dated December 1, 1999,
                          in the principal amount of $345,000 payable by
                          Nutrition For Life International, Inc., to Allan I.
                          Sirkin.

          Exhibit 10.44   Lock-Up Agreement, dated November 30, 1999, between
                          Allan I. Sirkin and Nutrition For Life International,
                          Inc.

          Exhibit 10.45   Lock-Up Agreement, dated November 30, 1999, between
                          Neil Sirkin and Nutrition For Life International, Inc.

          Exhibit 10.46   Lock-Up Agreement, dated November 17, 1999, between
                          Gregory Pusey and Nutrition For Life International,
                          Inc.

                                      29
<PAGE>

          Exhibit 10.47   Lock-Up Agreement, dated November 17, 1999, between
                          Barry C. Loder and Nutrition For Life International,
                          Inc.

          Exhibit 10.48   Lock-Up Agreement, dated November 17, 1999, between
                          Pailla Reddy and Nutrition For Life International,
                          Inc.

          Exhibit 10.49   Loan and Security Agreement among General Electric
                          Capital Corporation, Nutrition For Life International,
                          Inc., Ash Corp., Bactolac Pharmaceutical Inc. and NL
                          Acquisition Company.

          Exhibit 10.50   First Amendment to Loan and Agreement among General
                          Electric Capital Corporation, Nutrition For Life
                          International, Inc., Ash Corp., Bactolac
                          Pharmaceutical Inc. and NL Acquisition Company.

          Exhibit 21      Subsidiaries of the Company.

          Exhibit 23.1    Consent of BDO Seidman, LLP.

          Exhibit 23.2    Consent of Grant Thornton LLP.

          Exhibit 27      Financial Data Schedule Summary.

     *    These exhibits were previously filed as exhibits to the Company's
          Registration Statement on Form SB-2 (File No. 33-92274), and are
          incorporated herein by reference.


          (b)   Reports on Form 8-K

          A Report on Form 8-K was filed during the fourth quarter of fiscal
          1999 reporting a change in the certifying accountant, effective
          September 16, 1999.

          (c)   Exhibits

                (a)(3)above

          (d)   Financial Statement Schedules

                See Item 8 above.

                                      30
<PAGE>

                                  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.

                                    NUTRITION FOR LIFE INTERNATIONAL, INC.
                                    (Registrant)



  Date:  January 12, 2000        By:/s/ David P. Bertrand
                                    -----------------------------------------
                                    David P. Bertrand, President and Chief
                                    Executive Officer

  In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.


  Date:    January 12, 2000         /s/ David P. Bertrand
                                    -----------------------------------------
                                    David P. Bertrand, President and Chief
                                    Executive Officer and Director



  Date:    January 12, 2000         /s/ Jana B. Mitcham
                                    -----------------------------------------
                                    Jana B. Mitcham, Executive Vice President,
                                    Secretary, and Director


  Date:    January 12, 2000         /s/ David O. Rodrigue
                                    -----------------------------------------
                                    David O. Rodrigue, Vice President and Chief
                                    Financial Officer


  Date:    January 12, 2000          /s/ John R. Brown, Jr.
                                     ----------------------------------------
                                    John R. Brown, Jr., Vice President,
                                    Assistant Secretary and Treasurer


  Date:    January 12, 2000         /s/ F. Wayne Ballenger
                                    -----------------------------------------
                                    F. Wayne Ballenger, Director


  Date:    January 12, 2000         /s/ Gregory Pusey
                                    -----------------------------------------
                                    Gregory Pusey, Chairman of the Board of
                                    Directors and Director

                                      31