NTY Nbty Inc.

NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Dollars in thousands)

1. Basis of Presentation

        NBTY, Inc. and its subsidiaries are referred to herein collectively as "we", "our", "us", "NBTY", or the "Company". We have prepared these unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles applicable to interim financial information and on a basis that is consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended September 30, 2007 ("2007 Form 10-K"). In our opinion, these financial statements reflect all adjustments (including normal recurring items) necessary for a fair presentation of our results for the interim periods presented. These unaudited condensed consolidated financial statements do not include all information or notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in our 2007 Form 10-K. Results for interim periods are not necessarily indicative of results which may be achieved for a full year.

Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These judgments can be subjective and complex, and consequently actual results could differ from those estimates and assumptions. Our most significant estimates include: sales returns and other allowances; inventory valuation and obsolescence; allowance for doubtful accounts; valuation and recoverability of long-lived assets; income taxes; and accruals for the outcome of current litigation.

Concentration of Credit Risk and Significant Customers

        Financial instruments which potentially subject us to credit risk consist primarily of cash and cash equivalents (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts), investments and trade accounts receivable. We mitigate our risk by investing in or through major financial institutions. At December 31, 2007, our investments consisted of auction rate securities and variable rate demand notes, which were classified as available-for-sale investments and reported at fair value (which approximates cost). At December 31, 2007, included in our auction rate securities were fully insured, Aaa-rated New York State Agency securities of approximately $136,150. The underlying auction rate securities, without insurance, are rated between A and Aaa. Although we have not experienced a failed auction associated with any of our auction rate securities, in the case of a failed auction, the auction rate security becomes an illiquid long-term bond (until the failed auction is resolved by the issuer) and the subsequent reset rates on such security are set above the market specified rates in the prospectus/offering circular. Any impairment in the value of our investments due to failed auctions, or securities which have defaulted, could adversely impact our earnings and impact our future earnings.

        We perform on-going credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by a review of their credit information. Collections and payments from customers are continuously monitored.

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

1. Basis of Presentation (Continued)

        We maintain an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. While such bad debt expenses have historically been within expectations and allowances established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. If the financial condition of one or more of our customers were to deteriorate, we may require additional allowances.

        The following individual customers accounted for the following percentages of net sales for the three months ended December 31, 2007 and 2006, respectively:

        The loss of any one of these customers would have a material adverse effect on the Wholesale/US Nutrition segment if we were unable to replace such customer(s). In addition, a third customer, representing less than 10% of the Wholesale/US Nutrition segment's net sales is primarily a supplier to Customer A. Therefore, the loss of Customer A would likely result in the loss of most of the net sales of this third customer.

        The following individual customers accounted for 10% or more of the Wholesale/US Nutrition segment's gross accounts receivable as of December 31, 2007 and September 30, 2007, respectively:

Assets Held for Sale

        In fiscal 2007, we decided to sell the land and building located in Augusta, Georgia, since we no longer intend to develop a manufacturing facility at this site. We anticipate that this sale will be

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

1. Basis of Presentation (Continued)

completed during 2008. Accordingly, the carrying value of the land and building of $11,388 (which approximates its fair value less costs to sell) is classified as held for sale within prepaid expenses and other current assets in the accompanying balance sheet at December 31, 2007. During the three months ended December 31, 2007, the carrying value of the building increased due to capitalized improvements of $1,088.

Recent Accounting Developments

        In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007), ("SFAS No. 141R"), "Business Combinations", which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, however, includes changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning October 1, 2009 and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141R will be dependent on the extent and nature of any future acquisitions.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to measure certain financial instruments and other eligible items at fair value when the items are not otherwise currently required to be measured at fair value. Under SFAS 159, the decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. Companies electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. Companies electing the fair value option are required to distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS 159 will be effective as of the beginning of the first fiscal year that begins after November 15, 2007. We will adopt SFAS 159

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

1. Basis of Presentation (Continued)

on October 1, 2008. The impact of the adoption of SFAS 159 will be dependent on the extent to which we choose to elect to measure eligible items at fair value.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and enhances disclosures about fair value measurements. SFAS 157 applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurements. SFAS 157 is effective for us beginning October 1, 2008. In December 2007, the FASB released a proposed FASB Staff Position (FSP FAS 157-b—Effective Date of FASB Statement No. 157) which, if adopted as proposed, would delay the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We are currently evaluating the impact of adopting this standard on our consolidated financial statements and related disclosures.

2. Investments

        Our investments at December 31, 2007 consisted primarily of variable rate demand notes and auction rate securities, which were classified as available-for-sale marketable securities and reported at fair value (which approximates cost) in the accompanying consolidated balance sheets. Auction rate securities are long-term variable rate bonds tied to short-term interest rates that are reset through a "dutch auction" process which occurs every 7 to 35 days. These investments were recorded at fair value; any unrealized gains/losses were included in other comprehensive income, unless a loss was determined to be other than temporary. We classified such securities as current assets in the accompanying balance sheet because we have the ability and intent to sell these securities as necessary to meet our then current liquidity requirements. At December 31, 2007, there were no unrealized holding gains or losses.

        Investment income included in "Miscellaneous, net" in the statements of income was $2,674 and $880 for the three months ended December 31, 2007 and 2006, respectively.

3. Inventories

        The components of inventories were as follows:

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

4. Goodwill and Intangible Assets

Goodwill

        Goodwill represents the excess purchase price over the fair value of identifiable net assets of companies acquired. Goodwill and indefinite lived assets acquired in a business combination are not amortized, but instead tested for impairment at least annually. We test goodwill and indefinite lived intangibles for impairment annually as of September 30, the last day of our fourth fiscal quarter, unless an event occurs that would indicate the value may be impaired at an interim date.

        The changes in the carrying amount of goodwill by segment for the three month period ended December 31, 2007, were as follows:

        In connection with an acquisition completed in October 2007, customer lists, covenants not to compete and trademarks increased $4,168, $500 and $140, respectively. These amounts are preliminary and may be adjusted once a final allocation of the purchase price is completed.

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

4. Goodwill and Intangible Assets (Continued)

        Aggregate amortization expense of other intangible assets included in the consolidated statements of income under the caption "selling, general and administrative" expenses for the three months ended December 31, 2007 and 2006 was approximately $3,381 and $3,308, respectively.

        Assuming no changes in our definite lived intangible assets, estimated amortization expense for each of the five succeeding fiscal years is as follows:

5. Impairments

        In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), carrying values are reviewed for impairment whenever events or changes in circumstances indicate that the assets' carrying values may not be recoverable. In order to determine if a write down is necessary, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount. If required, an impairment charge is recorded based on an estimate of future discounted cash flows. We consider a history of cash flow losses on a store by store basis to be a primary indicator of potential impairment.

        During the three months ended December 31, 2007 and 2006, we evaluated, for an impairment review, certain retail stores that had reached a certain level of maturity and were sustaining operating losses. During the three months ended December 31, 2007 and 2006, we recognized impairment charges of $350 and $353, respectively. These impairment charges related primarily to leasehold improvements and furniture and fixtures for North American Retail operations and were included in "selling, general and administrative" expense in the statements of income.

6. Accrued Expenses and Other Current Liabilities

        The components of accrued expenses and other current liabilities were as follows:

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

7. Long-Term Debt

        In December 2007, we amended the terms of our multicurrency term facility to extend the maturity to December 2010.

8. Litigation Summary

Prohormone products

California Action

        On July 25, 2002, a putative consumer class-action lawsuit was filed in California state court against MET-Rx USA, Inc. ("MET-Rx"), an indirect subsidiary of Rexall Sundown, Inc. ("Rexall"), claiming that the advertising and marketing of certain prohormone supplements were false and misleading, or alternatively, that the prohormone products contained ingredients that were controlled substances under California law. Plaintiffs seek equitable and monetary relief. On June 18, 2004, this case was coordinated with several other class-action cases brought against other companies relating to the sale of products containing androstenediol, one of the prohormones contained in MET-Rx products. The coordinated proceedings have been assigned to a coordination judge for further pretrial proceedings. Plaintiff has moved for class certification and that motion is currently pending.

        MET-Rx recently filed a motion to dismiss the lawsuit based upon plaintiffs' failure to prosecute the case diligently. No trial date has been set. We have defended vigorously against the claims asserted and based upon the information available at this time, no determination can be made as to its final outcome, nor can its materiality be accurately ascertained.

New Jersey Action

        In March 2004, a putative class-action lawsuit was filed in New Jersey against MET-Rx, claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations are virtually identical to allegations made in a putative nationwide class-action previously filed in California, we moved to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time.

Nutrition Bars

        Rexall and certain of its subsidiaries are defendants in a class-action lawsuit brought in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statutes, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief. We have defended this action vigorously. In December 2006, while Rexall's and the other defendants' renewed motion for judgment on the pleadings was pending, the Court again stayed the case for all purposes, pending rulings on relevant cases before the California Supreme Court. Because it is unclear when the Supreme Court will issue rulings in these cases, Rexall cannot estimate how long the case will be stayed. Based upon the information available at this time, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

8. Litigation Summary (Continued)

        In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability and intellectual property claims) arise in the ordinary course of our business. We believe that such other inquiries, claims, suits and complaints would not have a material adverse effect on our consolidated financial condition or results of operations, if adversely determined against us.

9. Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors.

        The effective income tax rate for the three months ended December 31, 2007 and December 31, 2006 was 33.8%. The effective income tax rates are generally lower than the U.S. federal statutory rate, primarily due to the structure of our foreign subsidiaries which could also continue to impact future fiscal quarters. Effective October 1, 2007, we adopted FIN 48, "Accounting for Uncertainty in Income Taxes." In accordance with FIN 48, we recognized a cumulative-effect adjustment of $3,025, increasing our liability for unrecognized tax benefits, interest and penalties and reducing the October 1, 2007 balance of retained earnings.

        At October 1, 2007, we had $10,446 in unrecognized tax benefits, the recognition of which would have an effect of $6,288 on income tax expense and the effective tax rate. We do not believe that the amount will significantly change in the next 12 months.

        We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. This methodology is consistent with previous periods. At October 1, 2007, we had accrued $1,313 and $1,019 for the potential payment of interest and penalties, respectively. As of October 1, 2007, we are subject to U.S. Federal Income Tax examinations for the tax years 2004 through 2007, and to non-US examinations for the tax years of 2002 - 2007, In addition, we are generally subject to state and local examinations for fiscal years 2004 - 2007, except in California where we are undergoing examinations for fiscal years 1999 - 2001.

        There were no significant changes to any of these amounts during the three months ended December 31, 2007.

10. Stockholder's Equity and Net Income Per Share

        During October 2007, the Company repurchased 296 thousand shares of NBTY common stock at an average price of $35.87, totaling approximately $10,603, including commissions. All shares were repurchased in open-market transactions as part of our publicly announced share repurchase program. As of December 31, 2007, there were approximately 10,270,000 shares available to be repurchased under this program.

        Basic net income per share is based on the weighted average number of common shares outstanding during the three month period ended December 31, 2007 and 2006. Diluted net income per share includes the dilutive effect of outstanding stock options, which resulted in a dilutive effect of approximately 1,883,000 and 2,118,000 shares for the three months ended December 31, 2007 and 2006, respectively.

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

11. Segment Information

        We are organized by sales segments on a worldwide basis and evaluate performance based on a number of factors; however, the primary measures of performance are the net sales, gross profit and income or loss from operations (prior to corporate allocations) of each segment, as these are the key performance indicators that we review. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, IT, and various other corporate level activity related expenses. Such unallocated expenses remain within corporate. Corporate also includes our manufacturing assets and, accordingly, certain items associated with these activities remain unallocated in the corporate segment. The European Retail operations are evaluated excluding the impact of any intercompany transfer pricing.

        All of our products fall into one or more of these four segments:

•

Wholesale/US Nutrition—This segment is comprised of several divisions, each targeting specific market groups which include wholesalers, distributors, supermarket and drug store chains, pharmacies, health food stores, bulk and international customers.



•

North American Retail—This segment generates revenue through its 454 owned and operated Vitamin World stores selling proprietary brand and third-party products and through its Canadian operation of 80 owned and operated Le Naturiste stores.



•

European Retail—This segment generates revenue through its 514 Holland & Barrett stores, 31 GNC stores in the UK, 70 DeTuinen stores in the Netherlands and 19 Nature's Way stores in Ireland. Such revenue consists of sales of proprietary brand and third-party products as well as franchise fees.



•

Direct Response/E-Commerce—This segment generates revenue through the sale of proprietary brand and third-party products primarily through mail order catalog and the Internet. Catalogs are strategically mailed to customers who order by mail, internet, or by phone.

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NBTY, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Dollars in thousands)

11. Segment Information (Continued)

        The following table represents key financial information of our business segments:

        Net sales by location of customer were as follows:

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        Approximately 36% and 35% of our net sales during the three months ended December 31, 2007 and 2006, respectively, were denominated in currencies other than U.S. dollars, principally British Pounds, Euros and Canadian dollars. A significant weakening of such currencies versus the U.S. dollar could have a material adverse effect on our results of operations.

        Foreign subsidiaries accounted for the following percentages of total assets and total liabilities:

12. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

        The 7 ¹ / 8 % Senior Subordinated Notes due 2015 are guaranteed by all of our domestic subsidiaries, which are wholly-owned by the Company. These guarantees are full, unconditional and joint and several. The following condensed consolidating financial information presents:

1.

Condensed consolidating financial statements as of December 31, 2007 and September 30, 2007 and for the three months ended December 31, 2007 and 2006 of (a) NBTY, Inc., the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and



2.

Elimination entries necessary to consolidate NBTY, Inc., the parent, with guarantor and non-guarantor subsidiaries.

        The condensed consolidating financial statements are presented using the equity method of accounting for investments in wholly-owned subsidiaries. Under this method, the investments in subsidiaries are recorded at cost and adjusted for our share of the subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. This financial information should be read in conjunction with the consolidated financial statements and other notes related thereto.

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