##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 27, 2010

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

for the transition period from
                     to                     .

Commission file number:  001-34507





VITAMIN SHOPPE, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 11-3664322                       
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (IRS Employer
Identification No.)

2101 91st Street

North Bergen, New Jersey 07047

(Addresses of Principal Executive Offices, including Zip Code)

(800) 223-1216

(Registrants Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:



|                                        |  |                                         
|--------------------------------------- |  | ----------------------------------------
|Title of Class                          |  | Name of the exchange on which registered
|Common Stock, $0.01 par value per share |  | New York Stock Exchange                 

Securities registered pursuant to Section 12(g) of the Act:  None

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 of 1934 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                               |  |                           |  |  
|----------------------- |  | --------------------------------------------- |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                             |  | Accelerated filer         |  |  ̈
|Non-accelerated filer   |  | x (Do not check if smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes   ̈    No  x

As of April 27, 2010, Vitamin Shoppe Inc., had 26,978,311 shares of common stock outstanding.









---

##### Table of Contents

FORWARD LOOKING STATEMENTS

Statements in this document that are not historical facts are hereby identified as forward looking statements for the
purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the Exchange Act) and Section 27A of the Securities Act of 1933 (the Securities Act). Vitamin Shoppe, Inc. (formerly VS
Holdings, Inc. (VSI)), Vitamin Shoppe Industries Inc. (Industries) and VS Direct Inc. (Direct, and, together with VSI and Industries, the Company, we, us or our)
caution readers that such forward looking statements, including without limitation, those relating to the Companys future business prospects, results from acquisitions, revenue, new stores, working capital, liquidity, capital
needs, leverage levels, interest costs and income, wherever they occur in this document or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Companys senior management and involve a
number of risks and uncertainties that could cause the Companys actual results to differ materially from those suggested by the forward looking statements. You can identify these statements by forward-looking words such as
expect, intend, anticipate, plan, believe, seek, estimate, outlook, trends, future benefits, strategies,
goals and similar words. Such forward looking statements should, therefore, be considered in light of the factors set forth in Item 2.Managements Discussion and Analysis of Financial Condition and Results of
Operations.

The forward looking statements contained in this report are made under the captions
Managements Discussion and Analysis of Financial Condition and Results of Operations, and Other Information. Moreover, the Company, through its senior management, may from time to time make forward looking
statements about matters described herein or other matters concerning the Company. You should consider our forward-looking statements in light of the risks and uncertainties that could cause the Companys actual results to differ
materially from those which are managements current expectations or forecasts. These risks and uncertainties include, but are not limited to, industry based factors such as the level of competition in the vitamin, mineral and supplement
(VMS) industry, continued demand from the primary markets the Company serves, the availability of raw materials, as well as factors more specific to the Company such as restrictions imposed by the Companys debt including financial
covenants and limitations on the Companys ability to incur additional indebtedness, the Companys future capital requirements, and risk associated with economic conditions generally. See Item 1ARisk Factors in the
Companys Annual Report on Form 10-K, filed on March 17, 2010 with the Securities and Exchange Commission, for further discussion.

The Company disclaims any intent or obligation to update forward looking statements to reflect changed assumptions, the
occurrence of unanticipated events, or changes to future operating results over time.



2



---

##### Table of Contents

TABLE OF CONTENTS



|                      |  |                                                                                                                           |  |        
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | -------
|                      |  |                                                                                                                           |  | PageNo.
|                      |  | PART I FINANCIAL INFORMATION                                                                                              |  |        
|Item 1.               |  | Financial Statements                                                                                                      |  | 4      
|                      |  | Condensed Consolidated Balance Sheets as of March 27, 2010 (unaudited) and December 26,
2009                              |  | 4      
|                      |  | Condensed Consolidated Statements of Operations for the three months ended March 27, 2010 and March 28, 2009
 (unaudited) |  | 5      
|                      |  | Condensed Consolidated Statements of Cash Flows for the three months ended March 27, 2010 and March 28, 2009
 (unaudited) |  | 6      
|                      |  | Condensed Consolidated Statement of Stockholders Equity for the three months ended March 27, 2010 (unaudited)            |  | 7      
|                      |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                          |  | 8      
|Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                     |  | 25     
|Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                                |  | 36     
|Item 4.               |  | Controls and Procedures                                                                                                   |  | 36     
|                      |  |                                                                                                                          
|                      |  | PART II OTHER INFORMATION                                                                                                 |  |        
|Item 1.               |  | Legal Proceedings                                                                                                         |  | 37     
|Item 1A.              |  | Risk Factors                                                                                                              |  | 37     
|Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 37     
|Item 3.               |  | Defaults Upon Senior Securities                                                                                           |  | 37     
|Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 37     
|Item 5.               |  | Other Information                                                                                                         |  | 37     
|Item 6.               |  | Exhibits                                                                                                                  |  | 37     
|Signatures            |  | 38                                                                                                                       
|Certification EX-31.1 |  |                                                                                                                          
|Certification EX-31.2 |  |                                                                                                                          
|Certification EX-32.1 |  |                                                                                                                          
|Certification EX-32.2 |  |                                                                                                                          



3



---

##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                           |  | March 27,2010 |         |   | December 26,2009 |  
|ASSETS                                                                                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Current assets:                                                                                                                                                                                                            |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                  |  | $             | 12,162  |   |                  | $ | 8,797   |  
|Inventories                                                                                                                                                                                                                |  |               | 112,457 |   |                  |   | 106,091 |  
|Prepaid expenses and other current assets                                                                                                                                                                                  |  |               | 13,446  |   |                  |   | 13,401  |  
|Deferred income taxes                                                                                                                                                                                                      |  |               | 3,086   |   |                  |   | 5,145   |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                                                       |  |               | 141,151 |   |                  |   | 133,434 |  
|Property and equipment, net                                                                                                                                                                                                |  |               | 83,455  |   |                  |   | 83,960  |  
|Goodwill                                                                                                                                                                                                                   |  |               | 177,248 |   |                  |   | 177,248 |  
|Other intangibles, net                                                                                                                                                                                                     |  |               | 70,165  |   |                  |   | 70,356  |  
|Other assets:                                                                                                                                                                                                              |  |               |         |   |                  |   |         |  
|Deferred financing fees, net of accumulated amortization of $2,678 and $2,856 in 2010 and 2009, respectively                                                                                                               |  |               | 1,796   |   |                  |   | 2,384   |  
|Other long-term assets                                                                                                                                                                                                     |  |               | 1,872   |   |                  |   | 1,875   |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total other assets                                                                                                                                                                                                         |  |               | 3,668   |   |                  |   | 4,259   |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                                               |  | $             | 475,687 |   |                  | $ | 469,257 |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|                                                                                                                                                                                                                           |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                       |  |               |         |   |                  |   |         |  
|Current liabilities:                                                                                                                                                                                                       |  |               |         |   |                  |   |         |  
|Current portion of long-term debt                                                                                                                                                                                          |  | $             |        |   |                  | $ | 20,000  |  
|Current portion of capital lease obligation                                                                                                                                                                                |  |               | 1,595   |   |                  |   | 1,537   |  
|Revolving credit facility                                                                                                                                                                                                  |  |               | 20,000  |   |                  |   |        |  
|Accounts payable                                                                                                                                                                                                           |  |               | 28,693  |   |                  |   | 25,075  |  
|Deferred sales                                                                                                                                                                                                             |  |               | 5,504   |   |                  |   | 14,386  |  
|Accrued salaries and related expenses                                                                                                                                                                                      |  |               | 4,328   |   |                  |   | 7,551   |  
|Other accrued expenses                                                                                                                                                                                                     |  |               | 18,580  |   |                  |   | 14,469  |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                                  |  |               | 78,700  |   |                  |   | 83,018  |  
|Long-term debt, net of current portion                                                                                                                                                                                     |  |               | 100,106 |   |                  |   | 100,106 |  
|Capital lease obligation, net of current portion                                                                                                                                                                           |  |               | 1,953   |   |                  |   | 2,303   |  
|Deferred income taxes                                                                                                                                                                                                      |  |               | 19,057  |   |                  |   | 19,945  |  
|Other long-term liabilities                                                                                                                                                                                                |  |               | 4,987   |   |                  |   | 4,766   |  
|Deferred rent                                                                                                                                                                                                              |  |               | 25,648  |   |                  |   | 24,768  |  
|Commitments and contingencies                                                                                                                                                                                              |  |               |         |   |                  |   |         |  
|Stockholders equity:                                                                                                                                                                                                      |  |               |         |   |                  |   |         |  
|Common stock, $0.01 par value; 400,000,000 shares authorized, 26,849,710 shares issued and outstanding at March 27, 2010,
and 400,000,000 shares authorized, 26,750,423 shares issued and outstanding at December 26, 2009 |  |               | 268     |   |                  |   | 268     |  
|Additional paid-in capital                                                                                                                                                                                                 |  |               | 212,171 |   |                  |   | 210,359 |  
|Accumulated other comprehensive loss                                                                                                                                                                                       |  |               | (535    | ) |                  |   | (882    | )
|Retained earnings                                                                                                                                                                                                          |  |               | 33,332  |   |                  |   | 24,606  |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                                                                                 |  |               | 245,236 |   |                  |   | 234,351 |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                 |  | $             | 475,687 |   |                  | $ | 469,257 |  
|                                                                                                                                                                                                                           |  |               |         |   |                  |   |         |  

See accompanying notes to condensed consolidated financial statements.



4



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)



|                                             |  |                    |            |               |   |           
|-------------------------------------------- |  | ------------------ | ---------- | ------------- | - | ----------
|                                             |  | Three Months Ended
|                                             |  | March 27,2010      |            | March 28,2009
|Net sales                                    |  | $                  | 191,613    |               | $ | 172,555   
|Cost of goods sold                           |  |                    | 126,599    |               |   | 115,543   
|                                             |  |                    |            |               |   |           
|Gross profit                                 |  |                    | 65,014     |               |   | 57,012    
|Selling, general and administrative expenses |  |                    | 46,942     |               |   | 43,941    
|Related party expenses                       |  |                    |           |               |   | 370       
|                                             |  |                    |            |               |   |           
|Income from operations                       |  |                    | 18,072     |               |   | 12,701    
|Loss on extinguishment of debt               |  |                    | 552        |               |   |          
|Interest expense, net                        |  |                    | 2,927      |               |   | 5,007     
|                                             |  |                    |            |               |   |           
|Income before provision for income taxes     |  |                    | 14,593     |               |   | 7,694     
|Provision for income taxes                   |  |                    | 5,867      |               |   | 3,132     
|                                             |  |                    |            |               |   |           
|Net income                                   |  |                    | 8,726      |               |   | 4,562     
|Preferred stock dividends in arrears         |  |                    |           |               |   | 2,577     
|                                             |  |                    |            |               |   |           
|Net income available to common stockholders  |  | $                  | 8,726      |               | $ | 1,985     
|                                             |  |                    |            |               |   |           
|                                             |  |                   
|Weighted average shares outstanding          |  |                    |            |               |   |           
|Basic                                        |  |                    | 26,692,983 |               |   | 14,175,906
|Diluted                                      |  |                    | 27,708,463 |               |   | 15,969,484
|Net income per share                         |  |                    |            |               |   |           
|Basic                                        |  | $                  | 0.33       |               | $ | 0.14      
|Diluted                                      |  | $                  | 0.31       |               | $ | 0.12      



See accompanying notes to condensed consolidated financial statements.



5



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                  |  |                    |         |   |               |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------ | -
|                                                                                  |  | Three Months Ended |        
|                                                                                  |  | March 27,2010      |         |   | March 28,2009 |  
|Cash flows from operating activities:                                             |  |                    |         |   |               |   |        |  
|Net income                                                                        |  | $                  | 8,726   |   |               | $ | 4,562  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                    |         |   |               |   |        |  
|Loss on extinguishment of debt                                                    |  |                    | 552     |   |               |   |       |  
|Loss on disposal of fixed assets                                                  |  |                    | 2       |   |               |   | 1      |  
|Depreciation and amortization of fixed and intangible assets                      |  |                    | 5,414   |   |               |   | 5,078  |  
|Amortization of deferred financing fees                                           |  |                    | 285     |   |               |   | 292    |  
|Amortization of unrealized loss on terminated swap                                |  |                    | 366     |   |               |   |       |  
|Deferred income taxes                                                             |  |                    | 930     |   |               |   | 608    |  
|Deferred rent                                                                     |  |                    | 707     |   |               |   | 958    |  
|Equity compensation expense                                                       |  |                    | 809     |   |               |   | 628    |  
|Tax benefits on exercises of stock options                                        |  |                    | (403    | ) |               |   |       |  
|Changes in operating assets and liabilities:                                      |  |                    |         |   |               |   |        |  
|Inventories                                                                       |  |                    | (6,366  | ) |               |   | 852    |  
|Prepaid expenses and other current assets                                         |  |                    | 531     |   |               |   | 343    |  
|Other non-current assets                                                          |  |                    | 3       |   |               |   | (9     | )
|Accounts payable                                                                  |  |                    | 4,341   |   |               |   | 5,292  |  
|Accrued expenses and other current liabilities                                    |  |                    | (7,941  | ) |               |   | (9,823 | )
|Other long-term liabilities                                                       |  |                    | 222     |   |               |   | 48     |  
|                                                                                  |  |                    |         |   |               |   |        |  
|Net cash provided by operating activities                                         |  |                    | 8,178   |   |               |   | 8,830  |  
|                                                                                  |  |                    |         |   |               |   |        |  
|                                                                                  |  |                   
|Cash flows from investing activities:                                             |  |                    |         |   |               |   |        |  
|Capital expenditures                                                              |  |                    | (5,408  | ) |               |   | (8,377 | )
|                                                                                  |  |                    |         |   |               |   |        |  
|Net cash used in investing activities                                             |  |                    | (5,408  | ) |               |   | (8,377 | )
|                                                                                  |  |                    |         |   |               |   |        |  
|                                                                                  |  |                   
|Cash flows from financing activities:                                             |  |                    |         |   |               |   |        |  
|Borrowings under revolving credit agreement                                       |  |                    | 20,000  |   |               |   | 3,000  |  
|Repayments of borrowings under revolving credit agreement                         |  |                    |        |   |               |   | (3,000 | )
|Payment of capital lease obligations                                              |  |                    | (381    | ) |               |   | (290   | )
|Redemption of long term debt (Notes)                                              |  |                    | (20,000 | ) |               |   |       |  
|Payments for expenses related to the stock offering                               |  |                    | (87     | ) |               |   |       |  
|Proceeds from exercises of common stock options                                   |  |                    | 687     |   |               |   |       |  
|Tax benefits on exercises of stock options                                        |  |                    | 403     |   |               |   |       |  
|Deferred financing fees                                                           |  |                    | (27     | ) |               |   |       |  
|                                                                                  |  |                    |         |   |               |   |        |  
|Net cash provided by (used in) financing activities                               |  |                    | 595     |   |               |   | (290   | )
|                                                                                  |  |                    |         |   |               |   |        |  
|Net increase in cash and cash equivalents                                         |  |                    | 3,365   |   |               |   | 163    |  
|Cash and cash equivalents beginning of period                                     |  |                    | 8,797   |   |               |   | 1,623  |  
|                                                                                  |  |                    |         |   |               |   |        |  
|Cash and cash equivalents end of period                                           |  | $                  | 12,162  |   |               | $ | 1,786  |  
|                                                                                  |  |                    |         |   |               |   |        |  
|                                                                                  |  |                   
|Supplemental disclosures of cash flow information:                                |  |                    |         |   |               |   |        |  
|Interest paid                                                                     |  | $                  | 2,095   |   |               | $ | 4,687  |  
|Income taxes paid                                                                 |  | $                  | 372     |   |               | $ | 2,035  |  
|                                                                                  |  |                   
|Supplemental disclosures of non-cash investing activities:                        |  |                    |         |   |               |   |        |  
|Accrued purchases of property and equipment                                       |  | $                  | 802     |   |               | $ | 301    |  
|Assets acquired under capital lease                                               |  | $                  | 89      |   |               | $ | 234    |  

See accompanying notes
to condensed consolidated financial statements.



6



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(in thousands, except share data)



|                                          |  |              |  |                          |     |  |                                   |         |   |                  |   |       |   |  |   |        |  |   |         |  
|----------------------------------------- |  | ------------ |  | ------------------------ | --- |  | --------------------------------- | ------- | - | ---------------- | - | ----- | - |  | - | ------ |  | - | ------- | -
|                                          |  | Common Stock |  | AdditionalPaid-InCapital |     |  | AccumulatedOtherComprehensiveLoss |         |   | RetainedEarnings |   | Total |  
|                                          |  | Shares       |  | Amounts                  |     |  |                                   |        
|Balance at December 26, 2009              |  | 26,750,423   |  | $                        | 268 |  | $                                 | 210,359 |   |                  | $ | (882  | ) |  | $ | 24,606 |  | $ | 234,351 |  
|                                          |  |              |  |                          |     |  |                                   |         |   |                  |   |       |   |  |   |        |  |   |         |  
|Net income                                |  |             |  |                          |    |  |                                   |        |   |                  |   |      |   |  |   | 8,726  |  |   | 8,726   |  
|Interest rate swap, net of taxes of $246  |  |             |  |                          |    |  |                                   |        |   |                  |   | 347   |   |  |   |       |  |   | 347     |  
|                                          |  |              |  |                          |     |  |                                   |         |   |                  |   |       |   |  |   |        |  |   |         |  
|Total Comprehensive Income                |  |              |  |                          |     |  |                                   |         |   |                  |   |       |   |  |   |        |  |   | 9,073   |  
|Expenses relating to the stock offering   |  |             |  |                          |    |  |                                   | (87     | ) |                  |   |      |   |  |   |       |  |   | (87     | )
|Exercise of stock options                 |  |             |  |                          |    |  |                                   | 687     |   |                  |   |      |   |  |   |       |  |   | 687     |  
|Tax benefits on exercise of stock options |  |             |  |                          |    |  |                                   | 403     |   |                  |   |      |   |  |   |       |  |   | 403     |  
|Equity compensation expense               |  |             |  |                          |    |  |                                   | 809     |   |                  |   |      |   |  |   |       |  |   | 809     |  
|                                          |  |              |  |                          |     |  |                                   |         |   |                  |   |       |   |  |   |        |  |   |         |  
|Balance at March 27, 2010                 |  | 26,750,423   |  | $                        | 268 |  | $                                 | 212,171 |   |                  | $ | (535  | ) |  | $ | 33,332 |  | $ | 245,236 |  
|                                          |  |              |  |                          |     |  |                                   |         |   |                  |   |       |   |  |   |        |  |   |         |  



See accompanying notes to condensed
consolidated financial statements.



7



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

Vitamin Shoppe, Inc. (VSI), formerly VS Holdings, Inc., is incorporated in the State of Delaware, and through its wholly-owned
subsidiary, Vitamin Shoppe Industries Inc. (Subsidiary or Industries) and Industries wholly-owned subsidiary, VS Direct Inc. (Direct, and, together with Industries and VSI, the Company), is a
leading specialty retailer and direct marketer of nutritional products. Sales of both national brands and proprietary brands of vitamins, minerals, nutritional supplements, herbs, sports nutrition formulas, homeopathic remedies and other health and
beauty aids are made through VSI-owned retail stores, the Internet and mail order catalogs to customers located primarily in the United States. VSI operates from its headquarters in North Bergen, New Jersey.

For the 2009 period presented, share and per share information in these condensed consolidated financial statements and the notes hereto
have been adjusted to reflect the Companys approximately 1.8611-for-one stock split effective on October 27, 2009, described in Note 2Reorganization and Initial Public Offering, below.

The condensed consolidated financial statements as of March 27, 2010 and December 26, 2009, and for the three months ended
March 27, 2010 and March 28, 2009, include the accounts of VSI, Industries and Direct. All significant intercompany transactions have been eliminated. The condensed consolidated financial statements as of March 27, 2010 and for the
three months ended March 27, 2010 and March 28, 2009, are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted
in the United States (GAAP) have been condensed or omitted. The interim financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with GAAP. The interim
financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 26, 2009, as filed with the Securities and Exchange Commission on March 17, 2010. The results of
operations for the interim periods should not be considered indicative of results to be expected for the full year.

The
Companys fiscal year ends on the last Saturday in December. As used herein, the term Fiscal Year or Fiscal refers to the 52-week period, ending the last Saturday in December. Fiscal 2010 is a 52-week period ending
December 25, 2010 and Fiscal 2009 was a 52-week period ended December 26, 2009. The results for the three months ended March 27, 2010 and March 28, 2009, are each based on a 13-week period.

2. Reorganization and Initial Public Offering

On October 27, 2009, VS Parent, Inc. merged into VS Holdings, Inc., with VS Holdings being renamed, as Vitamin Shoppe, Inc (the
Merger). All common shares and warrants previously issued by VS Parent, Inc., were converted to common shares of Vitamin Shoppe, Inc., at approximately a 1.8611-for-one split, resulting in 14,085,349 common shares and 1,055,540 warrants
issued and outstanding at October 27, 2009. In addition 78,868 preferred shares were converted to preferred shares of Vitamin Shoppe, Inc.

On November 2, 2009, the Company completed an initial public offering (IPO), issuing 7,666,667 new common shares in
connection with the IPO, at a price of $17 per share, resulting in net proceeds from the offering of approximately $121.2 million, net of underwriters commissions. Other fees associated with the IPO amounted to approximately $1.7 million, which were
offset against the proceeds of the IPO. In connection with the IPO, 36,969 preferred shares previously held by VS Parent Inc., along with accumulated dividends in arrears, were converted into 3,764,720 common shares of Vitamin Shoppe, Inc., with the
remaining 41,899 preferred shares being redeemed for cash of approximately $72.5 million.



8



---

##### Table of Contents

3. Summary of Significant Accounting Policies

Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the reporting period. Actual results could differ
from those estimates.

Financial Instruments PolicyThe Company entered into an interest rate swap during December
2005 on a portion of its Second Priority Senior Secured Floating Rate Notes due 2012 (the Notes), which was designated as a cash flow hedge. The interest rate swap had a maturity date of November 2010, and was terminated on
September 25, 2009, at a cost of $2.6 million (the fair market value). The unamortized residual unrecognized loss of the interest rate swap resulting from the termination is recorded in accumulated other comprehensive loss in the amount of $0.9
million along with related deferred taxes of $0.6 million at December 26, 2009, and at March 27, 2010, the balance of the unamortized residual unrecognized loss recorded in other comprehensive loss was $0.5 million along with related
deferred taxes of $0.4 million.

The amounts in both accumulated comprehensive loss and deferred tax assets relating to the
unrecognized loss will amortize during Fiscal 2010 and be charged as a component of interest expense through November 2010, the remainder of the original term of the hedge. The Company does not engage in hedging activities for speculative purposes.

Advertising CostsCosts associated with the production and distribution of the Companys catalogs are
expensed as incurred. The costs of advertising for online marketing arrangements, magazines, television and radio are expensed the first time the advertising takes place. Advertising expense was $3.7 million and $4.4 million for the three months
ended March 27, 2010 and March 28, 2009, respectively.

Net Income Per ShareThe Companys basic
net income per share excludes the dilutive effect of stock options, warrants and unvested restricted shares. It is based upon the weighted average number of common shares outstanding during the period divided into net income after deducting
accumulated dividends on the Companys Series A Preferred Stock, up until the preferred shares were either liquidated or converted to common shares.

Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Stock options, warrants and unvested restricted shares are included as potential dilutive securities for the periods applicable, using the treasury stock method to the extent dilutive.

For the purposes of basic and diluted net income per share, as a result of the merger on October 27, 2009, weighted average shares
outstanding for purposes of presenting net income per share on a comparative basis were retroactively restated for the three months ended March 28, 2009, based on a approximately a 1.8611-for-one split at the time of the merger.



9



---

##### Table of Contents

The components of the calculation of basic net income per common share and diluted net
income per common share are as follows (in thousands except share and per share data):



|                                                                 |  |                    |            |               |   |           
|---------------------------------------------------------------- |  | ------------------ | ---------- | ------------- | - | ----------
|                                                                 |  | Three months ended
|                                                                 |  | March 27,2010      |            | March 28,2009
|Numerator:                                                       |  |                    |            |               |   |           
|Net income available to common stockholders                      |  | $                  | 8,726      |               | $ | 1,985     
|                                                                 |  |                    |            |               |   |           
|Denominator:                                                     |  |                    |            |               |   |           
|Basic weighted average common shares outstanding                 |  |                    | 26,692,983 |               |   | 14,175,906
|Effect of dilutive stock options, restricted stock and warrants: |  |                    |            |               |   |           
|Stock options                                                    |  |                    | 990,485    |               |   | 738,038   
|Unvested restricted stock                                        |  |                    | 24,996     |               |   |          
|Warrants                                                         |  |                    |           |               |   | 1,055,540 
|                                                                 |  |                    |            |               |   |           
|Diluted weighted average common shares outstanding               |  |                    | 27,708,463 |               |   | 15,969,484
|                                                                 |  |                    |            |               |   |           
|Basic net income per common share                                |  | $                  | 0.33       |               | $ | 0.14      
|                                                                 |  |                    |            |               |   |           
|Diluted net income per common share                              |  | $                  | 0.31       |               | $ | 0.12      
|                                                                 |  |                    |            |               |   |           

Stock options for the three months ended
March 27, 2010 and March 28, 2009, in the amount of 522,232 grants and 436,784 grants, respectively, have been excluded from the above calculation as they were anti-dilutive.

Recent Accounting PronouncementsThe Company has considered all new accounting pronouncements and has concluded that there
are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

4. Goodwill and Intangible Assets

The Company acquired $88.0 million of intangible assets and recorded $177.2 million of goodwill in an acquisition completed in Fiscal
2002. The Company also acquired $3.0 million of intangible assets related to asset purchases in Fiscal 2008, comprised primarily of operating leases and the acquisition of a tradename. Other intangible assets relating to asset purchases during
Fiscal 2008 include customer lists and non-compete agreements.

The following table discloses the carrying value of all
intangible assets (in thousands):



|                                      |  |                     |         |                         |   |       |  |                     |         |                         |   |         |  |   |       |  |   |        
|------------------------------------- |  | ------------------- | ------- | ----------------------- | - | ----- |  | ------------------- | ------- | ----------------------- | - | ------- |  | - | ----- |  | - | -------
|                                      |  | March 27, 2010      |         | December 26, 2009      
|                                      |  | GrossCarryingAmount |         | AccumulatedAmortization |   | Net   |  | GrossCarryingAmount |         | AccumulatedAmortization |   | Net    
|Intangible assets:                    |  |                     |         |                         |   |       |  |                     |         |                         |   |         |  |   |       |  |   |        
|Intangibles related to asset purchase |  | $                   | 3,000   |                         | $ | 1,589 |  | $                   | 1,411   |                         | $ | 3,000   |  | $ | 1,398 |  | $ | 1,602  
|Tradenames                            |  |                     | 68,754  |                         |   |      |  |                     | 68,754  |                         |   | 68,754  |  |   |      |  |   | 68,754 
|Goodwill                              |  |                     | 177,248 |                         |   |      |  |                     | 177,248 |                         |   | 177,248 |  |   |      |  |   | 177,248
|                                      |  |                     |         |                         |   |       |  |                     |         |                         |   |         |  |   |       |  |   |        
|                                      |  | $                   | 249,002 |                         | $ | 1,589 |  | $                   | 247,413 |                         | $ | 249,002 |  | $ | 1,398 |  | $ | 247,604
|                                      |  |                     |         |                         |   |       |  |                     |         |                         |   |         |  |   |       |  |   |        

Intangible amortization expense for the three months
ended March 27, 2010 was $0.2 million, and amortization expense for the three months ended March 28, 2009 was $0.2 million. Tradenames are not amortized, as they are determined to be intangible assets with indefinite lives. Tradenames and
goodwill will be tested for impairment in the last quarter of Fiscal 2010 or whenever impairment indicators exist.



10



---

##### Table of Contents

The useful lives of the Companys definite-lived intangible assets are between 1 to 7
years. The expected amortization expense on finite-lived intangible assets on the Companys condensed consolidated balance sheet at March 27, 2010, is as follows (in thousands):



|                         |  |   |      
|------------------------ |  | - | -----
|Remainder of Fiscal 2010 |  | $ | 537  
|Fiscal 2011              |  |   | 541  
|Fiscal 2012              |  |   | 124  
|Fiscal 2013              |  |   | 124  
|Fiscal 2014              |  |   | 85   
|                         |  |   |      
|                         |  | $ | 1,411
|                         |  |   |      

5. Property and Equipment

Property and equipment consists of the following (in thousands):



|                                                 |  |               |          |   |                  |   |          |  
|------------------------------------------------ |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                 |  | March 27.2010 |          |   | December 26,2009 |  
|Furniture, fixtures and equipment                |  | $             | 101,821  |   |                  | $ | 99,215   |  
|Leasehold improvements                           |  |               | 97,861   |   |                  |   | 95,897   |  
|Website development costs                        |  |               | 11,014   |   |                  |   | 11,014   |  
|                                                 |  |               |          |   |                  |   |          |  
|                                                 |  |               | 210,696  |   |                  |   | 206,126  |  
|Less: accumulated depreciation and amortization. |  |               | (127,977 | ) |                  |   | (123,123 | )
|                                                 |  |               |          |   |                  |   |          |  
|Subtotal                                         |  |               | 82,719   |   |                  |   | 83,003   |  
|Construction in progress                         |  |               | 736      |   |                  |   | 957      |  
|                                                 |  |               |          |   |                  |   |          |  
|                                                 |  | $             | 83,455   |   |                  | $ | 83,960   |  
|                                                 |  |               |          |   |                  |   |          |  

Depreciation and amortization expense on property and equipment, including equipment recorded under capital
leases, for the three months ended March 27, 2010 was $5.2 million, and for the three months ended March 28, 2009 was $4.9 million. Depreciation and amortization expense on property and equipment is recorded in selling, general and
administrative expenses on the condensed consolidated statements of operations. Assets held under capital leases, which are classified under furniture, fixtures and equipment, were $4.0 million, net of accumulated depreciation of $3.1 million, at
March 27, 2010, and $4.2 million, net of accumulated depreciation of $2.9 million, at December 26, 2009.

6. Credit Arrangements

Debt consists of the following (in thousands):



|                                                                 |  |               |         |                  |   |        
|---------------------------------------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|                                                                 |  | March 27,2010 |         | December 26,2009
|Revolving Credit Facility                                        |  | $             | 20,000  |                  | $ |       
|                                                                 |  |               |         |                  |   |        
|Second Priority Senior Secured Floating Rate Notes (the Notes) |  | $             | 100,106 |                  | $ | 120,106
|                                                                 |  |               |         |                  |   |        

Second Priority Senior Secured Floating Rate Notes

During January 2010, the Company repurchased $20.0 million of its Notes. Interest on the Notes, which were issued in November 2005, is set
at a per annum rate equal to a three month LIBOR plus 7.5%, which is reset quarterly on February 15, May 15, August 15 and November 15 of each year. The weighted average interest



11



---

##### Table of Contents

rate from December 26, 2009 through March 27, 2010 was 7.85%, and from December 27, 2008 through March 28, 2009 was 9.11% (Fiscal 2009 is presented exclusive of hedging
activities). The Notes mature on November 15, 2012. Interest on overdue principal and interest and liquidated damages, if any, will accrue at a rate that is 1% higher than the applicable interest rate on the Notes. If Industries cannot make
payments on the Notes when they are due, VSI and Industries only subsidiary, Direct (collectively, the Guarantors), have guaranteed the Notes and must make payments instead. The Notes and the guarantees are secured by a second
priority security interest in substantially all of Industries and the Guarantors assets that secure Industries new first priority senior secured credit facility. The Notes and the guarantees are Industries, and the
Guarantors second priority senior secured obligations, and rank equally in right of payment with all of Industries and the Guarantors existing and future senior indebtedness and senior to all of Industries and the
Guarantors existing and future subordinated indebtedness. The Notes and the guarantees are effectively subordinated to all of Industries and the Guarantors first priority senior secured indebtedness, including Industries new
first priority senior secured credit facility, to the extent of the collateral securing such indebtedness. If Industries sells certain assets, issues equity or experiences specific kinds of changes in control, Industries must offer to repurchase the
Notes. Since November 15, 2007, Industries has had the option to redeem some or all of the Notes. Industries used the proceeds from the sale of the Notes to repay all of its and VSIs existing indebtedness and to pay related fees and
expenses.

Revolving Credit Facilities

On November 15, 2005, the Company entered into a $50.0 million senior secured revolving credit facility, which was terminated on
September 25, 2009.

2009 Revolving Credit Facility

On September 25, 2009, the Company entered into a new revolving credit facility (the 2009 Revolving Credit Facility), and
simultaneously terminated its existing credit facility. The terms of the 2009 Revolving Credit Facility extend through September, 2013, and allow the Company to borrow up to $50.0 million subject to the terms of the facility. Similar to the
Companys previous credit facility, the availability under the 2009 Revolving Credit Facility is subject to a borrowing base calculated on the value of certain accounts receivable from credit card companies as well as the inventory of
Industries and Direct. The obligations thereunder are secured by a security interest in substantially all of the assets of VSI, Industries and Direct and VSI provided guarantees in respect of the Companys obligations under the 2009 Revolving
Credit Facility, and Industries and VSI have provided guarantees in respect of Directs obligations under the 2009 Revolving Credit Facility. The 2009 Revolving Credit Facility provides for affirmative and negative covenants affecting
Industries, VSI and Direct. The 2009 Revolving Credit Facility restricts, among other things, the Companys ability to incur indebtedness, create or permit liens on the Companys assets, declare or pay dividends and make certain other
restricted payments, consolidate, merge or recapitalize, acquire or sell assets, make certain investments, loans or other advances, enter into transactions with affiliates, change the line of business, and restricts the types of hedging activities
can be entered into. The 2009 Revolving Credit Facility has a maturity date of September 2013. However, if not amended, the 2009 Revolving Credit Facility may terminate at August 15, 2012, if, prior to such date, a significant portion of the
Notes has not been redeemed, as, at that date, the facility requires that the sum of all amounts owed under the Notes must be less than the sum of the Companys cash and cash equivalents plus excess availability (as defined under the 2009
Revolving Credit Facility), subject to certain limitations. The largest amount borrowed at any given point during the first fiscal quarter of 2010 was $20.0 million. The unused available line of credit under the 2009 Revolving Credit Facility at
March 27, 2010 was $29.1 million.

The borrowings under our 2009 Revolving Credit Facility accrue interest, at the
Companys option, at the rate per annum announced from time to time by the agent as its prime rate, or at a per annum rate equal to 2.50% above the adjusted Eurodollar rate. The weighted average interest rate for the 2009 revolving
credit line from December 26, 2009 through March 27, 2010 was 2.74%.



12



---

##### Table of Contents

The borrowings under the terminated revolving credit facility accrued interest through
September 25, 2009, at a per annum rate equal to between 1.25% and 1.75% (depending on excess availability) above the adjusted Eurodollar rate. The weighted average interest rate for the terminated revolving credit line from December 27,
2008 through March 28, 2009 was 2.82%.

Interest expense, net for the three months ended March 27, 2010 and
March 28, 2009 consists of the following (in thousands):



|                                                    |  |                    |       |   |               |   |       |  
|--------------------------------------------------- |  | ------------------ | ----- | - | ------------- | - | ----- | -
|                                                    |  | Three Months Ended |      
|                                                    |  | March 27,2010      |       |   | March 28,2009 |  
|Interest on the Notes                               |  | $                  | 2,430 |   |               | $ | 4,403 |  
|Amortization of deferred financing fees             |  |                    | 285   |   |               |   | 292   |  
|Interest on the revolving credit facility and other |  |                    | 215   |   |               |   | 313   |  
|Interest income                                     |  |                    | (3    | ) |               |   | (1    | )
|                                                    |  |                    |       |   |               |   |       |  
|Interest expense, net                               |  | $                  | 2,927 |   |               | $ | 5,007 |  
|                                                    |  |                    |       |   |               |   |       |  

Capital Leases

The Company leases certain computer equipment under capital leases which expire through fiscal 2012. The following is a schedule of the
future minimum lease payments under capital leases as of March 27, 2010 (in thousands):



|                                                 |  |   |      
|------------------------------------------------ |  | - | -----
|Remainder of Fiscal 2010                         |  | $ | 1,349
|Fiscal 2011                                      |  |   | 1,642
|Fiscal 2012                                      |  |   | 848  
|                                                 |  |   |      
|Total                                            |  |   | 3,839
|Less amount representing interest                |  |   | 291  
|                                                 |  |   |      
|Present value of minimum lease payments          |  |   | 3,548
|Less current portion of capital lease obligation |  |   | 1,595
|                                                 |  |   |      
|                                                 |  | $ | 1,953
|                                                 |  |   |      



13



---

##### Table of Contents

7. Stock-Based Compensation

Stock Option PlansIn Fiscal 2002 the Company adopted a Stock Option Plan (the 2002 Plan) for certain directors,
officers, consultants and employees of the Company. The Company authorized the issuance of up to 2,046,041 shares of common stock. In June 2006, the 2002 Plan was amended and assigned to VS Parent, Inc. (the Companys former parent) where it
was adopted as the VS Parent, Inc. 2006 Stock Option Plan (the 2006 Plan), converting all grants on a one-to-one basis for the right to receive a common share of VS Parent upon exercise. In connection with the Merger, the 2006 Plan was
assigned to VSI where it was converted at approximately a 1.8611-for-one share split resulting in up to 3,807,862 common shares authorized for issuance. In addition to the 2006 Plan, VSI adopted the Vitamin Shoppe 2009 Equity Incentive Plan (the
2009 Plan) on September 2, 2009, which authorized the issuance of up to 1,395,816 common shares for issuance of both stock option and restricted stock shares for certain employees of the Company after taking into consideration the
approximately 1.8611-for-one share split. The stock options are exercisable at no less than the fair market value of the underlying shares on the date of grant. Generally, options and restricted shares awarded shall become vested in four equal
increments on each of the first, second, third and fourth anniversaries of the date on which such options were awarded. The stock options have a maximum term of 10 years. The following table summarizes the 2006 and 2009 Plans as of March 27,
2010 and changes during the three month period then ended:



|                                             |  |                  |   |  |                              |       |                                                 |      |                                       |       
|-------------------------------------------- |  | ---------------- | - |  | ---------------------------- | ----- | ----------------------------------------------- | ---- | ------------------------------------- | ------
|                                             |  | Number ofOptions |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife (years) |      | AggregateIntrinsicValue (inthousands)
|Outstanding at December 26, 2009             |  | 3,868,980        |   |  | $                            | 11.93 |                                                 |      |                                       |       
|Granted                                      |  |                 |   |  |                              |      |                                                 |      |                                       |       
|Exercised                                    |  | (85,787          | ) |  | $                            | 8.01  |                                                 |      |                                       |       
|Canceled/forfeited                           |  | (17,659          | ) |  | $                            | 14.97 |                                                 |      |                                       |       
|                                             |  |                  |   |  |                              |       |                                                 |      |                                       |       
|Outstanding at March 27, 2010                |  | 3,765,534        |   |  | $                            | 12.01 |                                                 | 5.66 |                                       | 33,498
|                                             |  |                  |   |  |                              |       |                                                 |      |                                       |       
|Vested or expected to vest at March 27, 2010 |  | 3,577,257        |   |  | $                            | 12.01 |                                                 | 5.66 |                                       |       
|                                             |  |                  |   |  |                              |       |                                                 |      |                                       |       
|Vested and exercisable at March 27, 2010     |  | 2,602,127        |   |  | $                            | 10.69 |                                                 | 4.97 |                                       | 26,578
|                                             |  |                  |   |  |                              |       |                                                 |      |                                       |       

The total intrinsic value of options exercised during
the three months ended March 27, 2010, was $1.1 million. The cash received from options exercised during the quarter ended March 27, 2010 was $0.7 million. There were no exercises during the quarter ended March 28, 2009.

Restricted shares are issued at a value not less than the fair market value of the common shares on the date of the grant, and generally
vest in four equal increments on the anniversary date of each year after the date on which such shares were issued. There were 13,500 restricted shares issued during the first fiscal quarter of 2010, all of which were granted at the market value on
the date of grant of $20.01 per share. There were 90,557 restricted shares issued under the 2009 Plan during Fiscal 2009, of which 11,320 shares were vested as of March 27, 2010, resulting in a total of 92,737 shares of unvested restricted
stock outstanding as of March 27, 2010.

Stock-based compensation cost is measured at the grant date based on the fair
value of awards and is recognized as expense over the vesting period, net of anticipated forfeitures. Determining the fair value of stock-based awards at the grant date requires considerable judgment, including estimating expected volatility,
expected term and risk-free rate. The expected volatility is based on the volatility levels over the past 6.25 and 4.81 years (our expected holding periods) depending on the grant, from the average volatility of similar actively traded companies.
Generally, the expected holding period of the option is calculated using the simplified method using the vesting term of 4 years and the contractual term of 10 years, resulting in a holding period 6.25 years, Certain limited grants have contractual
terms of 7.5 years, and as such have a calculated holding period of 4.81 years. The simplified method was chosen as a means to determine the Companys holding period as prior to November 2009 there was no historical option exercise experience
due to the Company being privately held. As of



14



---

##### Table of Contents

March 27, 2010 there is insufficient information due to the Company being a new publicly owned company. The risk-free interest rate is derived from the average yield for the five and seven
year zero-coupon U.S. Treasury Strips, and from the five year zero-coupon U.S. Treasury Strips.

Compensation expense
attributable to stock-based compensation for the first quarter of Fiscal 2010 was approximately $0.8 million, and for the first fiscal quarter of 2009 was approximately $0.6 million. There were no options granted during the three months ended
March 27, 2010 and March 28, 2009. As of March 27, 2010, the remaining unrecognized stock-based compensation expense for non-vested stock options and restricted shares to be expensed in future periods is $7.9 million, and the related
weighted-average period over which it is expected to be recognized is 2.8 years. There were 2,602,127 and 1,163,407 vested and non-vested outstanding options, respectively, at March 27, 2010. Forfeitures are estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate since the plan inception in Fiscal 2002. The estimated value of future
forfeitures as of March 27, 2010 is approximately $0.4 million.

Employee Stock Purchase PlanOn
December 16, 2009, the Companys board of directors approved the Vitamin Shoppe 2010 Employee Stock Purchase Plan (the ESPP), subject to approval of the Companys shareholders. Pursuant to the plan, shares of common
stock will be issued beginning on July 1, 2010, and will continue to be issued quarterly thereafter subject to employee participation in the plan. Under the ESPP, participating employees will be allowed to purchase shares at 85% of the lower
market price of the Companys common stock at either the first or last trading day of the participation period. Similar to stock option grants, under the fair value accounting guidelines for stock compensation, the Company will recognize
compensation expense related to the estimated fair value of the discounted components of stock purchased under the ESPP.

8. Legal
Proceedings

Dwight Thompson v. The Vitamin Shoppe and Consolidated Actions. The Company reclassified
its California store managers as non-exempt employees in January 2004. On February 25, 2005, plaintiff Dwight Thompson (Thompson), a former store manager, filed suit on behalf of himself and other similarly situated
current and former California store managers and assistant store managers in the Superior Court of the State of California for the County of Orange (Orange County Superior Court), alleging causes of action for alleged wage and hour
violations, unfair business practices, unfair competition under Cal. Bus. & Prof. Code §§ 17000 et seq. (UCL) and penalties under the Labor Code Private Attorneys General Act, Cal. Labor Code §§ 2698 et
seq. (PAGA) (the Thompson Action). Almost one year later, on July 7, 2006, the same group of plaintiffs attorneys who were representing Thompson filed another wage and hour lawsuit against The Vitamin Shoppe based
on substantively identical allegations in the Orange County Superior Court, entitled Estel v. The Vitamin Shoppe Industries Inc. (Case No. 06CC07852) (the Estel Action). Plaintiffs in the Estel Action were already class members in
the Thompson Action. In January 2008, the Court consolidated the Thompson and Estel actions. In the consolidated complaint, Plaintiffs assert nine claims for relief against the Company: (1) failure to pay overtime wages; (2) unfair
business practices in violation of Cal. Bus. & Prof. Code §§ 17000 et seq.; (3) conversion; (4) failure to provide meal periods; (5) failure to provide rest periods; (6) unfair competition under the UCL;
(7) failure to provide itemized wage statements; (8) failure to provide wages and accrued vacation upon termination; and (9) recovery of civil penalties under PAGA. Plaintiffs purport to bring their UCL and PAGA claims as
representative actions and the remaining claims as individual claims and on behalf of a class composed of all current and former assistant managers and managers of the Company who were employed on or after April 14, 2006 (the Amended
Thompson Action). The Company intends to defend the Amended Thompson Action vigorously. As of March 27, 2010, the Company does not believe the financial statement impact of this matter will be material.

California District Attorneys Letter. On May 17, 2007, the Company received a letter from the Napa County
(California) District Attorney alleging that six of the Companys private label products contain levels of lead that, pursuant to Californias Proposition 65, Cal. Health & Safety Code section 25249.5 et seq.,



15



---

##### Table of Contents

(Proposition 65) require the products to bear a warning when sold in California. The letter claims that 12 other public prosecutors in California, including the California Attorney
General, are involved in a joint investigation of dietary supplements containing lead in amounts that expose users to lead in excess of 0.50 micrograms (ug) per day. The letter demands that the Company immediately cease all sales of
these products in California unless it provides a warning to consumers. It also notes that Proposition 65 provides for civil penalties of up to $2,500 per violation per day. The Company has met with the California Attorney General and certain
District Attorneys, and is investigating these allegations and consulting with its third-party suppliers of these products. The Company has withdrawn certain named products from the California market and has provided warnings with respect to other
products still available in California pending discussions with the public prosecutors. The Napa County District Attorney has expressed concerns on several occasions as to the method of warning employed by the Company and the completeness of its
implementation. The Company has revised its warnings and reviewed its procedures for implementing warnings. The Company has responded to numerous requests for information and has met in person with representatives of the Napa County District
Attorney and the California Attorney General to attempt to resolve this matter. As of March 27, 2010, the Company does not believe the financial statement impact of this matter will be material.

The People of the State of California v. 21st Century Healthcare, Inc. On October 22, 2008, a private enforcer
named Vicky Hamilton sent over 70 manufacturers and retailers of multivitamin products, including the Company, various Sixty-Day Notices of Violation of Proposition 65, Cal. Health & Safety Code section 25249.5 et seq. alleging that certain
products contain lead and lead compounds and were sold in California without a Proposition 65 warning threatening litigation pertaining to two of the Companys multivitamin products. On December 23, 2008, the California Attorney General
and nine California District Attorneys filed a complaint on behalf of the People of the State of California against a number of companies who received notices of violation from Ms. Hamilton, including the Company in Alameda County Superior
Court. The action alleges violations of both Proposition 65 and the UCL and supplants the litigation Ms. Hamilton sought to bring against the Company on the claims stated in her Notice of Violation. Penalties under Proposition 65 may be
assessed at the maximum rate of $2,500 per violation per day. Penalties under the UCL may be assessed at the same rate and are cumulative to those available under Proposition 65. Injunctive relief and attorneys fees are also available. The Company
is investigating these claims and discussing them with the California Attorney General and District Attorneys. At this time it is premature to determine the extent of any potential loss. Accordingly, as of March 27, 2010, the Company has not
accrued any liabilities related to this litigation.

J.C. Romero v. ErgoPharm Inc., Proviant Technologies Inc., VS
Holdings Inc, d/b/a Vitamin Shoppe, and General Nutrition Centers Inc. On April 27, 2009, plaintiff, a professional baseball player, filed a complaint against us, among others, in Superior Court of New Jersey (Law Division/Camden
County). Plaintiff alleges that he purchased from one of our stores and consumed 6-OXO Extreme, which was manufactured by a third party, and in August 2008, allegedly tested positive for a banned substance. Plaintiff served a 50 game suspension
imposed by Major League Baseball. The seven count complaint asserts, among other things, claims for negligence, strict liability, misrepresentation, breach of implied warranty and violations of the New Jersey Consumer Fraud Act, and seeks
unspecified monetary damages, including lost income during the suspension. The Company denies any and all liability and intends to vigorously defend these claims. Any liabilities that may arise from this matter are not probable or reasonably
estimable at this time. Accordingly, as of March 27, 2010, the Company has not accrued any liabilities related to this litigation.

The Company is party to various lawsuits arising from time to time in the normal course of business, many of which are covered by
insurance. Except as described above, as of March 27, 2010, the Company was not party to any material legal proceedings. Although the impact of the final resolution of these matters on the Companys financial condition, results of
operations or cash flows is not known, management does not believe that the resolution of these lawsuits will have a material adverse effect on the financial condition, results of operations or liquidity of the Company.



16



---

##### Table of Contents

9. Related Party Transactions

The Company had a management agreement with IPC Manager II, LLC (formerly Bear Stearns Merchant Manager II, LLC), which terminated on
November 2, 2009, as a result of the IPO. This agreement provided for a quarterly fee of the greater of $187,500 or 0.25% of gross sales for the preceding fiscal quarter for advisory and consulting services. In addition, per the agreement a
one-time termination fee of approximately $0.8 million was charged to expense during the fourth Fiscal quarter of 2009 in connection with the Companys initial public offering. Accordingly, there were no amounts paid during the three months
ended March 27, 2010. Amounts paid for the three months ended March 28, 2009 were approximately $0.4 million.

10. Segment Data

The Company currently operates two business segments, retail and direct. The operating segments are segments of the
Company for which separate financial information is available and for which operating results are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. The Companys management evaluates
segment operating results based on several indicators. The primary key performance indicators are sales and operating income for each segment. The table below represents key financial information for each of the Companys business segments,
retail and direct, as well as corporate costs. The retail segment includes the Companys retail stores. The retail segment generates revenue primarily through the sale of third-party branded and proprietary branded vitamins, minerals, herbs,
supplements, sports nutrition and other health and wellness products through retail stores throughout the United States. The direct segment generates revenue through the sale of third-party branded and proprietary branded vitamins, minerals, herbs,
supplements, sports nutrition and other health and wellness products through the Companys Web site and catalog. A catalog is mailed periodically to customers in the Companys Healthy Awards Program database, and the Companys website
at www.vitaminshoppe.com offers its customers online access to a full assortment of over 20,000 SKUs. Corporate costs represent the Companys administrative expenses which include, but are not limited to: human resources, legal, finance,
information technology, and various other corporate level activity related expenses. There are no inter-segment sales transactions.

The Companys segments are designed to allocate resources internally and provide a framework to determine management responsibility.
The accounting policies of the segments are consistent with those described in Note 3- Summary of Significant Accounting Policies in the Fiscal 2009 consolidated financial statements. The Company has allocated $131.9 million and $45.3 million of its
recorded goodwill to the retail and direct segments, respectively. The Company does not have identifiable assets separated by segment.

The following table contains key financial information of the Companys business segments (in thousands):



|                        |  |                    |         |   |               |   |         |  
|----------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                        |  | Three Months Ended |        
|                        |  | March 27,2010      |         |   | March 28,2009 |  
|Sales:                  |  |                    |         |   |               |   |         |  
|Retail                  |  | $                  | 169,063 |   |               | $ | 151,642 |  
|Direct                  |  |                    | 22,550  |   |               |   | 20,913  |  
|                        |  |                    |         |   |               |   |         |  
|Net sales               |  |                    | 191,613 |   |               |   | 172,555 |  
|                        |  |                   
|Income from operations: |  |                    |         |   |               |   |         |  
|Retail                  |  |                    | 31,356  |   |               |   | 24,675  |  
|Direct                  |  |                    | 4,491   |   |               |   | 4,366   |  
|Corporate costs         |  |                    | (17,775 | ) |               |   | (16,340 | )
|                        |  |                    |         |   |               |   |         |  
|Income from operations  |  | $                  | 18,072  |   |               | $ | 12,701  |  
|                        |  |                    |         |   |               |   |         |  



17



---

##### Table of Contents

11. Fair Value of Financial Instruments

The fair value of the Companys Notes have been determined by the Company using quoted market prices. The following table sets forth
the carrying amounts and fair values of the Companys Notes at March 27, 2010 and December 26, 2009 (in thousands):



|                                                   |  |                |         |                   |   |                |  |            |         |  |   |        
|-------------------------------------------------- |  | -------------- | ------- | ----------------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                                   |  | March 27, 2010 |         | December 26, 2009
|                                                   |  | CarryingAmount |         | Fair Value        |   | CarryingAmount |  | Fair Value
|Second Priority Senior Secured Floating Rate Notes |  | $              | 100,106 |                   | $ | 100,481        |  | $          | 120,106 |  | $ | 120,669

The fair value of
the Notes at March 27, 2010, is based on the last trade closest to that date which was February 11, 2010. The fair value for December 26, 2009, is based on the last trade closest to that date which was December 23, 2009.

Prior to its termination, the Company had an interest rate swap which was established as a cash flow hedge on a
portion of its Notes to offset fluctuations related to the variable rate interest payments as described in Note 6. The unrecognized loss related to the interest rate swap is included in accumulated other comprehensive loss in the condensed
consolidated balance sheets. The swap was previously categorized within Level 2 in the fair value hierarchy. For the three months ended March 27, 2010, approximately $0.4 million, was reclassified from accumulated other comprehensive loss and
the related deferred tax assets to earnings (as a component of interest expense). As of March 27, 2010, the Company expects approximately $0.5 million of unrealized losses, net of taxes, that are reported in accumulated other comprehensive
loss, along with $0.4 million of deferred tax assets related to the swap, to be reclassified into earnings within the next seven months.

12. Subsequent Events

On March 30, 2010, the Company entered into a three year agreement with a west coast third party logistics facility to service its
stores in the westernmost United States. On April 21, 2010, the Company amended its 2009 Revolving Credit Facility agreement increasing the maximum credit limit by $20.0 million to $70.0 million. In addition, in connection with the
aforementioned west coast facility agreement, the 2009 Revolving Credit Facility was amended to accommodate the allocation of the Companys inventory between its New Jersey distribution center and the west coast logistics facility. On
April 21, 2010, the Company announced its notice of redemption for $25.0 million in aggregate principal of its outstanding Notes, along with accrued and unpaid interest through the redemption date. The Company expects to complete the redemption
by May 21, 2010, which will be funded through drawing on the amended Revolving Credit Facility and existing cash and cash equivalents.

13. Supplemental Guarantor Information

The payment obligations of Industries under the Notes are jointly and severally and fully and unconditionally guaranteed on a senior basis
by: VSI (Industriess parent), Direct (Industriess sole subsidiary), all of Industriess future restricted domestic subsidiaries, and VSIs. The Notes and the guarantees are Industriess, VSI and Directs second
priority senior secured obligations. They rank equally with all of Industriess, Holdings and Directs existing and future senior indebtedness and rank senior to all of Industriess, VSI and Directs existing and
future subordinated indebtedness. The Notes and the guarantees are effectively subordinate to all of Industriess, VSI and Directs existing first priority senior secured indebtedness, to the extent of the collateral securing such
indebtedness, including indebtedness under the Revolving Credit Facility.

The indenture governing the Notes restricts the
ability of Industries and Direct to incur additional debt, pay dividends and make distributions, make certain investments, repurchase stock, incur liens, enter into transactions with affiliates, enter into sale and lease back transactions, merge, or
consolidate or transfer or sell assets.

The following supplemental financial information sets forth, on a consolidating
basis, balance sheets, statements of operations, and statements of cash flows for VSI, Industries and Direct:



18



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATING BALANCE SHEETS AS OF MARCH 27, 2010

(In thousands, except share data)



|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ------------- | - | --------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ------- | -
|                                                                                                                         |  | VitaminShoppe,Inc. |         |   | VS DirectInc. |   | VitaminShoppeIndustriesInc. |  |   | Eliminations |   |  | Consolidated |         
|ASSETS                                                                                                                   |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Current assets:                                                                                                          |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Cash and cash equivalents                                                                                                |  | $                  | 1,663   |   |               | $ | 1,932                       |  | $ | 8,567        |   |  | $            |         |   |  | $ | 12,162  |  
|Inventories                                                                                                              |  |                    |        |   |               |   | 17,510                      |  |   | 94,947       |   |  |              |         |   |  |   | 112,457 |  
|Prepaid expenses and other current assets                                                                                |  |                    |        |   |               |   | 170                         |  |   | 13,276       |   |  |              |         |   |  |   | 13,446  |  
|Intercompany receivable                                                                                                  |  |                    | 50,292  |   |               |   | 294,355                     |  |   | 257,687      |   |  |              | (602,334 | ) |  |   |        |  
|Deferred income taxes                                                                                                    |  |                    |        |   |               |   | 370                         |  |   | 2,716        |   |  |              |         |   |  |   | 3,086   |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total current assets                                                                                                     |  |                    | 51,955  |   |               |   | 314,337                     |  |   | 377,193      |   |  |              | (602,334 | ) |  |   | 141,151 |  
|Property and equipment, net                                                                                              |  |                    |        |   |               |   | 21,362                      |  |   | 62,093       |   |  |              |         |   |  |   | 83,455  |  
|Goodwill                                                                                                                 |  |                    |        |   |               |   |                            |  |   | 177,248      |   |  |              |         |   |  |   | 177,248 |  
|Other intangibles, net                                                                                                   |  |                    |        |   |               |   |                            |  |   | 70,165       |   |  |              |         |   |  |   | 70,165  |  
|Other assets:                                                                                                            |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Deferred financing fees, net of accumulated amortization of $2,678                                                       |  |                    |        |   |               |   |                            |  |   | 1,796        |   |  |              |         |   |  |   | 1,796   |  
|Other long-term assets                                                                                                   |  |                    |        |   |               |   | 2                           |  |   | 1,870        |   |  |              |         |   |  |   | 1,872   |  
|Deferred income tax asset                                                                                                |  |                    | 4,117   |   |               |   | 2,027                       |  |   | 15,802       |   |  |              | (21,946  | ) |  |   |        |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total other assets                                                                                                       |  |                    | 4,117   |   |               |   | 2,029                       |  |   | 19,468       |   |  |              | (21,946  | ) |  |   | 3,668   |  
|Investment in subsidiary                                                                                                 |  |                    | 209,580 |   |               |   |                            |  |   | 57,953       |   |  |              | (267,533 | ) |  |   |        |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total assets                                                                                                             |  | $                  | 265,652 |   |               | $ | 337,728                     |  | $ | 764,120      |   |  | $            | (891,813 | ) |  | $ | 475,687 |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|                                                                                                                         |  |                    |         |   |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                     |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Current liabilities:                                                                                                     |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Current portion of capital lease obligation                                                                              |  | $                  |        |   |               | $ |                            |  | $ | 1,595        |   |  | $            |         |   |  | $ | 1,595   |  
|Revolving credit facility                                                                                                |  |                    |        |   |               |   |                            |  |   | 20,000       |   |  |              |         |   |  |   | 20,000  |  
|Intercompany payable                                                                                                     |  |                    | 17,400  |   |               |   | 269,225                     |  |   | 315,709      |   |  |              | (602,334 | ) |  |   |        |  
|Accounts payable                                                                                                         |  |                    |        |   |               |   | 132                         |  |   | 28,561       |   |  |              |         |   |  |   | 28,693  |  
|Deferred sales                                                                                                           |  |                    |        |   |               |   | 836                         |  |   | 4,668        |   |  |              |         |   |  |   | 5,504   |  
|Accrued salaries and related expenses                                                                                    |  |                    |        |   |               |   | 656                         |  |   | 3,672        |   |  |              |         |   |  |   | 4,328   |  
|Other accrued expenses                                                                                                   |  |                    | 2,502   |   |               |   | 1,712                       |  |   | 14,366       |   |  |              |         |   |  |   | 18,580  |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total current liabilities                                                                                                |  |                    | 19,902  |   |               |   | 272,561                     |  |   | 388,571      |   |  |              | (602,334 | ) |  |   | 78,700  |  
|Long-term debt                                                                                                           |  |                    |        |   |               |   |                            |  |   | 100,106      |   |  |              |         |   |  |   | 100,106 |  
|Capital lease obligation, net of current portion                                                                         |  |                    |        |   |               |   |                            |  |   | 1,953        |   |  |              |         |   |  |   | 1,953   |  
|Deferred income taxes                                                                                                    |  |                    | 514     |   |               |   | 2,995                       |  |   | 37,494       |   |  |              | (21,946  | ) |  |   | 19,057  |  
|Other long-term liabilities                                                                                              |  |                    |        |   |               |   | 6                           |  |   | 4,981        |   |  |              |         |   |  |   | 4,987   |  
|Deferred rent                                                                                                            |  |                    |        |   |               |   | 4,213                       |  |   | 21,435       |   |  |              |         |   |  |   | 25,648  |  
|                                                                                                                         |  |                    |         |   |              
|Commitments and contingencies                                                                                            |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|                                                                                                                         |  |                    |         |   |              
|Stockholders equity:                                                                                                    |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Common stock, $0.01 par value; 400,000,000 shares authorized, 26,849,710 shares issued and outstanding at March 27, 2010 |  |                    | 268     |   |               |   |                            |  |   |             |   |  |              |         |   |  |   | 268     |  
|Additional paid-in capital                                                                                               |  |                    | 212,171 |   |               |   | 20,165                      |  |   | 166,791      |   |  |              | (186,956 | ) |  |   | 212,171 |  
|Accumulated other comprehensive loss                                                                                     |  |                    | (535    | ) |               |   |                            |  |   | (535         | ) |  |              | 535      |   |  |   | (535    | )
|Retained earnings                                                                                                        |  |                    | 33,332  |   |               |   | 37,788                      |  |   | 43,324       |   |  |              | (81,112  | ) |  |   | 33,332  |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total stockholders equity                                                                                               |  |                    | 245,236 |   |               |   | 57,953                      |  |   | 209,580      |   |  |              | (267,533 | ) |  |   | 245,236 |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity                                                                               |  | $                  | 265,652 |   |               | $ | 337,728                     |  | $ | 764,120      |   |  | $            | (891,813 | ) |  | $ | 475,687 |  
|                                                                                                                         |  |                    |         |   |               |   |                             |  |   |              |   |  |              |          |   |  |   |         |  



19



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATING BALANCE SHEET AS OF DECEMBER 26, 2009

(In thousands, except share data)



|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | --------- | - | --------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ------- | -
|                                                                                                       |  | VitaminShoppe,Inc. |         |   | VS Direct |   | VitaminShoppeIndustriesInc. |  |   | Eliminations |   |  | Consolidated |         
|ASSETS                                                                                                 |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Current assets:                                                                                        |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Cash and cash equivalents                                                                              |  | $                  | 1,767   |   |           | $ | 917                         |  | $ | 6,113        |   |  | $            |         |   |  | $ | 8,797   |  
|Inventories                                                                                            |  |                    |        |   |           |   | 17,510                      |  |   | 88,581       |   |  |              |         |   |  |   | 106,091 |  
|Prepaid expenses and other current assets                                                              |  |                    |        |   |           |   | 208                         |  |   | 13,193       |   |  |              |          |   |  |   | 13,401  |  
|Intercompany receivable                                                                                |  |                    | 47,444  |   |           |   | 292,145                     |  |   | 262,745      |   |  |              | (602,334 | ) |  |   |        |  
|Deferred income taxes                                                                                  |  |                    |        |   |           |   | 723                         |  |   | 4,422        |   |  |              |         |   |  |   | 5,145   |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total current assets                                                                                   |  |                    | 49,211  |   |           |   | 311,503                     |  |   | 375,054      |   |  |              | (602,334 | ) |  |   | 133,434 |  
|Property and equipment, net                                                                            |  |                    |        |   |           |   | 21,869                      |  |   | 62,091       |   |  |              |         |   |  |   | 83,960  |  
|Goodwill                                                                                               |  |                    |        |   |           |   |                            |  |   | 177,248      |   |  |              |         |   |  |   | 177,248 |  
|Other intangibles, net                                                                                 |  |                    |        |   |           |   |                            |  |   | 70,356       |   |  |              |         |   |  |   | 70,356  |  
|Other assets:                                                                                          |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Deferred financing fees, net of accumulated amortization of $2,856                                     |  |                    |        |   |           |   |                            |  |   | 2,384        |   |  |              |         |   |  |   | 2,384   |  
|Other                                                                                                  |  |                    |        |   |           |   | 2                           |  |   | 1,873        |   |  |              |         |   |  |   | 1,875   |  
|Deferred income tax asset                                                                              |  |                    | 3,741   |   |           |   | 1,969                       |  |   | 15,844       |   |  |              | (21,554  | ) |  |   |        |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total other assets                                                                                     |  |                    | 3,741   |   |           |   | 1,971                       |  |   | 20,101       |   |  |              | (21,554  | ) |  |   | 4,259   |  
|Investment in Subsidiary                                                                               |  |                    | 200,051 |   |           |   |                            |  |   | 54,533       |   |  |              | (254,584 | ) |  |   |        |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total assets                                                                                           |  | $                  | 253,003 |   |           | $ | 335,343                     |  | $ | 759,383      |   |  | $            | (878,472 | ) |  | $ | 469,257 |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|                                                                                                       |  |                    |         |   |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                   |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Current liabilities:                                                                                   |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Current portion of long-term debt                                                                      |  | $                  |        |   |           | $ |                            |  | $ | 20,000       |   |  | $            |         |   |  | $ | 20,000  |  
|Current portion of capital lease obligation                                                            |  |                    |        |   |           |   |                            |  |   | 1,537        |   |  |              |         |   |  |   | 1,537   |  
|Revolving credit facility                                                                              |  |                    |        |   |           |   |                            |  |   |             |   |  |              |         |   |  |   |        |  
|Intercompany payable                                                                                   |  |                    | 17,400  |   |           |   | 269,225                     |  |   | 315,709      |   |  |              | (602,334 | ) |  |   |        |  
|Accounts payable                                                                                       |  |                    |        |   |           |   | 166                         |  |   | 24,909       |   |  |              |         |   |  |   | 25,075  |  
|Deferred sales                                                                                         |  |                    |        |   |           |   | 2,596                       |  |   | 11,790       |   |  |              |         |   |  |   | 14,386  |  
|Accrued salaries and related expenses                                                                  |  |                    |        |   |           |   | 716                         |  |   | 6,835        |   |  |              |         |   |  |   | 7,551   |  
|Other accrued expenses                                                                                 |  |                    | 803     |   |           |   | 953                         |  |   | 12,713       |   |  |              |         |   |  |   | 14,469  |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total current liabilities                                                                              |  |                    | 18,203  |   |           |   | 273,656                     |  |   | 393,493      |   |  |              | (602,334 | ) |  |   | 83,018  |  
|Long-term debt                                                                                         |  |                    |        |   |           |   |                            |  |   | 100,106      |   |  |              |         |   |  |   | 100,106 |  
|Capital lease obligation, net of current portion                                                       |  |                    |        |   |           |   |                            |  |   | 2,303        |   |  |              |         |   |  |   | 2,303   |  
|Deferred income taxes                                                                                  |  |                    | 449     |   |           |   | 3,020                       |  |   | 38,030       |   |  |              | (21,554  | ) |  |   | 19,945  |  
|Other long term liabilities                                                                            |  |                    |        |   |           |   | 4                           |  |   | 4,762        |   |  |              |         |   |  |   | 4,766   |  
|Deferred rent                                                                                          |  |                    |        |   |           |   | 4,130                       |  |   | 20,638       |   |  |              |         |   |  |   | 24,768  |  
|                                                                                                       |  |                    |         |   |          
|Commitments and contingencies                                                                          |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|                                                                                                       |  |                    |         |   |          
|Stockholders equity:                                                                                  |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Common stock, $0.01 par value, 400,000,000 shares authorized, 26,750,423 shares issued and outstanding |  |                    | 268     |   |           |   |                            |  |   |             |   |  |              |         |   |  |   | 268     |  
|Additional paid-in capital                                                                             |  |                    | 210,359 |   |           |   | 20,165                      |  |   | 166,791      |   |  |              | (186,956 | ) |  |   | 210,359 |  
|Accumulated other comprehensive loss                                                                   |  |                    | (882    | ) |           |   |                            |  |   | (882         | ) |  |              | 882      |   |  |   | (882    | )
|Retained earnings                                                                                      |  |                    | 24,606  |   |           |   | 34,368                      |  |   | 34,142       |   |  |              | (68,510  | ) |  |   | 24,606  |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total stockholders equity                                                                             |  |                    | 234,351 |   |           |   | 54,533                      |  |   | 200,051      |   |  |              | (254,584 | ) |  |   | 234,351 |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity                                                             |  | $                  | 253,003 |   |           | $ | 335,343                     |  | $ | 759,383      |   |  | $            | (878,472 | ) |  | $ | 469,257 |  
|                                                                                                       |  |                    |         |   |           |   |                             |  |   |              |   |  |              |          |   |  |   |         |  



20



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 27, 2010

(In thousands)



|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        
|--------------------------------------------------------- |  | ------------------- | ----- | - | ------------- | - | --------------------------- |  | ------------ | ------- |  | ------------ | ------- | - |  | - | -------
|                                                          |  | VitaminShoppe, Inc. |       |   | VS DirectInc. |   | VitaminShoppeIndustriesInc. |  | Eliminations |         |  | Consolidated
|Net sales                                                 |  | $                   |      |   |               | $ | 38,570                      |  | $            | 153,043 |  | $            |        |   |  | $ | 191,613
|Commissions                                               |  |                     |      |   |               |   | 5,301                       |  |              | 2,128   |  |              | (7,429  | ) |  |   |       
|Cost of goods sold                                        |  |                     |      |   |               |   | 26,663                      |  |              | 101,427 |  |              | (1,491  | ) |  |   | 126,599
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        
|Gross profit                                              |  |                     |      |   |               |   | 17,208                      |  |              | 53,744  |  |              | (5,938  | ) |  |   | 65,014 
|Selling, general and administrative expenses              |  |                     | 809   |   |               |   | 11,655                      |  |              | 40,416  |  |              | (5,938  | ) |  |   | 46,942 
|Related party expenses                                    |  |                     |      |   |               |   |                            |  |              |        |  |              |        |   |  |   |       
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        
|(Loss) income from operations                             |  |                     | (809  | ) |               |   | 5,553                       |  |              | 13,328  |  |              |        |   |  |   | 18,072 
|Loss on extinguishment of debt                            |  |                     |      |   |               |   |                            |  |              | 552     |  |              |        |   |  |   | 552    
|Interest expense, net                                     |  |                     |      |   |               |   | 1                           |  |              | 2,926   |  |              |        |   |  |   | 2,927  
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        
|(Loss) income before (benefit) provision for income taxes |  |                     | (809  | ) |               |   | 5,552                       |  |              | 9,850   |  |              |        |   |  |   | 14,593 
|(Benefit) provision for income taxes                      |  |                     | (354  | ) |               |   | 2,131                       |  |              | 4,090   |  |              |        |   |  |   | 5,867  
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        
|(Loss) income before equity in net earnings of subsidiary |  |                     | (455  | ) |               |   | 3,421                       |  |              | 5,760   |  |              |        |   |  |   | 8,726  
|Equity in net earnings of subsidiary                      |  |                     | 9,181 |   |               |   |                            |  |              | 3,421   |  |              | (12,602 | ) |  |   |       
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        
|Net income                                                |  | $                   | 8,726 |   |               | $ | 3,421                       |  | $            | 9,181   |  | $            | (12,602 | ) |  | $ | 8,726  
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |         |   |  |   |        



21



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 28, 2009

(In thousands)



|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        
|--------------------------------------------------------- |  | ------------------- | ----- | - | ------------- | - | --------------------------- |  | ------------ | ------- |  | ------------ | ------ | - |  | - | -------
|                                                          |  | VitaminShoppe, Inc. |       |   | VS DirectInc. |   | VitaminShoppeIndustriesInc. |  | Eliminations |         |  | Consolidated
|Net sales                                                 |  | $                   |      |   |               | $ | 32,852                      |  | $            | 139,703 |  | $            |       |   |  | $ | 172,555
|Commissions                                               |  |                     |      |   |               |   | 5,078                       |  |              | 1,865   |  |              | (6,943 | ) |  |   |       
|Cost of goods sold                                        |  |                     |      |   |               |   | 23,762                      |  |              | 93,041  |  |              | (1,260 | ) |  |   | 115,543
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        
|Gross profit                                              |  |                     |      |   |               |   | 14,168                      |  |              | 48,527  |  |              | (5,683 | ) |  |   | 57,012 
|Selling, general and administrative expenses              |  |                     | 628   |   |               |   | 11,244                      |  |              | 37,752  |  |              | (5,683 | ) |  |   | 43,941 
|Related party expenses                                    |  |                     |      |   |               |   |                            |  |              | 370     |  |              |       |   |  |   | 370    
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        
|(Loss) income from operations                             |  |                     | (628  | ) |               |   | 2,924                       |  |              | 10,405  |  |              |       |   |  |   | 12,701 
|Interest expense, net                                     |  |                     |      |   |               |   |                            |  |              | 5,007   |  |              |       |   |  |   | 5,007  
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        
|(Loss) income before (benefit) provision for income taxes |  |                     | (628  | ) |               |   | 2,924                       |  |              | 5,398   |  |              |       |   |  |   | 7,694  
|(Benefit) provision for income taxes                      |  |                     | (275  | ) |               |   | 1,134                       |  |              | 2,273   |  |              |       |   |  |   | 3,132  
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        
|(Loss) income before equity in net earnings of subsidiary |  |                     | (353  | ) |               |   | 1,790                       |  |              | 3,125   |  |              |       |   |  |   | 4,562  
|Equity in net earnings of subsidiary                      |  |                     | 4,915 |   |               |   |                            |  |              | 1,790   |  |              | (6,705 | ) |  |   |       
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        
|Net income                                                |  | $                   | 4,562 |   |               | $ | 1,790                       |  | $            | 4,915   |  | $            | (6,705 | ) |  | $ | 4,562  
|                                                          |  |                     |       |   |               |   |                             |  |              |         |  |              |        |   |  |   |        



22



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 27, 2010

(In thousands)



|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------- | ------ | - | ------------- | - | ------ | --------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                                  |  | VitaminShoppe, Inc. |        |   | VS DirectInc. |   |        | VitaminShoppeIndustriesInc. |  |   | Eliminations |   |  | Consolidated |        
|Cash flows from operating activities:                                             |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                                                        |  | $                   | 8,726  |   |               | $ | 3,421  |                             |  | $ | 9,181        |   |  | $            | (12,602 | ) |  | $ | 8,726   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Loss on extinguishment of debt                                                    |  |                     |       |   |               |   |       |                             |  |   | 552          |   |  |              |        |   |  |   | 552     |  
|Loss on disposal of fixed assets                                                  |  |                     |       |   |               |   |       |                             |  |   | 2            |   |  |              |        |   |  |   | 2       |  
|Depreciation and amortization of fixed and intangible assets                      |  |                     |       |   |               |   | 1,253  |                             |  |   | 4,161        |   |  |              |        |   |  |   | 5,414   |  
|Amortization of deferred financing fees                                           |  |                     |       |   |               |   |       |                             |  |   | 285          |   |  |              |         |   |  |   | 285     |  
|Amortization of unrealized loss on terminated swap                                |  |                     |        |   |               |   |        |                             |  |   | 366          |   |  |              |         |   |  |   | 366     |  
|Deferred income taxes                                                             |  |                     | (311   | ) |               |   | 270    |                             |  |   | 971          |   |  |              |        |   |  |   | 930     |  
|Deferred rent                                                                     |  |                     |       |   |               |   | 83     |                             |  |   | 624          |   |  |              |        |   |  |   | 707     |  
|Equity compensation expense                                                       |  |                     | 809    |   |               |   |       |                             |  |   |             |   |  |              |        |   |  |   | 809     |  
|Tax benefits on exercises of stock options                                        |  |                     | (403   | ) |               |   |        |                             |  |   |             |   |  |              |         |   |  |   | (403    | )
|Equity in earnings of subsidiary                                                  |  |                     | (9,181 | ) |               |   |       |                             |  |   | (3,421       | ) |  |              | 12,602  |   |  |   |        |  
|Changes in operating assets and liabilities:                                      |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Inventories                                                                       |  |                     |       |   |               |   |       |                             |  |   | (6,366       | ) |  |              |        |   |  |   | (6,366  | )
|Prepaid expenses and other current assets                                         |  |                     |       |   |               |   | 38     |                             |  |   | 493          |   |  |              |        |   |  |   | 531     |  
|Intercompany                                                                      |  |                     | (2,445 | ) |               |   | (2,210 | )                           |  |   | 4,655        |   |  |              |        |   |  |   |        |  
|Other non-current assets                                                          |  |                     |       |   |               |   |       |                             |  |   | 3            |   |  |              |        |   |  |   | 3       |  
|Accounts payable                                                                  |  |                     |       |   |               |   | (34    | )                           |  |   | 4,375        |   |  |              |        |   |  |   | 4,341   |  
|Accrued expenses and other current liabilities                                    |  |                     | 1,697  |   |               |   | (1,061 | )                           |  |   | (8,577       | ) |  |              |        |   |  |   | (7,941  | )
|Other long-term liabilities                                                       |  |                     |       |   |               |   | 1      |                             |  |   | 221          |   |  |              |        |   |  |   | 222     |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash provided by operating activities                                         |  |                     | (1,108 | ) |               |   | 1,761  |                             |  |   | 7,525        |   |  |              |        |   |  |   | 8,178   |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|                                                                                  |  |                     |        |   |              
|Cash flows from investing activities:                                             |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Capital expenditures                                                              |  |                     |       |   |               |   | (746   | )                           |  |   | (4,662       | ) |  |              |        |   |  |   | (5,408  | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash used in investing activities                                             |  |                     |       |   |               |   | (746   | )                           |  |   | (4,662       | ) |  |              |        |   |  |   | (5,408  | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|                                                                                  |  |                     |        |   |              
|Cash flows from financing activities:                                             |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Borrowings under revolving credit agreement                                       |  |                     |       |   |               |   |       |                             |  |   | 20,000       |   |  |              |        |   |  |   | 20,000  |  
|Repayment of borrowings under revolving credit agreement                          |  |                     |       |   |               |   |       |                             |  |   |             |   |  |              |        |   |  |   |        |  
|Payments of capital lease obligation                                              |  |                     |       |   |               |   |       |                             |  |   | (381         | ) |  |              |        |   |  |   | (381    | )
|Redemption of long term debt (Notes)                                              |  |                     |       |   |               |   |        |                             |  |   | (20,000      | ) |  |              |         |   |  |   | (20,000 | )
|Payments for expenses related to the offering                                     |  |                     | (87    | ) |               |   |        |                             |  |   |             |   |  |              |         |   |  |   | (87     | )
|Proceeds from exercises of common stock options                                   |  |                     | 687    |   |               |   |        |                             |  |   |             |   |  |              |         |   |  |   | 687     |  
|Tax benefits on exercises of stock options                                        |  |                     | 403    |   |               |   |        |                             |  |   |             |   |  |              |         |   |  |   | 403     |  
|Deferred financing fees                                                           |  |                     |       |   |               |   |       |                             |  |   | (27          | ) |  |              |        |   |  |   | (27     | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash provided by (used in) financing activities                               |  |                     | 1,003  |   |               |   |       |                             |  |   | (408         | ) |  |              |        |   |  |   | 595     |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|                                                                                  |  |                     |        |   |              
|Net (decrease) increase in cash and cash equivalents                              |  |                     | (105   | ) |               |   | 1,015  |                             |  |   | 2,455        |   |  |              |        |   |  |   | 3,365   |  
|Cash and cash equivalents beginning of period                                     |  |                     | 1,767  |   |               |   | 917    |                             |  |   | 6,113        |   |  |              |        |   |  |   | 8,797   |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  
|Cash and cash equivalents end of period                                           |  | $                   | 1,662  |   |               | $ | 1,932  |                             |  | $ | 8,568        |   |  | $            |        |   |  | $ | 12,162  |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |         |   |  |   |         |  



23



---

##### Table of Contents

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 28, 2009

(In thousands)



|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------- | ------ | - | ------------- | - | ------ | --------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------ | -
|                                                                                  |  | VitaminShoppe, Inc. |        |   | VS DirectInc. |   |        | VitaminShoppeIndustriesInc. |  |   | Eliminations |   |  | Consolidated |       
|Cash flows from operating activities:                                             |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Net income                                                                        |  | $                   | 4,562  |   |               | $ | 1,790  |                             |  | $ | 4,915        |   |  | $            | (6,705 | ) |  | $ | 4,562  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Loss on disposal of fixed assets                                                  |  |                     |       |   |               |   | 1      |                             |  |   |             |   |  |              |       |   |  |   | 1      |  
|Depreciation and amortization of fixed and intangible assets                      |  |                     |       |   |               |   | 1,143  |                             |  |   | 3,935        |   |  |              |       |   |  |   | 5,078  |  
|Amortization of deferred financing fees                                           |  |                     |        |   |               |   |        |                             |  |   | 292          |   |  |              |        |   |  |   | 292    |  
|Deferred income taxes                                                             |  |                     | (275   | ) |               |   | 243    |                             |  |   | 640          |   |  |              |       |   |  |   | 608    |  
|Deferred rent                                                                     |  |                     |       |   |               |   | 55     |                             |  |   | 903          |   |  |              |       |   |  |   | 958    |  
|Equity compensation expense                                                       |  |                     | 628    |   |               |   |       |                             |  |   |             |   |  |              |       |   |  |   | 628    |  
|Equity in earnings of subsidiary                                                  |  |                     | (4,915 | ) |               |   |       |                             |  |   | (1,790       | ) |  |              | 6,705  |   |  |   |       |  
|Changes in operating assets and liabilities:                                      |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |       |  
|Inventories                                                                       |  |                     |       |   |               |   | 27     |                             |  |   | 825          |   |  |              |       |   |  |   | 852    |  
|Prepaid expenses and other current assets                                         |  |                     |       |   |               |   | 19     |                             |  |   | 324          |   |  |              |       |   |  |   | 343    |  
|Intercompany                                                                      |  |                     |        |   |               |   | 275    |                             |  |   | (275         | ) |  |              |       |   |  |   |       |  
|Other non-current assets                                                          |  |                     |       |   |               |   |       |                             |  |   | (9           | ) |  |              |       |   |  |   | (9     | )
|Accounts payable                                                                  |  |                     |       |   |               |   | 93     |                             |  |   | 5,199        |   |  |              |       |   |  |   | 5,292  |  
|Accrued expenses and other current liabilities                                    |  |                     |       |   |               |   | (1,267 | )                           |  |   | (8,556       | ) |  |              |       |   |  |   | (9,823 | )
|Other long-term liabilities                                                       |  |                     |       |   |               |   | 3      |                             |  |   | 45           |   |  |              |       |   |  |   | 48     |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Net cash provided by operating activities                                         |  |                     |       |   |               |   | 2,382  |                             |  |   | 6,448        |   |  |              |       |   |  |   | 8,830  |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|                                                                                  |  |                     |        |   |              
|Cash flows from investing activities:                                             |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Capital expenditures                                                              |  |                     |       |   |               |   | (2,403 | )                           |  |   | (5,974       | ) |  |              |       |   |  |   | (8,377 | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Net cash used in investing activities                                             |  |                     |       |   |               |   | (2,403 | )                           |  |   | (5,974       | ) |  |              |       |   |  |   | (8,377 | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|                                                                                  |  |                     |        |   |              
|Cash flows from financing activities:                                             |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Borrowings under revolving credit agreement                                       |  |                     |       |   |               |   |       |                             |  |   | 3,000        |   |  |              |       |   |  |   | 3,000  |  
|Repayment of borrowings under revolving credit agreement                          |  |                     |       |   |               |   |       |                             |  |   | (3,000       | ) |  |              |        |   |  |   | (3,000 | )
|Payments of capital lease obligation                                              |  |                     |       |   |               |   |       |                             |  |   | (290         | ) |  |              |       |   |  |   | (290   | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Net cash provided by financing activities                                         |  |                     |       |   |               |   |       |                             |  |   | (290         | ) |  |              |       |   |  |   | (290   | )
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Net increase (decrease) in cash and cash equivalents                              |  |                     |       |   |               |   | (21    | )                           |  |   | 184          |   |  |              |       |   |  |   | 163    |  
|Cash and cash equivalents beginning of period                                     |  |                     |       |   |               |   | 841    |                             |  |   | 782          |   |  |              |       |   |  |   | 1,623  |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  
|Cash and cash equivalents end of period                                           |  | $                   |       |   |               | $ | 820    |                             |  | $ | 966          |   |  | $            |       |   |  | $ | 1,786  |  
|                                                                                  |  |                     |        |   |               |   |        |                             |  |   |              |   |  |              |        |   |  |   |        |  



24



---

##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction
with the condensed consolidated financial statements and notes thereto included as part of this quarterly report on Form 10-Q. This report contains forward-looking statements that are based upon current expectations. We sometimes identify
forward-looking statements with such words as may, expect, anticipate, estimate, seek, intend, believe or similar words concerning future events. The forward-looking
statements contained herein, include, without limitation, statements concerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, research and development expenses, general and administrative expenses,
capital resources, new stores, additional financings or borrowings and additional losses and are subject to risks and uncertainties including, but not limited to, those discussed below and elsewhere in this quarterly report on Form 10-Q that could
cause actual results to differ materially from the results contemplated by these forward-looking statements. We also urge you to carefully review the risk factors set forth in Item 1ARisk Factors in our Annual Report on Form 10-K
filed on March 17, 2010 with the Securities and Exchange Commission.

Company Overview

We are a leading specialty retailer and direct marketer of vitamins, minerals, herbs, supplements, sports nutrition and other health and
wellness products. As of April 27, 2010, we operated 457 stores located in 37 states and the District of Columbia and sold direct to consumers through our web sites primarily www.vitaminshoppe.com, and our nationally circulated catalog.
We target the dedicated, well-informed vitamin, mineral and supplement (VMS) consumer and differentiate ourselves by providing our customers with an extensive selection of high quality products sold at competitive prices and value-added
customer service. We market over 700 different nationally recognized brands as well as our proprietary Vitamin Shoppe, BodyTech and MD Select brands. We offer our customers a selection of approximately 8,000 stock keeping units (SKUs)
offered in our typical store and an additional 12,000 SKUs available through our Internet and other direct sales channels. Our broad product offering enables us to provide our customers with a selection of products that is not readily available at
other specialty retailers or at mass merchants, such as drug stores chains and supermarkets. We believe our extensive product offering, together with our well-known brand name and emphasis on product education and customer service, help us bond with
our target customer and serve as a foundation for strong customer loyalty.

Segment Information

We sell our products through two business segments: retail, which is our retail store format, and direct, which consists of our internet
and catalog formats.

Retail. We believe we operate a unique retail store format in the VMS industry, which has been
successful in diverse geographic and demographic markets, ranging from urban locations in New York City to suburban locations in Plantation, Florida and Manhattan Beach, California, as well as to resort locations in Hawaii. Our stores carry a broad
selection of VMS products and are staffed with highly experienced and knowledgeable associates who are able to educate our customers about product features and assist in product selection.

Since the beginning of 2006, we have aggressively pursued new store growth. During this period through March 27, 2010, we opened 185
new stores, expanding our presence in our existing markets as well as entering new markets such as California, Texas, Michigan and Hawaii. Our new stores typically have reached sales more consistent with our mature store base over a three to four
year time period.

Direct. Our direct segment consists of our internet operations from our websites, primarily
www.vitaminshoppe.com, and our nationally circulated catalog. The direct segment enables us to service customers outside our retail markets and provides us with data that we use to assist us in the selection of future store locations.



25



---

##### Table of Contents

Our catalog is mailed regularly to our catalog customers contained in our Healthy Awards
Program database. Our catalog is currently designed to appeal to the dedicated, well-informed VMS consumer and includes a broad assortment of approximately 12,000 to 14,000 of our most popular SKUs. Our Web sites offer our customers online access to
our full assortment of over 20,000 SKUs.

Trends and Other Factors Affecting Our Business

Our performance is affected by trends that impact the VMS industry, including demographic, health and lifestyle preferences. Changes in
these trends and other factors, which we may not foresee, may also impact our business. For example, our industry is subject to potential regulatory actions, such as the ban on ephedra, and other legal matters that affect the viability of a given
product. Volatile consumer trends, such as those described in the following paragraph, as well as the overall impact on consumer spending, which may be impacted heavily by the current economic conditions, can dramatically affect purchasing patterns.
Our business allows us to respond to changing industry trends by introducing new products and adjusting our product mix and sales incentives. We will continue to diversify our product lines to offer items less susceptible to the effects of economic
conditions and not as readily substitutable, such as teas, lotions and spring water.

Sales of weight management products are
generally more sensitive to consumer trends, resulting in higher volatility than our other products. Our sales of weight management products have been significantly influenced by the rapid increase and subsequent decline of products such as those
containing ephedra, low carb products, and certain thermogenic products, such as Hydroxycut. Accordingly, we launch new weight management products on an ongoing basis in response to prevailing market conditions and consumer demands. As the rate of
obesity increases and as the general public becomes increasingly more health conscious, we expect the demand for weight management products, albeit volatile, to continue to be strong in the near term.

In addition to the weight management product lines, we intend to continue our focus in meeting the demands of an increasingly aging
population, the effects of increasing costs of traditional healthcare and a rapidly growing fitness conscious public.

Our
historical results have also been significantly influenced by our new store openings. Since the beginning of 2006, we have opened 189 stores and operate 457 stores located in 37 states and the District of Columbia as of April 27, 2010. To
accommodate the anticipated growth and geographic dispersion of our store locations we have entered into an agreement with a west coast third party logistics facility, which we plan to utilize in the latter half of fiscal 2010. The agreement is for
a period of three years.

Our stores typically require three to four years to mature, generating lower store level sales in
the initial years than our mature stores. As a result, new stores generally have a negative impact on our overall operating margin and sales per square foot. As our recently opened stores mature, we expect them to contribute meaningfully to our
operating results.

We intend to redeem more of our outstanding Notes during Fiscal 2010 and Fiscal 2011. We anticipate the
amount of Notes to be redeemed during the remainder of Fiscal 2010 to be approximately $25.0 million based on our current liquidity needs and availability.



26



---

##### Table of Contents

Critical Accounting Policies

Our significant accounting policies are described in Note 3 of the notes to the Consolidated Financial Statements included in our
financial statements for Fiscal 2009, Fiscal 2008, and Fiscal 2007, filed with the Securities and Exchange Commission on March 17, 2010, in our Annual Report on Form 10-K. A discussion of our critical accounting policies and estimates are
included in Managements Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K. Management has discussed the development and selection of these policies with the Audit Committee of our Board of Directors, and
the Audit Committee of our Board of Directors has reviewed its disclosures relating to them. Management believes there have been no material changes to the critical accounting policies or estimates reported in the Managements Discussion and
Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended December 26, 2009.

General Definitions for Operating Results

Net Sales consist of sales, net of sales returns and deferred sales, from comparable stores and non comparable stores, as well as
sales made directly to our internet and catalog customers. A store is included in comparable store sales after four hundred and ten days of operation.

Cost of goods sold,which excludes depreciation and amortization which is included within Selling, general and administrative
expenses, includes the cost of inventory sold, costs of warehousing and distribution and store occupancy costs. Warehousing and distribution costs include freight on internally transferred merchandise, rent for the distribution center and costs
associated with our buying department and distribution facility, including payroll, which are capitalized into inventory and then expensed as merchandise is sold. Store occupancy costs include rent, common area maintenance, real estate taxes and
utilities.

Gross profitis net sales minus cost of goods sold.

Selling, general and administrative expensesconsist of depreciation and amortization of fixed and intangible assets, operating
payroll and related benefits, advertising and promotion expense, and other selling, general and administrative expenses.

Related party expensesconsist of management fees incurred and paid to IPC Manager II, LLC.

Income from operations consists of gross profit minus selling, general and administrative expenses, and related party expenses.

Loss on extinguishment of debt represents expenses incurred in connection with the redemption or repayment of debt.

Interest expense, net includes interest on our second priority senior secured floating rate notes (the
Notes) along with interest on our swap and the amortization of the unrealized loss portion, interest on the revolving credit facility, letters of credit fees, interest on our capital leases, as well as amortization of financing costs,
offset with interest income earned from highly liquid investments (investments purchased with an original maturity of three months or less).



27



---

##### Table of Contents

Key Performance Indicators and Statistics

We use a number of key indicators of financial condition and operating results to evaluate the performance of our business, including the
following (in thousands):



|                                       |  |                    |         |   |               |   |         |  
|-------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                       |  | Three Months Ended |        
|                                       |  | March 27,2010      |         |   | March 28,2009 |  
|Net sales                              |  | $                  | 191,613 |   |               | $ | 172,555 |  
|Increase in comparable store net sales |  |                    | 6.2     | % |               |   | 5.1     | %
|Gross profit as a percent of net sales |  |                    | 33.9    | % |               |   | 33.0    | %
|Income from operations                 |  | $                  | 18,072  |   |               | $ | 12,701  |  

The following table
shows the growth in our network of stores during the three months ended March 27, 2010 and March 28, 2009:



|                                   |  |                    |   |  |              
|---------------------------------- |  | ------------------ | - |  | -------------
|                                   |  | Three Months Ended
|                                   |  | March 27,2010      |   |  | March 28,2009
|Store Data:                        |  |                    |   |  |              
|Stores open at beginning of period |  | 438                |   |  | 401          
|Stores opened                      |  | 16                 |   |  | 17           
|Stores closed                      |  | (1                 | ) |  |             
|                                   |  |                    |   |  |              
|Stores open at end of period       |  | 453                |   |  | 418          
|                                   |  |                    |   |  |              

Results of Operations

The information presented below is for the three months ended March 27, 2010 and March 28, 2009 and was derived from our
condensed consolidated financial statements, which, in the opinion of management, includes all adjustments necessary for a fair presentation of our financial position and operating results for such periods and as of such dates. The following table
summarizes our results of operations for the three months ended March 27, 2010 and March 28, 2009 as a percentage of net sales:



|                                             |  |                    |   |  |               |  
|-------------------------------------------- |  | ------------------ | - |  | ------------- | -
|                                             |  | Three Months Ended |  
|                                             |  | March 27,2010      |   |  | March 28,2009 |  
|Net sales                                    |  | 100.0              | % |  | 100.0         | %
|Cost of goods sold                           |  | 66.1               | % |  | 67.0          | %
|                                             |  |                    |   |  |               |  
|Gross profit                                 |  | 33.9               | % |  | 33.0          | %
|Selling, general and administrative expenses |  | 24.5               | % |  | 25.5          | %
|Related party expenses                       |  | 0.0                | % |  | 0.1           | %
|                                             |  |                    |   |  |               |  
|Income from operations                       |  | 9.4                | % |  | 7.4           | %
|Loss on extinguishment of debt               |  | 0.3                | % |  | 0.0           | %
|Interest expense, net                        |  | 1.5                | % |  | 2.9           | %
|                                             |  |                    |   |  |               |  
|Income before provision for income taxes     |  | 7.6                | % |  | 4.5           | %
|Provision for income taxes                   |  | 3.0                | % |  | 1.9           | %
|                                             |  |                    |   |  |               |  
|Net income                                   |  | 4.6                | % |  | 2.6           | %
|                                             |  |                    |   |  |               |  



28



---

##### Table of Contents

Three Months Ended March 27, 2010 Compared To Three Months Ended March 28, 2009

Net Sales

Net sales increased $19.1 million, or 11.0%, to $191.6 million for the three months ended March 27, 2010 compared to $172.6 million
for the three months ended March 28, 2009. The increase was primarily the result of an increase in our comparable store sales, and new sales from our non-comparable stores, as well as an increase in our direct sales.

Retail

Net sales from our retail stores increased $17.4 million, or 11.5%, to $169.1 million for the three months ended March 27, 2010
compared to $151.6 million for the three months ended March 28, 2009. We operated 453 stores as of March 27, 2010 compared to 418 stores as of March 28, 2009. Our overall store sales for the three months ended March 27, 2010
increased due to non-comparable store sales increases of $8.1 million and an increase in comparable store sales of $9.3 million, or 6.2%. Our overall sales increased primarily in the categories of supplements, which increased $3.3 million; vitamins
and minerals, which increased $3.4 million; and sports nutrition, which increased $8.7 million.

The supplements category was
among our fastest growing categories as we continue to experience significant growth in sales of essential fatty acids, or EFAs, as well as experiencing growth in other products during the quarter, such as CoQ10 and probiotics for digestive health.
Sales in our vitamin and minerals category increased at a rate greater than the overall increase in net sales due to the introduction of new special formulations for men and women as well as an increase in sales of Vitamin D. Product sales in the
sports nutrition category continues to be among our fastest growing categories and has been so for thirteen consecutive quarters. We expect this trend to continue based on the growth of the fitness-conscious market.

Direct

Net sales to our direct customers increased $1.6 million, or 7.8%, to $22.6 million for the three months ended March 27, 2010
compared to $20.9 million for the three months ended March 28, 2009. The overall increase in our direct sales was due to an increase in our internet sales of approximately $2.4 million which was offset by a decrease in our catalog sales. The
increase in web-based sales was largely due to a greater influx of customers gained as a result of an increase in promotional activity through certain of our online store-fronts. We have reduced our catalog circulation and customer prospecting as we
believe catalog purchasing in general is declining in popularity as a purchasing medium, especially in the wake of the growth of online shopping. In addition, as we continue to open more stores in new markets, some catalog customers choose to shop
at our retail locations.

Cost of Goods Sold

Cost of goods sold, which includes product, warehouse and distribution and occupancy costs, increased $11.1 million, or 9.6%, to $126.6
million for the three months ended March 27, 2010 compared to $115.5 million for the three months ended March 28, 2009. The dollar increase was primarily due to an increase in product sold and occupancy costs for the quarter ended
March 27, 2010, as compared to the quarter ended March 28, 2009. Cost of goods sold as a percentage of net sales decreased to 66.1% for the three months ended March 27, 2010, compared to 67.0% for the three months ended March 28,
2009. The decrease of cost of goods sold as a percentage of net sales was due to decreases in product costs of 0.7% as a percentage of net sales, as well as a decrease in occupancy costs of 0.2% as a percentage of net sales. The decrease in product
costs as a percentage of net sales was due primarily to a decrease in promotional activity during the three months ended March 27, 2010, as compared to the three months ended March 28, 2009.



29



---

##### Table of Contents

Gross Profit

As a result of the foregoing, gross profit increased $8.0 million, or 14.0%, to $65.0 million for the three months ended March 27,
2010 compared to $57.0 million for the three months ended March 28, 2009. Gross profit as a percentage of sales increased to 33.9% for the quarter ended March 27, 2010, compared to 33.0% for the quarter ended March 28, 2009.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, including operating payroll and related benefits, advertising and promotion expense,
depreciation and amortization, and other selling, general and administrative expenses, increased $3.0 million, or 6.8%, to $46.9 million for the three months ended March 27, 2010, compared to $43.9 million for the three months ended
March 28, 2009. The components of selling, general and administrative expenses are explained below. Selling, general and administrative expenses as a percentage of net sales decreased to 24.5% for the three months ended March 27, 2010,
compared to 25.5% for the three months ended March 28, 2009.

Operating payroll and related benefits increased $1.5
million, or 8.9%, to $18.1 million for the three months ended March 27, 2010 compared to $16.6 million for the three months ended March 28, 2009. Operating payroll and related benefits expenses as a percentage of net sales decreased to
9.4% for the three months ended March 27, 2010 compared to 9.6% for the three months ended March 28, 2009. The decrease as a percentage of net sales was primarily due to greater sales per hour for the quarter ended March 27, 2010, as
compared to the quarter ended March 28, 2009, due to the maturation of our newer stores.

Advertising and promotion
expenses decreased $0.7 million, or 15.5%, to $3.7 million for the three months ended March 27, 2010 compared to $4.4 million for the three months ended March 28, 2009. Advertising and promotion expenses as a percentage of net sales
decreased to 1.9% for the three months ended March 27, 2010, compared to 2.5% for the three months ended March 28, 2009. The decrease is primarily due to a reduction in grand opening promotions for our new stores for the three months ended
March 27, 2010, as compared to the three months ended March 28, 2009.

Other selling, general and administrative
expenses, which includes depreciation and amortization expense, increased $2.2 million, or 9.6%, to $25.2 million for the three months ended March 27, 2010 compared to $23.0 million for the three months ended March 28, 2009. The dollar
increase in other selling, general and administrative expenses was due to increases in the following expenses: depreciation and amortization expense of approximately $0.3 million; corporate payroll expenses of $0.8 million; stock-based compensation
expense of $0.2 million; credit card fees of $0.3 million; and various general administrative expenses of $0.5 million. Other selling, general and administrative expenses as a percentage of net sales decreased to 13.1% during the three months ended
March 27, 2010 compared to 13.3% for the three months ended March 28, 2009. The decrease as a percentage of sales was largely the result of experiencing overall economies of scale with regards to these expenses relative to the increase in
sales for the quarter ended March 27, 2010, as compared to the quarter ended March 28, 2009.

Related Party Expenses

There were no related party for the three months ended March 27, 2010. Related party expenses for the three months ended
March 28, 2009 were $0.4 million.

Income from Operations

As a result of the foregoing, income from operations increased $5.4 million, or 42.3%, to $18.1 million for the three months ended
March 27, 2010 compared to $12.7 million for the three months ended March 28, 2009. Income from operations as a percentage of net sales increased to 9.4% for the three months ended March 27, 2010 compared to 7.4% for the three months
ended March 28, 2009.



30



---

##### Table of Contents

Retail

Income from operations for the retail segment increased $6.7 million, or 27.1%, to $31.4 million for the three months ended March 27,
2010 compared to $24.7 million for the three months ended March 28, 2009. Income from operations as a percentage of net sales for the retail segment increased to 18.5% for the three months ended March 27, 2010, compared to 16.3% for the
three months ended March 28, 2009. The increase as a percentage of sales was primarily due to a 1.0% decrease in product costs as a percentage of sales as a result of a decrease in promotional markdowns during the quarter ended March 27,
2010, as compared to the quarter ended March 28, 2009. In addition, there was a decrease in advertising costs of 0.7% as a percentage of sales, due to a decrease in grand opening promotions during the quarter ended March 27, 2010, as
compared to the quarter ended March 28, 2009.

Direct

Income from operations for the direct segment increased $0.1 million, or 2.9%, to $4.5 million for the three months ended March 27,
2010 compared to $4.4 million for the three months ended March 28, 2009. Income from operations as a percentage of net sales for the direct segment decreased to 19.9% for the three months ended March 27, 2010 compared to 20.9% for the
three months ended March 28, 2009. The 1.0% decrease in income from operations as a percent of net sales was primarily due to an increase in product costs of 2.0%, as a percent of net sales, due largely to an increase in promotional pricing
during the three months ended March 27, 2010, as compared to the three months ended March 28, 2009, offset by a decrease in distribution costs as a percentage of sales of 0.3%, and a decrease in payroll expenses of 0.7% as a percentage of
sales during the three months ended March 27, 2010, as compared to the three months ended March 28, 2009. The decrease in distribution costs as a percentage of sales was primarily due to higher picking rates during the three months ended
March 27, 2010, as compared to the three months ended March 28, 2009. The decrease in payroll expense as a percentage of sales was primarily attributable to an increase in sales made through certain online store-fronts, which do not
require incremental payroll hours from our sales staff.

Corporate Costs

Corporate costs increased by $1.4 million, or 8.8%, to $17.8 million for the three months ended March 27, 2010 compared to $16.3
million for the three months ended March 28, 2009. Corporate costs as a percentage of net sales decreased to 9.3% for the three months ended March 27, 2010 compared to 9.5% for the three months ended March 28, 2009. The dollar
increase was primarily due to increases in depreciation and amortization expense of approximately $0.3 million, corporate payroll expenses of $0.8 million, and stock-based compensation expense of $0.2 million during the quarter ended March 27,
2010, as compared to the quarter ended March 28, 2009. The decrease as a percentage of sales was largely the result of experiencing overall economies of scale with regards to these expenses relative to the increase in sales for the quarter
ended March 27, 2010, as compared to the quarter ended March 28, 2009.

Loss on extinguishment of debt

Loss on extinguishment of debt of $0.6 million for the quarter ended March 27, 2010, represents the write-off of a portion of the
unrecognized loss of our interest rate swap of approximately $0.2 million, as well as the write-off of a portion of deferred financing fees of approximately $0.3 million, related to the redemption of a portion our Notes in January 2010.

Interest Expense, net

Interest expense net, decreased $2.1 million, or 41.5%, to $2.9 million for the three months ended March 27, 2010 compared to $5.0
million for the three months ended March 28, 2009. The decrease in interest expense was primarily due to the decrease in our outstanding Notes as a result of the redemption of $64.9 million in aggregate principal, offset in part by an increase
in borrowings from our Revolving Credit Line of $20.0 million. In



31



---

##### Table of Contents

addition, we experienced lower interest rates on our debt during the three months ended March 27, 2010, as compared to the three months ended March 28, 2009.

Provision for Income Taxes

We recognized $5.9 million of income tax expense during the three months ended March 27, 2010 compared with $3.1 million for the
three months ended March 28, 2009. The effective tax rate for the three months ended March 27, 2010 was 40.2%, compared to 40.7% for the three months ended March 28, 2009. The effective rate for the current period, as compared to the
same period last year, decreased primarily due to certain changes in our blended state income tax rates.

Net Income

As a result of the foregoing, we generated net income of $8.7 million for the three months ended March 27, 2010 compared to $4.6
million for the three months ended March 28, 2009.

Key Indicators of Liquidity and Capital Resources

The following table sets forth key indicators of our liquidity and capital resources:



|                                     |  |               |         |                  |   |        
|------------------------------------ |  | ------------- | ------- | ---------------- | - | -------
|                                     |  | March 27,2010 |         | December 26,2009
|Balance Sheet Data:                  |  |               |         |                  |   |        
|Cash and cash equivalents            |  | $             | 12,162  |                  | $ | 8,797  
|Working capital                      |  |               | 62,451  |                  |   | 50,416 
|Total assets                         |  |               | 475,687 |                  |   | 469,257
|Total debt, including capital leases |  |               | 123,654 |                  |   | 123,946



|                                          |  |                    |        |   |               |   |        |  
|----------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                          |  | Three Months Ended |       
|                                          |  | March 27,2010      |        |   | March 28,2009 |  
|Other Information:                        |  |                    |        |   |               |   |        |  
|Depreciation and amortization (1)         |  | $                  | 5,414  |   |               | $ | 5,078  |  
|                                          |  |                   
|Cash Flows Provided By (Used In):         |  |                    |        |   |               |   |        |  
|Operating activities                      |  | $                  | 8,178  |   |               | $ | 8,830  |  
|Investing activities                      |  |                    | (5,408 | ) |               |   | (8,377 | )
|Financing activities                      |  |                    | 595    |   |               |   | (290   | )
|                                          |  |                    |        |   |               |   |        |  
|Net increase in cash and cash equivalents |  | $                  | 3,365  |   |               | $ | 163    |  
|                                          |  |                    |        |   |               |   |        |  



|(1) | Excludes amortization of deferred financing fees.
|--- | -------------------------------------------------

Liquidity and Capital Resources

Our primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related primarily to the
construction of new stores. Historically, we have financed these requirements predominately through internally generated cash flow, supplemented with short-term financing. We believe that the cash generated by operations and cash and cash
equivalents, together with the borrowing availability under our revolving credit facility, will be sufficient to meet our working capital needs for the next twelve months, including investments made and expenses incurred in connection with our store
growth plans, systems development and store improvements.

We plan to spend up to $22 million in capital expenditures during
Fiscal 2010, of which up to $17 million will be in connection with our store growth and improvement plans with the remainder of up to $5 million being



32



---

##### Table of Contents

used for all other expenditures. Of the total capital expenditures projected for Fiscal 2010 we have already invested $5.4 million during the three months ended March 27, 2010. We plan on
opening approximately 42 stores during Fiscal 2010, of which we have already opened 16 stores as of March 27, 2010. Our working capital requirements for merchandise inventory will continue to increase as we continue to open additional stores.
Currently, our practice is to establish an inventory level of $165,000 to $185,000 at cost for each of our stores. Despite the recent challenges obtaining credit from the tightened global credit markets, we feel our new revolving credit facility
(entered into on September 25, 2009, as discussed elsewhere in this document) will provide us with sufficient liquidity through the next fiscal year. Furthermore, we have an additional two years of liquidity as compared to our previous facility
which we terminated on September 24, 2009. Additionally, 30 day payment terms have been extended to us by some of our suppliers allowing us to effectively manage our inventory and working capital. In April 2010, we increased our 2009 Revolving
Credit Facility by $20.0 million which we intend to use to redeem a portion of our Notes during Fiscal 2010.

We were in
compliance with all debt covenants as of March 27, 2010.

Cash Provided by Operating Activities

Cash provided by operating activities was $8.2 million for the three months ended March 27, 2010, as compared to $8.8 million of cash
provided by operating activities for the three months ended March 28, 2009. The $0.7 million decrease in cash flows from operating activities is primarily due to increases in expenditures on our inventory offset in part by an increase in our
net income for the three months ended March 27, 2010, as compared to the three months ended March 28, 2009. The increase in changes to our inventory expenditures is largely attributable to the continued efficiency of our inventory
management as we continue to achieve a just in time inventory replenishment model, and by an increase in the number of our stores. In the first fiscal quarter of 2009, we reduced our inventory while net sales increased. In the first fiscal quarter
of 2010, we increased inventory 6% while net sales increased 11%.

Cash Used in Investing Activities

Net cash used in investing activities during the three months ended March 27, 2010, was $5.4 million, compared to $8.4 million during
the three months ended March 28, 2009. Capital expenditures during the three months ended March 27, 2010, were used for the construction of 16 new stores, and improvements to existing stores, as well as computer equipment related to those
stores. During the three months ended March 28, 2009, capital expenditures were used for the construction of 17 new stores, as well as computer equipment related to those stores.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $0.6 million for the three months ended March 27, 2010, as compared to net cash used in
financing activities of $0.3 million for the three months ended March 28, 2009. The $0.9 million increase in cash provided by financing activities was due primarily to cash received from the exercise of employee stock options during the three
months ended March 27, 2010.

2005 Second Priority Senior Secured Floating Rate Notes

Commencing on February 15, 2006, interest on our Notes was set at a per annum rate equal to a three month LIBOR plus 7.5%, which
resets quarterly on February 15, May 15, August 15 and November 15 of each year. The weighted average interest rate from December 27, 2008 through March 27, 2010 was 7.85%. Interest on overdue principal and
interest and liquidated damages, if any, will accrue at a rate that is 1% higher than the then applicable interest rate on the Notes. The indenture governing the Notes restricts the ability of Vitamin Shoppe Industries, Inc. (Industries)
and VS Direct, Inc. (Direct) to incur additional debt, pay dividends and make distributions, make certain investments, repurchase stock, incur liens, enter into transactions with affiliates, enter into sale and lease back transactions,
merge, or consolidate or transfer or sell assets.



33



---

##### Table of Contents

2009 Revolving Credit Facility

On September 25, 2009, we entered into a new revolving credit facility (the 2009 Revolving Credit Facility), and
simultaneously terminated our existing credit facility that was entered into on November 15, 2005. We entered into the 2009 Revolving Credit Facility to obtain an additional two years of liquidity beyond the termination date of our previous
facility. In doing so, we incurred an incremental borrowing rate of 1% as compared to the former revolving credit facility. The terms of the 2009 Revolving Credit Facility extend through September 2013, and allow us to borrow up to $50.0 million
subject to the terms of the facility. Similar to our previous credit facility, the availability under the 2009 Revolving Credit Facility is subject to a borrowing base calculated on the value of certain accounts receivable from credit card companies
as well as the inventory of Industries and Direct. The obligations thereunder are secured by a security interest in substantially all of the assets of Vitamin Shoppe, Inc. (VSI), Industries and Direct. Direct and VSI, provided guarantees
in respect of our obligations under the 2009 Revolving Credit Facility, and Industries and VSI, have provided guarantees in respect of Directs obligations under the 2009 Revolving Credit Facility. The 2009 Revolving Credit Facility provides
for affirmative and negative covenants affecting Industries, VSI and Direct. The 2009 Revolving Credit Facility restricts, among other things, our ability to incur indebtedness, create or permit liens on our assets, declare or pay dividends and make
certain other restricted payments, consolidate, merge or recapitalize, acquire or sell assets, make certain investments, loans or other advances, enter into transactions with affiliates, change our line of business, and restricts the types of
hedging activities we can enter into. The 2009 Revolving Credit Facility has a maturity date of September 2013. However, the 2009 Revolving Credit Facility may terminate at August 15, 2012, if, prior to such date, a significant portion of our
Notes has not been redeemed, as, at that date, the facility requires that the sum of all amounts owed under the Notes must be less than the sum of our cash and cash equivalents plus excess availability (as defined under the 2009 Revolving Credit
Facility), subject to certain limitations. The largest amount borrowed at any given point during the period ended March 27, 2010 was $20.0 million. The unused available line of credit under the 2009 Revolving Credit Facility at March 27,
2010 was $29.1 million. In addition to the current availability, during April 2010 we amended our 2009 Revolving Credit Facility agreement to increase our availability on the facility by approximately $20.0 million, as we intend to redeem up to
$25.0 million of our outstanding Notes during Fiscal 2010.

The borrowings under our 2009 Revolving Credit Facility accrue
interest, at our option at the rate per annum announced from time to time by the agent as its prime rate, or at a per annum rate equal to 2.50% above the adjusted Eurodollar rate. The weighted average interest rate for the 2009 revolving
credit line from December 26, 2009 through March 27, 2010, was 2.74%.

We entered into an interest rate swap during
December 2005 on a portion of our Notes. The interest rate swap had a maturity date of November 2010, and was terminated on September 25, 2009, at a cost of $2.6 million (the fair market value). The unamortized residual unrecognized loss of the
interest rate swap resulting from the termination is recorded in accumulated other comprehensive loss in the condensed consolidated balance sheet. The amount of the unamortized loss was $0.9 million along with related deferred taxes of $0.6 million
at December 26, 2009, and $0.5 million along with related deferred taxes of $0.4 million, at March 27, 2010.



34



---

##### Table of Contents

Contractual Obligations and Commercial Commitments

As of March 27, 2010, our lease commitments and contractual obligations are as follows (in thousands):



|                         |  |       |         |                     |   |                                           |  |                   |       |                      |   |                             |  |   |        |  |   |       
|------------------------ |  | ----- | ------- | ------------------- | - | ----------------------------------------- |  | ----------------- | ----- | -------------------- | - | --------------------------- |  | - | ------ |  | - | ------
|Fiscal year ending       |  | Total |         | OperatingLeases (1) |   | Capital LeaseObligation,IncludingInterest |  | Long-TermDebt (2) |       | InterestPayments (3) |   | RevolvingCreditFacility (2)
|Remainder of Fiscal 2010 |  | $     | 62,364  |                     | $ | 55,179                                    |  | $                 | 1,349 |                      | $ |                            |  | $ | 5,836  |  | $ |      
|2011                     |  |       | 82,200  |                     |   | 72,777                                    |  |                   | 1,642 |                      |   |                            |  |   | 7,781  |  |   |      
|2012                     |  |       | 177,642 |                     |   | 70,204                                    |  |                   | 848   |                      |   | 100,106                     |  |   | 6,484  |  |   |      
|2013                     |  |       | 83,841  |                     |   | 63,841                                    |  |                   |      |                      |   |                            |  |   |       |  |   | 20,000
|2014                     |  |       | 53,815  |                     |   | 53,815                                    |  |                   |      |                      |   |                            |  |   |       |  |   |      
|Thereafter               |  |       | 130,224 |                     |   | 130,224                                   |  |                   |      |                      |   |                            |  |   |       |  |   |      
|                         |  |       |         |                     |   |                                           |  |                   |       |                      |   |                             |  |   |        |  |   |       
|                         |  | $     | 590,086 |                     | $ | 446,040                                   |  | $                 | 3,839 |                      | $ | 100,106                     |  | $ | 20,101 |  | $ | 20,000
|                         |  |       |         |                     |   |                                           |  |                   |       |                      |   |                             |  |   |        |  |   |       



|(1) | The operating leases included in the above table do not include contingent rent based upon sales volume, which represented less than 1% of our minimum lease obligations
during the first three months of Fiscal of 2010. In addition, the operating leases do not include common area maintenance costs or real estate taxes that are paid to the landlord during the year, which combined represented approximately 17.2% of our
minimum lease obligations for the three months ended March 27, 2010.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | We intend to redeem $25.0 million of our Notes during the second quarter of Fiscal 2010, primarily funded by our 2009 Revolving Credit Facility.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Interest payments are based upon the prevailing interest rates at March 27, 2010. Interest payments do not include interest expense related to our revolving credit
facility due to its revolving nature.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have an aggregate contingent liability of up to $2.5 million related
to potential severance payments for six executives as of March 27, 2010 pursuant to their respective employment agreements. We have an aggregate contingent liability of up to $2.3 million related to potential severance payments for nine
employees as of March 27, 2010, following a change in control pursuant to their respective employment agreements. These potential severance payments are not reflected in the table above.

Excluded from the above commitments is $4.6 million of long-term liabilities related to uncertain tax positions, due to the uncertainty
of the time and nature of resolution.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring
debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely have a material current or future effect on
our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Effects of Inflation

We
do not believe that our sales or operating results have been materially impacted by inflation during the periods presented in our financial statements. There can be no assurance, however, that our sales or operating results will not be impacted by
inflation in the future.

Recent Accounting Pronouncements

We have considered all new accounting pronouncements and have concluded that there are no new pronouncements that may have a material
impact on our results of operations, financial condition, or cash flows, based on current information.



35



---

##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

The Companys market risks relate primarily to changes in interest rates. Market risk represents the risk of changes in the value of
market risk sensitive instruments caused by fluctuations in interest rates and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows. In the ordinary course of business, we are primarily
exposed to interest rate risks. Other than on our Notes, which carry a floating interest rate, we have not used derivative financial instruments in connection with these market risks.

Our 2009 Revolving Credit Facility and Notes carry floating interest rates that are tied to LIBOR and the prime rate and, therefore, our
statements of operations and our cash flows are exposed to changes in interest rates. A one percentage point increase in LIBOR would cause an increase to the interest expense on our Notes of approximately $1.0 million annually. Additionally, a one
percentage point increase in LIBOR would cause an increase to our annual interest expense on our revolving credit facility of $0.2 million based on the balance of our 2009 Revolving Credit Facility as of March 27, 2010.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, our principal executive officer and principal financial officer, respectively, of the design and operation of our disclosure controls and procedures (as such term is defined in Rules l3a (e) and l5d15(e) under
the Securities Exchange Act of 1934 (the Exchange Act) as of March 27, 2010, pursuant to Exchange Act Rule 13a-l5. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and
procedures as of March 27, 2010 are effective.

Changes in Internal Control over Financial Reporting

There has been no changes in our internal control structure over financial reporting during the quarter ended
March 27, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



36



---

##### Table of Contents

PART II.

OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

The information set forth in Note 8 in the Notes to Condensed Consolidated Financial Statements included herein is hereby incorporated by
reference.



|Item 1A. | Risk Factors
|-------- | ------------

In addition to the risk factor included below, please refer to the Risk Factors section in our Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission on March 17, 2010, for a complete explanation of the factors affecting our business. Other than the risk factor included below, there have been no material changes from risk factors previously disclosed in our
Form 10-K, as filed with the Securities and Exchange Commission on March 17, 2010.

Recent legislation regarding
healthcare may adversely impact our results of operations

The Patient Protection and Affordable Care Act signed into
law in March 2010, may require us to make additional contributions to our current health care programs which may have an adverse impact on the results of our operations and cash flows.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None.



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                    
|            | 
|31.1        |  | Certification of Richard L. Markee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|            | 
|31.2        |  | Certification of Michael G. Archbold pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|32.1        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Chief Executive Officer.
|            | 
|32.2        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Chief Financial Officer.



37



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on April 30, 2010.



VSI, INC.By:

/s/ Richard L. MarkeeRichard L. MarkeeChief Executive OfficerBy

/s/ Michael G. ArchboldMichael G. ArchboldChief Financial Officer




38



---

##### Table of Contents

CERTIFICATIONS



|            |  |                                                                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                    
|            | 
|31.1        |  | Certification of Richard L. Markee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|            | 
|31.2        |  | Certification of Michael G. Archbold pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|32.1        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Chief Executive Officer.
|            | 
|32.2        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Chief Financial Officer.



39