Health & Nutrition Systems International Inc was informed by its exclusive manufacturer that effective December 31, 2002 they will be unable to supply the company with ephedra-based products because of the supplier's inability to obtain product liability insurance for such products.

Although Health and Nutrition Systems has been able to maintain its own insurance for such products, the Company has made a strategic decision to discontinue any ephedra-based products. CEO Chris Tisi said:

"We feel strongly that the ingredient is both safe and extremely effective when used properly; however, we do recognize the overwhelming negative press surrounding ephedra and the brands containing it. The local and federal regulations as well as the inability to maintain adequate liability insurance makes marketing products containing ephedra difficult if not impossible. We are considering reformulating the current brands containing ephedra with alternative ingredients. The company has been attempting to limit its percentage of sales of this ingredient over the past two years. Non ephedra-based brands are now $4,755,670 or 80% of the company's sales. "

The Company's sales from ephedra-based products was $1,486,147 or 25% of sales for 2001 and $936,000 or 19% for 2002.