Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes thereto of the Company included elsewhere herein.

Forward-Looking Statements and Risk Factors

This quarterly report and the documents incorporated by reference contain forward-looking statements which are intended to fall within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Act of 1934. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", and "estimates" and similar expressions identify forward-looking statements. Statements that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual performance and results could differ materially because of factors such as those set forth under "Risk Factors" in Form 10-K/A filed with the Securities and Exchange Commission on October 3, 2008 and this Form 10-Q.

We undertake no obligation to update or review any guidance or other forward-looking information, whether as a result of new information, future developments or otherwise.

General

Revenues from the Ingredient Products Group are primarily derived from the sale of proprietary ingredients together with the grant of patent licenses to use the ingredients, to manufacturers of vitamin and mineral supplements. The fees for the licenses are bundled on an undifferentiated basis with the price that the Company charges for its ingredients, since licenses are not sold separately.

Revenues from the Branded Products Group are principally derived from the sale of branded products to food, drug and mass retailers. Revenue, net of an estimate for returns, is recognized when the products are received by the retailers or, if the retailer has the right to return all unsold product, revenue is recognized when the end user takes possession of the product. Upon shipment by the Company, amounts billed to customers with the right to return all unsold product are included as accounts receivable, inventory is relieved, the sale is deferred and the gross profit is reflected as a current liability until the product is sold to the end user.

Cost of revenues includes both direct and indirect manufacturing costs. Research and development expenses include internal expenditures as well as expenses associated with third party providers. Advertising and promotion expenses include fees and expenses directly related to the selling of the Company's products including the cost of advertising, promotional expenses and third party fees. General and administrative expenses include salaries and overhead, third party fees and expenses, and costs associated with the operations of the Company. The Company capitalizes patent costs and intangible assets with finite lives, and amortizes them over periods not to exceed seventeen years.

Results of Operations

Revenues

Net sales of the Ingredient Products Group were $1.5 million and $1.8 million for the three month periods ended December 31, 2008 and 2007, respectively. Sales of chromium picolinate in the quarter were less than the comparable quarter a year ago.

Net sales of the Ingredient Products Group were $3.3 million and $3.7 million for the six months ended December 31, 2008 and 2007, respectively. Sales of chromium picolinate were lower than the comparable period a year ago.

Net product sales of the Branded Products Group for the three months ended December 31, 2008 were $11.3 million compared to $10.9 million in the comparable period a year ago. Net product sales through the direct response channel were $5.9 million compared to $7.2 million in the comparable period a year ago. Limiting advertising while the Company continues to better match its costs with revenues is the primary cause of the decline. Offsetting this decline was an improvement in net product sales made through the retail channel. Net product sales through the retail channel were $5.4 million compared to $3.7 million in the comparable period a year ago. Increased distribution, customer awareness and continued acceptance of our products was the primary reason for this improvement.

Net product sales of the Branded Products Group were $22.1 million for the six months ended December 31, 2008 compared to $20.9 million in the comparable period a year ago. Net product sales through the direct response channel were $12.1 million compared to $16.0 million in the same period a year ago. The Company's continued fine tuning of its costs versus revenues resulted in lower product sales. Offsetting the decline were net product sales through the retail channel of $10.0 million compared to $4.9 million in the comparable period a year ago. Increased distribution to traditional retailers, as well as continued acceptance of our brands, were the primary reasons for the increase.

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Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Other revenues were $77 thousand and $0.3 million in the three month periods ended December 31, 2008 and 2007, respectively.

Other revenues were $0.1 and $0.6 million in the six month periods ended December 31, 2008 and 2007, respectively.

Cost of revenues

Cost of revenues for the Ingredients Products Group were $0.4 million for both of the three month periods ended December 31, 2008 and 2007, respectively.

Cost of revenues for the Ingredients Products Group for each of the six month periods ended December 31, 2008 and 2007, was $0.9 million.

Cost of revenues for the Branded Products Group were $5.1 million for the three month period ended December 31, 2008 compared to $3.6 million in the same period a year ago. The increase is due to expenditures for product purchases associated with the increased sales through the retail channel ($1.8 million). The increase was partially offset by lower cost of branded products sold through the direct response channel ($0.3 million).

Cost of revenues for the Branded Products Group were $5.7 million for the six months ended December 31, 2008 compared to $2.2 million for the six months ended December 31, 2007. The cost of products sold through the retail channel was $5.7 million, an increase of $3.5 million when compared to the six months ended December 31, 2007, due primarily to expanded products, increases in net product sales and product mix. The cost of products sold through the direct response channel was $3.7 million compared to $4.9 million in the year ago period.

Advertising and Promotion Expenses ("Advertising")

Advertising expenses for the Branded Products Group for the three months ended December 31, 2008 were $4.8 million compared to $9.7 million in the comparable period a year ago. Advertising spending to support our retail products decreased $3.9 million to $1.0 million when compared to the same period a year ago. Advertising to support direct response was $3.8 million compared to $4.6 million in the comparable period a year ago. The decline in spend was due to our efforts to refocus our direct response spend versus revenues.

Advertising expense for the Branded Products Group for the six months ended December 31, 2008 was $9.9 million compared to $19.2 million in the same period a year ago. Advertising expenditures to support our consumer health brands declined $7.1 million to $1.7 million when compared to the same period a year ago. In addition, advertising through the direct response channel declined $2.2 million to $8.2 million when compared to the same period a year ago. Continued refocusing and target-specific advertising were the primary reasons for the improvement.

Fluctuations in the Ingredients Product Group for advertising in the three and six month periods were not material.

Unallocated Corporate Expenses

Unallocated corporate expenses for the three month period ended December 31, 2008 were $2.4 million compared to $2.9 million in the comparable period a year ago. The decrease is primarily due to a reduction in overall operating expenses.

Unallocated corporate expenses for the six months ended December 31, 2008 were $4.6 million compared to $4.7 million in the same period a year ago. The decrease is primarily due to lower operating expenses ($0.4 million) and lower amortization of intangibles ($0.5 million) partially offset by increased costs associated with our financings ($0.8 million).

Net Income (Loss)

Net income for the three month period ended December 31, 2008 was $0.1 million compared to a net loss of $3.8 million in the comparable period a year ago. Lower advertising and promotion expenditures account for the majority of the improvement.

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Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net income for the six months ended December 31, 2008 was $0.3 million compared to a net loss of $7.9 million in the comparable period a year ago. Improvement in revenues combined with reduced advertising and promotion expenditures were the primary reasons.

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments at December 31, 2008 were $3.2 million compared to $4.8 million at June 30, 2008.

During the six month period ended December 31, 2008, net cash of $2.2 million was used in operating activities, compared to $12.0 million in the comparable period a year ago. Improvement in operating results from a net loss of $7.9 million to a net income of $0.3 million, combined with an improvement in operating assets and liabilities account for the majority of the increase.

During the six month period ended December 31, 2008, net cash provided by investing activities was $4.6 million compared to $0.3 million of cash used in investing activities in the comparable period a year ago. During the quarter, the Company redeemed $1.0 million of its investment in long-term securities and sold its auction rate securities at face value of $4.0 million.

During the six month period ended December 31, 2008, net cash used in financing activities was $4.0 million. During the quarter, the Company used $3.0 million of the proceeds from the sale of the ARS to repay its debt with Chase Bank.

Our liquidity is affected by many factors, some based on the normal ongoing operations of the business and others related to the uncertainties of the industries in which we compete. Our liquidity may also be adversely affected by the current economic conditions, including consumer spending rates, the ability to collect on our accounts receivable and our ability to obtain working capital due to the tightening of global credit markets. Although our cash requirements will fluctuate based on the timing and extent of these factors, we believe that, going forward, cash generated from operations, together with our current cash balance and borrowing capability should be sufficient to satisfy our cash requirements for the next twelve months. Long-term liquidity is dependent upon achieving consistent profitability or raising additional financing.

If necessary, the Company will seek any necessary additional funding through arrangements with corporate collaborators, through public or private sales of its securities, including equity securities, or through bank financing. There is no assurance that additional funds will be available on terms favorable to the Company and its stockholders, or at all.