The statements contained in this Report that are not historical are forward-looking statements, including statements regarding the Company's expectations, intentions, beliefs or strategies regarding the future. Forward-looking statements include the Company's statements regarding liquidity, anticipated cash needs and availability and anticipated expense levels. All forward-looking statements included in this Report are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statement. It is important to note that the Company's actual results could differ materially from those in such forward-looking statements. Additionally, the following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Report. The discussion is based upon such financial statements which have been prepared in accordance with U.S. Generally Accepted Accounting Principles and the Standards of the Public Company Accounting Oversight Board (United States).

Management's Discussion and Analysis of Financial Condition and Results of Operations

We derive our revenues from developing, manufacturing and distributing a wide variety of nutraceuticals and cosmeticeuticals, sports nutrition products, pharmaceutical and generic drugs, and prescription and non-prescription products.

Cost of goods sold is comprised of direct manufacturing and manufacturing and distribution material product costs, manufacturing and pharmaceutical machinery depreciation, direct personnel compensation and other statutory benefits and indirect costs relating to labor to support product manufacture, distribution and the warehousing of production and other manufacturing overhead.

Research and development expenses that benefit us and that benefit our customers are charged against either cost of goods sold or included within selling, general and administrative expenses as incurred dependent upon whether the R&D relates to direct product materials expended, direct laboratory and manufacturing production costs or whether it relates to indirect or more facility and administrative type costs representing indirect salaries.

Selling, general and administrative expenses include management and general office salaries, taxes and benefits, advertising and promotional expenses, depreciation and amortization, stock compensation, insurance expenses, rents, legal and accounting costs, sales and marketing and other indirect operating costs.

Interest expense, net, consists of interest expense associated with credit lines, convertible debt, borrowings to finance capital equipment expenditures and other working capital needs and is partially offset by interest income earned on our funds held at banks.

Effective May 15, 2007, we discontinued our pharmacy benefit management operations, due to our mutual termination of our PBM contract with Amerigroup, formerly known as CarePlus Health. Therefore, after the contract termination date, we have not received or recorded PBM segment revenues or incurred or recorded related PBM contract expenses. We did not incur contract termination or any related exit costs associated with this contract termination.

For the year ended March 31, 2008, the following amounts, which are included in our consolidated statement of operations for the fiscal year ended March 31, 2008, as discontinued operations, were attributable to our PBM segment:

• PBM segment revenue of approximately $2.9 million;

• PBM segment gross profit of approximately $21,000;

• PBM segment selling, general and administrative expenses of approximately $21,000; and

• PBM segment exit income of approximately $8,000.

Effective October 16, 2007, we acquired 100% of the common stock of BOSS, a Florida corporation. BOSS develops, markets and distributes a wide variety of sports nutrition products, performance drinks, non-prescription dietary supplements, health and beauty care products, health food and nutritional products, soft goods and other related products. The transaction was accounted for as a purchase. The results of operations of BOSS and its subsidiaries have been included in our results of operations in our statement of operations, since the effective date of acquisition, October 16, 2007, as part of our distribution segment.

The unaudited pro forma effect of the acquisition of BOSS on our revenues, net income (loss) and net income (loss) per share, had the acquisition occurred on April 1, 2007 is as follows:

                                                    Year Ended
                                                  March 31, 2008
                                                   (Unaudited)
               Revenues                          $     89,770,058
               Net income (loss)                 $     (8,167,157 )
               Basic income (loss) per share     $          (0.59 )
               Diluted income (loss) per share   $          (0.59 )

For the period from October 16, 2007 through March 31, 2008, the following amounts, which are included in our consolidated statement of operations for the fiscal year ended March 31, 2008, were attributable to BOSS:

• Distribution revenue of approximately $24.5 million;

• Distribution gross profit of approximately $4.2 million;

• Selling, general and administrative expenses of approximately $4.0 million;

• Depreciation and amortization expense of approximately $79,000; and

• Interest income (expense), net of approximately $(220,000).

• Other income (expense), net of approximately $5,000.

The impact of the results of operations of BOSS, from October 16, 2007 through March 31, 2008, on our consolidated net loss for the fiscal year ended March 31, 2008, was a net loss of approximately $143,000.

Effective March 31, 2009, the distribution segment which includes BOSS and Breakthrough Engineered Nutrition, was discontinued. For the year ended March 31, 2009 the following amounts were included in our consolidated statement of operations attributable to our Distribution segment:

• Distribution segment revenue of approximately $41.1 million;

• Distribution segment gross profit of approximately $7.5 million;

• Distribution selling, general and administrative expenses of approximately $10.8 million.

• Distribution segment revenue of approximately $30.3 million;

• Distribution segment gross profit of approximately $7 million; and

• Distribution segment selling, general and administrative expenses of approximately $7.7 million.

Results of Operations

The table and the comparative analysis below for results of operations of the fiscal year ended March 31, 2009, as compared to the fiscal year ended March 31, 2008, excludes (1) the results of operations of BOSS and Breakthrough Engineered Nutrition discontinued March 31, 2009 and (2) the results of operations of our discontinued operations, the PBM segment, effective May 15, 2007.

The following table sets forth selected consolidated statements of operations data as a percentage of revenues for the periods indicated.

                                                                       Year Ended
                                                                       March 31,
                                                                   2009         2008
Revenues                                                           100.0 %      100.0 %
Cost of goods sold (excluding depreciation and amortization)        84.7 %       84.1 %

Gross profit                                                        15.3 %       15.9 %
Depreciation and amortization                                       10.9 %        7.2 %
Stock compensation expense                                           6.7 %        3.9 %
Selling, general and administrative expenses                        41.1 %       42.1 %
Goodwill and intangible asset impairments                           21.1 %         -  %
Other income (expense), net                                         10.8 %        0.2 %
Income (loss) from continuing operations before minority
interest, income taxes and preferred dividends                     (53.9 )%     (38.8 )%
Minority interest                                                    3.2 %        3.7 %
Income tax (expense) / benefit                                       4.3 %          5 %
Preferred dividends                                                  2.6 %        1.7 %

Net income (loss) from continuing operations                       (45.9 )%     (30.2 )%

Fiscal Year Ended March 31, 2009, Compared to Fiscal Year Ended March 31, 2008

Our analysis of the fiscal year ended March 31, 2009, as compared to the fiscal year ended March 31, 2008, excludes the operations of Breakthrough Engineered Nutrition, the operations of BOSS, acquired October 16, 2007 and whose entire Distribution segment was discontinued March 31, 2009 and PBM segment, discontinued on May 15, 2007.

Revenues

Our total revenues decreased approximately $2.4 million or 9.8% to approximately $22 million for the fiscal year ended March 31, 2009, from approximately $24.4 million for the fiscal year ended March 31, 2008.

Manufacturing revenues decreased approximately $4.2 million, or 17.2%, to approximately $20.2 million for the fiscal year ended March 31, 2009, as compared to approximately $24.4 million for the corresponding period. The number and size of three of our largest contract manufacturing customers has declined in the fiscal 2009 period as compared to the fiscal 2008 period. This is due to an overall economic decline due to timing of our customers' advertising and period-sensitive promotions which directly affects our business segment's manufacturing orders related to our customers' branded product demands which is outside of our control. Manufacturing capacities and capabilities continue to be increased as we continue to enhance our existing core manufacturing equipment and standard operating procedures. As we expect customer advertising and period-sensitive promotions to continue to increase, as they have since the December 2008 quarter, we expect to have increases in the number and size of orders.

Gross Profit

Our total gross profit from continuing operations decreased approximately $566,000 or 14%, to approximately $3.4 million for the fiscal year ended March 31, 2009, as compared to $3.9 million for the fiscal year ended March 31, 2008. Total gross margins decreased to 15.3% for the fiscal year ended March 31, 2009 from 15.9% for the fiscal year ended March 31, 2008.

Manufacturing gross profit decreased approximately $1.2 million, or 20%, to approximately $4.9 million for the fiscal year ended March 31, 2009, as compared to approximately $6.2 million in the corresponding period in 2008. For the fiscal year ended March 31, 2009 manufacturing gross margin decreased to 22.5%, from 25.1% in the corresponding period in 2008. Sales, gross profits and margins have decreased this 2009 fiscal year compared to the previous 2008 period, due to higher costs due to increases in freight charges due to increased fuel costs, increases in resin and plastic-based packaging component costs as well as increased labor costs. Current increases in this type of labor-based direct overhead costs are in line with our planned improvements surrounding enhanced standard operating and manufacturing procedures in all of our manufacturing plants. We expect that these improvements will continue to increase our visibility in the marketplaces that we compete in for new and expanded business for the upcoming fiscal year.

Pharmaceutical gross profit deficits decreased approximately $685,000 to approximately a gross profit deficit of $1.6 million for the fiscal year ended March 31, 2009 as compared to $2.3 million in gross profit deficit for this business segment for the fiscal year ended March 31, 2008. This was based primarily on the Cephalasporin and Beta-Lactam facilities that have no revenue streams but have costs associated with overall research and product development, and production and laboratory direct labor costs. The Largo, Florida generic drug plant has continued and increased its manufacturing of Vetprofen ™ , its branded generic Carprofen which has assisted in offsetting some of the costs associated with other research and product development, production and laboratory direct costs related to the pharmaceutical segment. The Largo, Florida Cephalasporin and generic drug plants incurred approximately $3.3 million of costs with the Baltimore, Maryland Beta-Lactam facility having incurred approximately $483,000 of costs with revenue offsets of approximately $1.72 million. We are awaiting FDA facility approval of both the Baltimore, Maryland Beta-Lactam and the Largo, Florida Cephalosporin drug facility plants and we estimate and anticipate that we will begin to derive revenues during the second or third quarter of the fiscal year ended March 31, 2010.

Selling, General and Administrative Expenses

Selling, general and administrative ("SGA") expenses consist of advertising and promotional expenses; stock compensation costs, insurance costs, research and development costs associated with the generic drug segment, personnel costs related to general management functions, finance, accounting and information systems, payroll expenses and sales commissions; professional fees related to legal, audit and tax matters; and non-production related depreciation and amortization expenses. Continuing operation selling, general and administrative expenses, inclusive of stock compensation and depreciation and amortization expenses, increased approximately $4.4 million, or 33.8%, to approximately $17.5 million for the fiscal year ended March 31, 2009, as compared to approximately $13.1 million in the corresponding 2008 period. An increase of approximately $173,000 in increased accounting costs associated with Sarbanes-Oxley compliance and tax compliance, goodwill and intangible impairment charges for the distribution segment of $13.3 million, $2.2 million increased in bad debts and uncollectible accounts; approximately $120,000 increase in utilities in Baltimore, Maryland and Largo, Florida; and increase in legal fees of approximately $100,000. As a percentage of sales, selling, general and administrative expenses increased to 41.1% for the fiscal year ended March 31, 2009 from 42.1% in the corresponding period in 2008.

Operating Income (Loss)

Operating loss was approximately $11.8 million, or 32.6% of revenues for the year ended March 31, 2009 as compared approximately $9.1 million, or 33% of revenues for the year ended March 31, 2008.

Other Income (Expense), Net

Other income (expense), net was $2.3 million for the year ended March 31, 2009, compared to approximately $(373,000) for the year ended March 31, 2008. Interest income (expense), net, was approximately $(1.7) million for the year ended March 31, 2009, compared to approximately $(394,000) for the year ended March 31, 2008. The increase in interest expense was primarily attributable to interest expense associated with $15 million convertible debt in addition to our short-term obligations issued during 2009, and was partially offset by interest earned. A $3.86 million gain was recognized based on the 60% sale of Acellis on January 9, 2009.

For the year ended March 31, 2009, we had recorded approximately $2.1 million of income tax benefit as compared to a benefit of approximately $2.5 million for the year ended March 31, 2008. The tax benefit was based on our tax calculation of temporary and permanent differences using the effective tax rates applied to our net loss for the year, changes in information gained related to underlying assumptions about our future operations, as well as the utilization of available operating loss carryforwards. In accordance with SFAS No. 109, "Accounting for Income Taxes," we have evaluated whether it is more likely than not that the deferred tax asset will be realized. Based on available evidence, we have concluded that it is more likely than not that the increase in the asset will be realized by carrying back approximately $19 million of the operating loss and by carrying forward the remainder of the loss to future periods through the expiration dates of the operating loss carryforwards beginning 2021 and ending 2028.

Inflation And Seasonality

We believe that there was no material effect on our operations or our financial condition as a result of inflation as of and for the years ended March 31, 2009 and 2008. We also believe that our business is not seasonal, however significant promotional activities can have a direct impact on our sales volume in any given quarter.

Economic And Industry Conditions

We believe that there is a decline in general economic and industry conditions and believe that such decline has had a negative effect, that we are unable to quantify, on our operations and our financial condition as of and for the years ended March 31, 2008 and 2007. Should there be a continued material deterioration of general economic or industry conditions, our results of operations could further be impacted in any given quarter.

Financial Condition, Liquidity and Capital Resources

We ended the 2009 fiscal year with approximately $90,000 of cash and cash equivalents, a decrease from $524,000 at the end of fiscal 2008. Working capital, the excess of current assets over current liabilities, inclusive of current portion of long-term obligations, decreased to approximately $14.4 million at the end of fiscal 2009, compared with $1.3 million at the end of fiscal 2008. As of March 31, 2009, our liquidity is affected by our certificate of deposit of approximately $5.3 million, which is included in current assets and which is pledged as collateral for our short-term obligations to First Community Bank of America.

We have financed our operations and growth primarily through cash flows from operations, borrowing under our revolving credit facility, operating leases, trade payables, the issuance of short-term obligations, and the receipt the of $15 million of gross private placement proceeds based on our April 2008 and 2007 totalling $15 million 6% convertible preferred stock private placement together with $2.5 million issuance of common stock and a March 2004 $5 million convertible 6% preferred stock.

During February 2007, we closed on a $2 million capital lease line facility and a $5 million line of credit with a bank both at LIBOR+1.5%. As of March 31, 2009, $548,173 was outstanding on the capital lease line facility. The $5 million line of credit was paid in full on October 24, 2007.

On April 5, 2007, we closed on $12.5 million financing with Whitebox Pharmaceutical Growth Fund, Ltd. ("Whitebox"), comprised of 8%, 6 year Convertible Debt together with $2.5 million of our $0.01 par value common stock together with 400,000 warrants as related to the $2.5 million in common stock. The $10 million of debt is convertible into our common stock at $4.36 with the 400,000 warrants convertible into our common stock at $5.23.

The Company and Whitebox entered into two registration rights agreements dated April 5, 2007, one related to 573,395 shares of common stock of the Company owned by Whitebox and the other related to the shares of common stock of the Company issuable upon conversion, or as payment of interest and principal with regard to, the $10,000,000 8% Secured Convertible Promissory Note dated April 5, 2007. In compliance with the foregoing, the Company filed a registration statement (file no. 333-142369) with the Securities and Exchange Commission (the "SEC") and caused it to become effective on December 7, 2007, pursuant to which the Company registered 1,931,395 shares, consisting of the 573,395 shares owned by Whitebox, up to 1,214,597 shares issuable upon the conversion of the note, up to 143,403 shares issuable upon the exercise of warrants owned by Rodman & Renshaw.

On April 24, 2008, the Company and Whitebox entered into an Amended and Restated Note Purchase Agreement (the "Restated Note Purchase Agreement"), Amended and Restated Convertible Promissory Note (the "Restated Note"), and Amended and Restated Registration Rights Agreement (the "Restated Registration Rights Agreement" and collectively with the "Restated Note Purchase Agreement and "Restated Note," the "Restated Agreements"), all of which collectively serve to amend and restate the Original Note, Original Note Purchase Agreement and the Original Registration Rights Agreements. The material amendments contained in the Restated Agreements include the following:

• The Additional Notes contemplated by the Original Note Purchase Agreement have been eliminated and replaced by adding the principal amount of the Additional Notes ($5,000,000) to the Restated Note, thus increasing the total principal amount of the Restated Note to $15,000,000.

• The terms and conditions necessary to satisfy the issuance of the Subsequent Notes contemplated by the Original Note Purchase Agreement have been modified so that Whitebox is now required to make such loan upon the Company's acquisition of the real estate related to its Beta-Lactam facility (which it currently leases) in Baltimore, Maryland and the satisfaction or waiver of certain other closing conditions related thereto.

• All interest that had accrued on the Original Note from its original issue date (April 5, 2007) through April 24, 2008, in the amount of $865,058, has been converted by Whitebox into a total of 389,666 shares of the Company's Common Stock in full satisfaction of such accrued interest.

• The interest rate on the Restated Note from and after April 24, 2008 has been increased to 12%, but all of such interest may now be paid, at the option of the Company in shares of common stock of the Company valued at 95% of the volume weighted average market price of the shares during the 5 trading days immediately preceding the payment of interest, provided that certain "Equity Conditions" (as defined in the Restated Note) have been satisfied. If the Company does not meet the Equity Conditions, and if funds are legally available for the payment of interest, then the Company must pay such interest in cash.

• All requirements that the Company meet certain minimum EBITDA targets have been deleted and replaced by a requirement that the Company's Current Assets (defined as the sum of (w) 100% of the Company's cash, plus
(x) 100% of the Company's net accounts receivables plus (y) 50% of the Company's net inventory plus (z) 30% of the Company's net property, plant and equipment) exceeds the Company's Total Debt (defined as indebtedness of the Company and its subsidiaries (x) to Whitebox, (y) under the $4,000,000 revolving promissory note with Wachovia Bank, National Association and (z) under the $5,000,000 promissory note with First Community Bank of America.) If the Company fails to satisfy the foregoing Current Assets Test as of the required date for filing any Form 10-K or Form 10-Q, as applicable (the "Current Assets Test Measurement Date"), Whitebox may require the Company to redeem up to $2,000,000 of the principal amount of the Restated Note as of such Current Assets Test Measurement Date. In addition, if the Company's Total Debt exceeds the Company's Current Assets by more than $2,000,000 as of the Current Assets Test Measurement Date, such shortfall will constitute an Event of Default under the Restated Note, in which case the entire outstanding principal amount (including any Accreted Principal or Make-Whole Amounts (as defined by the Restated Note)) under the Restated Note will be due and payable on the 30th day after the occurrence of such default if the Company is unable to cure such default within such thirty (30) day period.

• The Company agreed to register all of the shares issuable pursuant to the Restated Note (whether as a result of a conversion or otherwise) to the extent permitted by the SEC in accordance with its rules and regulations.

• The Company paid to Whitebox a $1,400,000 financing fee in cash.

The offering and sale of the Restated Note (as well as the Original Note and the shares issuable to Whitebox pursuant thereto) were deemed to be exempt under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offering and sale were made only to one accredited investor, and transfer of the securities has been restricted in accordance with the requirements of the Securities Act of 1933. The Company received written representations from Whitebox regarding, among other things, its accredited-investor status and investment intent. On June 29, 2009, the Company and Whitebox amended the convertible debt; see Note 20.

On October 12, 2007, BOSS issued a revolving Promissory Note ("Note") to Wachovia Bank, National Association ("Wachovia"), in the amount of $4 million or such sum as may be advanced and outstanding from time to time. Interest shall accrue on the unpaid principal balance and varies based on the LIBOR Market Index Rate plus 1.75%, for any day. The note is due and payable in consecutive monthly payments of accrued interest only, commencing on November 20, 2007, and continuing on the same day of each month thereafter until fully paid. In any event, all principal and accrued interest shall be due and payable on August 31, 2008. The principal balance on the note was $2,606,000 on March 31, 2008.

On April 25, 2008, we entered into a Modification Number 001 To Loan Agreement and a Modification Number 001 To Promissory Note with Wachovia, whereby the amount of the October 12, 2007 revolving Note to Wachovia was reduced from $4 million to $2.5 million, or such sum as may be advanced and outstanding from time to time. In addition, the rate of interest was modified whereby interest shall accrue on the unpaid principal balance and varies based on the LIBOR Market Index Rate plus 3.15%, for any day. Certain terms of the loan were modified including the financial covenant in regards to the liquidity ratio.

On October 1, 2007, we issued a $3.5 million promissory note to First Community . . .