SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) Securities

Exchange Act of 1934 for Quarterly Period Ended ~~March~~June 3130, 2011

-OR-

o ¨ Transition Report Pursuant to Section 13 or 15(d) of the

Securities And Exchange Act of 1934 for the transaction period from

_________ to________

Commission File Number: 333-162469

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

(Exact name of registrant as specified in its charter)

Nevada	27-0374885
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization	Identification Number)

450 East Las Olas Blvd.

Suite 830

Ft. Lauderdale, Florida 33301

(Address of principal executive offices) (zip code)

(954) 462-8895

(Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) 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 o¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o ¨ No o ¨

~~Large~~Indicate by check mark whether the registrant is a large accelerated filer, oan ~~Non-~~accelerated filer, oa ~~Accelerated~~non-accelerate filer, oor ~~Smaller~~a small reporting company xas defined by Rule 12b-2 of the Exchange Act):

Large accelerated filer ¨	Non-accelerated filer ¨
Accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o ¨ No x

The number of outstanding shares of the registrant's common stock, as of ~~May~~August 215, 2011: ~~Common Stock – 838~~ 42,100,000

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

FORM 10-Q

~~For~~June ~~the quarterly period ended March 31~~30, 2011

INDEX

		Page
PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010	4
	Condensed Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010	3
	Condensed Consolidated Statements of Operations (unaudited)	5
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 (unaudited)	5
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	7
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	23
Item 4.	Controls and Procedures	24
Item 4.	Controls and Procedures	23
PART II - OTHER INFORMATION		24
PART II - OTHER INFORMATION		23
Item 1.	Legal Proceedings	24
Item 1.	Legal Proceedings	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults upon Senior Securities	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
SIGNATURES		25

PART I

Item I - FINANCIAL STATEMENTS

3LTS Nutraceuticals, Inc.

Stone Harbor Investments, Inc.

Condensed Consolidated Balance Sheets

	As of March 31, 2011 (unaudited)			As of December 31, 2010
	As of June 30, 2011 (unaudited)			As of December 31, 2010
Assets
Current Assets:
Cash and cash equivalents	$	7793,~~802~~853		$	53,855
Accounts receivable		8,312			8,312
Restricted cash		1,325,600			-
Inventories		60,538			67,168
Accounts receivable		523,439			8,312
Prepaid expenses and other current assets		71,972			136,589
Inventories		60,417			67,168
Deferred loan costs		41,912			64,476
Prepaid expenses and other current assets		553,194			136,589
Total Current Assets		260,536			330,400
Deferred loan costs		38,884			64,476
Property and equipment - net		22,356			13,982
Total Current Assets		2,595,387			330,400
Total Assets	$	282,892		$	344,382
Property and equipment – net		32,419			13,982
Intangible Asset – net		797,778			-
Total Assets	$	3,425,584		$	344,382
Liabilities and Stockholders’ Deficiency
Current Liabilities:
Accounts payable	$	~~362~~272,~~629~~958		$	303,134
Accrued expenses		~~373~~277,~~597~~586			~~257~~205,~~986~~612
Deferred revenue		16,754			3,544
Accrued interest		149,132			52,374
Notes payable, net of debt discount of $80,039 and $159,569, respectively		1,526,659			1,047,129
Accrued rebate liability		382,074			-
Total Current Liabilities		2,279,639			1,611,793
Deferred revenue		14,379			3,544
Convertible debentures		270,000			270,000
Derivative liabilities		4,906			-
Contingencies
Current portion of convertible debentures		70,000			-
Total Current Liabilities		1,171,035			564,664
Convertible debentures		200,000			270,000
Accrued Licensing Fee		800,000			-
Convertible notes payable, net of debt discount of $0 and $159,569, respectively		4,690,376			1,047,129
Total Liabilities	$	6,861,411		$	1,881,793
Stockholders' Deficiency:
Preferred Stock, $0.00001 par value, 20,000,000 shares authorized:
Convertible Series C preferred stock, ($0.001 par value, 157,835 shares authorized, 0 and 157,835 issued and outstanding, respectively)		-			158
Common stock, ($0.00001 par value, 250,000,000 shares authorized, 41,900,000 and 24,159,200 shares issued and outstanding, respectively)		419			242
Common stock, ($0.00001 par value, 250,000,000 shares authorized, 42,100,000 and 24,159,200 shares issued and outstanding, respectively)		421			242
Additional paid in capital		~~264~~274,~~047~~342			329,066
Accumulated deficit		(23,~~531~~710,~~213)~~590	)		(1,866,877)	)
Total Stockholders' Deficiency		(23,~~266~~435,~~747)~~827	)		(1,537,411)	)
Total Liabilities and Stockholders' Deficiency	$	~~282~~3,~~892~~425,584		$	344,382

~~See~~The accompanying notes toare ~~unaudited~~an ~~interim~~integral part of these condensed consolidated financial statements.

~~Stone~~ LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Condensed Consolidated ~~Statements~~Statement of Operations

(unaudited)

	For the Three Months Ended			For the Three Months ended
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	March 31, 2011			March 31, 2010
	2011			2010			2011			2010
Net sales	$	183,285		$	261,358
Gross sales	$	760,579		$	486,538		$	943,864		$	747,896
Cost of sales		70,787			96,777
Reserve for rebates		382,074			-			382,074			-
Gross profit		112,498			164,581
Net Sales		378,505			486,538			561,790			747,896
Operating expenses:
Cost of Sales		293,957			154,628			372,268			251,406
Entrepreneur incentives		89,891			174,252
Gross Profit		84,548			331,910			189,522			496,490
Selling, general and administrative expenses		529,190			225,341
Operating expenses:
Total operating expenses		619,081			399,593
Entrepreneur incentives		214,265			95,086			304,155			269,338
Loss from operations		(506,583	)		(235,012	)
Selling, General and administrative expenses		802,185			285,396			1,323,851			510,738
Other income (expense):
Total operating expenses		1,016,450			380,482			1,628,006			780,076
Interest expense		(157,753	)		(26,757)
Loss from Operations		(931,902	)		(48,572	)		(1,438,484	)		(283,586	)
Total other expense		(157,753	)		(26,757)
Other Expense:
Net Loss	$	(664,336	)	$	(261,769	)
Change in fair value of derivative liability		(4,906	)		-			(4,906	)		-
Net loss per common share - basic and diluted	$	(0.03	)	$	(0.01	)
Interest expense		(242,571	)		(34,560	)		(400,324	)		(61,317	)
Weighted average number of common shares outstanding during the period - basic and diluted		24,254,650			21,285,600
Total Other Expense		(247,477	)		(34,560	)		(405,230	)		(61,317	)
Net Loss	$	(1,179,379	)	$	(83,132	)	$	(1,843,714	)	$	(344,903	)
Net loss per common share - basic and diluted	$	(0.03	)	$	(0.00	)	$	(0.06	)	$	(0.02	)
Weighted average number of common shares outstanding during the period - basic and diluted		41,963,736			21,285,600			33,158,113			21,285,600

~~See~~The accompanying notes toare ~~unaudited~~an ~~interim~~integral part of these condensed consolidated financial statements.

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	For the Three Months Ended March 31, 2011			For the Three Months Ended March 31, 2010
	For the Six Months Ended June 30, 2011			For the Six Months Ended June 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(~~664~~1,~~336~~843,714	)	$	(~~261~~344,~~769~~903	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		79159,~~530~~569			511,~~984~~111
Amortization of debt issuance costs		3481,~~564~~592			~~562~~4,496
Depreciation and amortization		210,~~426~~287			13,~~595~~191
Change in fair value of derivative liability		4,906			-
Stock based compensation		10,297			-
Changes in operating assets and liabilities:
Decrease (increase) in:
Inventories		6,630			(4,147	)
Accounts receivable		(515,127	)		-
Prepaid expenses and other current assets		64,617			(9,200	)
Inventories		6,751			9,871
Prepaid expenses and other current assets		(416,604	)		(49,390	)
Increase (decrease) in:
Accounts payable		59(30,~~495~~177	)		~~461~~90,791
Accrued expenses		~~115~~71,~~611~~974			~~(52~~40,~~799~~970	)
Deferred revenue		13,210			170,513
Accrued interest		159,911			45,747
Net Cash Used In Operating Activities		(288,253	)		(148,800	)
Accrued rebate liability		382,074			-
Deferred revenue		10,835			30,188
Net Cash Used In Operating Activities		(1,907,426	)		(157,928	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid to purchase property and equipment		(10,800	)		-
Net increase in restricted cash		(1,325,600	)		-
Net Cash Used in Investing Activities		(10,800	)		-
Cash paid to purchase property and equipment		(26,501	)		-
Net Cash Used in Investing Activities		(1,352,101	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		3,420,525			150,000
Payment of debt issuance costs		(56,000	)		(15,000	)
Purchase and retirement of treasury stock		(65,000	)		-
Net Cash Provided By Financing Activities		3,299,525			135,000
Net Increase (Decrease) in Cash and Cash Equivalents		39,998			(22,928	)
Cash and Cash Equivalents - Beginning of Period		53,855			31,460
Cash and Cash Equivalents - End of Period	$	93,853		$	8,532
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest	$	-		$	-
Taxes	$	-		$	-
SUPPLIMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series C Preferred Stock in connection with reverse merger	$	158		$	-
Issuance of Common Stock in connection with reverse merger	$	176		$	-
Accrued licensing fee	$	800,000		$	-
Effect of recapitalization	$	39,818		$	-
Conversion of accrued interest into convertible notes payable	$	63,153		$	-
Conversion of notes payable into convertible notes payable	$	1,606,128		$	-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		400,000			150,000
Payment of debt issuance costs		(12,000	)		(15,000	)
Purchase and retirement of treasury stock		(65,000	)		-
Net Cash Provided By Financing Activities		323,000			135,000
Net Increase (Decrease) in Cash and Cash Equivalents		23,947			(13,800	)
Cash and Cash Equivalents - Beginning of Period		53,855			31,460
Cash and Cash Equivalents - End of Period	$	77,802		$	17,660
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:

The accompanying notes are an integral part of these condensed consolidated financial statements.

Interest	$	-	$	-
Taxes	$	-	$	-
SUPPLIMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series C Preferred Stock in connection with reverse merger	$	158	$	-
Issuance of Common Stock in connection with reverse merger	$	176	$	-

~~See~~LTS ~~accompanying~~Nutraceuticals, ~~notes to unaudited interim condensed consolidated financial statements~~Inc.

6Notes to Unaudited Condensed Consolidated Financial Statements

Stone Harbor Investments, Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2011

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by ~~United States generally accepted accounting principles~~GAAP. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. ~~The~~LTS Nutraceuticals, Inc. (the “Company”) evaluated subsequent events through the issuance date of this Form 10-Q. The results for the interim period are not necessarily indicative of the results to be expected for the full year. The unaudited ~~interim~~ condensed consolidated financial statements should be read in conjunction with the Company's ~~Form~~audited ~~8-K~~year ~~filed~~end onfinancials ~~April~~for 6the year ended December 31, ~~2011~~2010, as ~~amended,~~filed ~~for~~with the ~~year~~SEC ~~ended~~as ~~December~~an 31exhibit to the Company’s Current Report on Form 8-K filed on April 6, ~~2010~~2011.

As discussed in Note 12, the Company approved a stock dividend. As a result, all share and per share amounts have been retroactively restated for the stock dividend and for the recapitalization (see Note 2) in parenthesis.

Note 2 – Organization and Business

Stone Harbor Investments, Inc. was incorporated in Nevada on May 14, 2009~~. Source~~, ~~Vitamin~~and ~~was~~changed ~~incorporated~~its inname ~~Delaware~~to onLTS ~~February 26~~Nutraceuticals, ~~2009~~Inc. ~~Source~~ ~~Vitamin has a wholly owned subsidiary, Live The Source “Canada” Ltd (“LTSC”), a Canadian corporation, which was incorporated~~ on ~~June~~April 121, ~~2010~~2011. ~~LTSC is currently inactive.~~ AsThe ~~the~~Company ~~result~~has ofthree adirect ~~share~~subsidiaries ~~exchange~~and ~~transaction~~one ~~which~~indirect ~~occurred on March 31, 2011, Source Vitamin is now a wholly owned~~ subsidiary ~~of Stone Harbor Investments, Inc~~.~~, and the two entities combined are henceforth referred to as the Company.~~

· The ~~Company~~Source isVitamin ~~based~~Company, ~~in Florida and operates in the United States and Canada~~Inc. ~~The~~ ~~Company develops and sells high-quality nutritional products~~ (“~~nutraceuticals~~Source Vitamin”) ~~that~~was ~~are~~incorporated ~~distributed~~in ~~throughout~~Delaware ~~North~~on ~~America~~February ~~through a network marketing system~~26, ~~which~~2009. isAs athe ~~form~~result of ~~direct~~a ~~selling.~~share ~~Its~~exchange ~~customer~~transaction ~~base~~which ~~comprises~~occurred ~~two~~on ~~types~~March of31, ~~customer;~~2011, ~~“Entrepreneurs”~~Source ~~and~~Vitamin ~~"Retail~~is ~~Customers."~~now ~~Entrepreneurs~~a ~~are~~wholly ~~independent~~owned ~~distributors~~subsidiary of the Company’s, ~~products~~and ~~who~~the ~~also~~Company, ~~purchase~~Source ~~the~~Vitamin, ~~Company’s~~LTSC ~~products~~(defined ~~for~~below), ~~their~~LTS ~~personal~~Brands ~~use.~~and ~~Retail~~Livethesource ~~Customers~~(both ~~purchase~~referenced ~~the~~below), ~~Company’s~~are ~~products~~collectively ~~strictly~~hereinafter ~~for~~referred ~~their~~to ~~personal~~as ~~use~~the “Company”.)

Source Vitamin has a wholly owned subsidiary, Live The Source “Canada” Ltd (“LTSC”), a Canadian corporation, which was incorporated on June 1, 2010. LTSC is currently inactive.

LTS Brands, Inc. and Livethesource, Inc. were incorporated in Nevada on June 17, 2011 and were inactive as of June 30, 2011.

The Company is based in Florida and develops and sells high-quality nutritional products (“nutraceuticals”) that are distributed throughout North America through a network marketing system, and other products through its retail marketing channel.

The customer base for products sold by the network marketing system comprises two types of customer: “Entrepreneurs”, which are independent distributors, who also purchase the Company’s products for their own personal use, and "Retail Customers" which are direct consumers who purchase the Company’s products strictly for their personal use.

The customer base for products sold through the retail channel is primarily comprised of national drug store and warehouse store chains.

Reverse Merger and Recapitalization

On March 31, 2011, Stone Harbor Investments, Inc. (“Stone Harbor”) a then shell corporation, merged with The Source Vitamin Company (“Source Vitamin”) and Source Vitamin became the surviving corporation (the “Merger”). This transaction was accounted for as a reverse merger. Stone Harbor did not have any operations and majority-voting control was transferred to ~~Source~~the ~~Vitamin. The~~shareholders ~~transaction also requires a recapitalization~~ of Source Vitamin. Since Source Vitamin acquired a controlling voting interest, it was deemed the accounting acquirer, while Stone Harbor was deemed the legal acquirer. The historical financial statements of the Company are those of Source Vitamin ~~and of the consolidated entities from the date of merger and subsequent~~.

Pursuant to the ~~merger~~Merger, the Company acquired ~~and cancelled~~ 77,924,000 shares of common stock from Stone Harbor’s majority shareholders for $65,000, which it then cancelled, and concurrently issued 24,300,000 ~~(486,000)~~ shares of common stock to Source Vitamin stockholders. Of the 24,300,000 ~~(486,000)~~ shares issued to Source Vitamin shareholders, 172,600 ~~(3,452)~~ shares were placed in escrow for conversion of the convertible debentures. If the debentures are not converted into common ~~share~~stock by ~~the~~their maturity dates, the shares will revert back to the original shareholders of record on the date of merger on a pro rata basis. Upon the closing of the ~~reverse merger~~Merger, former Source Vitamin stockholders held 58% of the issued and outstanding shares of common stock of the Company.

Stone Harbor Investments, Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2011

In connection with the reverse merger and recapitalization, all share and per share amounts have been retroactively restated.

Note 3 -– Going Concern, Liquidity and Management’'s ~~Plans~~Plan

The Company incurred a $~~664~~1,~~336~~843,714 net loss and used $~~288~~1,~~253~~907,426 of cash in operations for the period ended ~~March~~June 3130, 2011. As of ~~March~~June 3130, 2011, the Company has a $23,~~531~~710,~~213~~590 accumulated deficit and working capital ~~deficit~~ of $21,~~019~~424,~~103~~352.

The Company does not yet have a sustained history of financial stability. Historically its principal source of liquidity has been the issuances of debt through various debt financing transactions. ~~On April 6, 2011, the Company raised an additional $3,000,000 in cash through the issuance of convertible notes payable. See Note 12 for additional funding through the issuance of debt.~~

~~Management believes that its cash balances on May~~ 6, 2011 of approximately $2,538,000, current leve1 of working capital, and implementation of marketing and growth strategies in 2011 will be sufficient to sustain operations through March 31, 2012. However, there can be no assurance that the plans and actions proposed by management will be successful or that unforeseen circumstances will not require it to seek additional funding sources in the future or effectuate plans to conserve liquidity. In addition, there can be no assurance that its efforts to raise additional funds through the issuance of debt and/or equity securities will be successful or that in the event additional sources of funds are needed to continue operations, that they will be available on acceptable terms, if at all.

LTS Nutraceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of August 10, 2011, the Company had $139,626 in cash. The current operating plan indicates that losses from operations may be incurred for all of fiscal 2011. Consequently the Company may not have sufficient liquidity necessary to sustain operations for the next twelve months and this raises substantial doubt that the Company will be able to continue as a going concern.

Management is in the process of executing a plan to improve the operating performance and the financial position of the Company. This plan includes obtaining additional equity or debt financings, securing financing to purchase inventory, and increasing our product offering mix to the customers in our retail network. In addition, the Company continues to develop other initiatives intended to either increase sales, reduce costs or improve liquidity. Although management's plan reflects improvements in these trends, there can be no assurance that management's plan to improve the operating performance and the financial position of the Company will be successful. The Company continues to evaluate other alternative sources of capital for ongoing cash needs, however, there can be no assurance the Company will be successful in those efforts.

The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result should the Company be unable to continue as a going concern.

Note 4 - Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with ~~accounting principles generally accepted in the United States (“~~GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: the estimated useful lives for amortizable software, ~~and~~ debt issue costs and licensing costs, accrued expenses, derivative liabilities, vendor rebate liability, sales returns and the fair value of ~~preferred and~~ common stock granted in connection with various transactions. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from its estimates. The Company intends to re-evaluate all of its accounting estimates at least quarterly and record adjustments, when necessary.

Cash and Cash Equivalents

All highly liquid investments with an original maturity of 90 days or less when purchased are considered to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company minimizes credit risk associated with cash and cash equivalents by periodically evaluating the credit quality of its primary financial institutions. At times, its cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit. The Company had no uninsured balances at ~~March~~June 3130, 2011.

Restricted Cash

Restricted cash is restricted for use for investment and public relation expenditures only in accordance with the terms of the issuance of the convertible notes payable (See Note 9).

Accounts Receivable

Accounts receivable are carried at the expected net realizable value. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the accounts receivable. In addition, based on historical information, management estimates the amount of returned or damaged product and customers’ advertising allowances that may be deducted from outstanding accounts receivable. If there were a deterioration of a major customer’s creditworthiness, or actual defaults or allowances were higher than historical experience, our estimates of the recoverability of amounts due to us could be overstated, which could have a negative impact on operations.

Inventories

Inventories consist of vitamins and related health and nutritional products and are carried at the lower of cost or net realizable value. Cost is based solely on the amount paid by the Company to third parties.

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Notes to Unaudited ~~Interim~~ Condensed Consolidated Financial Statements

March 31, 2011

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of the related assets, which ranges from two to five years. The costs of leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the length of the related lease. Maintenance and repairs are charged to expense as incurred, costs of major additions and ~~betters~~betterments are capitalized. When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation is eliminated from the accounts and any resulting gain or loss is reflected in income.

Convertible Instruments

The Company ~~reviews~~accounts ~~all~~for ofhybrid ~~its~~contracts ~~convertible~~such as notes that feature conversion option in accordance with Accounting Standards Codification 815 “Derivatives and Hedging Activities,” (“ASC 815”). ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the ~~existence~~economic characteristics and risks of anthe embedded ~~conversion~~derivative ~~feature~~instrument ~~which~~are ~~may~~not ~~require~~clearly ~~bifurcation~~and closely related to the economic characteristics and risks of the host contract, if(b) the ~~certain~~hybrid ~~criteria~~instrument ~~are~~that ~~met.~~embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) ~~These~~a ~~criteria~~separate ~~include~~instrument ~~circumstances~~with the same terms as the embedded derivative instrument would be considered a derivative instrument. Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuance of equity or equity linked securities at exercise prices more favorable than that featured in ~~which:~~the hybrid contract, generally result in their bifurcation from the host instrument.

a) The ~~economic~~Company ~~characteristics~~accounts ~~and~~for ~~risks~~convertible ofinstruments (when the Company has determined that the embedded ~~derivative~~conversion ~~instrument~~options ~~are~~should not ~~clearly~~be bifurcated from their host instruments) in accordance with ASC 470-20 “Debt with Conversion and ~~closely~~Other ~~related~~“ (“ASC470-40”). Under ASC 470-20 discounts to convertible notes, when necessary, are recognized for the ~~economic~~intrinsic ~~characteristics~~value ~~and~~of ~~risks~~conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company accounts for convertible instruments (when it has determined that the embedded conversion options should be bifurcated from their host instruments) in accordance with ASC 815. Under ASC 815, a portion of the proceeds received upon the issuance of the hybrid contract are allocated to the fair value of the derivative. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reporting in results of operations.

b)Note ~~The~~Payable ~~hybrid~~Conversion ~~instrument~~Feature ~~that embodies both the embedded derivative instrument~~ and ~~the~~Other ~~host~~Derivative ~~contract is not remeasured at fair value under otherwise applicable guidance with changes in fair value reported in earnings as they occur, and~~Instruments

c) The ACompany’s ~~separate~~free ~~instrument~~standing derivatives include conversion option embedded in its convertible notes issued in April 2011. The Company evaluated the conversion option in accordance with the ~~same~~provisions ~~terms~~of asASC 815 and determined that the ~~embedded~~conversion ~~derivative~~option ~~instrument~~has ~~would~~all beof ~~considered~~the characteristics of a derivative ~~instrument~~in ~~subject~~its entirety that does not qualify for an exception to the derivative accounting rules. Specifically, the exercise price of the conversion option is not fixed at any time during the term of the note based on the occurrence or non-occurrence of certain ~~requirements~~events ~~(except~~and ~~for~~also ~~when~~entitles the ~~host~~counterparty ~~instrument~~to an adjustment of the exercise price in the event that the Company subsequently issues equity securities or equity linked securities at prices more favorable than the exercise price of the conversion option embedded in the notes. Accordingly, the conversion option is ~~deemed~~not indexed to bethe ~~conventional~~Company’s own stock. The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provides a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock as defined in ASC 815-40 “Contract in Entity’s Own Equity”. The Company classifies as liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counter party a choice of net-settlement or settlement in shares (physical or net-share settlement). The Company assesses classification of common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

AThe ~~bifurcated~~Company’s ~~derivative~~free ~~financial~~standing ~~instrument~~derivatives ~~may~~include bewarrants ~~required~~ to bepurchase ~~recorded~~common atstock ~~fair~~that ~~value~~were ~~and~~issued ~~adjusted~~with tothe ~~market~~Convertible atNotes ~~each~~Payable ~~reporting~~described ~~period~~in ~~end~~Note ~~date~~9. The InCompany ~~addition~~evaluated the common stock purchase warrants to assess their proper classification in the balance sheets as of June 30, 2011 using the applicable classification criteria enumerated under GAAP. The ~~Company~~potential ~~may~~of bea ~~required~~dilutive adjustment to ~~classify~~the ~~certain~~Warrants’ ~~stock~~exercise ~~equivalents~~price ~~issued~~and number of underlying shares of Common Stock may result in ~~connection~~a ~~with~~settlement amount that does not equal the ~~underlying~~difference ~~debt~~between ~~instrument~~the fair value of a fixed number of the Common Stock and at a fixed exercise price. Accordingly, the Warrants are not considered indexed to the Company’s own stock and, therefore, are accounted for as a derivative ~~liabilities~~liability in the accompanying condensed consolidated balance sheet as of June 30, 2011.

For convertible instruments that the Company has determined should not be bifurcated from their host instruments, it records discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. Also when necessary, The Company record deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the financing transaction and the effective conversion price embedded in the preferred shares.

Finally, if necessary, the Company will determine the existence of liquidated damage provisions. Liquidated damage provisions are not marked to market, but evaluated based upon the probability that a related liability should be recorded.

Revenue Recognition

The Company generates revenue from the ~~direct~~ sales of its vitamin and related health and nutritional products directly to consumers through its Entrepreneurs and retail marketing network. Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.

~~(1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.~~8

9LTS Nutraceuticals, Inc.

~~Stone~~Notes ~~Harbor~~to ~~Investments,~~Unaudited ~~Inc.~~Condensed Consolidated Financial Statements

~~Notes~~The Company accounts for payments made to ~~Unaudited~~customers ~~Interim~~in ~~Condensed~~accordance ~~Consolidated~~with ~~Financial~~ASC ~~Statements~~605 “Revenue Recognition” (“ASC 605”), which states that cash consideration (including a sales incentive) given by a vendor to a customer is presumed to be a reduction of the selling prices of the vendor’s products or services and, therefore, should be characterized as a reduction of revenue when recognized in the vendor’s income statement, rather than a sales and marketing expense. The Company has various agreements with customers that provide for discounts and rebates. These agreements are classified as a reduction of revenue. Certain other costs associated with customers that meet the requirements of ASC No. 605 are recorded as sales and marketing expense. Vendor considerations recorded as a reduction of sales were $382,074 and $0 for the three and six months ended June 30, 2011 and 2010, respectively.

~~March~~Revenue ~~31,~~is ~~2011~~recognized at the time products are shipped. The Company generally requires cash or credit card payment at the point of sale for sales to Entrepreneurs. The compensation plan for the Company’s Entrepreneurs generally does not provide rebates or selling discounts to Entrepreneurs who purchase its products and services.

Revenue is recognized at the time products are shipped. The Company generally requires cash or credit card payment at the point of sale. The compensation plan for the Company’s Entrepreneurs generally does not provide rebates or selling discounts to Entrepreneurs who purchase its products and services. The Company classifies selling discounts and rebates, if any, as a reduction of revenue.

Product Return Policy

Refunds are allowed only to Entrepreneurs who have given voluntary termination notices, or for incorrect or defective items. In these circumstances only, the Company provides a 30-day return policy. For the products sold through the retail network, returns are allowed only for incorrect or defective items.

For products sold to customer through the retail marketing network, we guarantee customer satisfaction. Our policy requires the customer to return the unused product to the retailer from whom they originally purchased it. We pay the retailer for the returned product plus a handling cost. We review gross revenue for estimated returns. The estimated returns are based on historical and industry experience. However, the estimate for product returns does not reflect the impact of a large product recall resulting from product nonconformance or other factors as such events are not predictable nor is the related economic impact estimable. We periodically assess the adequacy of this policy and record a liability as necessary. As of June 30, 2011, no reserve was recorded as any reserve was deemed to be immaterial.

Deferred Revenue

The Company requires cash or credit card payment at the time of sale. Any payments that are received prior to shipment are recorded as deferred revenue until the specific product is shipped as described above, at which time, it is recorded as revenue.

Advertising

Advertising costs are expensed as they are incurred and are included in selling, general and administrative expenses. Advertising expense ~~amounted~~was to$1,192 and $0 for the ~~periods~~three months ended ~~March~~June 3130, 2011 and 2010, respectively, and $1,192 and $0, respectively, for the six months ended June 30, 2011 and 2010.

Shipping and Handling Costs

The Company’s shipping and handling costs are included in revenue, with the corresponding expense in cost of sales.

Entrepreneur Incentives

Entrepreneur incentives expenses include all forms of commissions, compensation, bonuses and other incentives paid to our founder and ~~entrepreneur~~entrepreneurs.

Selling, General and Administrative

Selling, general and administrative expenses include wages and benefits, depreciation and amortization, rents and utilities, Entrepreneur event costs, professional fees and marketing.

Share-Based Payment Arrangements

Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments are recorded in cost of goods sold or general and administrative expense in the statement of operations, depending on the nature of the services provided.

LTS Nutraceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance now codified as Financial Accounting Standards Board (“FASB”) ~~Accounting Standards Codification (“~~ASC”) Topic 740, “ Income Taxes ,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

10Accounting guidance clarifies the accounting for uncertainties in income taxes recognized by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. Accounting guidance requires that any liability created for unrecognized tax benefits be disclosed. The application of accounting for income taxes may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. The Company would recognize interest and penalties related to unrecognized tax benefits in income tax expense. At June 30, 2011, The Company did not record any liabilities for uncertain tax positions.

Stone Harbor Investments, Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2011

Accounting guidance now codified as FASB ASC Topic 740-20, “Income Taxes – Intraperiod Tax Allocation,” clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-10 by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. The Company would recognize interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2010, The Company did not record any liabilities for uncertain tax positions.

Net Loss per Share

Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

The computation of basic and diluted loss per share for the year ended ~~March~~June 3130, 2011 excludes the following potentially dilutive securities because their inclusion would be anti-dilutive:

	For the Period Ended March 31, 2011
	For the Period Ended June 30, 2011
Convertible Debentures		172,600
		172,600
Stock Warrants		9,380,753
Stock Options		3,000,000
		12,553,353

Reclassification

Prior period amounts are reclassified, when necessary, to conform to the current period presentation.

New Accounting Pronouncements

In May 2011, the FASB issued guidance related to fair value measurements and disclosures in the financial statements. This guidance conforms the wording to describe many of the requirements in U.S. GAAP to International Financial Reporting Standards to ensure the related standards are consistently applied. The guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is effective during interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. The adoption of this standard will not materially expand the Company’s consolidated financial statement footnote disclosures.

Note 5 - Fair Value

~~The~~Financial ~~fair~~instruments, ~~value~~including ofcash ~~its financial assets~~ and ~~liabilities~~cash ~~reflects~~equivalents, ~~its~~restricted ~~estimate~~cash, ofaccounts ~~amounts~~payable ~~that~~and ~~the~~accrued ~~Company would have received in connection with the sale of the assets or paid in connection with the transfer of the~~ liabilities inare ancarried ~~orderly transaction between market participants~~ at ~~the~~cost, ~~measurement~~which ~~date.~~management Inbelieves ~~connection~~approximates ~~with measuring the~~ fair value ofdue ~~its assets and liabilities, the Company seeks~~ to ~~maximize~~ the ~~use~~short-term ofnature ~~observable inputs (market data obtained from independent sources) and to minimize the use~~ of ~~unobservable~~these ~~inputs (internal assumptions about how market participants would price assets and liabilities)~~instruments. The ~~following~~ fair value ~~hierarchy~~of convertible isdebentures ~~used~~and tonotes ~~classify~~payable ~~assets~~approximates ~~and~~their ~~liabilities~~carrying ~~based~~amounts onas ~~the~~a ~~observable~~market ~~inputs~~rate ~~and~~of ~~unobservable~~interest ~~inputs~~is ~~used~~attached ~~in order~~ to ~~value~~their ~~the assets and liabilities:~~repayment.

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.10

~~Level~~LTS 2:Nutraceuticals, ~~Observable inputs other than Level 1 inputs~~Inc. ~~Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.~~

~~Level~~Notes 3:to ~~Unobservable~~Unaudited ~~inputs~~Condensed ~~based~~Consolidated onFinancial ~~its assessment of the assumptions that market participants would use in pricing the asset or liability.~~Statements

The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Financial liabilities measured at fair value on a recurring basis are summarized below:

Fair value measurements at June 30, 2011

		June 30, 2011				Quoted prices in active markets for identical assets (Level 1)				Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)
Derivative liabilities		$	4,906			$	—			$	—			$	4,906

The derivative liabilities are measured at fair value using the lattice pricing model, and are classified within Level 3 of the valuation hierarchy.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:

	June 30, 2011
Beginning Balance	$	—
Aggregate fair value of derivative issued		—
Change in fair value of derivative included in income		4,906

Ending Balance	$	4,906

The significant assumptions and valuation methods that the Company used to determine fair value and the change in fair value of the derivative financial instrument at issue are discussed in Note 9.

In accordance with the provisions of ASC 815, the Company presented the conversion option and warrant liabilities at fair value on its condensed consolidated balance sheet, with the corresponding changes in fair value recorded in the Company’s condensed consolidated statement of operations for the applicable reporting periods. As disclosed in Note 9, the Company computed the fair value of the derivative liability at the date of issuance and the reporting date of June 30, 2011 using the lattice pricing model.

The Company developed the assumptions that were used as follows:

The fair value of the Company’s common stock was obtained from an independent third party valuation;

The term represents the remaining contractual term of the derivative; the volatility rate was developed based on analysis of the historical volatility rates of several similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue);

The risk free interest rates were obtained from publicly available US Treasury yield curve rates; and

The dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future.

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Notes to Unaudited ~~Interim~~ Condensed Consolidated Financial Statements

March 31, 2011

Note 6 - Prepaid expenses and other current assets

	March 31, 2011		December 31, 2010
	June 30, 2011		December 31, 2010
Credit card reserves	$	40,000	$	71,839
Prepaid expenses		2238,~~127~~586		21,377
Prepaid inventory costs		8,825		18,373
Prepaid consulting		249,465		-
Prepaid professional fees		-		20,000
Prepaid insurance		55,631		-
Advances to salesman		1,020		5,000
Prepaid inventory costs		71,500		18,373
Prepaid expenses and other current assets	$	71,972	$	136,589
Inventory credit receivable		54,000		-
Prepaid professional fees		42,992		20,000
Advances to consultant		1,020		5,000
Prepaid expenses and other current assets	$	553,194	$	136,589

Credit card reserves are cash collateral that is being held by the credit card processor to assure compliance with the individual processor’s policies, guidelines, and/or practices.

Note 7 – Property and Equipment

Property and equipment consist of the following:

	March 31, 2011			December 31, 2010			Estimated Useful Life
	June 30, 2011			December 31, 2010			Estimated Useful Life
Equipment and software	$	2336,~~864~~565		$	23,864		2-5years
Leasehold Improvements		1013,800			-		2 years
Less: Accumulated depreciation and amortization		(1217,~~308~~946	)		(9,882	)
Property and equipment, net	$	2232,~~356~~419		$	13,982

Depreciation and amortization was $5,638 and $1,595 for the ~~periods~~three ended ~~March~~June 3130, 2011 and 2010, ~~was~~respectively and $28,~~426~~064 and $3,191 for 1the six months ended June 30,~~595~~ 2011 and 2010, respectively.

Note 8 -– ~~Debt~~Intangible ~~and Other Financing~~Asset

On June 13, 2011, the Company entered into a Purchase and Exclusive Marketing Agreement (“Agreement”) with Imagenetix, Inc. (“Imagenetix”), Proprietary Nutritionals, Inc. (“Proprietary”) and Pharmachem Laboratories, Inc. (with Imagenetix and Proprietary, “PNI”) pursuant to which the Company was granted perpetual exclusive United States rights to purchase from PNI their Celadrin products and brand (“Celadrin”) as well as exclusive marketing and distribution and related rights in the U.S. During the term of the Agreement, the Company has the right to purchase Celadrin from PNI for use in the U.S. at a purchase price equal to the then agreed upon wholesale prices at a 2% discount, with a net 60 days payment term. Prices can be increased in any January for the next year by no more than the then consumer price index or 5% whichever is greater. The Company agreed to issued $800,000 of its common stock in exchange for the marketing and distribution rights. The transaction was recorded as an intangible asset and is amortized over the estimated useful life of fifteen years.

Amortization was $2,222 and $0 for the three ended June 30, 2011 and 2010, respectively and $2,222 and $0 for the six months ended June 30, 2011 and 2010, respectively.

Note 9 - Debt and Other Financing

Notes Payable

During June 2009, the Company entered into a $100,000 unsecured promissory note with a third party. The note ~~bears~~bore interest at fifteen percent per annum and was due on December 31, 2010. In connection with the note, the Company agreed to issue 157,835 shares of Source Vitamin’s convertible preferred series C stock ~~(see Note 9)~~. The preferred stock was valued at a fair value of $6,313 which was recorded as a debt discount to be amortized over the life of the note. For the three months ended ~~March~~June 3130, 2011 and 2010, $0 and $13,~~076~~740 was amortized to interest expense and for the six months ended June 30, 2011 and 2010, $0 and $4,816 was amortized to interest expense. The note and all accrued interest were subsequently ~~paid~~satisfied ~~off~~ as part of two $350,000 promissory notes the Company entered into during November 2010.

During June and July 2009, the Company entered into three unsecured promissory notes totaling $290,000 with a third party. The notes bear interest at fifteen percent per annum and matured between June 22 and November 1, 2010. In connection with these notes, the Company agreed to issue 533,904 shares of Source Vitamin’s convertible preferred series A stock. The preferred stock was valued at a fair value of $21,356 which was recognized as a debt issue cost to be amortized over the life of the notes. For the three months ended March 31, 2011 and 2010, $0 and $4,908 was amortized to interest expense. The Company used the net proceeds received from these notes to provide working capital.

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Notes to Unaudited ~~Interim~~ Condensed Consolidated Financial Statements

~~March~~During 31June and July 2009, the Company entered into three unsecured promissory notes totaling $290,000 with a third party. The notes bore interest at fifteen percent per annum and matured between June 22 and November 1, 2010. In connection with these notes, the Company agreed to issue 533,904 shares of Source Vitamin’s convertible preferred series A stock. The preferred stock was valued at a fair value of $21,356 which was recognized as a debt issue cost to be amortized over the life of the notes. For the three months ended June 30, 2011 and 2010, $861 and $10,845, respectively, was amortized to interest expense and for the six months ended June 30, 2011 and 2010, $13,771 and $21,571, respective was amortized to interest expense. The Company used the net proceeds received from these notes to provide working capital.

OnIn connection with these notes, on September 16, 2010, the Company entered into a subscription agreement with the ~~notes~~noteholder ~~holder~~ to purchase 2,646,850 ~~(52,937)~~ shares of common stock at par and granted the holder a six month option to acquire an additional 45,350 ~~(907)~~ shares of common stock at par. As a consideration of this agreement the notes holder agreed to (1) extend the maturity dates of the three notes (two of which had expired) to June, 30, 2011, (2) add all accrued interest of $59,059 to the ~~principle~~principal balance, and extend any accruing and unpaid interest until the extended maturity date, (3) waive all rights, titles and interest in the 533,904 shares convertible preferred series A stock originally issued and (4) waive any loan defaults prior to the subscription agreement. The option is exercisable upon certain conditions, including merging with a publicly traded company. 322,850 ~~(6,457)~~ shares of the common stock issued were deemed to be for the conversion of convertible series A preferred stock that is cancelled as part of this agreement, and the remaining 2,324,000 ~~(46,480)~~ shares were valued at fair value of $226,209 and was recognized as a debt discount and amortized over the remaining life of the notes. The option was valued at fair value of $4,425 using the black scholes valuation model and was also recognized as debt discount ~~(see Note 9)~~. These notes ~~are~~were subordinated to the two $350,000 promissory notes below and ~~shall~~were ~~automatically~~refinanced bealong ~~exchanged,~~with inaccrued ~~the~~interest ~~event~~by ofthe aConvertible ~~merger~~Notes ~~with~~Payable adiscussed ~~public~~below. For ~~company,~~the ~~for~~three ~~new~~months ~~convertible~~ended ~~promissory~~June ~~notes~~30, 2011 and ~~warrants~~2010, ~~with~~$73,128 ~~similar~~and ~~terms~~$0, ~~and~~respectively, ~~conditions~~was amortized to ~~the~~interest ~~Company’s~~expense ~~expected~~and ~~public~~for ~~financing. For~~ the ~~three~~six months ended ~~March~~June 3130, 2011 and 2010, $72145,~~324~~452 and $0, respectively was amortized to interest expense.

During March 2010, the Company entered into an unsecured promissory note for $150,000. The note ~~bears~~bore interest at ten percent per annum and was due on February 28, 2011. In accordance with this note, the Company paid $15,000 of debt issuance cost. On September 22, 2010, the Company issued 226,750 ~~(4,535)~~ shares of common stock to the note holder in exchange for an extension of the note maturity date to June 30, 2011, changes to repayment provisions so that accrued interest of $7,639 were added to the principle balance, and extend any accruing and unpaid interest until the extended maturity date. The shares were valued at fair value of $22,500 and recognized as a debt discount and amortized over the remaining life of the note. The note iswas subordinated to the two $350,000 promissory notes below and ~~shall~~was ~~automatically~~refinanced bealong ~~exchanged,~~with inaccrued ~~the~~interest ~~event~~by ofthe aConvertible ~~merger~~Notes ~~with~~Payable adiscussed ~~public~~below. For ~~company,~~the ~~for~~three ~~new~~months ~~convertible~~ended ~~promissory~~June ~~notes~~30, 2011 and ~~warrants~~2010, ~~with~~$6,911 ~~similar~~and ~~terms~~$0, ~~and~~respectively, ~~conditions~~was amortized to ~~the~~interest ~~Company’s~~expense ~~expected~~and ~~public~~for ~~financing. For~~ the ~~three~~six months ended ~~March~~June 3130, 2011 and 2010, $714,~~206~~117 and $0, respectively was amortized to interest expense.

During ~~August~~November 2010, the Company entered into two $50350,000 promissory notes. The notes ~~bear~~refinanced two $50,000 notes issued in August 2010, bore interest at ~~eight~~ten percent per annum, and ~~are~~were due on ~~September~~June 1530, ~~2010~~2011. The notes were collateralized by 17,303,300 of the founder’s shares and are guaranteed by the founder. These notes and all accrued interest were refinanced ~~and~~by ~~cancelled~~the asConvertible ~~part~~Notes ofPayable discussed below. In connection with these notes the ~~November~~Company ~~2010~~incurred debt ~~deal~~issue ascosts ~~discussed~~of ~~below~~$74,315 comprised of private placement and legal fees.

During ~~November~~March ~~2010~~2011, the Company entered into ~~two~~a $~~350~~400,000 promissory ~~notes~~note. The ~~notes~~note ~~refinanced~~bore ~~the two $50,000 notes discussed above, bear~~ interest at ten percent per annum, and ~~are~~was due on June 30, 2011. The ~~notes~~note ~~are~~was collateralized by 17,303,300 ~~(346,066)~~ of the founder’s shares and are guaranteed by the founder. InThe ~~connection with subordination agreement with the holders of the $290,000 and the $150,000 promissory notes, the~~ note ~~holders of the two $350,000 promissory notes further agree to convert the debt, in the event that the Company merges with a public company, at the same terms~~ and ~~conditions~~all asaccrued ~~the~~interest ~~public~~was ~~financing. In~~refinanced ~~connection~~by ~~with these notes~~ the ~~company~~Convertible ~~incurred~~Notes ~~debt~~Payable ~~issue~~discussed ~~costs of $74,315 comprised of private placement and legal fees~~below.

Convertible ~~Debentures~~Notes Payable

~~During~~On ~~October~~April ~~2009~~6, 2011, in a private placement transaction, exempt from registration under Section 4(2) of the Securities Act of 1933, the Company issued a $~~200~~4,~~000~~690,376 of Convertible ~~Note~~Notes Payable, ~~(the~~of ~~“Convertible~~which ~~Note”)~~$1,670,376 went to refinancing of existing notes payable and related accrued interest. The Convertible ~~Note~~Notes ~~has~~have a ~~three~~two year term maturing ~~October13~~April 5, ~~2012~~2013, ~~bears~~bear interest at ~~an annual rate of~~ ten percent per annum (payable semi-annually) and isare ~~unsecured~~secured by a first lien on all assets of the Company. The principal balances of the notes along with any unpaid interest may be converted anytime at the option of the holders to common stock at a price of $0.50 per share. During the life of the notes, the conversion price will be adjusted any time the Company ~~used~~sells it stock for a price under $0.50 to the ~~net~~lowest ~~proceeds~~price ~~received~~sold. In ~~from~~connection ~~this~~with ~~Convertible~~the ~~Note~~Notes, the Company issued 9,380,753 five year warrants to ~~provide~~acquire ~~working~~the ~~capital~~Company’s common stock at a price of $0.50 per share. During the life of the notes, the exercise price will be adjusted any time the Company sells it stock for a price under $0.50 to the lowest price sold. The conversion option and warrants were accounted for as derivatives, with the fair value recorded as a debt discount to be amortized over the life of the notes.

The Convertible Note is convertible at the option of the holder, in whole or in part, into 81,700 (1,634) shares of the Company’s common stock. The conversion price may be adjustable for standard anti-dilution provisions such as stock splits, stock dividends and similar types of recapitalization events.

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Notes to Unaudited ~~Interim~~ Condensed Consolidated Financial Statements

~~March~~The 31fair value of the note conversion feature derivative liability was immaterial and therefore no debt discount was recorded. The Company computed the fair value of the note conversion feature at the date of issuance and the reporting date of June 30, ~~2011~~2010 using the lattice pricing model with the following assumptions:

The Company evaluated the conversion feature embedded in the Convertible Note to determine whether such conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative

Input	April 6, 2011 (Issuance Date)			June 30, 2011 (Reporting Date)

Fair value of common stock	$	0.02		$	0.04
Exercise Price of Option	$	0.50		$	0.50
Term (years)		2			1.75
Volatility		50.00	%		50.00	%
Risk Free Interest Rate		1.96	%		0.61	%
Delta T		1/12			1/12
Up Ratio		1.144			1.144
Down Ratio		0.857			0.857
Up Transition Probability		0.5001			0.5001
Dividend Yield		—	%		—	%

~~and~~The iffair avalue ~~beneficial~~of ~~conversion~~the ~~feature~~warrant ~~exists.~~exercise ~~The~~price ~~Company~~derivative ~~has~~liability ~~determined~~was ~~that~~immaterial noand ~~beneficial~~therefore ~~conversion~~no ~~feature~~debt ~~exists~~discount ~~and~~was ~~determined~~recorded. The ~~that~~Company ~~since~~computed the ~~exercise~~fair ~~price~~value of the ~~convertible~~derivative ~~debt~~liability ~~does~~at ~~not~~the ~~contain~~date ~~variable~~of ~~conversion~~issuance ~~features,~~and ~~such~~the ~~conversion~~reporting ~~feature~~date ~~should~~of ~~not~~June be30, ~~bifurcated~~2010 ~~from~~using ~~its~~the ~~host~~lattice ~~instrument~~pricing ~~and~~model ~~accounted~~with ~~for~~the asfollowing ~~a freestanding derivative.~~assumptions:

During August and September 2010, the Company issued two Convertible Notes Payable (the “September Convertible Notes”) totaling $70,000. The September Convertible Notes have terms maturing in February 2012, bear interest at an annual rate of eight percent per annum and is unsecured. The Company used the net proceeds received from this September Convertible Notes to provide working capital.

Input	April 6, 2011 (Issuance Date)			June 30, 2011 (Reporting Date)

Fair value of common stock	$	0.02		$	0.04
Exercise Price of Option	$	0.50		$	0.50
Term (years)		5			4.75
Volatility		50.00	%		50.00	%
Risk Free Interest Rate		1.96	%		1.96	%
Delta T		1/12			1/12
Up Ratio		1.144			1.144
Down Ratio		0.857			0.857
Up Transition Probability		0.5001			0.5001
Dividend Yield		—	%		—	%

~~The September~~ Convertible Notes are convertible at the option of the holders, in whole or in part, into 90,900 (1,818) shares of its common stock. The conversion price was adjustable for standard anti-dilution provisions such as stock splits, stock dividends and similar types of recapitalization events.Debentures

~~The~~During ~~Company~~October ~~evaluated~~2009, the ~~conversion~~Company ~~feature~~issued ~~embedded~~a in$200,000 ~~the September~~ Convertible ~~Notes~~debenture to(the ~~determine~~“Convertible ~~whether~~debenture”). The ~~such~~Convertible ~~conversion~~debenture ~~feature~~has ~~should~~a bethree ~~bifurcated~~year ~~from~~term ~~its~~maturing ~~host~~October13, ~~instrument~~2012, ~~and~~bears ~~accounted~~interest ~~for~~at asan aannual ~~freestanding~~rate ~~derivative.~~of ~~The~~ten ~~Company~~percent ~~determined~~per ~~that~~annum ~~since~~and ~~the~~is ~~exercise~~unsecured. The ~~price~~Company ofused the ~~convertible~~net ~~debt~~proceeds ~~does~~received ~~not contain variable conversion features, such conversion feature should not be bifurcated~~ from ~~its~~this ~~host~~Convertible ~~instrument~~debenture ~~and~~to ~~accounted~~provide ~~for~~working ~~as a freestanding derivative~~capital.

~~Expected~~The ~~repayments~~Convertible debenture is convertible at the option of the ~~notes~~holder, ~~payable~~in ~~are~~whole or in part, into 81,700 shares of the Company’s common stock. The conversion price may be adjustable for standard anti-dilution provisions such as ~~follows:~~stock splits, stock dividends and similar types of recapitalization events.

	For the Year Ended December 31,
2011	$	1,606,698
2012		270,000
	$	1,876,698

The Company evaluated the conversion feature embedded in the Convertible debenture to determine whether such conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative and if a beneficial conversion feature exists. The Company has determined that no beneficial conversion feature exists and determined that since the exercise price of the convertible debt does not contain variable conversion features, such conversion feature should not be bifurcated from its host instrument and accounted for as a freestanding derivative.

~~Note~~During 9August -and ~~Stockholders’~~September ~~Deficiency~~2010, the Company issued two Convertible debentures (the “September Convertible debentures”) totaling $70,000. The September Convertible debentures have terms maturing in February 2012, bear interest at an annual rate of eight percent per annum and is unsecured. The Company used the net proceeds received from these September Convertible debentures to provide working capital.

The September Convertible debentures are convertible at the option of the holders, in whole or in part, into 90,900 shares of its common stock. The conversion price was adjustable for standard anti-dilution provisions such as stock splits, stock dividends and similar types of recapitalization events. The Company evaluated the conversion feature embedded in the September Convertible debentures to determine whether such conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative. The Company determined that since the exercise price of the convertible debt does not contain variable conversion features, such conversion feature should not be bifurcated from its host instrument and accounted for as a freestanding derivative.

LTS Nutraceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Expected repayments of the convertible notes payable and convertible debentures are as follows:

	For the Year Ended December 31,
2011	$	-
2012		270,000
2013		4,690,376
	$	4,960,376

Note 10 - Stockholders’ Deficiency

Preferred Stock

The Company has authorized a total of 20,000,000 shares of $0.00001 par value blank check preferred stock.

Source Vitamin’s Convertible Series C Preferred Stock

Source Vitamin’s Convertible Series C Preferred Stock (“Series C PS”) has voting rights equivalent to one vote per share, no liquidation preference, and are entitled to receive dividends equal to three percent of the Source Vitamin’s net income to be paid quarterly. Each share of the Series C PS is convertible into one share of the Source Vitamin’s common stock at the election of the holder, however if all accrued dividends have been paid by July 1, 2012, all outstanding shares automatically convert to common shares. Source Vitamin authorized and issued 157,835 shares of the Series C PS in connection with one promissory notes totaling $100,000 to one individual (see Note 89). These shares were converted tointo 95,450 ~~(1,909)~~ common shares in connection with the reverse merger that occurred on March 31, 2011.

Stone Harbor Investments, Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2011

Common Stock

On March 2, 2009, the Company issued 21,285,600 ~~(425,712)~~ founders shares of common stock for no consideration upon formation of Company.

On ~~March~~September 3116, ~~2011~~2010, the Company ~~issued~~entered 17into a subscription agreement with the note holder of the three promissory notes totaling $290,~~600,~~000 ~~(352~~to purchase 2,~~000)~~646,850 shares of common stock at par and granted the holder a six month option to acquire an additional 45,350 shares of common stock at par (see Note 9). The options were exercised in connection with the reverse merger that occurred in June 30, 2011 (Note 2). Options issued in connection with the subscription agreement were recognized as a debt discount and amortized over the remaining life of the notes and valued at a fair value of $4,425 using the black scholes valuation model utilizing the following assumptions:

On September 16, 2010, the Company entered into a subscription agreement with the notes holder of the three promissory notes totaling $290,000 to purchase 2,646,850 (52,937) shares of common stock at par and granted the holder a six month option to acquire an additional 45,350 (907) shares of common stock at par (see Note 8). The options were exercised in connection with the reverse merger that occurred in March 31, 2011 (Note 2). Options issued in connection with the subscription agreement were recognized as a debt discount and amortized over the remaining life of the notes and valued at a fair value of $4,425 using the black scholes valuation model utilizing the following assumptions:

Expected dividends		0	%
Expected volatility		27.32	%
Expected term – embedded conversion option	5 years
Risk free interest rate		.20	%
Expected forfeitures		100	%

On September 22, 2010, the Company issued 226,750 ~~(4,535)~~ share of common stock to the note holder of the unsecured $150,000 promissory note (see Note 89) in exchange for an extension of the notes maturity date to June 30, 2011, changes to repayment provisions so that all accrued interest is due on the maturity date and to remedy any defaults on the notes. The shares were valued at fair value of $22,500 and recorded as a debt discount and amortized over the remaining life of the note.

On March 31, 2011, the Company issued 17,600,000 shares common stock in connection with the Merger.

On April 21, 2011, the Company filed an amendment to its articles of incorporation in Nevada to change its name to LTS Nutraceuticals, Inc. Its directors and shareholders also approved a stock dividend to its shareholders pursuant to which the shareholders shall receive 49 additional shares of Company’s common stock for each share of Company’s common stock owned. All share and per share amounts have been retroactively restated.

On June 1, 2011, the Company issued 200,000 shares of common stock to a consultant for services valued at $8,000 ($0.04 per share). The shares were fully vested and were recorded as stock compensation expense.

Stock Options

On March 30, 2011, the Company’s Board and shareholders approved its 2011 Stock Option Plan, which has 12,000,000 shares reserved for issuance to officers, directors, employees and consultants.

On March 31, 2011, the Company granted 3,000,000 options to its Chief Executive Officer (Note 10). The options have an exercise price based on the fair market price or $0.02 per share and can be exercised over five years. The exercise price was based on a valuation performed by an independent third party. 1,000,000 options to vest on each one year anniversary of the granted date, and all then unvested options to automatically vest on the date upon which the Company’s aggregate gross revenues reach $50,000,000. These options had a fair value of $27,367 using the Black-Scholes option-pricing model using the following assumptions:

Risk-free interest rate		2.24	%
Expected dividend yield		0	%
Expected volatility		50	%
Expected life	5 years
Expected forfeitures		0	%

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Notes to Unaudited ~~Interim~~ Condensed Consolidated Financial Statements

On March 31, 2011, the Company granted 3,000,000 options to its Chief Executive Officer (Note 11). The options have an exercise price based on the fair market price or $0.02 per share and can be exercised over five years. The exercise price was based on a valuation performed by an independent third party. 1,000,000 options to vest on each one year anniversary of the granted date, and all then unvested options to automatically vest on the date upon which the Company’s aggregate gross revenues reach $50,000,000. These options had a fair value of $27,367 using the Black-Scholes-Merton option-pricing model using the following assumptions:

The following table summarizes our stock option activity for the period from December 31, 2010 through March 31, 2011:

Risk-free interest rate		2.24	%
Expected dividend yield		0	%
Expected volatility		50	%
Expected life	5 years
Expected forfeitures		0	%

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Balance at December 31, 2010		—		—		—	—
Granted		3,000,000	$	0.02		5.0	—
Forfeited or Cancelled		—		—		—	—
Balance at March 31, 2011		3,000,000		0.02		5.0	$	—
Exercisable at March 31, 2011		—	$	—		—	$	—

For the three months ended June 30, 2011 and 2010, $2,297 and $0, respectively, was recorded as stock compensation expense and for the six months ended June 30, 2011 and 2010, 2,297 and $0, respectively was amortized stock compensation expense.

~~Total~~The ~~unamortized~~following ~~compensation~~table ~~expense~~summarizes ~~related~~our to stock ~~options~~option atactivity ~~March~~for ~~31,~~the ~~2011~~period ~~amounted~~from toDecember ~~$27~~31,~~367~~ ~~and~~2010 isthrough ~~expected~~June to30, ~~be recognized over three years.~~2011:

Note 10 - Related Party Transactions

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Balance at December 31, 2010		—		—		—		—
Granted		3,000,000	$	0.02		5.0		—
Forfeited or Cancelled		—		—		—		—
Balance at June 30, 2011		3,000,000		0.02		4.75	$	—
Exercisable at June 30, 2011		250,000	$	0.02		4.75	$	—

~~The~~Total ~~founder~~unamortized ~~and~~compensation ~~Chairman~~expense ofrelated ~~the Board of Directors had an agreement with the Company whereby he is~~ to ~~receive~~stock aoptions ~~bonus~~at ofJune ~~five percent of eligible monthly sales. As a result of this agreement~~30, ~~the~~2011 ~~Company~~amounted ~~recorded~~to ~~bonus expense of~~ $825,~~256~~070 and ~~$11,434~~is expected to ~~the~~be ~~founder~~recognized ~~for~~over ~~the periods ended March 31, 2011 and 2010, respectively~~2. ~~This~~75 ~~agreement ended effective May 1, 2011~~years.

AsStock ~~of March 31, 2011, the Company owed the founder $35,139 in accounts payable.~~Warrants

OnThe ~~March~~following ~~31,~~summarizes ~~2011,~~our ~~the~~warrant ~~Company~~activity ~~entered~~for ~~into an employment agreement with its Chief Executive Officer (“CEO”) and a consulting agreement with its Chairman of~~ the ~~Board~~period offrom ~~Directors~~December ~~(Chairman”). These agreements generally require each executive to devote substantially all of his business time to the Company’s affairs~~31, ~~establish~~2010 ~~standards~~through ofJune ~~conduct~~30, prohibit competition with the Company’s company during their term, affirm the Company’s rights respecting the ownership and disclosure of trade secrets and other confidential information, provide for the acts and events that would give rise to termination of such agreements and provide express remedies for a breach of the agreement. Each of the Company’s employees will participate in its standard employee benefit programs, including medical/hospitalization insurance as in effect from time to time. The provisions of the individual agreements are summarized below2011:

	Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding – December 31, 2011		—	$	—		—
Granted		9,380,753		0.50		3.0
Exercised		—		—		—
Forfeited or Cancelled		—		—		—
Outstanding – June 30, 2011		9,380,753	$	0.50		2.8
Exercisable – June 30, 2011		9,380,753	$	0.50		2.8

At June 30, 2011, the total intrinsic value of all warrants outstanding and exercisable was $-0-.

Note 11 - Related Party Transactions

The founder and Chairman of the Board of Directors had an agreement with the Company whereby he is to receive a bonus of five percent of eligible monthly sales. As a result of this agreement, the Company recorded bonus expense of $12,762 and $32,550 to the founder for the six months ended June 30, 2011 and 2010, respectively. This agreement ended effective May 1, 2011.

As of June 30, 2011, the Company owed the founder $34,645 in accounts payable.

~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc.

Notes to Unaudited ~~Interim~~ Condensed Consolidated Financial Statements

On March 31, 2011, the Company entered into an employment agreement with its Chief Executive Officer (“CEO”) and a consulting agreement with its Chairman of the Board of Directors (“Chairman”). These agreements generally require each executive to devote substantially all of his business time to the Company’s affairs, establish standards of conduct, prohibit competition with the Company’s company during their term, affirm the Company’s rights respecting the ownership and disclosure of trade secrets and other confidential information, provide for the acts and events that would give rise to termination of such agreements and provide express remedies for a breach of the agreement. Each of the Company’s employees will participate in its standard employee benefit programs, including medical/hospitalization insurance as in effect from time to time. The provisions of the individual agreements are summarized below:

	·	Under the terms of his employment agreement effective March 31, 2011, which has a term of three years and terminates on March 30, 2014 and which shall automatically renew for successive one year periods unless either the Company or the CEO gives written notice of termination at least three months in advance of the end of the initial period of the agreement or any renewal period thereof, the CEO receives an annual salary of $200,000 (with salary commencing on May 1, 2011), a quarterly bonus of 1% of the Company’s gross revenue from direct sales of Company products for the just completed fiscal quarter due out of the Company’s net revenues for such quarter and due no later than 30 business days after the end of each fiscal quarter, and 5-year options to purchase our common stock with exercise prices equal to the market price per share of the Company’s common stock on the grant date as follows: (i) 3,000,000 options to be granted on March 31, 2011, with 1,000,000 options to vest on each one year anniversary of the granted date, and all then unvested options to automatically vest on the date upon which the Company’s aggregate gross revenues reach $50,000,000; and (ii) 1,000,000 options to be granted on the date on which the Company’s aggregate gross revenues reach $25,000,000, which options shall vest immediately on the grant date thereof.
	·	Under the terms of his consulting agreement March 31, 2011, which has a term of three years and terminated on March 30, 2014 and which shall automatically renew for successive one year periods unless the Company notifies the Chairman in writing prior to the end of the initial period of the agreement or any renewal period thereof, the Chairman receives an annual consulting fee of $150,000 (which fee shall commence on May 1, 2011).

Under the terms of his employment agreement effective March 31, 2011, which has a term of three years and terminates on March 30, 2014 and which shall automatically renew for successive one year periods unless either the Company or the CEO gives written notice of termination at least three months in advance of the end of the initial period of the agreement or any renewal period thereof, the CEO receives an annual salary of $200,000 (with salary having commenced on May 1, 2011), a quarterly bonus of 1% of the Company’s gross revenue from direct sales of Company products for the just completed fiscal quarter due out of the Company’s net revenues for such quarter and due no later than 30 business days after the end of each fiscal quarter, and 5-year options to purchase our common stock with exercise prices equal to the market price per share of the Company’s common stock on the grant date as follows: (i) 3,000,000 options to be granted on March 31, 2011, with 1,000,000 options to vest on each one year anniversary of the granted date, and all then unvested options to automatically vest on the date upon which the Company’s aggregate gross revenues reach $50,000,000; and (ii) 1,000,000 options to be granted on the date on which the Company’s aggregate gross revenues reach $25,000,000, which options shall vest immediately on the grant date thereof. As a result of this agreement, the Company recorded bonus expense of $3,254 and $0 for the six months ended June 30, 2011 and June 30, 2010, respectively.

~~Note~~· 11Under -the ~~Contingencies~~terms of his consulting agreement March 31, 2011, which has a term of three years and terminates on March 30, 2014 and which shall automatically renew for successive one year periods unless the Company notifies the Chairman in writing prior to the end of the initial period of the agreement or any renewal period thereof, the Chairman receives an annual consulting fee of $150,000 (which fee commenced on May 1, 2011).

Note 12 – Commitments and Contingencies

Operating leases

The Company leases space for its corporate office . The lease calls for rent of $4,000 per month and has a term through April 2012.

During May 2011, the Company entered into a three year lease for 1,562 square feet of warehouse space. The lease calls for rent of $1,571 per month.

Expected payments on operating leases are as follows:

	For the 12 month Ended June 30,
2012	$	58,852
2013		18,852
2014		17,281
	$	94,985

Economic Risks and Uncertainties

The recent global economic slowdown has caused a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions not only limit its access to capital, but also make it difficult for its customers, its vendors and us to accurately forecast and plan future business activities.

Legal Proceedings

From time to time, the Company is periodically a party to or otherwise involved in legal proceedings arising in the normal and ordinary course of business. As of the date of this Report, the Company is not aware of any proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.

Note 12 - Subsequent Events

On April 6, 2011, the Company raised an additional $3,000,000 in cash through the issuance of convertible notes payable. In addition, $1,690,376 of outstanding notes payable and accrued interest as of the funding date were exchanged for new convertible notes payable and warrants with similar terms and conditions as the new $3,000,000 convertible notes payable. The notes bear interest at ten percent and the interest is payable semi annually. The notes have a two year maturity date.

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Current Report on Form 8-K, which was filed with the United States Securities and Exchange Commission (the “SEC”) on April 6, 2011 and is available on the SEC’s website.

Unless the context requires otherwise, references in this Form 10-Q to the “Company,” The Source,” “we.” “our” and “us” for the period prior to the closing of the reverse merger on March 31, 2011 discussed below, refer to The Source Vitamin Company, Inc., a privately held Delaware corporation that is now our wholly owned subsidiary, and references to the “Company,” Stone Harbor,” “we.” “our” and “us” for the period subsequent to the closing of the reverse merger on March 31, 2011, refer to ~~Stone~~LTS ~~Harbor Investments~~Nutraceuticals, Inc., a Delaware corporation that is a publicly traded company, and its subsidiary, The Source Vitamin Company, Inc.

~~The~~Management’s ~~following~~ discussion and analysis ~~should~~of befinancial ~~read~~condition inand ~~conjunction~~results ~~with~~of operations is based upon our unaudited ~~interim~~ condensed consolidated financial statements, ~~and~~which ~~related~~have ~~notes~~been ~~appearing~~prepared ~~elsewhere~~in accordance with accounting principles generally accepted in ~~this~~the ~~report~~United onStates ~~Form 10-Q~~of America. InThe ~~addition~~preparation toof ~~historical~~these ~~information,~~unaudited ~~this~~condensed ~~discussion~~consolidated ~~and~~financial ~~analysis~~statements ~~contains~~requires ~~forward-looking~~us ~~statements~~to make estimates and assumptions that ~~involve~~affect ~~risks~~the reported amounts of assets, ~~uncertainties~~liabilities, revenues, and ~~assumptions.~~expenses, ~~Our~~and ~~actual~~related ~~results~~disclosure ~~may~~of ~~differ~~contingent ~~materially~~assets ~~from~~and ~~those~~liabilities. ~~anticipated~~On inan ~~these~~ongoing ~~forward-looking~~basis, ~~statements~~we asevaluate aour ~~result~~estimates ofand ~~certain factors~~assumptions, including, but not limited to, those ~~set~~related ~~forth~~to ~~under~~estimated ~~“Risk~~lives ~~Factors”~~for amortizable software and debt issuance costs, accrued expenses and the fair value of preferred and common stock granted in connection with various transactions. We base our ~~Report~~estimates on ~~Form~~historical ~~8-K~~experience asand ~~filed~~ on ~~April~~various 6other assumptions that are believed to be reasonable under the circumstances, ~~2011~~the ~~with~~results of which form the ~~United~~basis ~~States~~for ~~Securities~~making judgments about the carrying values of assets and ~~Exchange~~liabilities ~~Commission,~~that orare ~~the~~not ~~SEC~~readily apparent from other sources. Actual results may differ from these estimates and assumptions.

~~Management’s~~Merger ~~discussion~~ and ~~analysis~~Name of financial condition and results of operations is based upon our unaudited interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited interim condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including, but not limited to, those related to estimated lives for amortizable software and debt issuance costs, accrued expenses and the fair value of preferred and common stock granted in connection with various transactions. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.Change

On March 31, 2011, Stone Harbor Investments, Inc. (“Stone Harbor”) a then shell corporation, merged with The Source Vitamin Company (“Source Vitamin”) and Source Vitamin became the surviving corporation (the “Merger”). This transaction was accounted for as a reverse merger. Stone Harbor did not have any operations and ~~Subsequent~~majority-voting ~~Events~~control was transferred to the shareholders of Source Vitamin. Since Source Vitamin acquired a controlling voting interest, it was deemed the accounting acquirer, while Stone Harbor was deemed the legal acquirer. The historical financial statements of the Company are those of Source Vitamin.

Pursuant to the Merger, the Company acquired 77,924,000 shares of common stock from Stone Harbor’s majority shareholders for $65,000, which it then cancelled, and concurrently issued 24,300,000 shares of common stock to Source Vitamin stockholders. Of the 24,300,000 shares issued to Source Vitamin shareholders, 172,600 shares were placed in escrow for conversion of the convertible debentures. If the debentures are not converted into common stock by their maturity dates, the shares will revert back to the original shareholders of record on the date of merger on a pro rata basis. Upon the closing of the Merger, former Source Vitamin stockholders held 58% of the issued and outstanding shares of common stock of the Company.

On ~~March~~April 3121, 2011, ~~pursuant~~ the Company filed an amendment to aits ~~share~~articles ~~exchange~~of ~~transaction,~~incorporation ~~Source~~in ~~Vitamin~~Nevada ~~merged~~to ~~with~~change its name to LTS Nutraceuticals, Inc. Its directors and ~~into~~shareholders ~~the~~also ~~Company~~approved a stock dividend to ~~become~~its shareholders pursuant to which the shareholders shall received 49 additional shares of Company’s ~~principal~~common ~~operating~~stock ~~business~~for ~~(“Merger”). Prior~~each toshare ~~the~~of ~~merger, the~~ Company’s ~~had~~common nostock ~~operations,~~owned. All ~~referred~~share toand inper ~~this~~share ~~Current~~amounts ~~Report~~have asbeen ~~the~~retroactively ~~“Pre-Merger Business~~restated.”

In connection with the Merger, the former shareholders of Source Vitamin exchanged their ownership interests for common stock of the Company. As a result of this exchange the former shareholders of the Source Vitamin own approximately 58% of the Company’s outstanding common stock, before adjusting for any conversion or exercise of any of the Company’s convertible or exchangeable equity or debt instruments into common shares of the Company.

Subsequent events

Following consummation of the merger, on April 6, 2011, the Company raised an additional $4,690,376 through the sale of convertible promissory notes and warrants, referred to throughout this Current Report as the “Offering”. Of the $4,690,376 raised, $1,690,376 was used to convert existing bridge loan and other notes payable outstanding (along with accrued interest thereon) as of the time of the Merger into convertible promissory notes with the same terms and rights as the other notes issued under the Offering.

Company Overview

WeOur principal offices are ~~based~~located in Florida, and ~~operate~~we ~~in the United States and Canada. We~~ develop and sell high-quality nutritional products (“nutraceuticals”) that are distributed throughout North America through a network marketing system, which is a form of direct selling. Our customer base comprises two types of customer; "Entrepreneurs" (formerly called “distributors”) and "Retail Customers." Entrepreneurs are independent distributors of our products who also purchase the products for their personal use. Retail Customers purchase our products strictly for their personal use. ~~At March 31, 2011 and 2010, we had approximately 3,407 and 2,976, respectively, Entrepreneurs and Retail Customers in North America.~~

We have ongoing operations in the United States and Canada. We began shipping products in the United States during June 2009 and in Canada during April 2010. Sales from the U.S. for the three months ended March 31, 2011 and 2010 were $132,605 and $261,358 respectively, it represents a 49% decrease of the United States total sales in 2011 over 2010. The decrease is mainly attributed to the Company lacking sufficient working capital to manufacture enough product to fulfill sales orders in a timely manner. As a result, our entrepreneurs reduced their orders and even began to focus their efforts selling products of our competitors. Sales from Canada for the three months ended March 31, 2011 and 2010 were $50,680 and $0 respectively. The increase is a result we did not have any revenues in Canada for the three months ended March 31, 2010.18

AsOn aJune ~~developer~~13, ~~and manufacturer of nutritional and personal care products~~2011, ~~we utilize a direct selling model for~~ the ~~distribution~~Company ofentered ~~our~~into ~~products.~~a ~~The~~Purchase ~~success~~ and ~~growth~~Exclusive ofMarketing ~~our~~Agreement ~~business~~with isImagenetix, ~~primarily~~Inc. ~~based~~(“Imagenetix”), onProprietary ~~our~~Nutritionals, ~~ability~~Inc. to(“Proprietary”) ~~attract new Entrepreneurs~~ and ~~retain~~Pharmachem ~~existing~~Laboratories, ~~Entrepreneurs~~Inc. to(with ~~sell~~Imagenetix and ~~consume our products. Additionally~~Proprietary, it“PNI”) ispursuant ~~important~~ to ~~attract~~which ~~and~~the ~~retain~~Company ~~Retail~~was ~~Customers,~~granted ~~many~~the ofexclusive ~~whom~~United ~~are~~States ~~loyal~~rights ~~consumers~~to ofpurchase ~~our~~from ~~products.~~PNI Wetheir ~~believe~~Celadrin® ~~that~~products ~~our ability to attract~~ and ~~retain~~brand ~~Entrepreneurs~~(“Celadrin”) ~~and~~as ~~Retail~~well ~~Customers~~as toexclusive ~~sell~~marketing and ~~consume~~distribution ~~our~~and ~~products~~related isrights ~~influenced~~in bythe ~~a number of factors~~U.S. Celadrin ~~Some~~is ofour ~~these~~first ~~factors~~product ~~include:~~formulation ~~the~~which ~~growing~~we ~~desire~~sell ~~for~~to ~~a secondary source of income and small business ownership,~~ the ~~general~~mass ~~public's~~market ~~heightened~~through ~~awareness~~retail ~~and~~market ~~understanding~~channel of ~~the~~retailers, ~~connection~~including ~~between diet and long-term health~~Walgreens, ~~and~~Rite ~~the aging of the worldwide population~~Aid, asCostco ~~older~~and ~~people~~BJ’s ~~generally~~Wholesale ~~tend to consume more nutritional supplements~~Club.

We began shipping products to Entrepreneurs in the United States in June 2009 and in Canada in April 2010. We also began selling Celadrin to our retail market customers in June 2011.

As a developer and manufacturer of nutritional and personal care products, we utilize a direct selling model for the distribution of our products. The success and growth of our business is primarily based on our ability to attract new Entrepreneurs and retain existing Entrepreneurs to sell and consume our products. Additionally, it is important to attract and retain Retail Customers, many of whom are loyal consumers of our products. We believe that our ability to attract and retain Entrepreneurs and Retail Customers to sell and consume our products is influenced by a number of factors. Some of these factors include: the growing desire for a secondary source of income and small business ownership, the general public's heightened awareness and understanding of the connection between diet and long-term health, and the aging of the worldwide population, as older people generally tend to consume more nutritional supplements. Other keys to our success will be:

to increase the sales and product mix of Celadrin and add other retail products

our revised Entrepreneur compensation plan to provide our entrepreneurs an opportunity to earn compensation from the sales of Celadrin and similar products through our retail network (called “inline marketing”).

We believe that our high-quality products and our anticipated financially rewarding entrepreneur compensation plan are the key components to attracting and retaining Entrepreneurs and the continued success and growth of our business. To support our Entrepreneurs in building their businesses, we will sponsor meetings and events throughout the year, which offer information about our products and our network marketing system. These meetings are designed to assist Entrepreneurs in their business development and to provide a forum for interaction with some of our Entrepreneurs with leaders and members of our management team. We will also provide low cost sales tools, which we believe are an integral part of building and maintaining a successful home-based business for our associates.

In addition to Company-sponsored meetings and sales tools, we will maintain a website exclusively for our entrepreneurs where they can stay up-to-date on the latest news, obtain training materials, manage their personal information, enroll new customers, shop, and register for Company-sponsored events.

Expansion Plans

Our international operations were initiated by launching in Canada in April 2010. AsWe ~~discussed in the Liquidity section below, we~~ are currently exploring additional future expansion plans that include entry into new foreign markets and potential acquisition targets. We have identified several products and foreign markets in Europe, Asia and South America to be considered for future expansion. Furthermore, we are considering mergers and acquisitions of network marketing or retail/wholesale nutraceutical companies that offer synergy with the Company’s operations in addition to identifying other products that we can offer through our retail marketing arm.

We are also in the planning stages of introducing diet centers to be known as “Symbiotic Diet Centers”. These centers will be company – owned and staffed and will be venues where entrepreneurs and end-user clients can receive customized nutritional counseling and find all of our products for sale. Specifically, these centers will offer:

 Personalized nutritional information and counseling ~~ Programs for weight management and maintenance  The ability to solidify relationship between the Company, its entrepreneurs and its end-user clients.~~



Programs for weight management and maintenance



The ability to solidify relationship between the Company, its entrepreneurs and its end-user clients.

We plan to introduce these centers in the first quarter of 2012 initially in the following locations: Fort Lauderdale, Florida, Columbus, Ohio, Los Angeles, California, New York, NY, Atlanta, Georgia, British Columbia, Canada, and Toronto, Canada. We plan to roll out locations at the rate of two per calendar quarter.

Critical Accounting Policies and Estimates

Accounts Receivable

Revenue Recognition

The Company generates revenue from the ~~direct~~ sales of its vitamin and related health and nutritional products directly to consumers through its ~~entrepreneur~~Entrepreneurs and retail marketing network. Revenue is recognized when all of the following conditions exist: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.

~~Revenue~~The isCompany ~~recognized~~accounts atfor ~~the~~payments ~~time~~made ~~products~~to ~~are~~customers ~~shipped. The~~in ~~Company~~accordance ~~generally~~with ~~requires~~ASC 605 “Revenue Recognition” (“ASC 605”), which states that cash orconsideration ~~credit~~(including ~~card~~a ~~payment~~sales atincentive) ~~the~~given ~~point~~by a vendor to a customer is presumed to be a reduction of ~~sale. The~~the ~~compensation~~selling ~~plan~~prices ~~for~~of the ~~Company~~vendor’s ~~entrepreneurs~~products ~~generally~~or ~~does~~services ~~not~~and, ~~provide~~therefore, ~~rebates~~should orbe ~~selling~~characterized ~~discounts~~as toa ~~those~~reduction ~~who~~of ~~purchase~~revenue ~~its~~when ~~products~~recognized in the vendor’s income statement, rather than a sales and ~~services~~marketing expense. The Company ~~classifies~~has ~~selling~~various agreements with customers that provide for discounts and rebates,. ifThese ~~any,~~agreements are classified as a reduction of revenue. Certain other costs associated with customers that meet the requirements of ASC No. 605 are recorded as sales and marketing expense.

Revenue is recognized at the time products are shipped. The Company generally requires cash or credit card payment at the point of sale for sales to Entrepreneurs. The compensation plan for the Company’s Entrepreneurs generally does not provide rebates or selling discounts to Entrepreneurs who purchase its products and services.

Product Return Policy

Refunds are allowed only to Entrepreneurs who have given voluntary termination notices, or for incorrect or defective items. In these circumstances only, the Company provides a 30-day return policy.

Deferred Revenue

The Company requires cash or credit card payment at the time of sale for certain products. Any payments that are received prior to shipment are recorded as deferred revenue until the specific product is shipped as described above, at which time, it is recorded as revenue.

Results of Operations

WeComparison ~~currently~~of ~~generate revenue exclusively from~~ the ~~sale~~three ~~high-quality~~months ~~nutritional~~ended ~~products~~June ~~(“nutraceuticals”) that are distributed throughout North America through a network marketing system~~30, ~~which~~2011 ~~is a form of direct selling. Our operations in each of our markets exhibit similar financial performance metrics~~ and ~~have similar economic characteristics. As such, we have aggregated our operations around the world into a single operating segment.~~2010

~~Comparison~~The offollowing ~~the~~table ~~three~~sets ~~months~~forth, ~~ended~~for ~~March~~the 31periods indicated, ~~2011~~condensed ~~and~~consolidated ~~2010~~statements of operations information:

The following table sets forth, for the periods indicated, consolidated statements of operations information:

	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010			Change (Dollars)			Change (Percentage)
Gross Sales	$	760,579		$	486,538		$	274,041			56	%
Reserve for rebates		382,074			-			382,074			100	%
Net Sales		378,505			486,538			(108,033	)		(22	)%
Cost of Sales		293,957			154,628			139,329			90	%
Gross Profit		84,548			331,910			(247,362	)		(75	)%
Entrepreneur incentives		214,265			95,086			119,179			125	%
Selling, General and Administrative		802,185			285,396			516,789			181	%
Total Operating Expenses		1,016,450			380,482			635,968			167	%
Loss from Operations		(931,902	)		(48,572	)		(883,330	)		(1,819	)%
Derivative Expense		4,906			-			4,906			100	%
Interest Expense		242,571			34,560			208,011			602	%
Net Loss	$	(1,179,379	)	$	(83,132	)	$	(1,096,247	)		(1,319	)%

	Three Months Ended March 31, 2011			Three Months Ended March 31, 2010			Change (Dollars)			Change (Percentage)
Net Sales	$	183,285		$	261,358		$	(78,073	)		(30	)%
Cost of Sales		70,787			96,777			(25,990	)		(27	)%
Gross Profit		112,498			164,581			(52,083	)		(32	)%
Entrepreneur incentives		89,891			174,252			(84,361	)		(48	)%
Selling, General and Administrative		529,190			225,341			303,849			135	%
Total Operating Expenses		619,081			399,593			219,488			55	%
Loss from Operations		(506,583	)		(235,012	)		(271,571	)		(116	)%
Interest Expense		(157,753	)		(26,757)			(130,996	)		490	%
Net Loss	$	(664,336	)	$	(261,769)		$	(402,567	)		(154	)%

~~Net~~ Sales

~~Net~~Gross sales for the three months ended ~~March~~June 3130, 2011 and 2010 were $~~183~~760,~~285~~579 and $~~261~~486,~~358~~538, respectively. ~~Net~~Gross sales ~~decreased~~increased $78274,~~073~~041 or 3056%, in ~~2011 over 2010,~~ the ~~decrease~~second isquarter ~~mainly~~of ~~attributed~~2011 toover the ~~Company~~same ~~lacking~~period ~~sufficient working capital to manufacture enough product to fulfill sales orders~~ in ~~a timely. As a result~~2010, ~~our~~primarily ~~entrepreneurs~~due ~~reduced their orders and even began~~ to ~~focus~~the ~~their~~sales ~~efforts selling products~~ of our ~~competitors. Management~~newly ~~expects~~acquired ~~this~~Celadrin ~~trend~~product ~~to reverse during the following months as the Company raised $3,000,000~~ in aJune ~~private~~2011. ~~placement~~Gross ~~(see~~sales ~~Note~~Celadrin 12 in ~~our~~June ~~condensed~~2011 ~~financial~~amounted ~~statements) which will provide management with sufficient working capital~~ to ~~implement new marketing and growth strategies~~$523,436.

Reserve of rebates for the three months ended June 30, 2011 and 2010 were $382,074 and $0 respectively. The reserve for rebates which increased $382,074 or 100%, in 2011 over 2010, relates to the sales of the Celadrin products only. As we had no historical basis for evaluating the rebate reserve for this product as of June 30, 2011, we were required under applicable accounting guidance to reserve for the maximum possible liability of $382,074.

Net sales for the three months ended June 30, 2011 and 2010 were $378,505 and $486,538, respectively. Net sales decreased $108,033 or 22%, in 2011 over 2010. The overall decrease is mainly attributed to a decrease in sales to Entrepreneurs due to lack of sufficient product available to meet delivery requirements in a timely manner. Management expects this trend to reverse if and as it secures financing arrangements to provide sufficient working capital to: (i) meet increased purchase order demand for Celadrin (for which it acquired the exclusive rights in the second quarter of 2011); (ii) meet anticipated demand for its historical products (due in part to its revised compensation plan for our Entrepreneurs); and (iii) the anticipated growth in demand for all products due to implementation of new marketing and growth strategies.

Gross Profit

Gross profit for the three months ended ~~March~~June 3130, 2011 and 2010 were $~~112~~84,~~498~~548 and $~~164~~331,~~581~~910 which represents 6122% and 6368% of the total revenues respectively. The ~~Gross~~gross ~~Profit~~profit decreased $52247,~~083~~362 or 3275% in 2011 over 2010 due to (i) the ~~reduction~~change ofin the ~~revenue~~sales mix as Celadrin has lower margins than the products sold through the direct marketing networks and (ii) the requirement to record a maximum possible reserve for rebates due to the lack of sales history. The ~~Gross~~gross profit for 2011 of 6122% decreased from 63% for 2010 largely due to ~~increase~~the change in ~~material~~the ~~and~~sales ~~production~~mix ~~costs~~as ~~for~~Celadrin ~~one~~has oflower ~~our~~margins than the products ~~and~~sold athrough ~~sales~~the ~~promotion~~direct inmarketing ~~2011~~networks ~~where~~and werecording ~~provided~~a ~~free~~maximum ~~product~~possible ~~bundled~~reserve infor ~~kits~~rebates. Cost of sales for the three months ended ~~March~~June 3130, 2011 and 2010 were $70293,~~787~~957 and $96154,~~777~~628 which represents a 3978% and ~~$37~~32% respectively of the ~~Net~~net sales for the periods, this is aan ~~decrease~~increase of $25139,~~990~~329 or 2790% in 2011 over 2010.

Entrepreneur Incentives

Entrepreneur incentives ~~decreased~~increased to $89214,~~891~~265 for the three months ended ~~March~~June 3130, 2011 compared to $~~174~~95,~~252~~086 for the three months ended ~~March~~June 3130, 2010, aan ~~decrease~~increase of $84119,~~361~~179 or 48125%. The ~~decrease~~increase in entrepreneur incentives iswas primarily due to ~~the~~(i) ~~decrease~~discretionary inprograms ~~net~~to ~~sales~~motivate inthe ~~addition~~entrepreneurs to aincrease ~~decrease~~sales in ~~the~~2011 ~~number~~and of(ii) ~~active~~initial ~~distributors~~incentives aspaid ~~well~~to asentrepreneurs ~~the~~on ~~higher~~sales ~~ranked~~of ~~entrepreneurs~~Celadrin, inboth ~~2011~~of ~~compared~~which todid not occur in 2010.

Selling, General and Administrative

Selling, general and administrative increased to $~~529~~802,~~190~~185 for the three months ended ~~March~~June 3130, 2011 compared to $~~225~~285,~~341~~396 for three months ended ~~March~~June 3130, 2010. Selling, general and administrative expenses increased by $~~303~~516,~~849~~789 or ~~135~~181% in 2011 over 2010. The increase is primarily due to approximately $~~188~~230,000 of consulting and professional fees pertaining to investor relations, public relations, accounting, auditing and legal fees relating which were not incurred in 2010 due to ~~the~~expenses ~~merger~~relating ~~transaction~~to the Merger and public company expense, approximately $65240,000 of salary expense attributable to the increase in workforce from approximately three employees as of June 30, 2010 to fifteen employees ~~that~~as weof ~~did~~June ~~not~~30, ~~have~~2011and approximately $70,000 in ~~2010~~additional travel expenses.

Interest Expense

Interest expense increased to $~~157~~242,~~753~~571 for the three months ended ~~March~~June 3130, 2011 compared to $2634,~~757~~560 for the three months ended June ~~March 31~~30, 2010. Interest expense increased by $~~130~~208,~~996~~011 or ~~490~~602%, largely due to increasing our outstanding debt of $~~729~~740,~~520~~000 at ~~March~~June 3130, 2010 to $14,~~796~~690,~~659~~376 at ~~March~~June 3130, 2011. Also included in interest expense was accretion of note discounts and amortization of deferred loan costs. $7980,~~531~~039 of note discount accretion and $3447,~~564~~027 of deferred loan cost amortization was recorded for the three months ended ~~March~~June 3130, 2011 compared to $5,~~984~~548 and $~~562~~3,934, respectively, for the ~~period~~three months ended ~~March~~June 3130, 2010,. The increase in accretion of note discount and amortization of deferred loan costs in 2011 over 2010 is largely due to ~~note~~writing ~~modifications~~off $74,737 of debt discount and $39,147 of deferred loan costs associated with the ~~note~~notes ~~transaction~~payable that ~~occurred~~were ~~during~~converted ~~the~~into ~~last~~convertible ~~four~~notes ~~months~~payable ofin ~~2010~~conjunction with the April 6, 2011 financing.

~~Liquidity~~Comparison ~~and~~of ~~Capital~~the ~~Resources~~six months ended June 30, 2011 and 2010

During the three months ended March 31, 2011, we incurred a net loss of $664,336 and used $288,253 in cash from our operations primarily as a result of our net loss offset by non cash expenses of $116,521, a decrease in inventory and increases in accounts payable, accrued expenses and deferred revenues. In addition, at March 31, 2011, we had a working capital deficit of $2,019,103 and an accumulated deficit of $2,531,213.

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2010			Change (Dollars)			Change (Percentage)
Gross Sales	$	943,864		$	747,896		$	195,968			26	%
Reserve for rebates		382,074			-			382,074			100	%
Net Sales		561,790			747,896			(186,106	)		(25	)%
Cost of Sales		372,268			251,406			120,862			48	%
Gross Profit		189,522			496,490			(306,968	)		(62	)%
Entrepreneur incentives		304,155			269,338			34,817			13	%
Selling, General and Administrative		1,323,851			510,738			813,113			159	%
Total Operating Expenses		1,628,006			780,076			847,930			109	%
Loss from Operations		(1,438,484	)		(283,586	)		(1,154,898	)		(407	)%
Derivative Expense		4,906			-			4,906			100	%
Interest Expense		400,324			61,317			339,007			553	%
Net Loss	$	(1,843,714	)	$	(344,903	)	$	(1,498,811	)		(435	)%

During the three months ended March 31, 2011, our investing activities used net cash of $10,800 to purchase fixed assets and our financing activities generated $323,000 in net proceeds from the issuance of a $400,000 promissory note offset by $65,000 to purchase treasury stock in connection with the reverse merger.Sales

OnGross ~~April~~Sales 6,for ~~2011,~~ the ~~Company~~six ~~raised~~months anended ~~additional~~June $330,~~000,000~~ ~~through~~2011 ~~the~~and ~~sale~~2010 ofwere $4943,~~690,376~~864 ~~in convertible promissory notes~~ and ~~warrants~~$747,896 respectively. Of Gross ~~the~~sales increased $4195,~~690,376~~968 ~~raised,~~or $126%,~~690,376~~ ~~was~~in ~~used~~2011 toover ~~convert~~the ~~existing~~same ~~bridge~~period ~~loan~~2010, ~~and~~primarily ~~other~~due ~~notes~~to ~~payable~~the ~~outstanding~~sales ~~(along~~of ~~with~~our ~~accrued~~newly ~~interest~~acquired ~~thereon)~~Celadrin asproduct ofin ~~April~~June 6, 2011. ~~into~~Gross ~~convertible~~sales ~~promissory~~Celadrin ~~notes~~in ~~with~~June ~~the~~2011 ~~same~~amounted ~~terms~~to ~~and rights as the other notes issued under the offering~~$523,436.

WeReserve ~~do not~~of ~~yet~~rebates ~~have~~for athe ~~sustained~~six ~~history~~months ofended ~~financial~~June ~~stability. Historically~~30, ~~our~~2011 ~~principal~~and ~~source~~2010 ofwere ~~liquidity~~$382,074 ~~has~~and ~~been~~$0 ~~the~~respectively. The ~~issuances~~reserve offor ~~debt~~rebates ~~securities~~which increased $382,074 ~~including~~or ~~promissory~~100%, ~~notes~~in ~~and~~2011 ~~convertible~~over ~~debentures. Management~~2010, ~~believes~~relates ~~that~~to ~~our~~the ~~cash~~sales ~~balance~~of onthe ~~May~~Celadrin 6,products ~~2011~~only. ofAs ~~approximately $2,538,000~~we ~~million,~~had ~~current~~no ~~level~~historical ofbasis ~~working~~for ~~capital,~~evaluating ~~and~~the ~~implementation~~rebate ofreserve ~~marketing~~for ~~and~~this ~~growth~~product ~~strategies~~as inof June 30, 2011, ~~will~~we bewere ~~sufficient~~required under applicable accounting guidance to ~~sustain~~reserve ~~operations~~for ~~through~~the atmaximum ~~least~~possible ~~March~~liability ~~31,~~of ~~2012~~$382,074.

~~There~~Net ~~can~~sales befor nothe ~~assurance~~six ~~that~~months ~~the~~ended ~~plans~~June ~~and~~30, ~~actions~~2011 ~~proposed~~and by2010 ~~management~~were ~~will~~$561,790 beand ~~successful~~$747,896 ~~that~~respectively. Net wesales ~~will~~decreased ~~continue~~$186,106 toor ~~generate~~25%, ~~revenue~~in ~~from~~2011 ~~advertisements~~over ~~that~~2010. ~~have~~The ~~already~~overall ~~aired,~~decrease oris ~~that~~mainly ~~unforeseen~~attributed ~~circumstances~~to ~~will~~a ~~not~~decrease ~~require~~in ussales to ~~seek~~Entrepreneurs ~~additional~~due ~~funding~~to ~~sources~~lack of sufficient product available to meet delivery requirements in ~~the~~a ~~future~~timely ormanner. ~~effectuate~~Management ~~plans~~expects this trend to ~~conserve~~reverse ~~liquidity.~~if Inand ~~addition,~~as ~~there~~it ~~can~~secures befinancing noarrangements ~~assurance~~to ~~that~~provide ~~our~~sufficient ~~efforts~~working capital to: ~~raise additional~~(i) ~~funds~~meet ~~through~~increased ~~the~~purchase ~~issuance~~order ofdemand ~~debt~~for ~~and/or~~Celadrin ~~equity~~(for ~~securities~~which ~~will~~it beacquired ~~successful~~the orexclusive ~~that~~rights in the ~~event~~second ~~additional~~quarter ~~sources~~ of ~~funds~~2011); ~~are~~(ii) ~~needed~~meet anticipated demand for its historical products (due in part to ~~continue~~its ~~operations,~~revised ~~that~~compensation ~~they~~plan ~~will~~for beour ~~available~~Entrepreneurs); onand ~~acceptable~~(iii) ~~terms,~~the ifanticipated atgrowth in demand for all. products due to implementation of new marketing and growth strategies

Gross Profit

Gross profit for the six months ended June 30, 2011 and 2010 were $189,522 and $496,490 which represents 33.7% and 66.4% of the net sales, respectively. The gross profit decreased $306,969 or 62% in 2011 over 2010 due (i) to the change in the sales mix as Celadrin has lower margins than the products sold through the direct marketing networks and (ii) the requirement to record a maximum possible reserve for rebates due to the lack of sales history. The gross profit for 2011 of 33.7% decreased from 67% for the full year 2010 largely due to the change in the sales mix as Celadrin has lower margins than the products sold through the direct marketing networks and recording a maximum possible reserve for rebates. Cost of sales for the six months ended June 30, 2011 and 2010 were $372,268 and $251,406 which represents a 66.3% and 33.6% respectively of the net sales for the periods, this is an increase of $120,862 or 48% in 2011 over 2010.

Entrepreneur Incentives

Entrepreneur incentives increased to $304,155 for the six months ended June 30, 2011 compared to $269,338 for the six months ended June 30, 2010, an increase of $34,817 or 13%. The increase in entrepreneur incentives was primarily due to (i) discretionary programs to motivate the entrepreneurs to increase sales in the second quarter of 2011 and (ii) initial incentives paid to entrepreneurs on sales of Celadrin, both of which did not occur in 2010.

Selling, General and Administrative

Selling, general and administrative increased to $1,323,851for the six months ended June 30, 2011 compared to $510,738 for six months ended June 30, 2010. Selling, general and administrative expenses increased by $813,113 or 159% in 2011 over 2010. The increase is primarily due to approximately and additional $450,000 of consulting and professional fees pertaining to investor relations, public relations, accounting, auditing and legal fees relating which were not incurred in 2010 due to expenses relating to the Merger and public company expenses and approximately $310,000 of salary expense attributable to the increase in workforce from approximately three employees as of June 30, 2010 to fifteen employees as of June 30, 2011.

Interest Expense

Interest expense increased to $400,324 for the six months ended June 30, 2011 compared to $61,317 for the six months ended June 30, 2010. Interest expense increased by $339,007 or 553%, largely due to increasing our outstanding debt of $740,000 at June 30, 2010 to $4,690,376 at June 30, 2011. Also included in interest expense was accretion of note discounts and amortization of deferred loan costs. $159,569 of note discount accretion and $81,592 of deferred loan cost amortization was recorded for the six months ended June 30, 2011 compared to $4,496 and $11,111, respectively, for the six months ended June 30, 2010. The increase in accretion of note discount and amortization of deferred loan costs in 2011 over 2010 is largely due to writing off $74,737 of debt discount and $39,147 of deferred loan costs associated with the notes payable that were converted into convertible notes payable in conjunction with the April 6, 2011 issuance of the convertible notes payable.

Going Concern, Liquidity and Management's Plan

During the six months ended June 30, 2011, we incurred a net loss of $1,843,714 and used $1,907,426 in cash from our operations primarily as a result of our net loss offset by non cash expenses of $266,651, and increases in restricted cash, accounts receivable, prepaid expenses, accounts payable, accrued expenses and deferred revenues. In addition, at June 30, 2011, we had working capital of $1,424,352 and an accumulated deficit of $3,710,590.

During the six months ended June, 30 2011, our investing activities used net cash of $1,352,101 to purchase fixed assets and a net increase in restricted cash and our financing activities generated $3,299,525 in net proceeds from the issuance of a $400,000 promissory note offset by $65,000 to purchase treasury stock in connection with the reverse merger, net proceeds of $3,020,525 from the April 6, 2011 capital raise and payment of $56,000 of debt issue costs.

On April 6, 2011, the Company raised an additional $3,020,525 through the sale of $4,690,376 in convertible notes payable and warrants. Of the $4,690,376 raised, $1,690,376 was used to convert existing bridge loan and other notes payable outstanding (along with accrued interest thereon) as of April 6, 2011 into convertible notes payable with the same terms and rights as the other notes issued under the offering. In connection with the offering, $74,737 of debt discount and $39,147 of deferred loan costs associated with the $1,690,376 of bridge loan and other notes payable that were converted in the transaction.

We do not yet have a sustained history of financial stability. Historically our principal source of liquidity has been the issuances of debt securities, including notes payable and convertible debentures.

Management is in the process of executing a plan to improve the operating performance and the financial position of the Company. This plan includes optimizing obtaining additional equity or debt financings, securing financing to purchase inventory, and increasing our product offering mix to the customers in our retail network. In addition, the Company continues to develop other initiatives intended to either increase sales, reduce costs or improve liquidity. Although management's plan reflects improvements in these trends, there can be no assurance that management's plan to improve the operating performance and the financial position of the Company will be successful. The Company continues to evaluate other alternative sources of capital for ongoing cash needs, however, there can be no assurance the Company will be successful in those efforts.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result should the Company be unable to continue as a going concern.

Related Party Transactions

The founder ~~has~~had an agreement with Source Vitamin whereby he iswas to receive a bonus of five percent of eligible monthly sales ~~through~~that ~~March~~ended 31May 1, 2011. As a result of this agreement, the Company recorded bonus expense of $812,~~256~~762 and $1132,~~434~~550 to the founder for the ~~periods~~six months ended ~~March~~June 3130, 2011 and 2010, respectively.

See “Related Party Transactions” in our footnotes to our condensed consolidated financial statements for a description of an employment agreement with our CEO and a consulting agreement with our founder.

Off-Balance Sheet Arrangements

With the exception of operating leases, the company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company’s financial condition, results of operations or cash flows. The Company enters into operating leases for property. ~~See notes to the interim condensed consolidated financial statements for additional information on the Company’s operating leases.~~

~~New~~Cautionary ~~Accounting~~Factors ~~Pronouncements~~That May Affect Future Results

~~There~~This Quarterly Report on Form 10-Q and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of which are nosubject ~~recent~~to ~~accounting~~risks ~~pronouncements~~and ~~not~~uncertainties. ~~yet~~You ~~adopted~~can identify these forward-looking statements by their use of words such as “expects,” “plans,” “will,” “estimates,” “forecasts,” “projects” and other words of similar meaning. You can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company’s growth strategy, financial results and product and development programs. You must carefully consider any such statement and should understand that many factors could cause actual results to differ from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are ~~material~~known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.

~~Forward-Looking Statements~~23

~~This~~The ~~report~~Company ~~contains~~does not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements ~~including~~in ~~future~~light ~~expansion~~of ~~plans,~~factors ~~profitability~~described ~~and~~in ~~liquidity,~~this ~~our~~Form ~~expectations~~10-Q. ~~regarding~~In ~~revenue,~~various ~~our~~filings ~~belief~~the ~~regarding~~Company ~~decreased~~has ~~revenues,~~identified ~~our~~important ~~belief~~factors ~~regarding~~that ~~having~~could ~~sufficient~~cause ~~cash~~actual ~~and~~results ~~our~~to ~~belief~~differ ~~regarding~~from ~~working~~expected ~~capital~~or historic results. ~~Forward-looking~~ ~~statements~~You ~~can~~should beunderstand ~~identified~~that byit ~~words~~is ~~such~~not aspossible ~~“anticipates,”~~to ~~“intends,”~~predict ~~“plans,”~~or ~~“seeks,”~~identify ~~“believes,”~~all ~~“estimates~~such factors. Consequently,” ~~“expects”~~you ~~and~~should ~~similar~~not ~~references~~consider any such list to ~~future~~be ~~periods~~a complete list of all potential risks or uncertainties.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the future price of material used in the manufacture of our products, the effectiveness of our advertising campaigns, future economic conditions, the condition of the global credit and capital markets and the willingness of people to use our products.

Further information on our risk factors is contained in our filings with the SEC, including our Form 8-K filed on April 6, 2011. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

The registrant is subject to certain market risks, including changes in interest rates and currency exchange rates. The registrant does not undertake any specific actions to limit those exposures.

ITEM 4. CONTROLS AND PROCEDURES

Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

~~As of March 31~~Management, ~~2011,~~with ~~we conducted an evaluation, under~~ the ~~supervision and~~ participation of ~~management including~~ our Chief Executive Officer/ and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in ~~Rule~~Rules 13a-15(e) and ~~Rule~~ 15d-15(e) ofpromulgated under the Securities Exchange Act of 1934, as amended). ~~There~~(the ~~are~~“Exchange ~~inherent~~Act”)) ~~limitations~~as toof the ~~effectiveness~~end of ~~any~~the ~~system~~period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officer/ Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures. ~~Accordingly,~~are ~~even~~not effective ~~disclosure~~to ~~controls~~ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized, documented and ~~procedures~~reported, ~~can~~within ~~only~~the ~~provide~~time ~~reasonable~~periods ~~assurance~~specified ofin ~~achieving~~the ~~their~~SEC ~~control~~rules ~~objectives~~and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~Based~~Notwithstanding ~~upon~~the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this ~~evaluation~~Quarterly Report, ~~our~~the Chief Executive Officer/ the Chief Financial Officer ~~concluded~~believes that ~~our~~the ~~disclosure~~condensed ~~controls~~consolidated financial statements and ~~procedures~~other ~~are~~information ~~effective~~contained atin ~~the~~this ~~reasonable~~Quarterly ~~assurance~~Report ~~level~~present asfairly, ofin ~~March~~all 31material respects, ~~2011~~our business, financial condition and results of operations.

Our management, including our Chief Executive Officer/ Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

We have identified certain significant deficiencies that together constitute a material weakness in our disclosure controls and procedures. These significant deficiencies primarily relate to our lack of formalized written policies and procedures in the financial accounting area, our lack of appropriate resources to handle the accounting for complex equity and other transactions, and our lack of sophisticated financial reporting systems, due in part to the small size of our Company prior to the Merger. These significant deficiencies together constitute a material weakness in our disclosure controls and procedures.

We intend to take steps in the third quarter to remedy these issues by implementing necessary written procedures and reports, as we still have additional work to do to bring our disclosure controls and procedures up to public-company standards. Because the Merger occurred on March 31, 2011 and because Source Vitamin was a small privately-held company, we were unable to upgrade our disclosure controls and procedures to the level required of a public company prior to the end of the period covered by this quarterly report. Nevertheless, we are initiating remediation steps to rectify the identified significant deficiencies that together constitute a material weakness in our disclosure controls and procedures. Because these remediation steps have not yet been completed, we have performed additional analyses and other post-closing procedures to ensure that our condensed consolidated financial statements contained in this Quarterly Report were prepared in accordance with U.S. GAAP and applicable SEC regulations. Our planned remediation includes formalizing written policies and procedures,

determining the appropriate resources to handle complex transactions as they arise in the future, and upgrading our financial reporting systems.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the first quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings. ~~None.~~

~~Item~~We ~~1A.~~are ~~Risk~~not ~~Factors. Not~~aware ~~applicable~~of any litigation pending or threatened by or against the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On March 31, 2011, Stone Harbor Investments, Inc. (“Stone Harbor” or the “Company”) entered into a Share Exchange Agreement (the “Exchange Agreement”), with The Source Vitamin Company, Inc. (“Source Vitamin”) and the shareholders of Source Vitamin. Pursuant to the Exchange Agreement, which closed on March 31, 2011 ~~(the “Closing Date”)~~, the Company issued 24,300,000 (486,000) shares of the Company’s common stock to the shareholders of Source Vitamin ~~(the “Acquisition Shares”)~~, representing approximately 58% of the Company’s aggregate issued and outstanding common stock following the closing of the Exchange Agreement, in exchange for all of the issued and outstanding common stock of Source Vitamin.

On April 6, 2011, the Company entered into a subscription agreement (the “Subscription Agreement”) with accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell secured convertible promissory notes (the “Notes”) in the aggregate principal amount of up to $5,000,000. Pursuant to the Subscription Agreement, on April 6, 2010, the Company issued and sold to the Investors, convertible promissory notes (the “Notes”) in the aggregate principal amount of $4,690,376.34 (the “Private Placement”). The Notes are secured by a senior security interest in all of the assets of the Company and its subsidiaries. The Notes are convertible into common stock of the Company at an exercise price of $0.50 per share, subject to adjus tment in the event of stock splits, stock dividends, or in the event of certain subsequent issuances by the Company of common stock or securities convertible into common stock at a lower price. The Company intends to effect a 50:1 forward stock split of its Common Stock as a dividend, and this stock split shall not affect the exercise price of the Notes which shall remain at $.50 per share after the effectiveness of the stock split. The Notes mature two years from the date of issuance. The Notes bear interest at the rate of 10% per annum due and payable in cash semi-annually in arrears commencing six months from the date of closing and upon maturity. If an event of default has not occurred, the Company may elect to make any interest payments in shares of its common stock at a discount of 20% to the VWAP (volume weighted average price) for the Company’s common stock for the five final trading days directly preceding such semi annual interest payment date. In the eve nt (i) the Company is prohibited from issuing shares issuable upon conversion of a note, (ii) upon the occurrence of any other event of default, that continues beyond any applicable cure period, (iii) a change in control occurs, or (iv) upon the liquidation, dissolution or winding up of the Company or any subsidiary, then at the noteholder’s option, the Company must pay to each noteholder, a sum of money determined by multiplying up to the outstanding principal amount of the note designated by each such noteholder by, at the noteholder’s election, the greater of (x) 120%, or (y) a fraction the numerator of which is the highest closing price of the Company’s common stock for the thirty days preceding the date demand is made by the noteholder and the denominator of which is the lowest applicable conversion price during such thirty (30) day period, plus accrued but unpaid interest and any other amounts due. The Company has also i ssued to the Investors two warrants (collectively, the “Warrants”) to purchase common stock for each one share of Company common stock purchased on the closing date of the Private Placement . The Warrants will have a five-year term, may be exercised on a cashless basis (commencing twelve months after the closing date of the Private Placement only if the common stock underlying the Warrants is not included for public resale in an effective registration statement), and have an exercise price of $0.50, subject to adjustment in the event of stock splits, stock dividends, or in the event of certain subsequent issuances of the Company of common stock or securities convertible into common stock at a lower price. The Notes may not be converted, and the Warrants may not be exercised, to the extent such conversion or exercise would cause the holder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 4.99% of the Company’s then outstandin g shares of common stock following such conversion or exercise. Pursuant to the Subscription Agreement, the Investors shall have demand and piggyback registration rights. The Company’s obligations under the Notes are guaranteed by Source Vitamin Company, the Company’s wholly owned subsidiary.

Pursuant to an escrow agreement entered into between the Company, the Investors, and Grushko & Mittman, P.C., as escrow agent, $1,500,000 from the sale of the Notes will continue to be held in escrow in a non-interest bearing account and released to the Company or on the Company’s behalf not more frequently than one time each ten days. A request for release must be made in writing to the Escrow Agent and Collateral Agent. The request must include a copy of unanimously adopted resolutions of the board of directors of the Company certified by the secretary of the Company and the Company’s chief financial officer that (i) the Company is requesting a release of funds and the details thereof including the amount, purposes, and wire delivery instructions, (ii) that such requested funds are for reimbursement of funds which were timely employed in conformity in all material respects with the use of proceeds set forth on Schedule 9(e) to the Subscription Agreement under the heading “Use of Proceeds to be Reimbursed After Closing”, and (iii) an Event of Default, or an event that with the giving of notice or the passage of time could become an Event of Default, has not occurred. The Company must provide to Collateral Agent reasonably satisfactory proof that the funds for which reimbursement is sought had been used for the purposes described in part (ii) of the previous sentence. The Escrow Agent may not release any funds if an objection to such release has been made by Collateral Agent. Deviations from Schedule 9(e) to the Subscription Agreement may be made subject to the written approval of the Collateral Agent. 9(e) contemplates the entire $1,500,000 will be used for public relations and investor relations services rendered by a direct marketing firm under t he Company’s direction to implement and manage a direct mail correspondence program. The Company believes that this program will be beneficial for its business and keeping its shareholders apprised of its progress. Unless postponed by the Company and Collateral Agent, any funds retained in escrow on the nine month anniversary of the Closing Date will be released to Subscribers requesting such release in proportion to the relative amount of Note principal held by all Subscribers as of such nine month anniversary date. Upon release to the Subscribers, such sums shall be applied against amounts outstanding on the Notes in the manner set forth in the Notes.

On April 6, 2011, in a private placement transaction, exempt from registration under Section 4(2) of the Securities Act of 1933, the Company issued $4,690,376 of Convertible Notes Payable, of which $1,670,376 went to refinancing of existing notes payable and related accrued interest. The Convertible Notes have a two year term maturing April 5, 2013, bear interest at ten percent per annum (payable semi-annually) and are secured by a first lien on all assets of the Company. The principal balances of the notes along with any unpaid interest may be converted anytime at the option of the holders to common stock at a price of $0.50 per share. During the life of the notes, the conversion price will be adjusted any time the Company sells it stock for a price under $0.50 to the lowest price sold. In connection with the Notes, the Company issued 9,380,753 five year warrants to acquire the Company’s common stock at a price of $0.50 per share. During the life of the notes, the exercise price will be adjusted any time the Company sells it stock for a price under $0.50 to the lowest price sold.

In connection with the foregoing, the Company relied upon the exemption from securities registration afforded by Rule 506 of Regulation D as promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”) and/or Section 4(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities. Not applicable.

Item 5. Other Information. None.

Item 6. Exhibits

Exhibit 31 - ~~Certifications~~Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32 - ~~Certifications~~Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements 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.

~~the~~Dated: ~~Registrant~~August ~~has~~15, ~~duly caused this Report to be signed on its behalf~~2011

by the undersigned thereunto duly authorized.

Dated: May 13, 2011

STONE HARBOR INVESTMENTS, INC.

By: /s/Jerry Rayman Jerry Rayman, Principal Executive Officer and Principal Financial and Accounting Officer

Jerry Rayman, Principal Executive Officer and

Principal Financial and Accounting Officer

Filing Compare · LTS Nutraceuticals, Inc.