-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QX83J6vOFR7umkgy84ATDekeIRs27/V5/FZM95tvyKvjiRYdusIVa2JLvAqpQh2c 1RWYfqeU18KyaOUGsqfaUg== 0001019056-03-000771.txt : 20030814 0001019056-03-000771.hdr.sgml : 20030814 20030814065701 ACCESSION NUMBER: 0001019056-03-000771 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATURAL HEALTH TRENDS CORP CENTRAL INDEX KEY: 0000912061 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 592705336 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26272 FILM NUMBER: 03843277 BUSINESS ADDRESS: STREET 1: 12901 HUTTON DRIVE STREET 2: -- CITY: DALLAS STATE: TX ZIP: 75234 BUSINESS PHONE: 972-241-6525 MAIL ADDRESS: STREET 1: 5605 N. MACARTHUR BLVD. STREET 2: 11TH FLOOR CITY: IRVING STATE: TX ZIP: 75038 10QSB 1 natural_10qsb.txt FORM 10-QSB FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-25238 NATURAL HEALTH TRENDS CORP. (Exact Name of Small Business Issuer as Specified in its Charter) Florida 59-2705336 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 5605 N. MacArthur Boulevard, 11th Floor Irving, Texas 75038 (Address of Principal Executive Office) (Zip Code) (972) 819-2035 (Issuer's telephone number including area code) Indicate by check mark whether the issuer (1) has 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 and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of issuer's Common Stock, $.001 par value, outstanding as of August 8, 2003 were 4,656,408 shares. NATURAL HEALTH TRENDS CORP. FORM 10-QSB For Quarter Ended June 30, 2003 INDEX Page Number ------ PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet as of June 30, 2003 1 (unaudited) Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2003 and 2002 2 Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2003 and 2002 3 Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2003 and 2002 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis or Plan of Operations 6 Item 3. Controls and Procedures 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities and Use of Proceeds 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signature 11 Certifications 12 NATURAL HEALTH TRENDS CORP. CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 2003 ------------ ASSETS Current Assets: Cash $ 2,856,235 Accounts receivable 1,582,073 Inventories 2,974,300 Prepaid expenses and other current assets 237,923 ------------ Total Current Assets 7,650,531 Restricted cash 955,926 Property and equipment, net 972,508 Deposits and other assets 763,584 Goodwill 207,765 Database 856,845 Website 33,250 ------------ Total Assets $ 11,440,409 ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 3,363,990 Accrued expenses 371,017 Accrued bonus payable 1,087,147 Notes payable 334,437 Current portion of long term debt 109,416 Income tax payable 330,322 Other current liabilities 367,645 ------------ Total Current Liabilities 5,963,974 ------------ Long term notes payable 41,643 ------------ Total Liabilities 6,005,617 Minority interest 749,978 Stockholders' Equity: Preferred stock ($1,000 par value; authorized 1,500,000 shares) -- Common stock ($.001 par value; authorized 500,000,000 shares; issued and outstanding 4,656,408 shares) 4,656 Additional paid in capital 32,647,502 Accumulated deficit (27,961,965) Deferred compensation (11,250) Accumulated other comprehensive income 5,871 ------------ Total Stockholders' Equity 4,684,814 ------------ Total Liabilities and Stockholders' Equity $ 11,440,409 ------------
See Notes to Consolidated Financial Statements. 1 NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net sales $ 12,156,719 $ 9,116,192 $ 21,800,141 $ 15,270,336 Cost of sales 1,680,340 1,573,626 3,617,186 2,664,121 ------------ ------------ ------------ ------------ Gross profit 10,476,379 7,542,566 18,182,955 12,606,215 Associate commissions 4,928,928 4,535,501 9,051,342 7,747,237 Selling, general and administrative expenses 4,026,873 2,355,613 6,849,829 4,337,451 ------------ ------------ ------------ ------------ Operating income 1,520,578 651,452 2,281,784 521,527 Minority interest in subsidiary 82,417 (48,541) (23,231) (60,378) Loss on foreign exchange (64,292) (78,781) (11,492) (78,871) Other income, net 124,682 154,169 389,196 323,531 Interest, net (11,776) (14,980) (20,176) (32,609) ------------ ------------ ------------ ------------ Net income before taxes 1,651,609 663,319 2,616,081 673,200 Income tax expense 330,322 -- 330,322 -- Net income 1,321,287 663,319 2,285,759 673,200 Preferred stock dividends 408 19,175 810 41,460 ------------ ------------ ------------ ------------ Net income to common stockholders $ 1,320,879 $ 644,144 $ 2,284,949 $ 631,740 ============ ============ ============ ============ Basic income per common share $ 0.28 $ 0.22 $ 0.50 $ 0.22 ============ ============ ============ ============ Basic weighted common shares used 4,656,408 2,972,713 4,569,986 2,819,830 ============ ============ ============ ============ Diluted income per common share $ 0.23 $ 0.17 $ 0.41 $ 0.18 ============ ============ ============ ============ Diluted weighted common shares used 5,695,045 3,682,051 5,608,623 3,529,168 ============ ============ ============ ============
See Notes to Consolidated Financial Statements. 2 NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net income $ 1,321,287 $ 663,319 $ 2,285,759 $ 673,200 Other comprehensive income, net of tax Foreign translation adjustment (18,967) 53,816 5,871 59,658 ------------ ------------ ------------ ------------ Comprehensive income $ 1,302,320 $ 717,135 $ 2,291,630 $ 732,858 ============ ============ ============ ============
See Notes to Consolidated Financial Statements. 3 NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, -------------------------------------- 2003 2002 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,285,759 $ 673,200 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 310,051 191,008 Stock issued for compensation 51,826 7,192 Gain on forgiveness of debt (400,000) (400,000) Minority interest of subsidiary 23,231 196,091 CHANGES IN ASSETS AND LIABILITIES: Accounts receivable (1,062,321) (239,846) Inventories (53,176) (216,256) Prepaid expenses 169,883 175,393 Deposits and other assets (431,978) 152,495 Accounts payable and accrued expenses (780,311) 2,476,668 Deferred revenue -- 116,684 Income tax payable 330,322 -- Other current liabilities 14,602 225,071 ----------- ----------- Total Adjustments (1,827,871) 2,684,500 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 457,888 3,357,700 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (428,037) (367,958) Database purchase (226,845) -- Increase in restricted cash (628,041) (88,122) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,282,923) (456,080) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable and long-term debt -- 260,000 Payments of notes payable and long-term debt (198,114) (77,365) ----------- ----------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (198,114) 182,635 ----------- ----------- Effect of Exchange Rate Changes 15,438 59,658 NET (DECREASE) INCREASE IN CASH (1,007,711) 3,143,913 CASH, BEGINNING OF PERIOD 3,863,946 324,315 ----------- ----------- CASH, END OF PERIOD $ 2,856,235 $ 3,468,228 =========== ===========
See Notes to Consolidated Financial Statements. 4 NATURAL HEALTH TRENDS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) 1. We are Natural Health Trends Corp. ("NHTC"), an international direct-selling company. We operate through our subsidiaries that distribute products to promote health, wellness and vitality. Lexxus International, Inc., our majority-owned subsidiary and other Lexxus subsidiaries (collectively, "Lexxus"), sell certain cosmetic products as well as "quality of life" products. eKaire.com, Inc., our wholly-owned subsidiary ("eKaire"), distributes nutritional supplements aimed at general health and wellness. 2. The accompanying unaudited financial statements of Natural Health Trends Corp. and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-QSB and Article 10 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) of financial position and results of operations for the interim periods have been presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the six month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual report on Form 10-KSB for the year ended December 31, 2002. 3. In January 2003, the Company issued 18,500 shares of Common Stock to a law firm for legal services of approximately $34,000. 4. In January 2003, the Company issued 10,000 shares of Common Stock to a consulting firm for consulting services of approximately $19,000. 5. On January 31, 2003, the Company entered into a Database Purchase Agreement with NuEworld.com Commerce, Inc. ("NuEworld") and Lighthouse Marketing Corporation, our wholly-owned subsidiary ("Lighthouse"), pursuant to which Lighthouse purchased a database of associates from NuEworld in exchange for the issuance of 360,000 shares of our Common Stock. NuEworld was in the business of marketing and selling a variety of products and services through its multi-level marketing distribution network. 6. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies under what circumstances a contract with initial investments meets the characteristics of a derivative and when a derivative contains a financing component. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The Company does not expect that the adoption of SFAS No. 149 will have a significant effect on the Company's financial statement presentation or disclosures. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The Company does not expect that the adoption of SFAS No. 150 will have a significant effect on the Company's financial statement presentation or disclosures. 5 Item 2. Management's Discussion and Analysis or Plan of Operations The following discussions should be read in conjunction with the consolidated financial statements and notes contained in Item 1 hereof. Forward Looking Statements When used in Form 10-QSB and in future filings by the Company with the Securities and Exchange Commission, the words "will likely result", "the Company expects", "will continue", "is anticipated", "estimated", "projected", "outlook" or similar expressions are intended to identify "forward looking statements" within the meaning of the Private Securities Litigation Act of 1995. The Company wishes to caution readers not to place undue reliance on such forward-looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the results of any revisions, which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. Overview Natural Health Trends Corp. was incorporated on December 1, 1988, in the state of Florida. NHTC is an international direct-selling company operating in more than 30 markets throughout Asia, North America and Eastern Europe. The Company markets premium quality personal care products under the Lexxus brand and markets its nutritional supplement products under the Kaire brand. NHTC's common stock, par value $0.001 per share (the "Common Stock"), is listed on the OTC Bulletin Board (the "OTCBB"). In July 2003, we applied for listing of our shares of Common Stock on The American Stock Exchange. We anticipate that our shares of Common Stock will commence trading on The American Stock Exchange during the third quarter of 2003. In March 2003, we effected a 1-for-100 reverse stock split with respect to our outstanding shares of Common Stock. In addition, the trading symbol for the shares of our Common Stock changed from "NHTC" to "NHLC". NHTC is a holding company that operates two businesses, Lexxus and eKaire, which distribute products that promote health, wellness and vitality through two distinct multi-level marketing ("MLM") channels. The following paragraphs will outline the progression of NHTC as it is organized today. In February 1999, NHTC Holdings Inc. acquired certain assets (the "Kaire Assets") of Kaire International, Inc., a Delaware corporation ("KII"). The assets included, but not limited to, the corporate name, all variations and any other product name, registered and unregistered trademarks, tradenames, servicemarks, patents, logos and copyrights of KII, and independent associate lists. In January 2001, NHTC entered into a joint venture with Lexxus International and formed a new majority-owned USA subsidiary, Lexxus International, Inc., a Delaware corporation. The original founders of Lexxus International received an aggregate of 100,000 shares of our Common Stock and own 49% of the total number of shares of capital stock of Lexxus International, Inc. In the second quarter of 2001, we incorporated Lexxus International (SW Pacific) Pty. Ltd., an Australian corporation and our majority-owned subsidiary, which does business in Australia ("Lexxus Australia"). In addition, we incorporated Lexxus International (New Zealand) Limited, a New Zealand corporation and majority-owned subsidiary of NHTC, which does business in New Zealand ("Lexxus New Zealand"). In June 2001, we incorporated Lighthouse Marketing Corporation ("Lighthouse"), a Delaware Corporation and our wholly-owned subsidiary. As of January 31, 2003, Lighthouse acquired certain assets from NuEworld. See Footnote 5 for more detail. 6 In June 2001, we sold all of the outstanding Common Stock in Kaire Nutraceuticals, Inc., a Delaware corporation, to a South African firm. In November 2001, we incorporated Lexxus International Co., Ltd., a corporation organized under the laws of the Republic of China and our majority-owned subsidiary ("Lexxus Taiwan") which does business in Taiwan. In January 2002, we incorporated MyLexxus Europe AG, a corporation organized under the laws of Switzerland and our majority-owned subsidiary ("MyLexxus Europe"). This company manages the sales of product into sixteen eastern European countries, including Russia. In March 2002, we incorporated Lexxus International Co., Ltd., a corporation organized under the laws of Hong Kong and our wholly-owned subsidiary ("Lexxus Hong Kong") which does business in Hong Kong. In April 2002, we incorporated Personal Care International India Pvt. Ltd., a corporation organized under the laws of India and our wholly-owned subsidiary ("MyLexxus India") which does business in India. In June 2002, we incorporated Lexxus International Marketing Ltd., a corporation organized under the laws of Singapore and our majority-owned subsidiary ("Lexxus Singapore") which does business in Singapore. In November 2002, we incorporated Lexxus International (Philippines) Inc., a corporation organized under the laws of the Philippines and our majority-owned subsidiary ("Lexxus Philippines") which does business in the Philippines. In June 2003, we incorporated LXK Ltd. (South Korea), a corporation organized under the laws of South Korea and our wholly-owned subsidiary ("Lexxus Korea") which does business in South Korea. Six Months Ended June 30, 2003 Compared To The Six Months Ended June 30, 2002. Revenues. Revenues were approximately $21,800,000 and $15,270,000 for the six months ended June 30, 2003 and June 30, 2002, respectively; an increase of $6,530,000 or 43%. The increased sales were primarily from additional sales of Lexxus products and the expansion of Lexxus into new international markets, including South Korea in June 2003, partially offset by a slight decrease in the sales of eKaire products. Cost of Sales. Cost of sales for the six months ended June 30, 2003 was approximately $3,617,000 or 17% of net sales. Cost of sales for the six months ended June 30, 2002 was approximately $2,664,000 or 17% of net sales. The total cost of sales increased due to increased sales volume and increased costs associated with the packaging of the Lexxus product line. Gross Profit. Gross profit increased from approximately $12,606,000 in the six months ended June 30, 2002 to approximately $18,183,000 in the six months ended June 30, 2003, or an increase of 44%. The increase in gross profit of approximately $5,577,000 was attributable to higher sales volumes by Lexxus. Associate Commissions. Associate commissions were approximately $9,051,000 or 42% of sales in the six months ended June 30, 2003 compared to approximately $7,747,000 or 51% of sales for the six months ended June 30, 2002. The increase of commission expense is directly related to the increase in gross sales and the terms of the Company's compensation plans. The decrease in commission expense as a percentage of sales is due to the normal fluctuations that occur in the compensation plan and also due to the amount of revenues allocated to the compensation plan. Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of net sales increased from approximately $4,337,000 or 28% of sales in the six months ended June 30, 2002 to approximately $6,850,000 or 31% of sales in the six months ended June 30, 2003. These costs as a percentage of net sales increased primarily due to 7 general and administrative costs, such as hiring staff, preparing office space and initial marketing efforts through the expansion into new international markets. Operating income. Operating income increased from an operating income of approximately $522,000 in the six months ended June 30, 2002 to operating income of approximately $2,282,000 in the six months ended June 30, 2003. This is attributable to higher sales volume, increased selling, general and administrative costs and increased associate commissions. Income Taxes. In the second quarter 2003, the Company has provided income taxes in the amount of $330,000, due to the limitation of the utilization of the Company's available net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. Other Income. As part of other income during the six months ended June 30, 2003 and the six months ended June 30, 2002, NHTC realized a gain of approximately $400,000 in other income due to forgiveness of debt. Net Income. Net income was approximately $2,286,000 in the six months ended June 30, 2003 as compared to approximately $673,000 in the six months ended June 30, 2002. The increase in net income of approximately $1,613,000 is due to increased sales and efficient cost containment efforts partially offset by an income tax expense. Liquidity and Capital Resources. The Company has funded the working capital and capital expenditure requirements primarily from cash provided through operations and through limited borrowings from individuals. At June 30, 2003, the ratio of current assets to current liabilities was 1.28 to 1.0 and the Company had working capital of approximately $1,687,000. Cash provided by operations for the six months ended June 30, 2003 was approximately $458,000 primarily due from increased sales, the launch of the Company's South Korean operations which were partially offset by increased accounts receivable and the reduction of accounts payable. Cash used in investing activities during the period was approximately $1,283,000 due to the purchase of an associate database, the increase of capital expenditures and the increase of restricted cash. Cash used by financing activities during the period was approximately $198,000. Total cash decreased by approximately $1,008,000 during the period. CRITICAL ACCOUNTING POLICIES A summary of significant accounting policies is included in Note 2 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2002. Management believes that the application of these policies on a consistent basis enables the Company to provide useful and reliable financial information about the Company's operating results and financial condition. EFFECT OF NEW ACCOUNTING STANDARDS In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies under what circumstances a contract with initial investments meets the characteristics of a derivative and when a derivative contains a financing component. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The Company does not expect that the adoption of SFAS No. 149 will have a significant effect on the Company's financial statement presentation or disclosures. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The Company does not expect that the adoption of SFAS No. 150 will have a significant effect on the Company's financial statement presentation or disclosures. 8 Item 3. Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our President and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds In March 2003, NHTC issued 360,000 shares of our Common Stock to NuEworld.com Commerce, Inc. pursuant to a database purchase agreement. In January 2003, the Company issued 18,500 shares of Common Stock to a law firm for legal services of approximately $34,000. In January 2003, the Company issued 10,000 shares of Common Stock to a consulting firm for consulting services of approximately $19,000. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders On May 22, 2003, the Company held its Annual Meeting of Stockholders where the stockholders of the Company approved the following proposals: (a) Election of Directors. Mark D. Woodburn, Terry LaCore, Sir Brian Wolfson and Randall A. Mason were elected to the Board of Directors of the Company for a term of one (1) year, each receiving 3,218,419, 3,218,299, 3,215,149 and 3,218,519 votes respectively in favor of his election (69.5% of the shares outstanding). (b) Amendment to the 2002 Stock Option Plan. The amendment to the Company's 2002 Stock Plan was approved by the stockholders of the Company (3,215,333 votes for (69.46% of the shares outstanding); 4,891 shares against; and 1,230 shares abstained). 9 (c) Ratification of the Appointment of Independent Accountants. The ratification of the appointment of Sherb & Co., LLP as independent accountants of the Company for fiscal year ending December 31, 2003 was approved by the stockholders of the Company (3,221,055 votes for (69.59% of the shares outstanding); 284 votes against; and 115 shares abstained). Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of the President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None. 10 SIGNATURE 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. NATURAL HEALTH TRENDS CORP. By: /s/ Mark D. Woodburn ---------------------------- Mark D. Woodburn President Date: August 13, 2003 11 EX-31 3 ex31_1.txt CERTIFICATION EXHIBIT 31.1 CERTIFICATION I, Mark D. Woodburn, do certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Natural Health Trends Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /S/ MARK WOODBURN ------------------- Mark D. Woodburn President and Chief Financial Officer Date: August 13, 2003 12 EX-32 4 ex32_1.txt CERTIFICATIONS EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Natural Health Trends Corp. (the "Company") on Form 10-QSB for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark D. Woodburn, President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ MARK D. WOODBURN - ------------------------------------- Mark D. Woodburn President and Chief Financial Officer and Director August 13, 2003 13 -----END PRIVACY-ENHANCED MESSAGE-----