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<SEC-DOCUMENT>0001019056-04-000906.txt : 20040701
<SEC-HEADER>0001019056-04-000906.hdr.sgml : 20040701
<ACCEPTANCE-DATETIME>20040630173605
ACCESSION NUMBER:		0001019056-04-000906
CONFORMED SUBMISSION TYPE:	8-K/A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20040331
ITEM INFORMATION:		Financial statements and exhibits
FILED AS OF DATE:		20040701

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:		8-K/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26272
		FILM NUMBER:		04892303

	BUSINESS ADDRESS:	
		STREET 1:		12901 HUTTON DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		972-241-4080

	MAIL ADDRESS:	
		STREET 1:		12901 HUTTON DRIVE
		STREET 2:		--
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K/A
<SEQUENCE>1
<FILENAME>natural_8ka.txt
<DESCRIPTION>FORM 8-K/A
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 8-K/A

                                (Amendment No. 1)


                                 CURRENT REPORT

                         Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


        Date of Report (Date of earliest event reported) March 31, 2004
                                                         --------------


                           NATURAL HEALTH TRENDS CORP.
      --------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



               Florida               0-25238            59-2705336
           ------------------------------------------------------------
           (State or other         (Commission        (IRS Employer
           jurisdiction of         File Number)     Identification No.)
             Formation)



                12901 Hutton Drive Dallas, TX                   75234
           ------------------------------------------------------------
           (Address of principal executive offices)           (Zip Code)



        Registrant's telephone number, including area code (972) 241-4080
                                                           --------------

                                       NA
          ------------------------------------------------------------
          (Former name or former address, if changes since last report)
<PAGE>

         Natural Health Trends Corp. (the "Company" or "NHTC") hereby files this
Amendment No. 1 to its Current Report on Form 8-K, which was filed with the
Commission on April 15, 2004. This Amendment No. 1 provides the unaudited
proforma consolidated financial statements of the Company and the historical
audited financial statements of MarketVision Communications Corporation
("MarketVision"), which was acquired on March 31, 2004.

ITEM 7.  Financial Statements and Exhibits
- ------------------------------------------

         (a)      Financial Statements of Business Acquired

         The following financial statements of MarketVision are set forth in
Exhibit 99.1 and are hereby incorporated by reference herein: (i) the audited
balance sheets as of December 31, 2003 and 2002, (ii) the related statements of
income, stockholders' equity and cash flows for the years ended December 31,
2003 and 2002, and (iii) the related notes to the financial statements for such
periods.

         (b)      Unaudited Proforma Consolidated Financial Information

         The following unaudited Proforma Consolidated Statements of Operations
reflects the results of operations for the year ended December 31, 2003 and for
the three months ended March 31, 2004 after giving effect to adjustments
described in the following paragraphs, as if the Company had acquired
MarketVision on January 1, 2003.

         The Company has included a post-closing consolidated balance sheet as
of March 31, 2004 in this amendment on page 4, in lieu of a proforma
consolidated balance sheet.

Purchase of MarketVision

         On March 31, 2004, the Company entered into a merger agreement with
MarketVision, pursuant to which the Company acquired all of the outstanding
capital stock of MarketVision in exchange for 690,000 shares of NHTC restricted
common stock (the "Issued Shares"), promissory notes in the aggregate principle
amount of approximately $3,203,000, a cash payment of $1,336,875 in April 2004,
less pre-acquisition net payables due MarketVision of approximately $609,000 for
a total purchase price of approximately $17,618,000, including acquisition costs
of approximately $150,000. The shares issued were valued at the average closing
price of NHTC Common Stock of $23.08 discounted by 15% due to certain
restrictions contained in the purchase agreement. The average closing price of
$23.08 was calculated based on the closing price of NHTC Common Stock a few days
before and after the acquisition was announced. MarketVision is the exclusive
developer and service provider of direct selling internet technology used by the
Company since 2001. MarketVision hosts and maintains the internet technology for
the Company and charges an annual fee for this service based upon the number of
enrolled distributors of the Company's products. MarketVision earned revenues
for this service of approximately $1,839,000 and $579,000 for the year ended
December 31, 2003 and three months ended March 31, 2004, respectively.

         Management believes that this transaction is in the best interests of
the Company because (i) the success of the Company's business is dependent upon
MarketVision's direct selling software and (ii) the Company projects enrolling a
significant number of new distributors in the future, which would be very
expensive under the former compensation agreement between the Company and
MarketVision. Since the former owners of MarketVision include Terry LaCore, a
member of the Company's Board of Directors and the Chief Executive Officer of
Lexxus International, Inc., a wholly owned subsidiary of NHTC, the Board of
Directors hired the independent appraisal firm of Bernstein, Conklin & Balcombe
to assess the fairness of the transaction with MarketVision from a financial
point of view. In March 2004, Bernstein, Conklin & Balcombe delivered its
<PAGE>

opinion to the Company's Board of Directors that the MarketVision transaction is
fair to the Company from a financial point of view.

         In addition, the Company entered into a Shareholder's Agreement with
the former stockholders of MarketVision. Such agreement contained customary
terms and conditions, including restrictions on transfers of the NHTC shares,
rights of first refusal and indemnification. Further, the Shareholder's
Agreement contains a one time put right related to 240,000 NHTC shares for the
benefit of the former stockholders of MarketVision (other than Mr. LaCore) that
requires NHTC, during the six month period commencing eighteen months following
the earlier of (i) the first anniversary of the closing date, or (ii) the date
on which the Issued Shares are registered with the Securities and Exchange
Commission (the "SEC") for resale to the public, to repurchase all or part of
the NHTC shares still owned by the such stockholders for $4.00 per share less
any amount previously received by such stockholders from the sale of their
shares of NHTC stock. The Company has recorded this obligation of $960,000 as
mezzanine common stock in the balance sheet at March 31, 2004. The agreement
also provided the former stockholders of MarketVision with piggyback
registration rights in the event NHTC files a registration statement with the
SEC, other than on Forms S-4 or S-8, stock option grants for the former
stockholders (other than Mr. LaCore) as well as three-year employment agreements
for the former stockholders, other than Mr. LaCore. In the event that the
Company defaults on its payment obligations under the notes or the employment
agreements, an entity owned by the former stockholders of MarketVision (other
than Mr. LaCore) has certain rights to use, develop, modify, market, distribute
and sublicense the MarketVision software to third parties.

         Operations of MarketVision subsequent to March 31, 2004 have been
included in the Company's consolidated financial statements. The transaction was
accounted for using the purchase method of accounting and the purchase price was
allocated among the assets acquired based on their estimated fair market values.
The assets of MarketVision included certain computer equipment and developed
software.

         The purchase price was calculated as follows:

    690,000 shares of NHTC Common Stock valued at
    $23.08 per share less 15% discount for restrictions
    associated with the stock issued                             $   13,536,420
    Cash paid in April 2004                                           1,336,875
    Promissory notes issued at closing                                3,203,403
    Preacquisition net payables due to MarketVision                    (609,190)
    Acquisition costs                                                   150,302
                                                                 --------------
         Total purchase price                                    $   17,617,810
                                                                 ==============

         The purchase price was allocated among assets acquired based on their
estimated fair market values as follows:

    Property and equipment                                               25,000
    Amortizable intangible assets                                     5,600,000
    Goodwill                                                         11,992,810
    Deferred taxes                                                   (1,904,000)
    Deferred tax asset recognized for the
    Company's loss carry forward based
    upon offset against MarketVision's
    deferred tax liabilities                                          1,904,000
                                                                 --------------
         Total purchase price allocation                         $   17,617,810
                                                                 ==============

                                       2

<PAGE>
         Amortizable intangibles acquired will be amortized over their estimated
life of seven years. The purchase price allocation is based on preliminary
estimates, including estimates of federal tax contingencies, which are subject
to change once additional information becomes available. Changes to these
estimates could result in changes to the purchase price allocation.

Unaudited Proforma Consolidated Financial Information

         The Company's unaudited consolidated balance sheet as of March 31, 2004
gives effect to the acquisition of MarketVision and was previously included in
the Company's consolidated financial statements and the notes thereto in the
Company's Quarterly Report on Form 10-Q as of and for the three months ended
March 31, 2004 which are incorporated herein by reference. The Company's
unaudited consolidated balance sheet as of March 31, 2004, as previously filed,
is presented on the following page.

                                       3
<PAGE>
                  NATURAL HEALTH TRENDS CORP. and SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                                                    March 31,
                                                                       2004
                                                                  -------------
                                                                   (Unaudited)
ASSETS

Current assets:
   Cash and cash equivalents                                       $ 15,266,262
   Restricted cash                                                    2,347,024
   Accounts receivable                                                  432,973
   Inventories, net                                                   5,766,889
   Prepaid expenses and other                                         3,513,663
                                                                   ------------
      Total current assets                                           27,326,811

Property and equipment, net                                             869,637
Software                                                              5,600,000
Goodwill                                                             12,756,037
Database, net                                                           593,058
Deposits and other assets                                               272,852
                                                                   ------------
      Total assets                                                 $ 47,418,395
                                                                   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                $  2,830,414
   Accrued expenses                                                   3,624,492
   Accrued distributor commissions                                    4,930,758
   Income taxes payable                                               1,831,887
   Notes payable                                                        238,760
   Current portion of long-term debt                                  2,729,803
   Deferred revenue                                                   5,379,625
   Other current liabilities                                            551,484
                                                                   ------------
      Total current liabilities                                      22,117,223

Long term debt                                                          525,031
                                                                   ------------
      Total liabilities                                              22,642,254

Minority interest                                                       626,681

Mezzanine common stock                                                  960,000

Stockholders' equity:
   Preferred stock ($1,000 par value; authorized
   1,500,000 shares)                                                         --
   Common stock ($0.001 par value; authorized
   500,000,000 shares; issued and outstanding
   5,446,365 and 4,656,409 shares as of
   March 31, 2004 and December 31, 2003, respectively)                    5,446
   Additional paid in capital                                        48,754,556
   Accumulated deficit                                              (25,278,505)
   Accumulated other comprehensive loss                                (292,037)
                                                                   ------------
      Total stockholders' equity                                     23,189,460
                                                                   ------------

      Total liabilities and stockholders' equity                   $ 47,418,395
                                                                   ============

                                       4
<PAGE>
         The following unaudited proforma consolidated statements of operations
have been prepared to give effect to the acquisition of MarketVision using the
purchase method of accounting. The unaudited proforma consolidated statements of
operations of the Company and MarketVision for the year ended December 31, 2003
and for the three months ended March 31, 2004 includes the historical statements
of operations for the respective companies for the periods presented as if the
acquisitions had occurred as of January 1, 2003.

         The unaudited proforma consolidated financial statements are based on
the respective historical financial statements, including the notes thereto, of
the Company and MarketVision and should be read in conjunction with: (i) the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003 and
the Form 10-Q for the three months ended March 31, 2004 and (ii) MarketVision's
audited financial statements for the years ended December 31, 2003 and 2002,
included in this amended Current Report as Exhibit 99.1.

         The unaudited proforma consolidated statements of operations include
adjustments, which are based upon preliminary estimates, to reflect the
allocation of the purchase price to the acquired assets of MarketVision. The
purchase price allocation is preliminary and the final purchase accounting
adjustments may differ from the proforma adjustments presented herein.

         The unaudited proforma consolidated statements of operations are
intended for information purposes only and are not necessarily indicative of the
financial position or results of operations that would have actually been
reported had the acquisition occurred on January 1, 2003 for statements of
operations purposes, nor are they indicative of the future financial position or
results of operations. The unaudited proforma consolidated statements of
operations do not include potential cost savings from operating efficiencies or
synergies that may result from the acquisition.

                                       5
<PAGE>


                  NATURAL HEALTH TRENDS CORP. and SUBSIDIARIES

             UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 2003

<TABLE>
<CAPTION>
                                                                                                      Proforma           Proforma
                                                                  NHTC           MarketVision        Adjustments         Combined
                                                              ------------       ------------       -------------      ------------
                                                                (Note 1)           (Note 2)            (Note 3)          (Note 4)
<S>                                                           <C>                   <C>               <C>              <C>
Net sales                                                     $ 62,885,830          1,839,282         (1,839,282)      $ 62,885,830
Cost of sales                                                   12,524,826                 --         (1,839,282)        10,685,544
                                                              ------------       ------------       ------------       ------------
Gross profit                                                    50,361,004          1,839,282                 --         52,200,286

Operating expenses:
   Distributor commissions                                      27,095,921                 --                 --         27,095,921
   Selling, general and administrative expenses                 16,741,213          1,159,934            800,000         18,701,147
                                                              ------------       ------------       ------------       ------------
      Total operating expenses                                  43,837,134          1,159,934            800,000         45,797,068
                                                              ------------       ------------       ------------       ------------
Income from operations                                           6,523,870            679,348           (800,000)         6,403,218

Other income (expense):
   Loss on foreign exchange                                        (77,280)                --                 --            (77,280)
   Other income                                                    139,156                 --                 --            139,156
    Interest income (expense), net                                 (62,996)             2,516            (65,000)          (125,480)
                                                              ------------       ------------       ------------       ------------
      Total other income (expense)                                 (1,120)             2,516            (65,000)           (63,604)
                                                              ------------       ------------       ------------       ------------
Income from continuing operations before
taxes and minority interest                                      6,522,750            681,864           (865,000)         6,339,614
   Income tax provision                                           (860,000)                --            (12,000)          (872,000)
   Minority interest, net of taxes                                (284,210)                --                 --           (284,210)
                                                              ------------       ------------       ------------       ------------

Net income                                                       5,378,540            681,864           (877,000)         5,183,404
   Preferred stock dividends                                           810                 --                 --                810
                                                              ------------       ------------       ------------       ------------
Net income to common shareholders                             $  5,377,730            681,864           (877,000)      $  5,182,594
                                                              ============       ============       ============       ============

Basic income per common share:
   Net income to common shareholders                          $       1.17                                             $       0.98
                                                              ============                                             ============
   Basic weighted common shares used                             4,609,296                               690,000          5,299,296
                                                              ============                          ============       ============

Diluted income per common share:
   Net income to common shareholders                          $       0.95                                             $       0.81
                                                              ============                                             ============
   Diluted weighted common shares used                           5,688,099                               690,000          6,378,099
                                                              ============                          ============       ============
</TABLE>

      See Notes to Unaudited Proforma Consolidated Statements of Operations

                                       6

<PAGE>

                  NATURAL HEALTH TRENDS CORP. and SUBSIDIARIES

             UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
                    For the Three Months Ended March 31, 2004

<TABLE>
<CAPTION>

                                                                                                      Proforma           Proforma
                                                                   NHTC           MarketVision       Adjustments         Combined
                                                               ------------       ------------      ------------       ------------
                                                                 (Note 1)           (Note 2)          (Note 3)           (Note 4)

<S>                                                            <C>                     <C>              <C>            <C>
Net sales                                                      $ 38,435,209            579,159          (579,159)      $ 38,435,209
Cost of sales                                                     7,928,128                 --          (579,159)         7,348,969
                                                               ------------       ------------      ------------       ------------
Gross profit                                                     30,507,081            579,159                --         31,086,240

Operating expenses:
   Distributor commissions                                       20,204,655                 --                --         20,204,655
   Selling, general and administrative expenses                   6,473,164            199,363           200,000          6,872,527
                                                               ------------       ------------      ------------       ------------
      Total operating expenses                                   26,677,819            199,363           200,000         27,077,182
                                                               ------------       ------------      ------------       ------------
Income from operations                                            3,829,262            379,796          (200,000)         4,009,058

Other income (expense):
   Loss on foreign exchange                                          (8,868)                --                --             (8,868)
   Other income                                                     168,583                 --                --            168,583
   Interest income (expense), net                                      (913)               153            (4,000)            (4,760)
                                                               ------------       ------------      ------------       ------------
      Total other income (expense)                                  158,802                153            (4,000)           154,955
                                                               ------------       ------------      ------------       ------------

Income from continuing operations before
taxes and minority interest                                       3,988,064            379,949          (204,000)         4,164,013
   Income tax provision                                            (797,613)                --           (75,000)          (872,613)
   Minority interest, net of taxes                                  (79,724)                --                --            (79,724)
                                                               ------------       ------------      ------------       ------------


Net income                                                        3,110,727            379,949          (279,000)         3,211,676
   Preferred stock dividends                                             --                 --                --                 --
                                                               ------------       ------------      ------------       ------------
Net income to common shareholders                              $  3,110,727            379,949          (279,000)      $  3,211,676
                                                               ============       ============      ============       ============

Basic income per common share:
   Net income to common shareholders                           $       0.67                                            $       0.60
                                                               ============                                            ============
   Basic weighted common shares used                              4,667,288                              682,418          5,349,706
                                                               ============                         ============       ============

Diluted income per common share:
   Net income to common shareholders                           $       0.53                                            $       0.49
                                                               ============                                            ============
   Diluted weighted common shares used                            5,909,383                              682,418          6,591,801
                                                               ============                         ============       ============
</TABLE>

      See Notes to Unaudited Proforma Consolidated Statements of Operations

                                       7

<PAGE>

        Notes to Unaudited Proforma Consolidated Statements of Operations


Note 1.  The Consolidated Statements of Operations for Natural Health Trends
Corp. and Subsidiaries include the results of operations as reflected in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003 and
the Company's unaudited Quarterly Report on Form 10-Q for the three months ended
March 31, 2004.

Note 2.  The Statements of Operations for MarketVision include the results of
operations as reflected in the audited financial statements for the year ended
December 31, 2003 included in this amended Current Report as Exhibit 99.1 and
the unaudited preliminary financial statements for the three months ended March
31, 2004.

Note 3.  Proforma adjustments include estimated adjustments for both periods
presented to (i) eliminate billings from MarketVision to the Company for
services rendered, (ii) reflect amortization expense on the intangible assets
acquired pursuant to the MarketVision acquisition and amortized over 7 years,
(iii) reflect interest expense on the promissory notes issued pursuant to the
MarketVision acquisition with interest rates of 4.00-4.50% per annum, and (iv)
reflect the estimated incremental income tax provision.

Note 4.  The unaudited proforma consolidated statements of operations do not
include potential cost savings from operating efficiencies or synergies that may
results from the acquisitions.


(c)               Exhibits

         10.1.    Agreement and Plan of Merger, dated as of March 31, 2004, by
                  and among the Company, MergerCo and MarketVision. (1)

         10.2.    Stockholders Agreement, dated as of March 31, 2004, by and
                  among the Company, John Cavanaugh, Terry LaCore and Jason
                  Landry. (1)

         10.3.    Employment Agreement, dated as of March 31, 2004, between
                  MergerCo and John Cavanaugh. (1)

         10.4.    Employment Agreement, dated as of March 31, 2004, between
                  MergerCo and Jason Landry. (1)

         10.5     Guaranty of the Employment Agreements dated as of March 31,
                  2004 executed by Lexxus International, Inc. (1)

         10.6     Software License Agreement dated as of March 31, 2004
                  among the Company, MergerCo and MarketVision Consulting
                  Group, LLC. (1)

         99.1     Audited Financial Statements of MarketVision Communications
                  Corporation for the years ended December 31, 2003 and 2002 and
                  the notes thereto (filed herein).

         (1)      Previously filed with NHTC's Form 8-K dated March 31, 2004.


                                       8
<PAGE>
                                    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:   July 1, 2004

                                       9

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ex99_1.txt
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
                                                              MarketVision
                                                            Communications
                                                               Corporation






                                          ======================================

                                                            Financial Statements
                                          Years Ended December 31, 2003 and 2002
<PAGE>


                                         MarketVision Communications Corporation


                                                                        Contents

================================================================================


                  Independent auditors' report                                 3


                  Financial statements

                      Balance sheets                                           4

                      Statements of income                                     5

                      Statements of stockholders' equity                       6

                      Statements of cash flows                                 7

                      Notes to financial statements                            8








                                                                               2
<PAGE>
Independent Auditors' Report


The Stockholders and Board of Directors
MarketVision Communications Corporation

We have audited the accompanying balance sheets of MarketVision Communications
Corporation (the "Company") as of December 31, 2003 and 2002 and the related
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MarketVision
Communications Corporation as of December 31, 2003 and 2002, and the results of
its operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.


/s/ BDO Seidman, LLP


January 23, 2004 (except for note 8
which is dated as of March 31, 2004)


                                                                               3
<PAGE>
                                         MarketVision Communications Corporation


                                                                  Balance Sheets

================================================================================

December 31,                                                 2003           2002
- --------------------------------------------------------------------------------
Assets

Current
     Cash and cash equivalents                        $   793,727   $   350,966
     Receivables from related parties                   1,248,141       741,190
     Prepaid expenses and other assets                      9,964         7,978
- --------------------------------------------------------------------------------

Total current assets                                    2,051,832     1,100,134

Property and equipment, net                               105,030        97,631
- --------------------------------------------------------------------------------

                                                      $ 2,156,862   $ 1,197,765
================================================================================

Liabilities and Stockholders' Equity

Current
     Accounts payable and accrued liabilities         $    69,688   $    68,389
     Current portion of long-term debt                      6,120         5,736
     Unearned refundable fees from related parties        947,604       685,023
- --------------------------------------------------------------------------------

Total current liabilities                               1,023,412       759,148

Long-term debt, excluding current portion                  13,754        19,843
- --------------------------------------------------------------------------------

Total liabilities                                       1,037,166       778,991

Commitments and contingencies

Stockholders' equity
     Common stock - no par value; 40,000,000 shares
         authorized and 888,889 shares outstanding             --            --
     Additional paid-in capital                           143,000       143,000
     Retained earnings                                  1,153,246       471,382
     Notes receivable from stockholder                   (176,550)     (195,608)
- --------------------------------------------------------------------------------

Total stockholders' equity                              1,119,696       418,774
- --------------------------------------------------------------------------------

                                                      $ 2,156,862   $ 1,197,765
================================================================================

See accompanying summary of accounting policies and
notes to financial statements.

                                                                               4
<PAGE>
                                         MarketVision Communications Corporation


                                                            Statements of Income

================================================================================

Years ended December 31,                               2003                2002
- --------------------------------------------------------------------------------

Revenue                                         $ 1,839,282         $ 1,373,944

Costs and expenses
     Payroll and benefits                           892,551             647,776
     Professional fees                              156,451             161,009
     Administrative                                 110,932              97,942
- --------------------------------------------------------------------------------

                                                  1,159,934             906,727
- --------------------------------------------------------------------------------

Income from operations                              679,348             467,217

Other income (expense)
     Interest income                                  4,011               4,064
     Interest expense                                (1,495)             (1,765)
- --------------------------------------------------------------------------------

Total other income, net                               2,516               2,299
- --------------------------------------------------------------------------------

Net income                                      $   681,864         $   469,516
- --------------------------------------------------------------------------------

See accompanying summary of accounting policies and
notes to financial statements.

                                                                               5
<PAGE>
                                         MarketVision Communications Corporation


                                              Statements of Stockholders' Equity

================================================================================

<TABLE>
<CAPTION>
                                                                                                            Note
                                         Common Stock             Additional                          Receivable              Total
                                  --------------------------         Paid-in          Retained              from      Stockholders'
                                      Shares         Amount          Capital          Earnings       Stockholder             Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>            <C>               <C>               <C>                <C>
Balance, December 31, 2001           400,000      $      --      $        --       $     1,866       $        --        $     1,866

Stock compensation                   488,889             --          143,000                --                --            143,000

Advances to stockholders                  --             --               --                --          (195,608)          (195,608)

Net income                                --             --               --           469,516                --            469,516
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2002           888,889             --          143,000           471,382          (195,608)           418,774

Repayments                                --             --               --                --            19,058             19,058

Net income                                --             --               --           681,864                --            681,864
- ------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2003           888,889      $      --      $   143,000       $ 1,153,246       $  (176,550)       $ 1,119,696
====================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.

                                                                               6
<PAGE>
                                         MarketVision Communications Corporation


                                                        Statements of Cash Flows

================================================================================

<TABLE>
<CAPTION>
Years ended December 31,                                             2003           2002
- ----------------------------------------------------------------------------------------
<S>                                                           <C>            <C>
Cash Flows from Operating Activities:
     Net income                                               $   681,864    $   469,516
     Adjustments to reconcile net income to net cash
       provided by operating activities:
         Stock compensation                                            --        143,000
         Depreciation                                              31,063         23,771
         Change in assets and liabilities:
              Receivables from related parties                   (506,951)      (699,555)
              Prepaid expenses and other assets                    (1,986)        (4,826)
              Accounts payable and accrued liabilities              1,299         52,855
              Unearned refundable fees from related parties       262,581        453,580
- ----------------------------------------------------------------------------------------

Net cash provided by operating activities                         467,870        438,341

Net Cash from  Investing Activities:
     Purchase of property and equipment                           (38,462)       (23,876)
     (Advances to) repayment from stockholders                     19,058       (195,608)
- ----------------------------------------------------------------------------------------

Net cash used in investing activities                             (19,404)      (219,484)

Cash Flows from Financing Activities:
     Payments on note payable                                      (5,705)        (5,004)
- ----------------------------------------------------------------------------------------

Net cash used in financing activities                              (5,705)        (5,004)
- ----------------------------------------------------------------------------------------

Net Increase in Cash and Cash Equivalents                         442,761        213,853

Cash and Cash Equivalents, beginning of year                      350,966        137,113
- ----------------------------------------------------------------------------------------

Cash and Cash Equivalents, end of year                        $   793,727    $   350,966
========================================================================================

Noncash Operating Activities:
     Stock compensation                                       $        --    $   143,000
Supplemental Cash Flow Information:
     Interest paid                                            $     1,495    $     1,765
========================================================================================
</TABLE>

See accompanying summary of accounting policies and
notes to financial statements.

                                                                               7
<PAGE>
                                         MarketVision Communications Corporation


                                                   Notes to Financial Statements

================================================================================

1.       Description of the         Organization - MarketVision Communications
         Business                   Corporation (the Company), a Minnesota
                                    S-Corporation, was formed on June 8, 2000 to
                                    provide information technology services to
                                    Natural Health Trends Corp. (NHTC) and its
                                    affiliates. A director of NHTC is also the
                                    Chief Executive Officer of one of the
                                    affiliates of NHTC and a 45% stockholder of
                                    the Company. As a result, NHTC and its
                                    affiliates are considered related parties of
                                    the Company. The Company paid this
                                    stockholder a consulting fee of $120,000 and
                                    $115,000 in 2003 and 2002, respectively,
                                    that is included in professional fees.

2.       Summary of Significant     Use of estimates - In preparing the
         Accounting Policies        financial statements in conformity with
                                    accounting principles generally accepted in
                                    the United States of America, management is
                                    required to make estimates and assumptions
                                    that affect the reported amounts of assets,
                                    liabilities, revenues and expenses during
                                    the reporting period. Actual results may
                                    vary from management's estimates.

                                    Cash and cash equivalents - The Company
                                    considers all highly liquid investments with
                                    maturities when purchased of three months or
                                    less to be components of cash.

                                    Concentration of credit risks - Financial
                                    instruments that potentially subject the
                                    Company to concentrations of credit risk are
                                    primarily cash equivalents, short-term
                                    investments and receivables.

                                    The Company maintains its cash in two bank
                                    accounts. Accounts in the United States are
                                    insured by the Federal Deposit Insurance
                                    Corporation ("FDIC") up to $100,000. Some of
                                    the Company's cash balances exceed insured
                                    limits.

                                    Property and equipment - Property and
                                    equipment are recorded at cost and
                                    depreciated using the straight-line method
                                    over the estimated useful lives of the
                                    assets, ranging from 3 to 7 years.
                                    Depreciation expense is included in
                                    administrative expenses. Property and
                                    equipment are reviewed for impairment
                                    whenever an event or change in circumstances
                                    indicates that the carrying amount of an
                                    asset or group of assets may not be
                                    recoverable.

                                                                               8
<PAGE>
                                         MarketVision Communications Corporation


                                                   Notes to Financial Statements

================================================================================

                                    Income taxes - The Company elected to be
                                    taxed under the provisions of Subchapter S
                                    of the Internal Revenue Code, under which
                                    the Company's taxable income or loss is
                                    included in the Federal income tax returns
                                    of its stockholders. Therefore, no provision
                                    or liability for Federal income taxes has
                                    been included in the accompanying
                                    financial statements.

                                    Revenue recognition - The Company's revenue
                                    is primarily derived from annual access fees
                                    paid by NHTC and its affiliates for which
                                    the Company provides NHTC's distributors
                                    access to various internet technologies over
                                    a 12-month period. Access fees are
                                    determined based on the number of enabled
                                    distributors using an agreed upon rate, are
                                    billed in advance, and are refundable on a
                                    pro rata basis in the event of distributor
                                    termination prior to completion of the
                                    12-month period. The Company recognizes
                                    revenue from these fees ratably over the
                                    12-month service period. During 2003 and
                                    2002, the Company provided extended payment
                                    terms for a portion of the outstanding
                                    receivable balance with NHTC. The Company
                                    believes collection of its receivables with
                                    NHTC is reasonably assured.

3.       Property and Equipment     Property and equipment consisted of the
                                    following at December 31, 2003 and 2002,
                                    respectively:


                                        Estimated
                                         Useful
                                          Lives
                                         (Years)             2003          2002
- --------------------------------------------------------------------------------
Furniture and office equipment             3-5       $    123,699    $   85,237
Automobile                                  5              45,820        45,820
- --------------------------------------------------------------------------------
                                                          169,519       131,057
Less accumulated depreciation                              64,489        33,426
- --------------------------------------------------------------------------------

                                                     $    105,030    $   97,631
================================================================================

                                                                               9
<PAGE>
                                         MarketVision Communications Corporation


                                                   Notes to Financial Statements

================================================================================

4.     Unearned Refundable Fees     Unearned refundable fees from related
       from Related Parties         parties represents annual access fees
                                    received from NHTC and its affiliates that
                                    are recognized as revenue over the 12-month
                                    period that the Company provides NHTC's
                                    distributors access to various internet
                                    technologies. These fees are refundable on a
                                    pro rata basis in the event of distributor
                                    termination prior to completion of the
                                    12-month service period.

5.     Long-Term Debt               Long-term debt consists of the following at
                                    December 31:


                                                    2003               2002
- --------------------------------------------------------------------------------
6.5% automobile note payable                   $       19,874     $       25,579
Less current portion                                    6,120              5,736
- --------------------------------------------------------------------------------

Long-term portion                              $       13,754     $       19,843
================================================================================

Future maturities of long-term debt are as follows:

Fiscal year ending
- --------------------------------------------------------------------------------

2004                                                              $       6,120
2005                                                                      6,530
2006                                                                      7,224
- --------------------------------------------------------------------------------
                                                                  $      19,874
================================================================================

6.       Notes Receivable           Note receivable from stockholder bears
         from Stockholder           interest at 1.52% and was repaid as part of
                                    the merger agreement described in note 8.

7.       Stockholders' Equity       On January 1, 2002, the Company issued
                                    488,889 shares of its common stock to
                                    certain employees as compensation. The
                                    shares were valued at $0.2925 per share
                                    based on an assessment by management.

                                                                              10
<PAGE>
                                         MarketVision Communications Corporation


                                                   Notes to Financial Statements

================================================================================

8.       Subsequent Event           On March 31, 2004, NHTC entered into a
                                    merger agreement with the Company, pursuant
                                    to which NHTC acquired all of the
                                    outstanding capital stock of the Company in
                                    exchange for the issuance of 690,000 shares
                                    of NHTC restricted common stock, promissory
                                    notes in the aggregate principal amount of
                                    approximately $3,203,000, a cash payment of
                                    approximately $1,337,000, acquisition costs
                                    of approximately $150,000 less
                                    pre-acquisition net payables due
                                    MarketVision of $609,000 for a total
                                    purchase price of approximately $17,618,000.


                                                                              11

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</DOCUMENT>
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