UNITED STATES
                                     SECURITIES AND EXCHANGE COMMISSION
                                           Washington, D.C. 20549

                                                 FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934.
                For the fiscal year ended December 31, 1996

                                                     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 0-18476
                                                 AMRION, INC.
                         (Exact name of registrant as specified in its charter)

Colorado                                                     84-1050628
State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization                                Identification No.)

6565 Odell Place  Boulder, Colorado                          80301
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code: (303) 530-2525
Securities registered pursuant to Section 12(b) of the Act:  None

                  Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, par value $.0011 per share
                                        (Title of class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act 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 if  disclosure of delinquent  filers  pursuant to
Item 405 of Regulation  S-K is not contained herein, and will not be contained,
to the best of  registrant's  knowledge,  in definitive proxy or  information
statements  incorporated  by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.  [X]

As of March 24,  1997,  the  aggregate  market value of the voting stock held by
non-affiliates was approximately  $76,216,526 based upon the last transaction in
the common stock known to the registrant.

The number of shares of the  Registrant's  $.0011 par value  common stock 
outstanding  as of March 24, 1997 was 5,251,514.
                                    Documents Incorporated By Reference:
The information  required in Part III of this Form 10-K has been incorporated by
reference to the  Registrant's  definitive proxy statement on Schedule 14A to be
filed with the Commission on or before April 30, 1997.


                                                   Part I

Statements and information  presented within this Annual Report on Form 10-K for
Amrion,  Inc.  and  its  93%  owned  subsidiary,   Natrix   International,   LLC
(collectively the "Company")  contain  "forward-looking  statements"  within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking   statements  can  be  identified  by  the  use  of  predictive,
future-tense or forward-looking terminology,  such as "believes," "anticipates,"
"expects,"   "estimates,"  "may,"  "will"  or  similar  terms.   Forward-looking
statements  also  include  projections  of  financial  performance,   statements
regarding  management's  plans and  objectives  and  statements  concerning  any
assumptions  relating to the foregoing.  Certain important factors regarding the
Company's  business,  operations  and  competitive  environment  which may cause
actual  results  to  vary  materially  from  these  forward-looking   statements
accompany such statements.

ITEM I:   Business


GENERAL

The Company is engaged in developing,  producing and marketing innovative, safe,
high quality nutriceuticals and nutritional supplements. The Company's products,
which are  guaranteed  for potency and purity,  include  nutriceuticals,  herbs,
herbal formulas, vitamins, minerals and homeopathic medicinals.

The  Company  currently   markets  and  sells   approximately  670  items  under
Company-owned  trademarks  through  four  principal  divisions,  utilizing  five
distribution channels which include direct marketing,  specialty retail and mass
merchandising,  health care  professionals and international  sales. The Company
operates in one segment with four separate  marketing  divisions.  Each division
employs a  combination  of marketing  strategies  which may include  catalog and
direct  mailings,  print  advertising,  free standing  inserts,  package  insert
programs,  retail  merchandising,  radio,  television,  coupons,  point  of sale
materials and customer service calls. The Company does not depend on a few major
customers and the loss of any single  customer  would not have an adverse effect
on the Company's sales.

The  Company's  direct  marketing  sales are  conducted by the Direct  Marketing
Division (the "DMD") through two product lines. The Specialty  Products Division
markets nutritional  supplement products primarily to health food stores, retail
outlets, general sporting goods stores and independent distributors.  The Health
Care  Professional  Division was established to market  nutritional  supplements
exclusively  to health care  professionals  for  dispensing  to  patients  under
professional  supervision.  The  Company's  International  Division  markets the
Company's product lines primarily through  distributors in Barbados,  Hong Kong,
Italy,  Mexico,  Malaysia,  Portugal,  Russia,  Saudi  Arabia  and  Taiwan.  The
Company's  subsidiary,  Natrix  International,  markets  a line  of  nutritional
supplements through mass merchandisers.

In 1994, the Company established its own manufacturing facility and is currently
producing approximately 65% of its products, which account for nearly 95% of the
Company's sales. The  establishment of its own  manufacturing  facility enhanced
the Company's  current  operations by providing it the ability to better control
and reduce  turnaround  time from order to delivery,  reduce  inventory  levels,
increase  quality  control and increase  profit margins through the reduction of
product costs.


HISTORY

The Company  was formed on January 21, 1987 under the name Herbs of China,  Ltd.
and was primarily engaged in the sale of Chinese herbal formulas to athletes. On
August  18,  1988,  the  Company  acquired  100% of the  outstanding  shares  of
Bioenergy  Nutrients,  Inc.,  a  private  Colorado  corporation  formed  by  the
Company's  President,  Mark S.  Crossen,  which engaged in the  development  and
marketing of nutritional supplements.  Subsequently,  Bioenergy Nutrients,  Inc.
was merged into the Company.  In October 1988,  the Company  changed its name to
Bioenergy Nutrients, Inc. to reflect the merger and in March 1993, the Company's
name was  changed  to  Amrion,  Inc.  to more  adequately  reflect  its  diverse
operations.

On October 17, 1989, the Company  completed a public  offering of 341,772 shares
of Common  Stock  through a warrant  conversion  program at a price of $1.47 per
share.  The net  proceeds to the Company from the  offering  were  approximately
$446,000. The proceeds from this offering were used to expand the markets served
by the Company,  develop the Company's product lines and fulfill working capital
requirements.

On November 2, 1993, the Company completed a public offering of 1,520,000 shares
of Common  Stock and  380,000  shares were sold by a  shareholder  at a price of
$6.75 per share.  On December 17, 1993 an  additional  285,000  shares of Common
Stock  were  sold at $6.75  through  the  Underwriter's  45-day  option to cover
over-allotments.  The net proceeds to the Company from the stock  offering  were
$11,004,000  after expenses of  $1,179,000.  The net proceeds from this offering
were used to establish and equip a  manufacturing  facility,  develop and market
new products for retail distribution and fulfill working capital needs.

In  connection  with  this  offering,  the  Company  sold to  John  G.  Kinnard,
Incorporated,  as representative of the Underwriters  (the  "Underwriter"),  for
$50, a five-year  warrant to purchase 190,000 shares of Common Stock exercisable
at $8.10. During August 1996, the Underwriter  exchanged outstanding warrants to
purchase  87,510  shares of common  stock to effect the exercise of warrants for
102,490 shares of the Company's common stock in a cashless exercise.


INDUSTRY OVERVIEW

According  to  industry  analysts'  reports,  the retail  market for vitamin and
nutritional  supplements has grown  dramatically from $3.5 billion in 1991 to an
estimated $6.5 billion in 1996 and is currently  growing at 13% to 15% annually.
By the year 2001, retail sales are expected to exceed $12 billion. The growth to
date is  largely a result of an  increased  national  interest  in  preventative
health choices;  favorable  consumer attitude shifts toward natural health care;
increased  consumer  willingness toward self-care in resistance to rising health
care costs; and a rapidly growing  demographic segment of the population over 40
years old concerned with aging and disease.  However, there is no assurance that
consumer  attitudes  will continue to shift toward natural health care, and that
the  40+  population   segment  will  continue  to  embrace  self-care  and  use
supplements at the same rate.

Recent  estimates  indicate  that 54% of the U.S.  population  uses  nutritional
supplements  at least  occasionally  in some form  (tablet,  capsule or liquid).
Aging  baby  boomers  and  seniors  are more  likely  to be heavy  consumers  of
nutritional  supplements.  Approximately  7% of the U.S.  adult  population  are
considered to be heavy  consumers of  supplements,  taking them more than once a
day. Heavy users of supplements are more likely college  graduates,  females and
professionals.  The greatest  incidence of use is among those living on the west
coast.

Mass  market  retailers  (drug,  grocery  and  discount  stores)  accounted  for
approximately  45% of dietary  supplement  sales in 1996 and health and  natural
food  stores  accounted  for more than 38% of industry  sales.  Mail order sales
represented 3.4%.

Public  awareness  of the  positive  effects of vitamins  and other  nutritional
supplements  on health  has been  heightened  by widely  publicized  reports  of
favorable research findings.  Such reports have cited a correlation  between the
consumption  of  micro-nutrients  such  as  beta  carotene,  vitamins  C  and E
(antioxidant  vitamins) and reduced incidence of diseases such as heart disease,
cancer and stroke.  In February  1995,  the  University  of Southern  California
School of Medicine  reported that vitamin E reduces  arterial  plaque buildup in
people with diagnosed  coronary artery disease.  In October 1995, the Journal of
The American Medical Association reported on research which suggests that higher
blood levels of folic acid could lead to a lower level of vascular disease.

Coincident with the  proliferation of published  studies revealing the potential
health  benefits of nutritional  supplements,  has been an increase in physician
recommendations  to patients of  antioxidants.  USA Today reported that a survey
conducted in 1996 at an American  Heart  Association  conference  found that the
number of physicians  recommending  antioxidant  vitamins had increased 42% over
the previous year.

While the vast majority of studies  continue to suggest that vitamin  intake can
have positive  effects on long-term  health,  there are occasional  studies that
find negative  relationships  between vitamin intake and health. One of the more
significant  negative  studies was the "Finnish" study released in the Spring of
1994.  This study  examined the impact of beta carotene and vitamin A on a group
of  middle-aged,  long-term  Finnish  smokers.  The  study  suggested  that beta
carotene and vitamin A were not effective in reducing lung cancer.

Based upon increased consumer awareness, the Company anticipates that the market
for  vitamins  and other  nutritional  supplements  will  continue to  increase.
However,  there can be no assurance  that the absence of media  attention or the
publication  of  adverse  reports  regarding   vitamins  and  other  nutritional
supplements or reports  regarding the Company's primary products will not have a
material  adverse  effect on the market for such  products  or on the  Company's
sales or income.


SALES AND MARKETING

The Company  utilizes direct mail of Company  designed  catalogs,  brochures and
individual  mail pieces which  highlight  product lines and current  promotional
activities.  The  Company  complements  its direct  mail  activities  with print
advertising,  free standing  inserts,  package insert  programs and  television.
Finally,  the Company uses outbound  courtesy  sales calls  designed to identify
specific  customer  groups,  provide market  research data on customer needs and
satisfaction and assist in monitoring sales by product line or user group.

Additionally, the Company's retail and health care professional divisions, which
target health food stores, health care providers and mass merchandisers, utilize
marketing strategies which include direct mail, telemarketing contact,  personal
visits from sales representatives, consumer and trade advertising, point of sale
materials,   free  standing   inserts  with  coupons  in  newspapers  and  radio
advertising.

Direct Marketing Division

The Direct Marketing Division (DMD) accounted for 87% of the Company's net sales
during 1996 and markets the Bioenergy  Nutrients (BN) and  HealthSmart  Vitamins
(HSV) product  lines.  The BN line  consists of  approximately  250  nutritional
supplement  products  and several  homeopathic  remedies  which are  marketed to
consumers  nationwide  through direct mail (catalogs,  mini-catalogs,  and other
direct mail  programs),  outbound  telephone  sales and magazine  and  newspaper
advertisements.   In  July  1994,  the  Direct  Marketing  Division   introduced
HealthSmart Vitamins, a line of value-priced nutritional supplements.  This line
presently  consists of  approximately  135 vitamin  and  nutritional  supplement
products which are marketed to nutritionally-aware  consumers nationwide through
direct mail.

The  Company's  success in direct  marketing has been  accomplished  through the
development of  sophisticated  and  proprietary  information  systems capable of
capturing,  storing, retrieving,  reporting and interpreting buying patterns and
customer  sales data to evaluate  product and  promotional  activities.  In this
regard,  the  Company  utilizes  several   fundamental  aspects  and  internally
developed  proprietary  methods of  database  marketing  in both its direct mail
customer acquisition programs and customer maintenance programs.

The Direct Marketing Division acquires customers through two primary mediums: 1)
direct  mail,  and  2)  print  advertising.   The  primary  method  of  customer
acquisition is direct mail, whereby the Company rents other companies'  customer
lists,  and in return  it is  necessary  to allow  those  companies  to rent the
Company's  customer  list.  As the  Company  expands  its  customer  acquisition
programs,  it believes  that the need to rent its customer  list on a reciprocal
basis will diminish.

The  Company  plans to  continue  to  study,  test and  evaluate  new  marketing
techniques, such as direct response television, radio, free standing inserts and
mini-catalogs. The Company also places advertising in magazines and professional
journals in an attempt to add new  customers to its mailing list.  However,  the
Company  has  not  determined  the  viability  or  proven  the  success  of  its
alternative customer acquisition programs.

Specialty Products Division

The Specialty Products Division markets the BioDynamax line of nutritional herbs
and formula  supplements to health food store  retailers and accounted for 3% of
the Company's net sales during 1996.

The  BioDynamax  line of  nutritional  supplements  is comprised of 90 products,
including Guaranteed Potency Herbs,  specialty nutrients and  condition-specific
formulas,  each scientifically  formulated to be the highest quality supplements
in the retail health food  industry.  The BioDynamax  line utilizes  direct mail
promotions supported by field sales representatives and telesales to acquire new
health food store customers.

BioDynamax'  Guaranteed  Potency Herbs include the most popular herbal  extracts
available in health food  stores.  Each  extract is  standardized  to a specific
level  of  active   constituents,   and  this  standardization  is  verified  by
independent third-party laboratory analysis.

Health Care Professional Division

The Health Care Professional  Division markets the PhysioLogics  product line of
nutritional  supplements and homeopathic  medicinals  exclusively to health care
professionals,  primarily  chiropractors,  for dispensing to patients in clinics
and offices under  professional  supervision.  This division accounted for 3% of
the Company's net sales during 1996.

The general  marketing  goals  adopted for the  Division  during 1996 focused on
providing specialized service and product selection to the existing PhysioLogics
doctor  account base and a  concentrated  effort toward the  acquisition  of new
accounts. The PhysioLogics product line includes 95 separate products.

The PhysioLogics  line has  traditionally  been marketed directly to health care
professionals,  primarily  chiropractors.  Direct mail  promotions  supported by
telesales will continue to be the primary  vehicle for acquiring  sales in 1997.
In addition,  further market expansion into alternative  medicine practices will
be initiated.

Cevan International

The  Company  organized  its  Cevan  International  Division  in 1993 to  pursue
international  sales of the Company's  product lines. The Division was developed
to leverage the Company's strength in product  development and marketing to gain
a presence in markets outside the United States.

Cevan International  experienced significant sales growth in 1996 with net sales
of $2.7  million  (5% of the  Company's  net  sales)  compared  to net  sales of
$899,000 in 1995.  Cevan  International  currently  markets its products through
distributors  in 20 countries  including  Barbados,  Hong Kong,  Italy,  Mexico,
Malaysia,  Portugal,  Russia,  Saudi Arabia and Taiwan.  Throughout  1996, Cevan
International  focused on managing its existing  accounts  while  acquiring  new
accounts and assisting current distributors with growing their businesses.

During 1997,  Cevan  International  will focus on  increasing  sales to existing
accounts by  developing  effective  marketing  materials  to assist with product
promotion.


Natrix International, LLC - majority-owned subsidiary

Natrix  International  was formed as a  Colorado  limited  liability  company in
February 1994 by two member  organizations;  Amrion, Inc. and Indena Spa. Natrix
was  established  to develop the North  American  mass  market for herbal  based
health  maintenance  products.  It is the  Company's  intention  to expand  this
business  opportunity by establishing  the leading brand of natural  products in
each targeted  category within the health and beauty sector.  The Natrix product
line  consists of six  proprietary  formulas  and is sold  through food and drug
chains and discount  mass  merchandisers.  The  specially  formulated  botanical
extracts are positioned as stand-alone brands in their respective categories and
target the same channels of distribution,  utilize the same management team, and
generally target the same customer profile.

The  product  line  is  supported  in the  retail  market  with a  comprehensive
advertising and promotional  marketing program.  The emphasis will be on gaining
full distribution in existing markets and evaluation of the marketing  elements.
Chain  specific  programs will be developed to support  expansion  through major
drug chains.  Natrix  International  accounted for 2% of the Company's net sales
during 1996.

In 1997, Natrix will focus on gaining new production distribution within the top
30 national and regional accounts, expand current production distribution within
existing accounts,  incorporate  account-specific promotional vehicles and trade
advertising  into the  overall  marketing  strategy  and  develop  an  effective
national broker network.


MANUFACTURING

The  Company  purchased  a 31,000  square foot  building  for its  manufacturing
operations  in  Longmont,  Colorado in March 1994.  The finished  area  provides
approximately   5,000,   12,000  and  14,000  square  feet  for  administrative,
manufacturing and distribution needs,  respectively.  The Company also leases an
additional  18,000 square feet of warehouse space from a  non-affiliated  party,
which lease expires in October 1998.  The  manufacturing  operation is currently
producing  approximately 65% of the Company's products,  representing nearly 95%
of total net sales.  The Company  purchases the balance of its products from its
existing third party manufacturers.

The  establishment  of its own  manufacturing  facility  enhanced the  Company's
current  operations  by  increasing  its profit  margins,  reducing its need for
private  contractors  and  increasing its ability to control the quality and the
supply of its products.  In addition,  inventory turns and product mix have been
improved.  The Company seeks to maintain a sufficient level of product inventory
to  meet  customer  demand  in the  event  of  manufacturing  delays  or  supply
shortages.

Through  education,  training  and  supervision,  the  Company  places  a strong
emphasis on quality  control,  and all raw materials  and finished  products are
subject  to  sample  testing  for  weight  and  purity.  By May  1997,  a  fully
operational analytical laboratory will be completed.  This laboratory will allow
in-house   analyses  of   microbial   content  and   concentrations   of  active
phytochemical  constituents to better guarantee the quality, safety and efficacy
of the Company's products.  As the Company continues to expand its product lines
and increase its vertical  integration,  quality assurance will continue to be a
major   emphasis.   The  Company  will  focus  on  expanding   its  process  and
manufacturing controls in 1997.


SOURCES AND AVAILABILITY OF RAW MATERIALS

The  Company  currently  imports  approximately  75% of its raw  materials  from
various  foreign  countries.  The  raw  materials  are  sent  to  the  Company's
manufacturing  facility or various independent third party manufacturers who are
contracted for blending,  mixing, tableting,  encapsulating,  liquid preparation
and bottling.  Due to the increase in demand for the Company's products from the
overall growth in the natural products industry,  Amrion has developed strategic
partnerships with key domestic and international raw material  suppliers.  These
written supply contracts between Amrion and principal raw material suppliers are
negotiated  during the fourth  quarter of each year for the  following  year and
provide reasonable assurance that the Company's supply of raw materials will not
be  interrupted.  However,  alternative  sources of the Company's  materials are
available  in the event a  supplier  is unable to deliver  as  specified  in the
written supply contract. The termination of supply by one or more of its vendors
could have a temporary adverse effect on the Company's sales.

The cost  incurred by the Company  for its raw  materials  could rise due to the
possible  continued  deterioration  of the value of the U.S.  Dollar against the
foreign  currencies of the Company's  suppliers.  Further cost  increases  could
result due to the  increase in demand  relative to the supply of these  products
from the overall growth in the natural products industry.


DESCRIPTION OF MATERIAL PRODUCTS

The  Company's  products  are  dietary  nutritional  supplements;  they  are not
pharmaceutical  or medicinal  products.  As such,  the Company makes no specific
claims of efficacy regarding treatment of any disease. The Company's nutritional
supplements  have been  found  effective  by the  Company's  customers,  and the
Company  markets  its  products  to  satisfy  the  nutritional  needs  of  those
customers.

The  Company  has not  conducted  its own  scientific  research  of its  product
components;  however,  it has made a  thorough  investigation  of  American  and
international  scientific  and medical  studies and has concluded  that there is
general  scientific  support for the  nutritional  benefits  associated with its
products.

Coenzyme Q10
Coenzyme  Q10 (CoQ10) was  discovered  in 1957 at the  University  of  Wisconsin
Enzyme Institute.  CoQ10 is a naturally occurring nutrient. Its crucial function
is to act as a "spark  plug"  within  the  body's  cells,  igniting  enzymes  to
manufacture  pure energy in the form of ATP  (adenosine  triphosphate).  Studies
support CoQ10's ability to help nutritionally support the cardiovascular system,
revitalize  the body's  natural  defense  system,  energize  the body's cells to
increase stamina and endurance and minimize the effects of "free radical" damage
through its  antioxidant  properties.  Proponents  further believe that, in some
circumstances, CoQ10 can help improve metabolism,  nutritionally support healthy
gums and help to nutritionally support healthy blood pressure. CoQ10 is imported
as a raw material powder in kilograms. CoQ10 is encapsulated and packaged at 
the Company's manufacturing facility.

Bilberry
Known scientifically as Vacciunium  Myrtillus,  the Bilberry bush belongs to the
family of Ericaceae.  It is a shrubby perennial plant that grows in the woods of
northern  Europe and the sandy  areas of northern  America and Canada.  Clinical
studies  indicate  that  Bilberry  can  help  nutritionally   support  the  tiny
capillaries  that feed eye  muscles  and nerves,  and by this  action,  can help
inhibit the damage caused by blood vessel  deterioration.  Bilberry is perceived
by its users to: 1) offer  nutritional  support  for  healthy  eye  function  in
fighting  blurred vision,  eye strain and  near-sightedness,  2) help extend the
range of vision  and  promote  the  sharpness  of  images,  and 3) aid the eye's
ability to focus and adapt to the dark.  Bilberry is imported as a raw  material
powder  in  kilograms  and  is  encapsulated   and  packaged  at  the  Company's
manufacturing facility.

Ginkgo Biloba
Ginkgo  Biloba  Extract  (GBE) comes from the extract of the leaves of the
Ginkgo  tree.  European  clinical studies support GBE's ability to: 1) enhance 
intracellular energy production,  2) increase cellular glucose uptake, 
3) improve  vascular  cellular  health,  4) demonstrate  free radical 
scavenging  activity (attack substances that can cause tissue damage and
inflammation),  and 5) help improve blood flow to the brain and
peripheral  extremities,  although some of these perceived  benefits have not
been clinically proven. GBE is imported  as a raw  material  powder  in  
kilograms  and is  encapsulated  and  packaged  at  the  Company's manufacturing
facility.

MARKET DEVELOPMENT ACTIVITIES

During 1996 and 1995 the Company  spent  $3,175,000  and  $2,204,000  on product
marketing and development expenses,  including costs associated with development
of its retail products  divisions and its subsidiary Natrix  International.  The
Company has  continued  to engage in an  expansive  market  research  program to
enlarge and  diversify  its product  lines and expand its  customer  base beyond
direct marketing.  These efforts led to an introduction of approximately 145 new
products  and  the  discontinuance  of 75  products  for a  net  addition  of 70
products, totaling 670 products at year-end, December 31, 1996.


COMPETITION

The business of developing,  manufacturing and marketing vitamins,  minerals and
other  nutritional  supplements  is highly  competitive.  It is not  possible to
accurately  assess  the  number  and  size of  competitors,  as the  nutritional
supplement  industry is  fragmented by many small  companies,  many of which are
privately-held  and do not  publish  sales and  marketing  figures.  The Company
believes that its competitive  pricing,  quality of  advertising,  comprehensive
lines of quality products and customer service  commitment  enable it to compete
favorably with other companies.

The DMD uses direct marketing offerings of nutritional  supplements in an effort
to be more price  competitive  than companies  selling similar  products through
retail  outlets.  The DMD believes that it competes  favorably with other direct
market  sellers  of  similar  products  on the  basis of price,  reputation  and
customer service, including speed of delivery and new product offerings.

Similarly, the Company believes its Retail Products and Health Care Professional
Divisions,  which  sell  to  retailers  and  alternative  doctors,  can  compete
favorably  with  other  companies  on the basis of price,  reputation,  customer
service and other  provided  services.  The sales  strategy  will  emphasize the
unique  design,  quality and efficacy of the product  lines while  maintaining a
highly trained sales force.  Primary positioning in all sales efforts will focus
on  standardization of high quality herbal products,  scientifically  researched
for efficacy and safety.

Mass  market  retailers   (drug,   grocery  and  discount  stores)  account  for
approximately 45% of dietary supplement sales and health and natural food stores
account for  approximately  38% of industry  sales.  Industry  analysts  predict
significant  growth in sales of vitamins  and  nutritional  supplements  through
these  distribution  channels.  Less than 4% of vitamin and  dietary  supplement
sales are derived from direct marketing methods. In an effort to increase market
share,  the Company has entered the mass market through its retail divisions and
subsidiary.


TRADEMARKS AND COPYRIGHTS

The  Company  owns  common  law   trademarks  and  has  obtained  114  trademark
registrations  on its product  names from the United States Patent and Trademark
Office.

Fifteen  additional  applications have been made and are pending before the U.S.
Patent  and  Trademark  Office.  The  Company  has  not  applied  for  trademark
protection  in any foreign  jurisdictions.  During the  remainder  of 1997,  the
Company  anticipates  an additional 40 federal  applications  will be filed with
respect to the addition of new products.  Federally  registered  trademarks have
perpetual  life,  provided  they are renewed by the holder on a timely basis and
properly  used as a  trademark,  subject to the rights of third  parties to seek
cancellation of the trademark.  Additionally, the Company will apply to register
approximately  75 copyrights on  advertising  literature,  product  catalogs and
trade secrets with the United States Copyright Office.


GOVERNMENT REGULATION

The  processing,  formulation,  labeling,  distribution  and  advertising of the
Company's  products  are  subject to  regulation  by several  federal  agencies,
including the United States Food and Drug  Administration  ("FDA"),  the Federal
Trade Commission ("FTC"),  the Consumer Product Safety  Commissions,  the United
States   Department  of  Agriculture,   the   Occupational   Safety  and  Health
Administration,  the United  States  Environmental  Protection  Agency,  and the
United States Postal Service ("USPS").  The Company's  products are also subject
to regulatory preview of various state and local agencies.

On October 25, 1994,  President Clinton signed the Dietary Supplement Health and
Education Act of 1994 ("DSHEA") into law. In passing DSHEA,  Congress acquiesced
to the  sentiment  and  will  of  the  American  public  and  acknowledged  "the
importance  of  nutrition  and the  benefit  of  dietary  supplements  to health
promotion and disease prevention."  Congress noted "a link between the ingestion
of  certain  nutrients  or dietary  supplements  and the  prevention  of chronic
diseases." Perhaps the most compelling  provision of DSHEA is the assertion that
"preventative  health  measures,   including  education,   good  nutrition,  and
appropriate  use of safe  nutritional  supplements  will limit the  incidence of
chronic diseases and reduce long-term health care expenditures."

Arguably,  the  provision of DSHEA with the greatest  impact on the  nutritional
supplement  industry is the legislative  establishment and legal definition of a
separate class of substances  known as "dietary  supplements."  This  definition
eliminates much of the legal limbo and regulatory uncertainty that existed under
the previously established  categories:  food, food additive and drug. A dietary
supplement will require evidence of a history of use or other evidence of safety
establishing  that it will reasonably be expected to be safe. Such evidence must
be provided by the  manufacturer  or  distributor to the  appropriate  authority
before it may be  marketed.  The  legislation  allows for the  dissemination  of
information about the benefits of  supplementation,  as long as that information
is not false or  misleading.  The  information  must present a balanced  view of
available  scientific  information  on a  dietary  supplement.  DSHEA  expressly
permits  manufacturers  of  dietary  supplements  to  make  "structure/function"
statements of nutritional  support in advertising and on labels. Such statements
may explain  how a nutrient  or dietary  supplement  affects  the  structure  or
function of the body.  The statements may also document the mechanism by which a
vitamin or other dietary ingredient maintains that structure or function.

However,  DSHEA fails to establish  complete  guidelines  for allowable  claims,
delegating  that function to the Commission on Dietary  Supplement  Labels.  The
appointment  of the  Commission  members  was  completed  in October  1995.  The
Commission  was  required  under  DSHEA,  but  failed  to submit a report to the
President by October 25, 1996.  Respected industry analysts  anticipate that the
Commission  will delay its report until October 1997.  The Company  believes its
products,  advertising and labeling are consistent with the spirit and intent of
the  DSHEA  and  responsive  to the  desires  and  needs of  customers  to place
substantiated  structure/function  and  nutritional  support  statements  on the
labels of products.

The Company  will  continue to refine its  policies  and systems to  effectively
communicate truthful information about dietary and nutritional supplements while
ensuring compliance with applicable federal, state and local regulations.


EMPLOYEES

The Company employs approximately 301 full-time persons, of whom 75 are employed
in executive, accounting,  information technology,  administrative and marketing
support functions;  138 in sales, customer relations and marketing positions; 24
in product  development,  purchasing and quality  control  functions;  and 64 in
shipping,  receiving and manufacturing positions. Also, the Company is currently
utilizing temporary contract employees from outside employment  agencies.  These
individuals are primarily engaged in the  manufacturing,  shipping and receiving
departments of the Company. None of the Company's employees are represented by a
collective  bargaining unit. The Company believes that its relationship with its
employees is good.


INDUSTRY SEGMENTS

The Company operates in a single Industry Segment.


ITEM 2:   Properties


PROPERTY, PLANT AND EQUIPMENT

In March 1994, the Company purchased a 31,000 square foot manufacturing facility
and a 64,500 square foot  adjacent lot for future  expansion for a total cost of
$1,020,000.  The Company  used a portion of the net proceeds  obtained  from its
November 2, 1993 stock  offering to purchase  the  facility  and land.  The cash
outlay  for  this  manufacturing  facility  did  not  significantly  affect  the
Company's  working capital position.  Approximately  12,000 square feet (39%) is
utilized  for  manufacturing  operations,  with the  remaining  balance used for
administrative,  distribution and warehousing  needs. In March 1997, the company
leased an additional 18,000 square feet of warehouse space from a non-affiliated
party, which lease expires in October, 1998.

The Company also owns a 20,000 square foot office  building  located in Boulder,
Colorado,   which  was   acquired   in  April   1993  to  house  the   Company's
administrative,  marketing and sales  personnel.  The Company leases  additional
4,400,  3,750 and 5,227  square feet of office space from  non-affiliated  third
parties,  with leases expiring in November 1997, February 1999 and October 1998,
respectively.  These facilities consist of  administrative,  marketing and sales
offices.

The Company believes its facilities will need to be expanded in 1998 to meet its
growth needs for  administration,  marketing and  manufacturing  functions.  The
Company  is  currently  investigating  a "build  to suit" and  subsequent  lease
arrangement  with a local  developer.  Sufficient  acreage  of land and at least
100,000  square feet of  facilities  space will need to be  acquired  and leased
accordingly. The Company maintains general commercial/casualty  insurance on its
properties, which it deems to be adequate for its present needs.

ITEM 3:   Legal Proceedings

From time to time the Company is a party to  litigation  arising in the ordinary
course of business. The Company has never been the subject of a suit for product
liability,  although the marketing and sale of nutritional  supplements  exposes
the Company to the risk of product  liability suits.  The Company  currently has
its own product liability  insurance of $10,000,000 and is an additional insured
on all of the policies of its manufacturers.

On June 24,  1994,  the Company  and its  President  resolved  an  investigation
commenced by the federal Food and Drug Administration by consenting to the entry
of an  injunction  against  them.  In its  consent,  neither the Company nor its
President  admitted  or denied  the facts  alleged  by the FDA.  In the  consent
decree, the court enjoined the Company and its President from misbranding any of
its dietary  supplement  products  and from  selling and  distributing  any drug
products  without  complying with  applicable  federal laws. The decree provides
that the Company may petition the federal court in Denver to dissolve the Decree
if the FDA has not  notified  the Company by June 24, 1999 that there has been a
significant  violation of the Decree.  To date, the Company has not received any
such  notice.  As part of the  same  matter,  the  Company  entered  into a Plea
Agreement  with the United  States of America in which the Company,  on June 22,
1994, agreed to plead guilty to one count of selling, on or about July 12, 1989,
misbranded bottles of Coenzyme Q10. Subsequently, the Company was fined $46,000.


ITEM 4:   Submission of Matters To a Vote of Security Holders

None.






                                                  Part II


ITEM 5:  Market for Registrant's Common Equity and Related Stockholder Matters

(a)      Principal Market or Markets.  The Company's common stock is traded
         in the  over-the-counter  market on the NASDAQ National Market System
         under the symbol "AMRI."

The following  table sets forth  quarter-by-quarter  data for 1995 and 1996. The
range of high and low representative bid quotations are for the Company's Common
Stock as quoted by NASDAQ National Market System.
<TABLE>

<S>                                      <C>                   <C>
                                                    Bid
                                         High                  Low
Calendar Year 1995
  First Quarter                          $9.63                $6.50
  Second Quarter                         10.38                 8.75
  Third Quarter                          12.50                 9.38
  Fourth Quarter                         12.38                 9.88

Calendar Year 1996
  First Quarter                         $15.38               S10.38
  Second Quarter                         18.50                14.50
  Third Quarter                          22.00                14.88
  Fourth Quarter                         26.25                19.00
</TABLE>

(b)  Approximate  Number of  Holders of Common  Stock.  The number of holders of
record of the  Company's  $0.0011 par value Common Stock at March 24, 1997,  was
approximately 795. This does not include an indeterminate number of shareholders
whose shares are held by brokers in street name.

(c) Dividends. Holders of Common Stock are entitled to receive such dividends as
may be declared by the Company's Board of Directors. No dividends have been paid
with respect to the Company's  Common Stock and no dividends are  anticipated to
be paid in the foreseeable future.

ITEM 6:   Selected Financial Data

The following table sets forth certain  selected  financial data with respect to
the Company,  and is  qualified  in its  entirety by reference to the  financial
statements and notes thereto.
<TABLE>
<S>                                <C>              <C>              <C>          <C>            <C>
Balance Sheet Data:                 12/31/96        12/31/95          12/31/94  12/31/93      12/31/92
------------------                  --------        --------          --------  --------      --------
Working capital                    $10,760,000      $5,271,000       $4,265,000 $ 6,694,000    $1,324,000
Total assets                        30,215,000      23,600,000       19,033,000  15,523,000     2,631,000
Current liabilities                  4,317,000       3,744,000        2,823,000   1,045,000       588,000
Stockholders' equity                25,576,000      19,719,000       16,127,000  14,425,000     1,995,000

Operations Data:                      1996            1995              1994       1993          1992
---------------                       ----            ----              ----       ----          ----
Net sales                          $54,255,000     $38,756,000      $25,244,000 $16,418,000   $10,606,000
Cost of products                    22,595,000      16,311,000       10,786,000   7,286,000     4,901,000
Net income                           4,520,000       3,111,000        2,137,000   1,426,000       795,000
Net income per common                                                                      
share                                      .86             .60              .42         .41           .26

</TABLE>

Item 7: Management's Discussion and Analysis of Financial Condition and Results
        of Operations

The following  review concerns the three years ended December 31, 1996, 1995 and
1994,  which should be read in  conjunction  with the financial  statements  and
notes  thereto  presented in this 10-K.  Statements  regarding  future  economic
performance  contained within Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations,  constitute  forward-looking  statements.
Certain  factors  regarding the Company's  business,  operations and competitive
environment  which  may cause  actual  results  to vary  materially  from  these
forward-looking statements accompany such statements.

General

Over the last three  years,  the  Company's  net sales and net income have grown
substantially.  Net sales have increased to $54,255,000 in 1996 from $38,756,000
in 1995  and  $25,244,000  in 1994.  Similarly,  net  income  has  increased  to
$4,520,000 in 1996 from  $3,111,000 in 1995 and  $2,137,000 in 1994.  Management
believes this growth is the result of being market driven,  adaptive to industry
trends and  responsive to its  customers'  needs,  as well as a  proficiency  to
maintain  disciplined  financial  controls.  The  Company  financed  this growth
primarily through cash flow from operations.  However,  a public offering of the
Company's Common Stock was completed in the fourth quarter of 1993 (net proceeds
of  $11,004,000)  that  significantly   strengthened  the  Company's   financial
structure. There is no seasonality in the Company's business.

See  Liquidity  and Capital  Resources  on page 12 for future  trends due to the
establishment of manufacturing capabilities and new marketing programs.

Results of Operations

Net sales for the twelve  months ended  December 31, 1996 were  $54,255,000,  an
increase of $15,499,000 (40%) from $38,756,000 for the same period one year ago.
Net sales for the twelve months ended December 31, 1995 increased by $13,512,000
(54%)  compared  to net sales of  $25,244,000  during  the twelve  months  ended
December  31,  1994.  This  represents  a growth  in net  sales of more than $29
million, or 115%, for the two years ended December 31, 1996.

Continued growth in net sales for the twelve months ended December 31, 1996, was
a direct result of the Company's  marketing  programs which increased the number
of new  customers by 34% and the Company's  diversification  of its product base
with  the  introduction  of  approximately  145 new  products,  which  generated
$5,943,000  in net  sales.  The  increase  in net sales  during  the year  ended
December 31, 1995, as compared to December 31, 1994 was due to a 65% increase in
new customers and the introduction of 50 new products which generated $2,200,000
in net sales.

The  Company  has been able to expand  sales  through  larger and more  frequent
customer acquisition  mailings,  advertisements in magazines and newspapers and,
it believes,  through the nationwide trend towards  preventive  health care as a
viable alternative to traditional  medical treatment.  A portion of the increase
in net sales is attributable to  improvements in customer  segmentation  mailing
programs  within the  existing  customer  base.  Such  mailings  have  generated
excellent sales response rates on smaller and more targeted mailings to existing
customers.

The Company intends to continue to implement new customer  acquisition  programs
through  mailings,   telemarketing,   print   advertisements,   direct  response
television,   field  sales  representatives  and  expanded  retail  distribution
programs. The Company plans to add 75-100 new products and approximately 115,000
new  customers  through these  scheduled  marketing  programs in 1997.  However,
difficulties or delays in the development,  production, testing and marketing of
products, including a failure to ship new products when anticipated,  failure of
customers to accept these products, and a failure of manufacturing  economies to
develop when planned may reduce the number of new products introduced.

Cost of products was $22,595,000, $16,311,000 and $10,786,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. This represents 42%, 42%
and 43% of net sales for the twelve months ended December 31, 1996, 1995 and 
1994, respectively.  During  the years  ended  December  31,  1996 and  1995, 
cost of products as a percentage of net sales  remained the same over the prior
year due to continued  reductions in product costs  (approximately  2% of net
sales) from in-house  manufacturing  and lower product prices  through volume
discounts and expanded direct sourcing of raw materials. However, this reduction
was offset by a 2% increase  as a  percentage  of net sales in the cost of
products  from the continued  use of  product  promotionals  as  part  of the
Company's  marketing strategies.  During the years ended December 31, 1995 and
1994, cost of products as a percentage of net sales  decreased by 1% due t
reductions in product costs from in-house manufacturing.

Cost of mailings was $10,274,000, $7,118,000, and $4,003,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. This represents 19%, 18% and 16%
of net sales for the twelve  months  ended  December  31,  1996,  1995 and 1994,
respectively.  The 3% increase as a percentage  of net sales in cost of mailings
from the year ended  December 31, 1996  compared to the year ended  December 31,
1994  was due to the  increased  use of  customer  acquisition  mailings.  These
mailings are more  expensive due to increased  costs  associated  with acquiring
each new customer and such mailings  typically  have lower  response  rates than
mailings to existing customers. However, the Company is expecting these costs to
remain  constant in 1997 and is estimating the cost of mailings to be 19% of net
sales for the twelve months ended December 31, 1997.  However,  cost of mailings
may be higher due to the  Company's  lack of  experience  regarding  alternative
customer acquisition programs. Until alternative customer acquisition strategies
prove successful,  the Company will continue to rely on its direct mail efforts,
which could  contribute  to an increase in cost of mailings  due to  uncertainty
regarding response and retention rates of such mailings.

In the year ended December 31, 1996, selling,  general and administrative (SG&A)
expenses  increased by $4,176,000 or 37% to $15,499,000  from the prior year. In
the year ended December 31, 1995,  SG&A expenses  increased by $3,289,000 or 41%
to $11,323,000 from the same period one year ago. This  significant  increase in
SG&A in 1996 was primarily due to the market  development costs of $1,289,000 by
Natrix International, the Company's majority owned subsidiary. Further increases
were due primarily to the Company's sales growth, which necessitated  additional
staffing requirements of approximately $1,389,000 in 1996 and $1,685,000 in 1995
and  substantial  increases in product  marketing  and  development  expenses of
approximately $971,000 in 1996 and $636,000 in 1995.

SG&A as a  percentage  of net  sales was 29%,  29% and 32% for the  years  ended
December  31, 1996,  1995 and 1994,  respectively.  SG&A as a percentage  of net
sales in 1994 was higher than in 1996 and 1995, due to the substantial  start-up
and market development costs incurred by the Company and its subsidiary,  Natrix
International, during 1994.

For the years ended  December 31,  1996,  1995 and 1994,  the Company  generated
interest income of $414,000, $365,000 and $359,000 and produced rental income on
its customer list of $144,000, $125,000 and $114,000 respectively.

Net income as a  percentage  of net sales was 8.3%,  8.0% and 8.5% for the three
years ended December 31, 1996, 1995 and 1994, respectively.  Net income for 1996
increased by $1,409,000 (45%) from the prior year. Net income for 1995 increased
by $974,000  (46%) to  $3,111,000  compared to net income of $2,137,000 in 1994.
Overall,  for the two years  ended  December  31, 1996 net income  increased  by
$2,383,000 (111%) due to the Company's increased sales, cost control efforts and
lower product costs during a period of significant  expenditures  on product and
market development in the Company's newer retail product lines.


Liquidity and Capital Resources

On November  2, 1993,  the  Company  completed  a public  offering of its Common
Stock. The net proceeds to the Company from the stock offering were $11,004,000.
During  1996 and  1995,  the  Company  spent  approximately  $1 and $2  million,
respectively,  to add  capacity to its  manufacturing  facility and continue the
development  of the Natrix  line to be sold in the retail mass  market.  Despite
these significant expenditures,  the Company generated enough cash from internal
cash flows in 1996 and 1995 to have a cash and marketable  securities balance of
$9,173,000 at December 31, 1996, with no long-term debt.

The Company has generated  cash from  operating  activities  of  $2,396,000  and
$3,736,000 during the years ended December 31, 1996 and 1995, respectively.  The
generation of cash from  operating  activities  of $2,396,000  during the twelve
months ended December 31, 1996 is primarily due to net income of $4,520,000,  an
increase of $1,409,000 from net income of $3,111,000 in 1995, and an increase of
$888,000 in accounts payable and accrued liabilities from December 31, 1995.

These cash sources were offset by accounts receivables  increasing by $1,368,000
in 1996 due to the Company's sales expansion into the retail mass markets on net
30 day payment terms and by product inventories increasing by $2,691,000 in 1996
compared to  increases  of $331,000  during 1995.  Additionally,  the  Company's
deferred  promotional  mailing  costs  increased by $272,000 in 1996 compared to
increases  of $217,000  for the same period in 1995.  The  increases in accounts
receivable,  inventory and deferred  promotional mailing costs were necessary to
support continued sales growth and expanding product lines.

Cash flows used by investing activities totaled $2,171,000 during the year ended
December 31, 1996 versus  $3,276,000  for the same period in 1995. The continued
use of cash in investing  activities resulted from the purchase of machinery and
equipment for the manufacturing facility and computer equipment and software for
a total  cost of  $1,576,000.  Additionally,  the  Company  used  $1,480,000  to
purchase  mail  lists and used  $103,000  in cash to  purchase  other  fixed and
intangible assets. Finally, the Company generated cash of $988,000 from the sale
of marketable  securities.  The Company believes the cash invested in marketable
securities  combined with its current working capital  position will be adequate
to meet future operating needs.  However,  as significant  expenses are incurred
for  marketing   distribution   development,   facility  expansion  and  product
development, the Company may be required to seek additional funding.

Cash flows provided by financing  activities  totaled $1,221,000 during the year
ended  December  31,  1996 as a result of stock  options  being  exercised  that
generated  $1,188,000 in cash. These stock options were granted to employees and
directors during 1995, 1994, 1993 and 1992.

The Company  accounts for marketable  securities in accordance with Statement of
Financial Accounting Standards No. 115. Accordingly, these securities are stated
at fair value  with  unrealized  gains and losses  included  as a  component  of
stockholders' equity until realized.  At December 31, 1996, the Company recorded
a marketable  securities  valuation allowance for an unrealized loss of $217,000
as a component  of  stockholders'  equity.  At December  31,  1996,  the Company
recorded  a  valuation  allowance  equal  to the  deferred  tax  effects  of the
marketable  securities net unrealized  loss as management of the Company has not
been  able to  determine  that it is more  likely  than not that the  unrealized
capital loss will be realized.

The Company has a $650,000  revolving line of credit agreement with a bank which
bears interest at 1% over the bank's prime lending rate and expires in June 1997
and no amounts were outstanding at December 31, 1996.

The Company is currently  investigating a  "build-to-suit"  and subsequent lease
arrangement  with a local  developer.  Sufficient  acreage  of land and at least
100,000  square feet of  facilities  space will need to be  acquired  and leased
accordingly.


ITEM 8:   Financial Statements and Supplementary Data

The report of independent  certified public accountants  appears on page F-1 and
the financial  statements,  notes to financial statements and schedule appear on
pages F-2 through F-19 hereof.




ITEM 9:   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

None.

                                                  PART III

The  information  required  by Part III of Form 10-K is  incorporated  herein by
reference to Registrant's  definitive  Proxy Statement to be filed in connection
with the 1997 Annual Meeting of Shareholders to be held on June 27, 1997.

                                                  PART IV


ITEM 14:   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)      The following consolidated financial statements are filed as part of
         this report:

Report of Independent Certified Public Accountants                          F-1

Consolidated Balance Sheets as of December 31, 1996 and 1995          F-2 - F-3

Consolidated Statements of Income for each of the Three Years Ended
December 31, 1996, 1995 and 1994                                            F-4

Consolidated Statements of Stockholders' Equity for each of the Three Years
Ended December 31, 1996, 1995 and 1994                                      F-5

Consolidated Statements of Cash Flows for each of the Three Years Ended
December 31, 1996, 1995 and 1994                                            F-6

Summary of Accounting Policies                                        F-7 - F-9

Notes to Consolidated Financial Statements                           F-10 -F-19

Schedule 11 - Valuation and Qualifying Accounts                            F-20

(b)      There were no Form 8-K's filed for the Registrant during the Quarter
         ended December 31, 1996.

(c)      The following Exhibits are filed as part of this report:

Exhibit
   No                          Document
   3.0            Amended and Restated Articles of Incorporation (1)

   3.1            Bylaws (2)

   23             Consent of BDO Seidman, LLP*

   27             Financial Data Schedule*




*Filed herewith

(1)      Incorporated by reference from the Company's Registration Statement
         No. 333-15939, on Form S-8 as filed with the Securities and Exchange
         Commission on December 4, 1996.

(2)     Incorporated  by reference from the Company's Post Effective Amendment
        to Registration Statement No.33 13345-D on Form S-18.


                                                 SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.

                                  AMRION, INC.
                Date:  April 8, 1997 /s/ Mark S. Crossen                 
                                     Mark S. Crossen, Chief Executive Officer
                                                      & President  


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

 Signature                          Title                         Date

/s/ Mark S. Crossen                 Chairman of the Board of      April 8, 1997
-------------------                 Directors and Principal Executive
Mark S. Crossen                     Officer

/s/ Jeffrey S. Williams             Director, Principal           April 8, 1997
-----------------------             Financial and Accounting
Jeffrey S. Williams                 Officer

/s/ Theodore W. Brin                Director                      April 8, 1997
---------------------
Theodore W. Brin                           
<PAGE>



Report of Independent Certified Public Accountants


The Board of Directors and Stockholders
Amrion, Inc. and Subsidiary
Boulder, Colorado

We have audited the accompanying consolidated balance sheets of Amrion, Inc. and
subsidiary  as of  December  31,  1996  and 1995  and the  related  consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended  December 31, 1996.  We have also audited the schedule
listed in the accompanying  index.  These financial  statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Amrion,  Inc. and
subsidiary  at December 31, 1996 and 1995,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 1996 in conformity with generally accepted accounting principles.

Also, in our opinion,  the schedule presents fairly,  in all material  respects,
the information set forth therein.



                                                              BDO SEIDMAN, LLP
Denver, Colorado
March 14, 1997

                                                                            F-1
<PAGE>



                                                                   Amrion, Inc.

                                                    Consolidated Balance Sheets
<TABLE>

                                                                                                             
<S>                                                                        <C>              <C>
December 31,                                                                       1996            1995


Assets

Current:
  Cash and cash equivalents                                                $  2,277,469      $   831,544
  Accounts receivable, less allowance of
    $28,000 and $48,000 for possible losses (Note 4)                          1,991,772          624,006
  Inventories (Notes 1 and 4)                                                 7,727,315        5,035,872
  Mail supplies                                                                 893,268        1,026,463
  Deferred promotional mailing costs, net                                     1,375,625        1,103,987
  Other                                                                         811,997          393,273


Total current assets                                                         15,077,446        9,015,145


Property and equipment, net of accumulated
   depreciation (Notes 2 and 4)                                               5,272,940        4,368,672


Other assets:
  Marketable securities available for sale (Note 3)                           6,895,214        7,934,514
  Mailing lists, net of accumulated amortization
    of $1,797,810 and $1,083,229                                              2,876,748        2,111,556
  Intangible assets, net of accumulated amortization
    of $114,291 and $72,945                                                      92,917          170,429


Total other assets                                                            9,864,879       10,216,499

                                                                            $30,215,265      $23,600,316
</TABLE>

                    See accompanying summary of accounting policies and notes to
consolidated financial statements.

                                                                            F-2
<PAGE>


                                                                   Amrion, Inc.
                                                    Consolidated Balance Sheets



<TABLE>
                                                                                                             
<S>                                                                        <C>               <C>           
December 31,                                                                      1996             1995


Liabilities and Stockholders' Equity

Current:
  Accounts payable                                                         $  3,093,739      $ 3,094,662
  Accrued liabilities:
    Payroll and payroll taxes                                                   365,928          275,195
    Income taxes                                                                      -          193,255
    Other                                                                       857,830          180,988
 

Total current liabilities                                                     4,317,497        3,744,100

Deferred income taxes (Note 5)                                                  280,000          104,000


Total liabilities                                                             4,597,497        3,848,100


Minority interest                                                                41,973           32,865

Commitments (Note 7)

Stockholders' equity (Note 6):
  Common stock, $.0011 par value - shares authorized,
    10,000,000; issued 5,326,814 and 5,026,813                                    5,860            5,529
  Additional paid-in capital                                                 13,176,747       11,788,856
  Retained earnings                                                          12,610,602        8,090,756
  Marketable securities valuation allowance (Note 3)                           (217,414)        (165,790)


Total stockholders' equity                                                   25,575,795       19,719,351


                                                                           $ 30,215,265      $23,600,316
</TABLE>

                    See accompanying summary of accounting policies and notes to
consolidated financial statements.

                                                                            F-3
<PAGE>



                                                                    Amrion, Inc.
                                               Consolidated Statements of Income



<TABLE>                             
<S>                                               <C>            <C>           <C>
Years Ended December 31,                                   1996           1995          1994


Net sales                                          $ 54,255,321   $ 38,756,288  $ 25,244,237


Cost of sales:
  Cost of products                                   22,595,323     16,311,467    10,786,215
  Cost of mailings                                   10,274,262      7,118,374     4,002,900


Cost of sales                                        32,869,585     23,429,841    14,789,115


Gross profit                                         21,385,736     15,326,447    10,455,122

Operating expenses - selling, general
   and administration                                15,499,257     11,322,857     8,033,599


Income from operations                                5,886,479      4,003,590     2,421,523


Other income (expense):
  Interest income                                       413,628        365,184       359,159
  Other, net                                            202,667        229,861       326,663


Total other income                                      616,295        595,045       685,822


Income before taxes on income and minority
  interest in loss of subsidiary                      6,502,774      4,598,635     3,107,345

Taxes on income (Note 5)                              2,007,000      1,552,000     1,060,000

Minority interest in loss of subsidiary                  24,072         64,637        89,319


Net income                                         $  4,519,846    $ 3,111,272  $  2,136,664


Net income per common and
 common share equivalent                           $        .86    $       .60  $        .42


Weighted average number of common
 shares and common share equivalents
  outstanding                                         5,268,140      5,146,572     5,031,721

</TABLE>
                    See accompanying summary of accounting policies and notes to
consolidated financial statements.
                             
                                                                            F-4

<PAGE>


                                                                    Amrion, Inc.
                                 Consolidated Statements of Stockholders' Equity


<TABLE>
Years Ended December 31, 1996, 1995 and 1994

                                                                                                           Marketable
                                    Common Stock               Additional                                  Securities    Total
                                 -----------------------        Paid-In       Retained      Treasury
                                                                                                           Valuation  Stockholders'
                                 Shares          Amount         Capital       Earnings      Stock          Allowance    Equity

<S>                            <C>           <C>            <C>            <C>             <C>            <C>         <C>         
Balance, January 1, 1994        4,930,915    $    5,424     $ 11,626,968   $  2,842,820     $ (50,000)    $        -  $ 14,425,212

  Marketable securities
    valuation allowance                 -             -                -              -             -       (484,388)     (484,388)

  Costs associated with prior
    year public offering                -             -         (35,050)              -             -              -       (35,050)

  Sale of stock through options
    exercised (Note 6)              50,181           55          84,963               -             -              -        85,018

  Net income                             -            -               -       2,136,664             -              -     2,136,664


Balance, December 31, 1994       4,981,096        5,479      11,676,881       4,979,484       (50,000)      (484,388)   16,127,456

  Marketable securities
    valuation allowance                  -            -               -               -             -        318,598       318,598

  Sale of stock through
    options exercised (Note 6)      45,717           50         161,975               -             -              -       162,025

  Retirement of Treasury
    Stock (Note 6)                       -            -         (50,000)              -        50,000              -             -

  Net income                             -            -               -       3,111,272             -              -     3,111,272


Balance, December 31, 1995       5,026,813        5,529       11,788,856      8,090,756             -       (165,790)   19,719,351

  Marketable securities
    valuation allowance                  -            -                -              -             -        (51,624)      (51,624)

  Sale of stock through
    options exercised (Note 6)     197,511          218        1,388,004              -             -              -     1,388,222

  Exercise of warrants in
    cashless exercise (Note 6)     102,490          113             (113)             -             -              -             -

  Net income                             -            -                -      4,519,846             -              -     4,519,846


Balance, December 31, 1996       5,326,814    $   5,860     $  13,176,747   $12,610,602     $       -     $ (217,414) $ 25,575,795

</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.

                                                                            F-5
<PAGE>

                                                                    Amrion, Inc.
                                           Consolidated Statements of Cash Flows





Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<S>                                                           <C>            <C>            <C>
Years Ended December 31,                                        1996          1995           1994


Cash flows from operating activities:
  Net income                                                  $ 4,519,846    $  3,111,272   $ 2,136,664
  Adjustments to reconcile net income
    to net cash provided by
    operating activities:
     Depreciation and amortization                             1,427,757          934,456       558,623
      Deferred tax expense (benefit)                             264,000           50,000       (19,000)
      Provision for losses on accounts
        receivable                                                     -          (12,000)       49,000
      Minority interest share in loss
        of subsidiary                                            (24,072)         (64,637)      (89,319)
      Changes in operating assets and
        liabilities:
         Accounts receivable                                  (1,367,766)          (72,705)    (292,902)
         Inventories                                          (2,691,443)         (331,101)  (2,739,086)
         Mailing supplies                                        133,195          (437,752)    (163,199)
         Deferred promotional mailing costs                     (271,638)         (217,078)    (670,811)
         Other assets                                           (482,392)         (146,100)    (224,809)
         Accounts payable                                        254,817           542,670    1,673,688
         Accrued liabilities                                     633,320           378,724      103,692


Cash provided by operating activities                          2,395,624         3,735,749      322,541


Cash flows from investing activities:
  Purchase of marketable securities available
    for sale                                                           -          (120,147)  (2,074,482)
  Proceeds from the sale of marketable securities
    available for sale                                           987,676                 -            -
  Purchase of property and equipment                          (1,576,087)       (1,481,112)  (2,338,115)
  Purchase of mail lists and intangible assets                (1,582,690)       (1,674,723)    (682,042)


Cash used in investing activities                             (2,171,101)       (3,275,982)  (5,094,639)


Cash flows from financing activities:
  Proceeds from issuance of common
    stock - net                                                1,188,222           162,025       49,968
  Minority interest contributions                                 33,180            88,821       98,000


Cash provided by financing
  activities                                                   1,221,402           250,846      147,968


Net increase (decrease) in cash
  and cash equivalents                                         1,445,925           710,613   (4,624,130)

Cash and cash equivalents, beginning of year                     831,544           120,931    4,745,061


Cash and cash equivalents, end of year                     $   2,277,469      $    831,544   $  120,931
</TABLE>


See accompanying summary of accounting policies and notes to consolidated
financial statements
                                                                            F-6


<PAGE>



                                                                    Amrion, Inc.
                                                 Summary of Accounting Policies

                                                                            
Organization and Business

The  consolidated  financial  statements  include the  accounts of Amrion,  Inc.
("Amrion")  and those of its 93% owned  subsidiary,  Natrix  International,  LLC
("Natrix"),   a  Colorado  Limited  Liability   Corporation   (collectively  the
"Company").  Amrion markets nutritional  supplements  principally throughout the
United States, with the balance to customers in the Far East, Europe and Mexico,
using a combination of direct mail, telemarketing and space advertising.  Natrix
is engaged in the marketing and distribution of proprietary  herbal based health
maintenance  products to food and drug chains and discount  mass  merchandisers.
The  Company's  primary  products are Coenzyme  Q10,  Bilberry and Ginkgo Biloba
which  comprised 39% of the Company's net sales for the year ended  December 31,
1996.

Principles of Consolidation

All significant  intercompany  accounts and transactions have been eliminated in
consolidation.

Concentrations of Credit Risk

The Company's  financial  instruments  exposed to  concentrations of credit risk
consist  primarily  of accounts  receivable,  cash  equivalents  and  marketable
securities.

Concentrations  of credit  risk with  respect to such  accounts  receivable  are
limited due to the large number of customers, generally short payment terms, and
their dispersion across geographic areas.

The Company's cash  equivalents  are high quality money market  accounts  placed
with major financial  institutions.  Marketable  securities consist primarily of
preferred stock and AAA rated tax-exempt  municipal bonds. The investment policy
limits the Company's exposure to concentrations of credit risk.

Inventories

Inventories are valued at the lower of cost or market.  Cost is determined using
the standard cost method, which approximates the weighted average cost method.

                                                                            F-7
<PAGE>

Property and Equipment

Property and equipment are stated at cost.  Depreciation  is computed  using the
straight-line  method based on the estimated  useful lives of related  assets
generally 3 to 31.5 years.  Maintenance and repair costs are expensed as 
incurred.

Marketable Securities

The Company  accounts for marketable  securities in accordance with Statement of
Financial  Accounting  Standards  No.  115  ("SFAS"),  "Accounting  for  Certain
Investments  in Debt and  Equity  Securities".  All  marketable  equity and debt
securities  have been  categorized as available for sale as the Company does not
have  the  positive  intent  to hold to  maturity  or does not  intend  to trade
actively.  These  securities are stated at fair value with unrealized  gains and
losses included as a component of stockholders' equity until realized.

Advertising

The Company  expenses the  production  costs of  advertising  the first time the
advertising  takes  place,  except  for  direct-response  advertising,  which is
capitalized and amortized over its expected period of future benefits.

Direct  response  advertising  consists  primarily  of direct mail  advertising,
including deferred  promotional  mailing costs, of the Company's  products.  The
capitalized  costs  of  mailed  promotional  materials  are  amortized  over the
expected promotional benefit period of three months.

Advertising  expense for the years ended  December 31,  1996,  1995 and 1994 was
$10,867,000, $7,702,000 and $4,607,000.

Income Taxes

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting for Income Taxes" which requires the use of the "liability  method".
Accordingly,  deferred tax  liabilities  and assets are determined  based on the
temporary  differences  between the financial  statement and tax bases of assets
and  liabilities,  using  enacted  tax rates in effect for the year in which the
differences are expected to reverse.

                                                                            F-8
<PAGE>

Intangible Assets

Purchased  mailing  lists,  trademarks  and  copyrights  are  amortized  by  the
straight-line  method over their estimated useful lives which range from five to
ten years.  On an ongoing  basis the  Company  reviews  the  recoverability  and
amortization  periods of intangible assets taking into  consideration any events
or  circumstances  which  could  impair the assets  carrying  value and  records
adjustments when necessary.

Income Per Common and Common Share Equivalent

Income per common and common share  equivalent is based on the weighted  average
number  of common  shares  outstanding  during  each of the  periods  presented.
Options  to  purchase  stock are  included  as  common  share  equivalents  when
dilutive.  In 1996, 1995 and 1994, options representing common share equivalents
of 88,781, 124,942 and 67,920 shares, respectively, are included in the weighted
average number of common shares and common share equivalents outstanding.

Cash Equivalents

The Company considers cash and all highly liquid  investments  purchased with an
original maturity of three months or less to be cash equivalents.

Use of Estimates

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

Revenue Recognition

Revenue is recognized upon shipment of goods to the customer.

Stock Option Plans

The Company applies APB Opinion 25,  "Accounting for Stock Issued to Employees",
and related  Interpretations in accounting for all stock option plans. Under APB
Opinion 25, no compensation cost has been recognized for stock options issued to
employees as the exercise price of the Company's stock options granted equals or
exceeds the market price of the underlying common stock on the date of grant.

SFAS No. 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma  information  regarding net income as if compensation cost for
the Company's stock option plans had been determined in accordance with the fair
value based method prescribed in SFAS No. 123.

Reclassifications

Certain  items  included  in  prior  years   financial   statements   have  been
reclassified to conform to current year presentation.
                                                                            F-9

<PAGE>



                                                                   Amrion, Inc.
                                     Notes to Consolidated Financial Statements


 <TABLE>                                                                       
1.    Inventories

Inventories consisted of the following:
<S>                                                         <C>                <C>
December 31,                                                1996               1995


Finished goods                                              $ 3,019,080        $ 2,071,756
Work in process                                                 434,133          1,111,137
Raw materials                                                 4,274,102          1,852,979


                                                            $ 7,727,315        $ 5,035,872
</TABLE>




2.    Property and Equipment

Property and equipment consisted of the following:
<TABLE>
<S>                                                         <C>                <C>
December 31,                                                1996               1995


Land                                                        $  326,000         $   326,000
Building and leasehold improvements                          2,081,769           1,967,495
Computer equipment and software                              1,981,424           1,218,686
Machinery and equipment                                      1,841,826           1,109,731
Furniture and equipment                                        390,770             293,263
Equipment not yet in service                                   432,904             563,431


                                                             7,054,693           5,478,606
Less accumulated depreciation                                1,781,753           1,109,934


Net property and equipment                                  $5,272,940         $ 4,368,672

</TABLE>
Depreciation  expense for the years ended  December 31, 1996,  1995 and 1994 was
approximately $742,000, $446,000 and $322,000.

                                                                           F-10 

<PAGE>


3.    Marketable Securities

Marketable securities consisted of the following:
<TABLE>
<S>                                             <C>           <C>           <C>             <C>                                 
                                                Gross         Gross
                                                Amortized     Unrealized    Unrealized        Fair
                                                   Cost         Gains        Losses          Value


December 31, 1996:

  Debt Securities -
    Municipal securities                        $ 5,922,292   $   5,336    $  (139,776)    $ 5,787,852
  Equity Securities -
       Preferred stock                            1,190,336       5,274        (88,248)      1,107,362


                                              $   7,112,628   $  10,610    $  (228,024)    $ 6,895,214
December 31, 1995:

  Debt Securities -
    Municipal securities                      $   7,052,722   $  27,605    $  (144,768)    $ 6,935,559
  Equity Securities -
    Preferred stock                               1,047,582       3,361        (51,988)        998,955


                                              $   8,100,304   $  30,966    $  (196,756)    $ 7,934,514

</TABLE>
Contractual  maturities  of debt  securities  available for sale at December 31,
1996 are as follows:
<TABLE>
<S>                                                     <C>            <C>
                                                         Amortized          Fair
                                                           Cost            Value
 

Maturities within one year                              $ 2,401,272    $2,339,359
Maturities after one year and within five years           3,521,020     3,448,493

                                                        $ 5,922,292    $5,787,852
</TABLE>

                                                                           F-11

<PAGE>

4. Financing Agreement

The Company has a $650,000 line-of-credit  agreement with a bank. The line bears
interest at 1% over the bank's prime  lending rate (9.25% at December 31, 1996).
The  line  expires  in  June  1997  and  is  secured  by  inventories,  accounts
receivable,   furniture,   fixtures,  and  equipment.   There  were  no  amounts
outstanding under the line of credit at December 31, 1996 and 1995.

5.    Taxes on Income

Taxes on income consisted of the following components:
<TABLE>
<S>                                    <C>           <C>           <C>
Year Ended December 31,                   1996           1995         1994


Current:
      Federal                          $ 1,502,000   $ 1,286,000   $  922,000
      State                                241,000       216,000      157,000

                                         1,743,000     1,502,000    1,079,000


Deferred (reduction):
      Federal                              243,000        46,000      (17,000)
      State                                 21,000         4,000       (2,000)


                                           264,000        50,000      (19,000)

                                        $2,007,000    $1,552,000   $1,060,000
</TABLE>

                                                                           F-12
<PAGE>


The components of the net deferred tax assets and liabilities are shown below.
<TABLE>
<S>                                             <C>             <C>
December 31,                                         1996            1995


Accumulated depreciation and amortization       $ (280,000)     $  (105,000)
Marketable securities net unrealized loss           81,000           62,000
Allowance for product returns                       41,000           39,000
Accrued payroll costs                               21,000           21,000
Other, net                                          40,000          (10,000)

                                                   (97,000)           7,000


Valuation allowance                                (81,000)         (62,000)



Net deferred income tax liabilities              $(178,000)       $ (55,000)
</TABLE>



Deferred tax assets of $102,000 and $49,000 as of December 31, 1996 and 1995 are
included in other current assets.

At December 31, 1996 and 1995, the Company recorded a valuation  allowance equal
to the deferred tax effects of the marketable  securities net unrealized loss as
management of the Company has not been able to determine  that it is more likely
than not that the net unrealized capital loss will be realized.

A reconciliation  of the effective tax rates with the federal  statutory rate is
shown below:
<TABLE>
<S>                                            <C>         <C>        <C>
Year Ended December 31,                          1996        1995         1994


Federal income tax computed at statutory rate  $2,219,000  $1,585,000 $1,057,000

State income taxes, net of federal benefit        159,000     135,000    104,000
Tax-exempt interest income                        (99,000)   (131,000)   (97,000)
Other                                            (272,000)    (37,000     (4,000)


Taxes on income                                $2,007,000  $1,552,000 $1,060,000
</TABLE>
                                                                           F-13
<PAGE>

6.    Stockholders' Equity

Stock Options

At December,  1996, the Company has two stock option plans,  which are described
below.  The Company  applies APB Opinion  25,  "Accounting  for Stock  Issued to
Employees",  and related  Interpretations  accounting  for the plans.  Under APB
Opinion 25, because the exercise  price of the Company's  employee stock options
equals  the  market  price of the  underlying  stock on the  date of  grant,  no
compensation cost has been recognized.

Non-Qualified Stock Option Plan

The  Company  has a  Non-Qualified  Stock  Option  Plan (the Plan),  expiring
December 30, 1999, reserving for issuance 511,000 shares of the Company's common
stock.  The Plan provides for grants to either  employees,  officers or employee
directors,  at the  discretion  of the  compensation  committee  of the Board of
Directors,  stock options to purchase common stock of the Company at a price not
less  than 80% of the fair  market  value,  as  defined,  on the date of  grant.
Options  granted  primarily  vest  ratably  on an annual  basis over a five year
period.  Any options granted under the Plan must be exercised  within five years
of the date they were granted.

Non-Employee Director Stock Option Plan

The Company has a Non-Employee Director Stock Option Plan (the "Director Plan"),
expiring January 13, 2000, reserving for issuance 70,000 shares of the Company's
common stock. The Director Plan provides that each person who was a non-employee
director of the Company on December 31, 1994 and who is a non-employee  director
of the Company on December 31st of each succeeding  year shall be granted,  each
year,  a five-year  option to purchase up to 3,000 shares of common stock of the
Company at an exercise  price based upon the fair market value,  as defined,  on
the date of grant.  Options issued under the Director Plan are fully exercisable
on the date of  grant.  Any  options  granted  under the  Director  Plan must be
exercised within five years of the date they were granted.

                                                                           F-14

<PAGE>


Other Stock Options

During 1996,  1995 and 1994,  the Company  granted  various  options to purchase
shares of its common stock to directors  and  employees  for services  rendered.
Under the terms of the options,  employees  and  directors  may  exercise  their
options at prices  ranging  from $3.33 to $13.50  (which  approximated  the fair
market  value at the date of  grant)  per share  over a four to six year  period
beginning on the grant date,  provided they remain directors or employees of the
Company.

FASB Statement 123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123"),
requires the Company to provide pro forma information regarding net loss and net
loss per share as if compensation costs for the Company's stock option plans and
other stock awards had been  determined in accordance  with the fair value based
method  prescribed in SFAS No. 123. The Company estimates the fair value of each
stock award at the grant date by using the  Black-Scholes  option-pricing  model
with the following  weighted-average  assumptions  used  respectively:  dividend
yield of 0 percent  for all  years;  expected  volatility  of 42 to 54  percent;
risk-free  interest  rates of 6.43 to 7.66  percent;  and expected  lives of one
year.

Under the  accounting  provisions for SFAS No. 123, the Company's net income per
share would have been decreased by the pro forma amounts indicated below:
<TABLE>
<S>                                            <C>                <C>
                                                      1996            1995
Net income
      As reported                              $  4,519,846       $   3,111,272
      Pro forma                                $  4,241,008       $   2,832,880

Net income per share
      As reported                              $        .86       $         .60
      Pro forma                                $        .81       $         .55
</TABLE>

During the initial  phase-in period of SFAS 123, the effect on pro forma results
are not  likely to be  representative  of the  effects  on pro forma  results in
future years since options vest over several years and  additional  awards could
be made each year.
                                                                           F-15
<PAGE>

A summary of the status of the  Company's  stock option plans and  outstanding
warrants as of December  31, 1996,  1995 and 1994 and changes  during the years
ending on those date is presented below:
<TABLE>

                                                              1996                               1995
                                               -------------------------------    ---------------------
                                                                      Weighted
                                                                      Average
                                                     Range of         Exercise         Range of          Exercise
                                                     Shares            Price           Shares             Prices
<S>                                          <C>                <C>                  <C>              <C>

Outstanding, beginning of year                        644,961   $        6.17         686,476          $ 1.47 - 6.20
  Granted                                              42,800           13.02          25,500            7.00 - 10.88
  Cancelled                                          (127,750)           6.20         (21,298)           1.47 - 6.20
  Exercised                                          (197,511)           6.00         (45,717)           1.47 - 6.20


Outstanding, end of year                              362,500   $        7.07         644,961          $ 1.47 - 10.88


Options exercisable, end of year                      144,200   $        8.18         246,961          $ 1.47 - 10.88


Weighted average fair value of options
  granted during the year                      $        7.59                    $        3.23

</TABLE>



The  following  table  summarizes  information  about stock options and warrants
outstanding at December 31, 1996:
<TABLE>


                                               Options Outstanding                         Options Exercisable
                                         ----------------------------                  ------------------------   
                                                     Weighted
                                                      Average         Weighted                          Weighted
                 Range of        Number             Remaining          Average           Number          Average
                 Exercise       Outstanding         Contractual       Exercise        Exercisable       Exercise
                  Prices        at 12/31/96            Life              Price        at 12/31/96         Price

           <S>                     <C>               <C>           <C>                    <C>         <C>
           $  3.33 - 6.20           302,700           7.9 years     $       6.16           93,200     $     5.90
              6.80 - 9.00            21,000                 3.2             8.01           21,000           8.01
              9.13 - 13.50           29,800                 5.5            11.03           21,000          11.67
                    22.40             9,000                 5.0            22.40            9,000          22.40
</TABLE>
 
                                                                           F-16


<PAGE>


Warrants

In  connection  with the 1993  public  offering,  the  Company had issued to the
underwriter a five-year warrant to purchase 190,000 shares of common stock at an
exercise  price of $8.10.  During August 1996,  the  underwriter  in a cash-less
exercise  exchanged  outstanding  warrants to purchase  87,510  shares of common
stock to effect the exercise of warrants for 102,490 shares of common stock.

Treasury Stock

In 1995 the Company  retired its  treasury  stock as a result of a change in the
Colorado Business Corporation Act.

7.  Commitments

Self-Insurance

The Company is partially  self insured for employee  medical  liabilities  which
covers risk up to $12,500 per individual covered under the plan. The Company has
purchased excess medical  liability  coverage for individual claims in excess of
$12,500 and aggregate claims in excess of approximately $250,000 annually with a
national medical insurance carrier.  Premiums and claim expenses associated with
the medical self insurance  program are included in the accompanying  statements
of income.

Supplier Agreements

The Company has agreements to purchase certain raw materials from 
vendors through December 31, 1997.  The maximum commitment by the Company is
$1,725,000.

The Company currently imports  approximately 75% of its product ingredients from
various foreign countries. While the Company does not have supply contracts with
all  of  its  vendors,  alternative  sources  of  the  Company's  materials  are
available.  The termination of supply by one or more of its vendors could have a
temporary adverse effect on the Company's sales.

                                                                           F-17
<PAGE>


Lease Agreements

The Company leases office and warehouse space under various operating leases. As
of  December  31,  1996,  remaining  minimum  annual  rental  commitments  under
noncancelable operating leases are as follows:
<TABLE>
<S>                                                                <C>

Year ended December 31,                                               Total


1997                                                                $ 153,000
1998                                                                  125,000
1999                                                                    5,000

                                                                    $ 283,000
</TABLE>


Rent expense for the years ended  December 31, 1996 and 1995 was  approximately
$39,000 and $3,000.  There was no rent expense for the year ended December 31,
1994.

8.  Subsequent Events

In March 1997,  the Company began a stock  buy-back  program  authorized by
the Board of Directors.  Through March 19, 1997,  the Company  repurchased 
111,800 shares at a cost of approximately $2,184,000.

                                                                           F-18



<PAGE>


9.    Selected Quarterly Financial Data (Unaudited)
<TABLE>
<S>                                    <C>           <C>              <C>          <C>        
                                             1st            2nd            3rd           4th


Year ended December 31, 1996:

Net sales                              $ 13,381,956  $ 11,871,331     $ 14,063,408 $ 14,938,626
Gross profit                              4,559,119     5,119,968        5,574,394    6,132,255
Income from operations                    1,174,701     1,387,307        1,679,842    1,644,629
Net income                                  923,090     1,174,613        1,154,682    1,267,461
Net income per common
 and common equivalent share                    .18           .22              .22          .24


Year ended December 31, 1995:

Net sales                                10,131,780     8,810,143       10,738,458    9,075,907
Gross profit                              3,741,886     3,282,684        4,043,192    4,258,685
Income from operations                    1,101,483       507,333        1,153,365    1,241,409
Net income                                  793,129       492,982          865,077      960,084
Net income per common and
 common equivalent share                        .16           .10              .17          .17
</TABLE>

10.   Supplemental Disclosures of Cash Flow Information
<TABLE>
<S>                                                  <C>         <C>          <C>
Year Ended December 31,                               1996           1995        1994


Cash paid during the period for:

  Income taxes                                      $1,594,000   $ 1,207,000   $1,032,000


  Interest                                          $    2,000   $     6,000   $   19,000

</TABLE>
                                                                           F-19

<PAGE>





                                                                   Amrion, Inc

                                Schedule II - Valuation and Qualifying Accounts



                                                        

Accounts Receivable - Allowance for possible losses
<TABLE>



<S>                                        <C>                <C>                <C>              <C>       
                                                                  Additions
                                                Balance           Charged to                            Balance
                                              at Beginning        Costs and                              at End
                                               of Period           Expenses          Deductions         of Period


Year Ended December 31, 1996                $       48,000    $            -     $       20,000    $       28,000
Year Ended December 31, 1995                        60,000            59,754             71,754            48,000
Year Ended December 31, 1994                        39,000            34,968             13,968            60,000
</TABLE>
                                                                           F-20
<PAGE>